WEBVTT - Deep Bread Basket Blues 0:00:03.800 --> 0:00:07.280 Welcome to Bloomberg Opinion. I'm Bonnie Quinn. This week they've 0:00:07.320 --> 0:00:11.320 been very, very slow to move towards this. Jonathan Bernstein 0:00:11.400 --> 0:00:14.080 on the public hearings from the House January sixth Committee, 0:00:14.120 --> 0:00:18.400 which start Thursday, and the impression the six Countom six 0:00:18.560 --> 0:00:22.279 sessions will make. Later, we'll speak with Ruth Pollard in Colombo, 0:00:22.360 --> 0:00:25.160 Sri Lanka which defaulted for the first time since it 0:00:25.239 --> 0:00:28.640 won independence from Great Britain, and the country is a 0:00:28.680 --> 0:00:34.160 potential bellweather for investors on developing economies post pandemic. First though, 0:00:34.240 --> 0:00:37.360 to the intensifying and global food crisis. Here's the U. S. 0:00:37.400 --> 0:00:41.520 Treasury Secretary Janet Yellen last week. Russia's war against Ukraine 0:00:41.760 --> 0:00:46.440 has exacerbated the issue of food security for people around 0:00:46.440 --> 0:00:51.200 the world, particularly in emerging and developing countries. I spoke 0:00:51.200 --> 0:00:54.120 with David Fickling for an overview of just how bad 0:00:54.200 --> 0:00:58.240 the situation is for global economies, particularly those dependent on 0:00:58.320 --> 0:01:03.080 food imports. I think we're approaching a quite unusual turn 0:01:03.160 --> 0:01:05.480 in the sort of history of global food security. To 0:01:05.480 --> 0:01:07.880 be honest, if you look back at the long history 0:01:07.880 --> 0:01:09.840 of this, you know, one of the crucial things that 0:01:09.959 --> 0:01:12.600 helps keep the world fed over the past fifty years, 0:01:12.680 --> 0:01:16.039 while the world population has doubled, is actually trade. People 0:01:16.080 --> 0:01:18.000 talk a lot about the growth of sort of chemical 0:01:18.040 --> 0:01:21.399 fertilizers and farm machinery, which have both been very important 0:01:21.440 --> 0:01:24.080 in the twentieth century in keeping the world fed, but 0:01:24.160 --> 0:01:26.280 trade is a really important part of that because, of course, 0:01:26.280 --> 0:01:29.120 if you have drought and crop failures in your region, 0:01:29.440 --> 0:01:32.160 then there's no amount of fertilizer or farm machinery that 0:01:32.200 --> 0:01:34.240 will solve the fact that your crop just won't grow. 0:01:34.680 --> 0:01:37.240 So a really important thing that I think is underappreciated 0:01:37.640 --> 0:01:39.679 is that the cost of ocean trade in the nineteenth 0:01:39.720 --> 0:01:42.840 century dropped by about and so you suddenly have this 0:01:42.920 --> 0:01:45.399 global trade in grains and about a quarter of all 0:01:45.440 --> 0:01:48.280 the calories we consume it and now traded across borders. 0:01:48.320 --> 0:01:50.880 So it's very important that this is a global trade. 0:01:50.920 --> 0:01:53.480 But I think something's undappreciated is that it's quite a 0:01:53.560 --> 0:01:57.640 concentrated trade. The world's bread baskets are rather few. There's 0:01:57.640 --> 0:02:01.080 probably about six of them the US Midwest, the South America, 0:02:01.120 --> 0:02:04.440 sort of Argentina, Brazil, that area, areas of western Europe 0:02:04.440 --> 0:02:07.040 and the Ukraine and the former Soviet Union and Russia. 0:02:07.360 --> 0:02:10.080 And I think most importantly the plain between the Indus 0:02:10.120 --> 0:02:13.160 and the Ganges in northern India and Pakistan and eastern China, 0:02:13.200 --> 0:02:16.480 between the Yank Sea and the Yellow Rivers. Those six 0:02:16.680 --> 0:02:20.000 red baskets are absolutely crucial to the world's growth. Of 0:02:20.000 --> 0:02:24.200 these relatively few number of crops that we depend on, wheat, rice, corn, soybeans. 