Latest / Stephanomics / How to Build Back Greener After the Pandemic

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How to Build Back Greener After the Pandemic · Stephanomics

0:00
Speaker 1: I think there is a tremendous opportunity there, but we
0:03
Speaker 1: have to begin by recognizing the very difficult position in
0:06
Speaker 1: which we find ourselves. We've got something like the Spanish
0:09
Speaker 1: flu right after the First World War, the Great Depression
0:12
Speaker 1: of the thirties, and the need for reconstruction after the
0:15
Speaker 1: Second World War all rolled up together. We have to act.
0:20
Speaker 1: What you've seen is the shipping company is kind of
0:22
Speaker 1: quite without enough space to carry all this cargo, and
0:26
Speaker 1: it really, it really could create some problems as you
0:29
Speaker 1: head into, you know, the holiday season, and then you
0:32
Speaker 1: get into close to Chinese New Year in in February,
0:36
Speaker 1: so there's a lot of concern. Hello and welcome to
0:44
Speaker 1: Stephano Mix, the podcast that brings the global economy to you.
0:47
Speaker 1: And that was Lord Nick Stern, economist and policymaker, painting
0:52
Speaker 1: a vivid picture of the challenge the world's facing today.
0:55
Speaker 1: The opportunity he talked about is one we also touched
0:59
Speaker 1: on last week, the chance to build back greener. The
1:02
Speaker 1: British Prime Minister Boris Johnson and the leaders of the
1:04
Speaker 1: European Union don't agree on much these days, but they
1:08
Speaker 1: are both formally committed to mending their battered economies in
1:12
Speaker 1: a way that also helps to tackle global warming. But
1:16
Speaker 1: are the fine words translating into action on the ground,
1:19
Speaker 1: and does the future of the planet really rest on
1:22
Speaker 1: the outcome of next week's U S election. Lord Stern
1:26
Speaker 1: shares his expert view with me on this week's podcast,
1:29
Speaker 1: and later on Bloomberg's Trades Are, Brendan Murray will explain
1:33
Speaker 1: why the world's container ships might not have enough space
1:36
Speaker 1: for all of your Christmas presents this year. That's all
1:39
Speaker 1: we need. Brendan also has the latest on a race
1:42
Speaker 1: I know you'll be following almost as closely as Biden
1:45
Speaker 1: versus Trump, the race to lead the World Trade Organization.
1:49
Speaker 1: But first, here's Bloomberg Environment correspondent Jess Shankleman with a
1:53
Speaker 1: report on the dream and the reality of that much
1:57
Speaker 1: talked about green recovery. It might not be glamorous work,
2:13
Speaker 1: but stuffing insulation into drafty homes as winter approaches could
2:18
Speaker 1: be exactly the kind of job that's key to helping
2:20
Speaker 1: the economy recover and help save the planet. I think
2:24
Speaker 1: there's there was always a perception that people weren't interested
2:27
Speaker 1: in energy efficiency, and you couldn't ever get consumers to
2:30
Speaker 1: interest to be interested in it, and what's happened in
2:33
Speaker 1: the last kind of six weeks has proven that kind
2:37
Speaker 1: of you to be completely untruck. Um, you know, we've
2:41
Speaker 1: got consumers interested who on a gale that are kind
2:47
Speaker 1: of totally shocked by to be honest, that's Dave Robson,
2:51
Speaker 1: who runs home improvement company Insta Group in the county
2:54
Speaker 1: of Berkshire, an hours drive west of London. When I
2:58
Speaker 1: first spoke to him a month ago, Dave reckoned Insta
3:01
Speaker 1: Group could double its sales in the coming months thanks
3:04
Speaker 1: to a new UK government grant giving homeowners as much
3:07
Speaker 1: as five thousand pounds that's nearly six and a half
3:10
Speaker 1: thousand dollars to make their homes more energy efficient. In
3:14
Speaker 1: a year that's seen joblessness saw thanks to the pandemic.
3:18
Speaker 1: Britain is one of a handful of countries pushing for
3:20
Speaker 1: a green recovery. The idea is that you don't just
3:26
Speaker 1: try to rebuild an economy that looks like the world
3:29
Speaker 1: of but one that helps to cut greenhouse gases and quickly.