0:02:24.240 --> 0:02:27.160 More than half of wheat and rice and corn are 0:02:27.200 --> 0:02:33.440 grown if you put those those areas together soybeans described Now, 0:02:33.480 --> 0:02:35.560 for most of the time, that's not too much of 0:02:35.560 --> 0:02:37.920 a problem because although there's just half a dozen of 0:02:37.919 --> 0:02:40.520 these bread baskets, if you get a drought in one region, 0:02:40.919 --> 0:02:43.919 it tends to pair with good rainfall and another region 0:02:43.960 --> 0:02:46.639 that leads to higher crop yields, because essentially the rainfall 0:02:46.680 --> 0:02:48.880 has to go somewhere. It evaporates on one side of 0:02:48.919 --> 0:02:50.519 the ocean, it tends to drop on the other side 0:02:50.520 --> 0:02:52.240 of the ocean, and when we talk about things like 0:02:52.280 --> 0:02:55.600 El Nino and Landinia, that's essentially about rainfall ending up 0:02:55.639 --> 0:02:59.280 in different places. However, as the climate is changing, a 0:02:59.360 --> 0:03:01.440 lot of va is getting a lot less secure than 0:03:01.480 --> 0:03:03.120 it has been in the past, and I think that's 0:03:03.120 --> 0:03:05.360 really putting pressure on some of the fairly sort of 0:03:05.360 --> 0:03:07.200 shaky system that we have there in place over the 0:03:07.200 --> 0:03:09.640 stage of half a dozen bread baskets to keep the 0:03:09.639 --> 0:03:12.040 world said, were seeing several weather events right now, even 0:03:12.120 --> 0:03:15.360 just in the United States alone, where Montana is suffering drought, 0:03:15.440 --> 0:03:18.320 North Dakota can't get anything seated because of rain. So 0:03:18.440 --> 0:03:20.560 weather has a lot to do with the fact that 0:03:20.760 --> 0:03:22.560 there's going to be a shortage. It is not just 0:03:22.680 --> 0:03:25.680 Russias war in Ukraine. Absolutely, And of course you know 0:03:25.760 --> 0:03:28.040 you see that weather event in the US. Prices for 0:03:28.160 --> 0:03:31.480 spring red wheat in Chicago here fourteen year high in March, 0:03:31.600 --> 0:03:34.040 So there is a wheat problem in North America. Now, 0:03:34.480 --> 0:03:36.720 in normal times you would look to the world's other 0:03:36.800 --> 0:03:39.400 big wheat producers. Now one of the world's top three 0:03:39.440 --> 0:03:42.960 wheat producers may be slightly surprising in fact, is India. 0:03:43.240 --> 0:03:45.000 You don't think of India as a big wheat producer. 0:03:45.160 --> 0:03:47.880 It's not a big wheat exporter normally because it's almost 0:03:47.920 --> 0:03:53.080 all consumed at home for chapaties. And now, well, exactly 0:03:53.360 --> 0:03:55.720 what we've seen in India over the past couple of months. 0:03:55.760 --> 0:03:58.440 We've seen this very extreme heat wave and that has 0:03:58.480 --> 0:04:02.160 caused India to embargo exports of wheat places like the 0:04:02.160 --> 0:04:05.680 Middle East, they were very dependent on wheat from Ukraine. 0:04:05.840 --> 0:04:08.600 That's obviously been damaged by the war in Ukraine. The 0:04:08.640 --> 0:04:11.200 places they were hoping to get their wheat supplies from 0:04:11.240 --> 0:04:14.040 with India, but now injuries not supply that either. Obviously 0:04:14.080 --> 0:04:16.159 you see these high prices in the US as well, 0:04:16.480 --> 0:04:19.520 So you really see how some relatively small changes, and 0:04:19.640 --> 0:04:21.800 especially if you throw geer politics in the mix, as 0:04:21.839 --> 0:04:24.760 with the war in Ukraine, suddenly what looked like a 0:04:24.760 --> 0:04:27.680 decent spread of food baskets can very quickly that are 0:04:27.760 --> 0:04:30.679 rather short. You also point out on a recent piece 0:04:30.839 --> 0:04:34.240 food dependent nations can import nutrition, but they must have 0:04:34.279 --> 0:04:36.520 the foreign exchange to pay for it, and we know 0:04:36.680 --> 0:04:39.240 that because of the dollar strength, that's in short supply 0:04:39.320 --> 0:04:42.000 in many of these countries. Yeah. Absolutely, and of course 0:04:42.000 --> 0:04:45.160 a wheat currency becomes a problem for especially the poorest 0:04:45.200 --> 0:04:48.280 in the country, even if there is the availability of 0:04:48.520 --> 0:04:52.800 imported nutrition. I mean, another interesting example you look at Brazil. 