3:35
Speaker 1: Research by the Trade Unions Congress shows that some green
3:39
Speaker 1: activities like insulating homes, upgrading ports, and even improving internet
3:44
Speaker 1: connections to make it easier for people to work from
3:47
Speaker 1: home can be some of the fastest job creators. They
3:51
Speaker 1: reckon more than one point two million new green jobs
3:55
Speaker 1: could be created over the next two years in the UK.
3:59
Speaker 1: It's one a very few areas where Britain's trade unions
4:03
Speaker 1: and the Conservative Prime Minister Boris Johnson actually agree. The
4:08
Speaker 1: COVID crisis is a catalyst for change. So we need
4:11
Speaker 1: to give people the chance to train for the new
4:14
Speaker 1: jobs that are being created every day. And there's one
4:17
Speaker 1: area where we are progressing with gale force speed, and
4:22
Speaker 1: that is the green economy, the green industrial revolution that
4:27
Speaker 1: in the next ten years will create hundreds of thousands,
4:30
Speaker 1: if not millions of jobs. That's Johnson speaking earlier this
4:35
Speaker 1: month to his supporters at the Tory Party Conference. The
4:38
Speaker 1: speech was just a taste of another big announcement that's
4:41
Speaker 1: due in the next few weeks of a ten point
4:43
Speaker 1: plan for a green industrial revolution, expected to include major
4:48
Speaker 1: new investments in hydrogen and a ban on the sale
4:51
Speaker 1: of new petrol and diesel cars by five maybe even earlier.
4:57
Speaker 1: It's a similar story in Europe. Before co of it nineteen,
5:00
Speaker 1: the European Union had already set a course for a
5:03
Speaker 1: climate friendly reinvention with a package of regulations known as
5:07
Speaker 1: the Green Deal, but it wasn't exactly clear how they
5:11
Speaker 1: were going to match words with cash. COVID has changed
5:17
Speaker 1: all that, bas I had a Dutch member of the
5:20
Speaker 1: European Parliament for the Green Party thinks it could make
5:24
Speaker 1: a real difference. The Green Deal was very much a
5:29
Speaker 1: kind of legislative package that is turning our kind of lawmaking,
5:36
Speaker 1: but without really an investment next to it. And well,
5:41
Speaker 1: I mean the terminology comes from the from the New
5:43
Speaker 1: Deal from Roosevelt. I think that was an investment package.
5:47
Speaker 1: Maybe so a bit of a weird green deal. It
5:50
Speaker 1: was from the start, but I think the Corona crisis
5:54
Speaker 1: just accelerated that discussion because it was clear then there
5:57
Speaker 1: needs to be also an investment need linked to it.
5:59
Speaker 1: Of course, one third of the e U s seven
6:02
Speaker 1: fifty billion euro Recovery Fund is now going to be
6:05
Speaker 1: financed by green bonds. As host of the next round
6:09
Speaker 1: of global climate change talks, known as COP, the UK
6:13
Speaker 1: is under particular pressure to show leadership on cutting emissions.