0:04:52.880 --> 0:04:55.680 Brazil recently not a country that you really associate with 0:04:55.720 --> 0:04:58.719 a sort of open trade policy, but they've been drastically 0:04:58.760 --> 0:05:02.640 cutting the tara frights essentially to zero for all food imports. 0:05:02.680 --> 0:05:04.599 The idea of values. Of course, that inflation is very 0:05:04.680 --> 0:05:06.760 high in Brazil, and it is a problem for people 0:05:06.760 --> 0:05:09.200 in Brazil that they can't afford to eat. Well. That 0:05:09.560 --> 0:05:12.240 is a decent policy approach, but the problem is it's 0:05:12.240 --> 0:05:14.120 not nearly sufficient, because if you look at the way 0:05:14.160 --> 0:05:17.000 that the real the currency has fallen in recent years, 0:05:17.360 --> 0:05:20.000 Brazili the big food producer anyway, and it's probably not 0:05:20.040 --> 0:05:22.320 going to lead to any increase in food imports because 0:05:22.480 --> 0:05:26.920 Brazilians simply can't afford the market global price of food. Now, David, 0:05:27.000 --> 0:05:30.240 how bad does this get in terms of people actually 0:05:30.320 --> 0:05:33.760 starving people in places you might even associate balmon and 0:05:33.800 --> 0:05:37.440 food and security with I mean, the past few decades 0:05:37.680 --> 0:05:41.920 mostly have been an extremely successful period of bringing down 0:05:42.200 --> 0:05:46.240 rates of under nutrition under nourishment. That progress continued to 0:05:46.320 --> 0:05:51.200 slow down through but then just in and then particularly 0:05:52.120 --> 0:05:55.479 since of course the code pandemic, we've really started to 0:05:55.480 --> 0:05:57.800 lose ground on that. Now, part of that is essentially 0:05:57.880 --> 0:06:00.360 driven by the pandemic and driven by incomes. People don't 0:06:00.360 --> 0:06:02.240 have the money to spend on food that they used 0:06:02.240 --> 0:06:04.680 to have, but it's not just because of that, and 0:06:04.720 --> 0:06:07.679 I think particularly at the moment, we see all sorts 0:06:07.680 --> 0:06:10.719 of factors are leading to a much more insecure environment 0:06:10.760 --> 0:06:13.520 for food. Clearly, you have the crop failers that we're seeing. 0:06:13.520 --> 0:06:15.760 We're in the third year of a Landinia event, which 0:06:15.800 --> 0:06:17.960 causes all sorts of disruption to the food system in 0:06:18.000 --> 0:06:19.400 that way, that's why you see a lot of these 0:06:19.520 --> 0:06:22.320 low yields on crops from Latin America. That tends to 0:06:22.320 --> 0:06:24.159 be the case with that with a landing near event. 0:06:24.560 --> 0:06:26.560 On top of that, of course, energy prices are very 0:06:26.640 --> 0:06:29.080 high and that pushes up the cost of fertilizer, so 0:06:29.240 --> 0:06:32.000 that's another thing that decreases yield. And then you throw 0:06:32.040 --> 0:06:34.640 into the mix the war in Ukraine is a factor. 0:06:34.760 --> 0:06:38.000 Ukraine and Russia are both big food exporters for that matter, 0:06:38.040 --> 0:06:41.400 and then led up at ports in Ukraine and Russia 0:06:41.440 --> 0:06:44.440 that just won't get out now absolutely absolutely. Then you 0:06:44.480 --> 0:06:47.440 can add some of these export embargoes obviously, you know, 0:06:47.480 --> 0:06:52.560 an interesting one was India's wheat embargo follows very rapidly 0:06:52.560 --> 0:06:56.000 on the heels of an export embargo in Indonesia for 0:06:56.080 --> 0:06:58.599 palmer which has actually now been revoked, but went on 0:06:58.680 --> 0:07:01.080 for a while injuries. One of the biggest importers of 0:07:01.080 --> 0:07:04.520 palm oil. India needs palm oil for basic nutrition for Indians, 0:07:04.800 --> 0:07:08.600 they lose that nutrition from Indonesia, they embargo their wet 0:07:08.600 --> 0:07:11.840 exports elsewhere, and you see these knock on effects everywhere. 