6:17
Speaker 1: It's even drafted in former Bank of England governor Mark
6:20
Speaker 1: Karney for advice but the Central Bank under Carney's replacement
6:28
Speaker 1: Andrew Bailey, has been accused of tacit lee undermining the
6:32
Speaker 1: government's net zero goal. Earlier this year, climate activists gathered
6:37
Speaker 1: on thread Needle Street, where the Bank of England has
6:40
Speaker 1: stood for nearly three hundred years and where I'm standing
6:44
Speaker 1: now in the pouring rain, a smaller protest than usual
6:47
Speaker 1: thanks to COVID restrictions. Protesters wore masks of this bespectacled
6:52
Speaker 1: Andrew Bailey, and they accused him of greenwashing. Frown boyd
6:57
Speaker 1: from research and campaign organization Positive he was among them. Obviously,
7:01
Speaker 1: Andrew Bailey took up his posts and then quite quickly
7:04
Speaker 1: found himself in the middle of a pandemic. Now the
7:07
Speaker 1: measures that he that they quickly put in place had
7:12
Speaker 1: no regard for climate whatsoever. And so they increased their
7:16
Speaker 1: corporate bond buying program corporate QUEI by another ten billion,
7:21
Speaker 1: and that took into no account the commitment he made,
7:26
Speaker 1: so it was still looking at buying bonds in shell BP,
7:30
Speaker 1: fossil FHIO companies and high carbon sectors. The problem, she says,
7:36
Speaker 1: is that in the Bank's effort to have a neutral
7:38
Speaker 1: impact on the market, it's actually favoring the status quo
7:42
Speaker 1: of a high carbon economy. At the very least, France
7:45
Speaker 1: says polluting companies should have had to agree to cut
7:49
Speaker 1: carbon in return for bail ads, And since I spoke
7:53
Speaker 1: to fran Bailey has hinted that things could change. We
7:56
Speaker 1: don't want to diverge from being neutral in the sense
7:59
Speaker 1: that it's not the job of the bank along and
8:01
Speaker 1: to go around picking winners as it were. However, neutrality
8:05
Speaker 1: obviously can take more than one form if you like,
8:07
Speaker 1: in terms of how you define it. So what I
8:09
Speaker 1: want to get to is is from being what you
8:11
Speaker 1: might call just completely neutral across the whole sex, just
8:14
Speaker 1: saying let's be sort of climate change consistent neutral. So
8:19
Speaker 1: we will put a criteria in there about climate change,
8:22
Speaker 1: and then once we put that climate that climate change
8:25
Speaker 1: criteria in after that we will again have a set
8:28
Speaker 1: of things with the bonds we can buy, and we
8:30
Speaker 1: will be neutral within that. Yet, outside of Europe and
8:47
Speaker 1: South Korea, there's not much of a green recovery to
8:50
Speaker 1: speak of Globally. Only one of the twelve trillion dollars
8:55
Speaker 1: of financial support from governments in response to COVID nineteen
8:59
Speaker 1: can so far be called green stimulus. According to Bloomberg,
9:02
Speaker 1: an e f in the US, the second largest admitter.
9:06
Speaker 1: President Trump has not been talking about a green recovery. Instead,
9:12
Speaker 1: he spent quite a lot of energy defending his decision
9:15
Speaker 1: to pull the U S out of the Paris Agreement
9:17
Speaker 1: to limit global warming. I took us out because we
9:20
Speaker 1: were going to have to spend trillions of dollars, and
9:23
Speaker 1: we were treated very unfairly when they put us in there.
9:26
Speaker 1: They did us a great disservice. They were going to
9:28
Speaker 1: take away our businesses. I will not sacrifice tens of
9:33
Speaker 1: millions of jerbs, thousands and thousands of companies because of
9:37
Speaker 1: the Paris Accord. Former Federal Reserve Chair Janet Yellen is
9:42
Speaker 1: campaigning for an escalating carbon tax that would send a
9:45
Speaker 1: signal to businesses that the future will be clean. She
9:49
Speaker 1: remains hopeful that Joe Biden could adopt it if elected.
9:54
Speaker 1: Coming out of this, I think more countries will be working,
9:58
Speaker 1: and I think this is a certain really true if
10:01
Speaker 1: um if Biden becomes president in the United States. But
10:07
Speaker 1: government's introducing carbon taxes need to think carefully about how
10:12
Speaker 1: they do it. French President Emmanuel mccron and the hard
10:16
Speaker 1: way after hundreds and thousands of people protested against a
10:19
Speaker 1: planned rise in fuel taxes. Here's Morgan du Pray, who
10:23
Speaker 1: is head of the Network of Central Banks and Supervisors
10:27
Speaker 1: for greening the financial system, and he's also deputy head
10:30
Speaker 1: of the Financial Stability Department at Bank to France. There
10:34
Speaker 1: is this issue of fairness and social fairness, and probably
10:38
Speaker 1: what happened in France like two years ago was yet
10:40
Speaker 1: another number of people had the impression that as individual
10:44
Speaker 1: they were charged for driving their car um, whereas big
10:49
Speaker 1: companies were not charged, didn't have to pay any taxes.
10:52
Speaker 1: So they may have this feeling that at the end
10:55
Speaker 1: of the day was unfair even though they were ready
10:58
Speaker 1: to make an effort, they wanted to ever to be
11:00
Speaker 1: restributed in a very in a fair way. UM. So
11:04
Speaker 1: you have predictibility and fairness which are suddenly the too
11:08
Speaker 1: um quite important conditions to success. Back in the UK,
11:14
Speaker 1: the Green Homes Grant has had a few teething trouble
11:17
Speaker 1: Since I last spoke to Dave Robson. He says it's
11:21
Speaker 1: been a frustrating few weeks and while he's hired some
11:24
Speaker 1: new people, the government hasn't yet issued any of the vouchers.
11:28
Speaker 1: His customers need to get their discounts. I think, I mean,
11:32
Speaker 1: I kind of run a business that's so very much
11:35
Speaker 1: wants to get on with things, So I think there
11:37
Speaker 1: is there's a doubt to be a little bit of
11:40
Speaker 1: frustration that we've not been able to start before now
11:42
Speaker 1: because the demand has been so good. We want to
11:44
Speaker 1: make sure that we kind of capitalize on that demand.
11:48
Speaker 1: We just want to get going, and I think, yeah,
11:50
Speaker 1: I'm really optimistic about the impact that it's going to have.
12:02
Speaker 1: So I'm delighted to welcome back to Stephonomics. Nicolas Stern
12:06
Speaker 1: Lord Stern, Professor of Economics and Government at the London
12:09
Speaker 1: School of Economics and share of the Grantham Research Institute
12:13
Speaker 1: on Climate Change in the Environment. He also made a
12:17
Speaker 1: name in this field by leading the Stern Review on
12:21
Speaker 1: the Economics of Climate Change for the UK Government back
12:24
Speaker 1: in two thousand and six, as well as being chief
12:26
Speaker 1: Economists of World Bank and lots of other very distinguished things.
12:29
Speaker 1: Very nice to have you back on and there has
12:33
Speaker 1: been so much about the opportunity that this awful pandemic
12:39
Speaker 1: provides for governments to potentially accelerate their plans on the environment.
12:44
Speaker 1: As they try and pull the economy out of it.
12:47
Speaker 1: How much do you think that exists? And how much
12:49
Speaker 1: is wishful thinking? And it's nice to be back talking
12:53
Speaker 1: to you, Stath. I think there is a tremendous opportunity there,
12:57
Speaker 1: But we have to begin by recognizing the very difficult
13:00
Speaker 1: Asian in which we find ourselves. We've got something like
13:03
Speaker 1: the Spanish flu right after the First World War, the
13:05
Speaker 1: Great Depression of the thirties, and the need for reconstruction
13:09
Speaker 1: after the Second World War all rolled up together. We
13:12
Speaker 1: have to act on the unemployment around the world very quickly.
13:16
Speaker 1: We saw, of course, during the nineteen just how pernicious
13:20
Speaker 1: extended periods of unemployment could be for the political and
13:25
Speaker 1: social fabric of societies. So that sense of urgency is
13:30
Speaker 1: enormously important. Having said that, how can we act quickly
13:35
Speaker 1: in a way which is also sustainable When we look
13:39
Speaker 1: at the kinds of things that we need to do
13:41
Speaker 1: from the point of view of making our economy is
13:44
Speaker 1: much less destructive for the environment. Many of those things
13:49
Speaker 1: can be fast in implementation, they're labor intensive, and they
13:55
Speaker 1: have strong economic multipliers in large measure because the important
13:59
Speaker 1: content is relatively small and of course they had the
14:03
Speaker 1: environment environmental benefits as well. I would point to energy efficiency,
14:09
Speaker 1: retrofitting of buildings, making our cities more friendly to cycle
14:15
Speaker 1: cyclists and pedestrians, making a broadband connections stronger, and of
14:22
Speaker 1: course the natural capital side, planting trees, restoring degraded land,
14:28
Speaker 1: looking after waterways and so on. So it's a huge issue.
14:32
Speaker 1: It's global. We have to act quickly, but so many
14:35
Speaker 1: of the things that we need to do from the
14:37
Speaker 1: point of view of sustainability and tackling climate change and
14:40
Speaker 1: loss of biodiversity are things which fit the bill very
14:45
Speaker 1: well for a fast and strong recovery. Is it realistic
14:49
Speaker 1: to say that governments, when they think about supporting businesses
14:52
Speaker 1: who may be just about to go bust, that they
14:56
Speaker 1: ought to be pausing to do environmental conditions and strings
15:00
Speaker 1: attached to that money. The timing matters, and I think
15:03
Speaker 1: it's helpful to distinguish between rescue and recovery. The immediate
15:09
Speaker 1: rescue from a very rapid shutdown is something where you're
15:15
Speaker 1: just trying to keep the existing economy running. You're trying
15:18
Speaker 1: to keep people in employment, and for that kind of issue,
15:22
Speaker 1: I wouldn't press conditionality very hard. But a lot of
15:27
Speaker 1: this story will be about loans, and at some point
15:32
Speaker 1: in the months that follow. It will depend on the country,
15:35
Speaker 1: it would depend on the way in which the support
15:39
Speaker 1: had been structured. But much of the support is through loans,
15:42
Speaker 1: and those loans will have to be rolled over, redefined,
15:47
Speaker 1: perhaps in some cases converted into equity at some point
15:52
Speaker 1: in the next six or nine months, again depending on
15:55
Speaker 1: the country and the sector, and it seems to be
15:58
Speaker 1: at that point it is sensible to try to work
16:02
Speaker 1: with firms to foster investment in the jobs and economy
16:07
Speaker 1: of the future. Bailout conditionalities is kind of heavy language.
16:12
Speaker 1: What we're trying to do is to be constructive and
16:14
Speaker 1: look to the future. And so if you converted from
16:16
Speaker 1: alan to equity, well you would want to have a
16:19
Speaker 1: picture of where that firm was going and support those
16:23
Speaker 1: things which were a bit stronger. What do you think
16:32
Speaker 1: about the role of central banks has become a bit
16:35
Speaker 1: of a controversy and quite a debate in Europe, with
16:38
Speaker 1: the head of the bunders Bank, for example, against Fisen
16:41
Speaker 1: saying that the central banks, the European central banks, shouldn't
16:46
Speaker 1: be making noises about favoring green bonds. For example, in
16:51
Speaker 1: the quantitative easing programs, green assets. What do you think
16:55
Speaker 1: about that? Do you think it's a job for central banks? Yes,
16:58
Speaker 1: I do. Central bank are about inflation, of course, but
17:04
Speaker 1: they're also about stable economies and stable recoveries, strong recoveries.
17:11
Speaker 1: Any central bank has to think about how to come
17:13
Speaker 1: out of this as quickly as possible, and how to
17:17
Speaker 1: come out of it in a way that lays strong
17:19
Speaker 1: foundations for the future. I think that's perfectly central Actually,
17:27
Speaker 1: in the remit of a central bank. Europe has declared
17:32
Speaker 1: that their future is strongly in that direction. That is
17:37
Speaker 1: a been adopted by their governments right across Europe, and
17:43
Speaker 1: the job of the central bank seems to me to
17:45
Speaker 1: be in part to promote the kind of economic growth
17:49
Speaker 1: that the people of that place have chosen. It's interesting.
17:54
Speaker 1: I mean, the art of the argument against that would
17:56
Speaker 1: be governments are the ones who are elected to make
18:00
Speaker 1: strategic decisions about the shape of the economy and the
18:03
Speaker 1: things that the public sector broadly conceived, should invest in
18:07
Speaker 1: and support, and that if central banks start getting into that,
18:14
Speaker 1: they become too political. Central banks in this case would
18:19
Speaker 1: be supporting a definition of growth which has been set
18:25
Speaker 1: by politicians they're there to help with growth and stability
18:30
Speaker 1: and inflation, and it seems perfectly reasonable in that context
18:35
Speaker 1: for a Central Bank of Europe to support the definition
18:39
Speaker 1: of growth and stability that the European Body politics has
18:43
Speaker 1: given call democracy, isn't it? How much does the US
18:47
Speaker 1: election matter for this whole conversation? The U S election,
18:53
Speaker 1: I think matters greatly from the point of view of
18:56
Speaker 1: the sense of direction for the world. We have a
18:59
Speaker 1: European Union that has declared very strongly that the future
19:03
Speaker 1: is low carbon and it's committed to zero carbon by
19:06
Speaker 1: twenty fifty. We have China as of September twenty and
19:13
Speaker 1: Chi Jinping speech to the you in General Assembly, we
19:18
Speaker 1: have China that is committed to carbon neutrality by twenty
19:22
Speaker 1: six So that's close to the world economy or the
19:28
Speaker 1: world emissions. I should say, if you had United States, China,
19:32
Speaker 1: and Europe, that would be half the world's emissions committed
19:36
Speaker 1: to a very strong sense of direction. And I do
19:40
Speaker 1: think that that extra momentum that would come from the
19:45
Speaker 1: US federal government commitment would be of great value. But
19:49
Speaker 1: having said that, those of us who know and love
19:52
Speaker 1: the United States have always admired it's it's heterogeneity, how
19:58
Speaker 1: different it is in different places. And we have cities
20:01
Speaker 1: and states and firms right across the United States constituting
20:04
Speaker 1: more than half the US g dB that are rather
20:08
Speaker 1: strongly committed. And one thing that is very important in
20:11
Speaker 1: all this is the way in which firms around the world,
20:16
Speaker 1: many of them US firms have gone out in front.
20:21
Speaker 1: Microsoft had declared the net zero by twenty forty and
20:26
Speaker 1: indeed to buy back past emissions. Google Alphabet a month
20:31
Speaker 1: or so ago, made a similar kind of commitment. You know,
20:35
Speaker 1: Walmart has been a leader, Amazon is committed. A lot
20:40
Speaker 1: of the energy companies in the US are moving very
20:42
Speaker 1: strongly in this direction. So I think you're seeing leadership.
20:48
Speaker 1: Brian moynihan, Bank of America. You know, you're seeing leadership
20:51
Speaker 1: in American firms, which I think is playing through very strongly.
20:56
Speaker 1: So if the federal government, if the White House joined
21:00
Speaker 1: the very considerable US momentum in the private sector and
21:04
Speaker 1: in cities and states, United States could become a powerhouse
21:08
Speaker 1: of this story. And if you put them together with
21:11
Speaker 1: Europe in China, I think you would see a decisive
21:15
Speaker 1: move in a very good direction, and it would power
21:18
Speaker 1: the growth of the next decade. We have a particular
21:21
Speaker 1: fondness on Stephanomics for people who look very clearly at
21:26
Speaker 1: the potential for catastrophe in this world and still see
21:30
Speaker 1: lots of practical grounds for action and hope. Lord Stern,
21:34
Speaker 1: thank you very much. Thank you, steph And let me
21:37
Speaker 1: add one new asked to optimism. I'm enormously optimistic about
21:41
Speaker 1: what we can do. I worry deeply about what we
21:45
Speaker 1: will do, but it's discussing what's possible, discussing how attracted
21:49
Speaker 1: it could be that I think helps translate what we
21:53
Speaker 1: can do into what we will do, or at least
21:56
Speaker 1: increases the probability of us doing better. Thank you very much. Stuff,
22:01
Speaker 1: Thank you now. Dedicated listeners will remember we spent much
22:13
Speaker 1: often talking about trade wars, usually with Bloomberg's trades are
22:18
Speaker 1: Brendan Murray. The last time we talked about trade was
22:21
Speaker 1: probably earlier in the year, in the first weeks of
22:24
Speaker 1: the pandemic, when the fear was that global trade lines
22:27
Speaker 1: might seize up as a result of the crisis. And
22:30
Speaker 1: there's even been talk on this podcast and other places
22:33
Speaker 1: about the end of globalization as a result of the
22:36
Speaker 1: pandemic and those US China trade wars, but things have
22:40
Speaker 1: moved on since then. In fact, shipping companies are reporting
22:43
Speaker 1: record breaking loads. We've also got a big diplomatic storm
22:48
Speaker 1: brewing over who's going to run the World Trade Organization,
22:51
Speaker 1: the body that polices global trade rules and has generally
22:54
Speaker 1: keeps the multinatural trading system afloat. So I thought it
22:57
Speaker 1: was a good opportunity to catch up with Brendan Murray,
23:00
Speaker 1: who's been keeping tabs on all of it. Brendon, it's
23:03
Speaker 1: very nice to have you back. Um, tell me first
23:06
Speaker 1: about those massive container loads. What what's been happening in
23:11
Speaker 1: the first half of the year. The problem was, uh,
23:14
Speaker 1: not enough demand. Obviously, people were locked down, borders were closed,
23:19
Speaker 1: and the world economy really suffered from a lack of
23:22
Speaker 1: demand for all the goods that are produced. Uh. The
23:25
Speaker 1: issue that's that's happened more recently in the second half
23:27
Speaker 1: of the year is that demand has come roaring back.
23:30
Speaker 1: People are not going to restaurants, not taking vacations and
23:34
Speaker 1: buying lots of stuff or for around their homes and
23:37
Speaker 1: things like, you know, extra appliances and recreational gear for
23:42
Speaker 1: their backyards. So what the shipping companies did in the
23:45
Speaker 1: first half of the year, is they really geared down
23:48
Speaker 1: at the number of ships that were sailing across the Pacific,
23:51
Speaker 1: across the Atlantic, and they reduced the capacity to carry
23:55
Speaker 1: containers by quite a bit, and that sent the cost
23:58
Speaker 1: of shipping through the roof. And remember where a lot
24:01
Speaker 1: of air airplanes were grounded, and so air cargo capacity
24:04
Speaker 1: also shrank a lot. So what's happened is in the
24:07
Speaker 1: second half of the year, all that demand came roaring
24:10
Speaker 1: back without a sufficient number of ships to to carry
24:13
Speaker 1: it all. And so we've got, you know, ships making
24:17
Speaker 1: Transpacific Transatlantic passages now filled to capacity, and that's maintaining
24:23
Speaker 1: this level of high shipping costs that we're seeing. So
24:26
Speaker 1: I feel like I'm bang on trend because I was
24:28
Speaker 1: actually at a big d I Y store at eight
24:31
Speaker 1: o'clock this morning buying paint. So I feel like I'm
24:34
Speaker 1: embodying that trend you're talking about. But it does seem
24:36
Speaker 1: like we're seeing on the oceans the other side of
24:40
Speaker 1: the kind of recovery that we've talked about all around
24:42
Speaker 1: the world, this difference between what's happening with the good
24:45
Speaker 1: side of the economy and services. Oh, is there any
24:49
Speaker 1: sense that more ships are going to come on stream. Well,
24:51
Speaker 1: shipping is a very as you can imagine, capital intensive
24:56
Speaker 1: business where you can't just buy a ship and put
24:58
Speaker 1: it online and and have it going. So it's it
25:01
Speaker 1: moves in years rather than months. Are definitely weeks. So
25:06
Speaker 1: what you what you've seen is the shipping company is
25:08
Speaker 1: kind of caught with without enough space to carry all
25:11
Speaker 1: this cargo, and it really, it really could create some
25:14
Speaker 1: problems as you head into you know, the holiday season,
25:18
Speaker 1: and then you get into close to Chinese New Year
25:21
Speaker 1: in in February. So there's a lot of concern that
25:24
Speaker 1: this peak demand that we're seeing it's really going to
25:26
Speaker 1: be maintained over the next couple of months, and ultimately
25:30
Speaker 1: the people who import, the companies that import, you know,
25:33
Speaker 1: are paying the higher costs and it's just a matter
25:34
Speaker 1: of time before they start passing that cost onto consumers.
25:38
Speaker 1: Do you think that this is really a short term
25:41
Speaker 1: thing that's responding to the big rise in demand for
25:44
Speaker 1: some of these goods and and the and the lack
25:46
Speaker 1: of ships, or does it tell us something about the
25:50
Speaker 1: death of global supply chains having been a bit exaggerated, Yeah,
25:55
Speaker 1: I think that I think it's the latter supply chain
25:57
Speaker 1: has got a bad rap in the first half of
25:59
Speaker 1: the year when people couldn't get you know, paper towels
26:02
Speaker 1: and other kinds of things household necessities. But they recovered
26:06
Speaker 1: pretty quickly and from a lot of accounts, you know,
26:09
Speaker 1: adjusted for this next round of lockdowns, which are likely
26:13
Speaker 1: to come in the winter. You know, I think the
26:16
Speaker 1: what we're learning, and we're obviously not through the pandemic
26:19
Speaker 1: by any means, is that globalization has really kind of
26:23
Speaker 1: held the held the world economy together in a in
26:26
Speaker 1: a lot of in a lot of ways. You can
26:27
Speaker 1: imagine if people aren't able to spend money on the
26:31
Speaker 1: services that they do or get the goods that they
26:33
Speaker 1: that they need, you know, we'd be in a we'd
26:35
Speaker 1: be in a whole bigger world of hurt. So that's
26:38
Speaker 1: a nice visual story of lots of stuff sitting on
26:43
Speaker 1: ships going from one country to another. But we've also
26:46
Speaker 1: got a big storm blow blowing behind closed doors over
26:50
Speaker 1: who's going to be ahead of the w t A,
26:52
Speaker 1: what's going on the that's right, So there's a big
26:54
Speaker 1: diplomatic uh discussion that's sort of turning into a debate
26:59
Speaker 1: now in any of the Switzerland where the w t
27:01
Speaker 1: O is based uh There are two candidates vying to
27:05
Speaker 1: be the director General of the w t O. One
27:08
Speaker 1: is a Nigerian her name is Ngozi okonjo Iwala, and
27:12
Speaker 1: a South Korean named you Young He and they are
27:16
Speaker 1: It's been a fairly close race over the past couple
27:19
Speaker 1: of weeks, but it seems to be going the way
27:22
Speaker 1: of the Nigerian who there's a sense that the consensus
27:26
Speaker 1: could form around her. What's standing in the way of
27:30
Speaker 1: that is apparently the US support is not there, and
27:34
Speaker 1: the US is obviously a big powerful voice at the
27:37
Speaker 1: at the table of the w t O and and
27:39
Speaker 1: could conceivably just block this recommendation that has come that
27:44
Speaker 1: con jo Iwala become the next leader of the w
27:47
Speaker 1: t O. So it's quite ah, it's a storm that's
27:49
Speaker 1: sort of brewing right now. And obviously, you know, the
27:52
Speaker 1: w t O is the is the is the referee
27:54
Speaker 1: of of global trade. So it's a diplomatic spat right now,
27:58
Speaker 1: but ultimately it could have a big impact on global commerce.
28:02
Speaker 1: If you're sitting in one of these I guess they're
28:04
Speaker 1: not smoke filled rooms anymore, But if you're sitting in
28:06
Speaker 1: Geneva battling this out. Is this one of those things
28:09
Speaker 1: where you're just going to wait to see what happens
28:11
Speaker 1: with the U S selection. Does the argument over the
28:14
Speaker 1: World Trade Organization's leadership go away? If Joe Biden is
28:18
Speaker 1: the next president, it probably doesn't go away, but the
28:23
Speaker 1: tactics probably change and the tone of the of the
28:26
Speaker 1: reform drive. That's you know that the US government would
28:31
Speaker 1: get behind. Obviously if if the Trump administration gets a
28:35
Speaker 1: second term, you know they're going to follow through as
28:38
Speaker 1: as as as much as they can to to rein
28:43
Speaker 1: the w t O in if if if there's a
28:45
Speaker 1: Biden administration, I think there are plenty of people in
28:49
Speaker 1: those circles who you know, agree that the w t
28:52
Speaker 1: O ne needs to be reformed, but it doesn't need
28:54
Speaker 1: to be you know, driven to the brink of extinction
28:57
Speaker 1: to get there. So that's one another one of global
29:00
Speaker 1: institutions waiting and watching to see what happens next Tuesday.
29:04
Speaker 1: Brenda Murray, thank you very much, Thank you, thanks for
29:16
Speaker 1: listening to Stephanomics. We'll be back next week with more
29:18
Speaker 1: on the ground reporting and analysis from around the world,
29:21
Speaker 1: and I suspect a few words about what the next
29:25
Speaker 1: four years might hold for the United States. Remember you
29:28
Speaker 1: can always find us on the Bloomberg Terminal, website, app,
29:31
Speaker 1: or wherever you get your podcasts, And for more news
29:34
Speaker 1: and analysis from Bloomberg Economics, you can follow at Economics
29:38
Speaker 1: on Twitter. This episode was produced by Magnus Henrickson, with
29:42
Speaker 1: special thanks to Jess Shan Coleman, Eva Krakowska, Yana Randall, Lord,
29:47
Speaker 1: Nicholas Stern, and Brendan Murray. Lucy Meekin is the executive
29:51
Speaker 1: producer of Stephonomics and the head of Bloomberg podcast is
29:54
Speaker 1: Francescan Levi. Four