0:07:12.040 --> 0:07:14.800 Malaysia embargoing exports of chicken. But of course you've got 0:07:14.800 --> 0:07:17.640 an avian influenza atbreak around the world at the moment, 0:07:17.920 --> 0:07:20.160 and the price of corn, which is essentially the price 0:07:20.160 --> 0:07:22.760 of raising chickens, is also very high. So there are 0:07:22.800 --> 0:07:25.680 all sorts of impacts like this, and the World Food Program, 0:07:25.720 --> 0:07:29.360 for example, do much about this. Well. Traditionally, that's exactly 0:07:29.400 --> 0:07:31.680 what the World Food Program is for, and in fact, 0:07:31.720 --> 0:07:34.880 it's its origins essentially are as a US export program. 0:07:34.920 --> 0:07:37.320 It's deep origins are in World War One when Herbert 0:07:37.320 --> 0:07:40.080 Hoover was seeing sort of famine in Belgium and decided 0:07:40.120 --> 0:07:43.160 to use some of the US's significant agricultural surpluses to 0:07:43.400 --> 0:07:46.000 solve that problem. So that is what the World Food 0:07:46.000 --> 0:07:49.880 Program does. It uses the agricultural surpluses from from the 0:07:50.000 --> 0:07:52.360 US and to a lesser extent, Europe as a way 0:07:52.400 --> 0:07:56.040 of applying supplementary nutrition around the world. That works as 0:07:56.080 --> 0:07:59.840 long as you don't have these simultaneous bread basket failures 0:08:00.200 --> 0:08:02.640 and as long as they don't come repeatedly. But that's 0:08:02.640 --> 0:08:05.600 the risk with climate change. And you know, I think 0:08:05.640 --> 0:08:09.760 a key instance here in ten you had very dramatic 0:08:09.800 --> 0:08:12.360 heat waves and drought in Russia that caused a real 0:08:12.360 --> 0:08:15.600 collapse in the agricultural production there, and they were paired 0:08:15.640 --> 0:08:19.160 with flooding in Pakistan. Normally, of course, the rainfall it 0:08:19.240 --> 0:08:21.840 was the same climate system. Normally, you would say, you know, 0:08:21.880 --> 0:08:24.400 there's a drought one place, there's rainfall elsewhere. But the 0:08:24.400 --> 0:08:28.000 flood in Pakistan was so severe that Pakistan also suffered 0:08:28.160 --> 0:08:30.160 a collapse in production. So two of the world's big 0:08:30.200 --> 0:08:33.120 wheat belts collapsed at the same time, which is not 0:08:33.240 --> 0:08:35.080 something that we've seen before, but it is something that 0:08:35.679 --> 0:08:38.680 as global warming increases the risk of that. And remember 0:08:38.679 --> 0:08:40.840 that only you know six or some of these red 0:08:40.920 --> 0:08:43.440 baskets around the world, the risk of that goes up 0:08:43.520 --> 0:08:46.880 quite substantially. Is easter in China at least a functioning 0:08:46.880 --> 0:08:49.720 bread basket for the world at moment. China is an 0:08:49.720 --> 0:08:52.840 interesting case, but it also an interesting case around geo politics. 0:08:53.200 --> 0:08:55.600 You see occasional reports out of China saying that you know, 0:08:55.640 --> 0:08:59.040 they're the agricultural yields are not as good as expected, 0:08:59.080 --> 0:09:00.720 and there are you know, there as of food problems, 0:09:00.720 --> 0:09:02.840 but I would say China is pretty well supplied with 0:09:02.840 --> 0:09:05.600 food at the moment, and actually over amplic supplied. If 0:09:05.600 --> 0:09:08.920 you look at the stockpiles that they have of key grains, 0:09:09.360 --> 0:09:12.880 they are extremely high. They've got enough stockpiles to last, 0:09:13.280 --> 0:09:15.400 you know, in most cases well beyond a year, when 0:09:15.440 --> 0:09:18.360 a lot of other parts of the world are very short. Now. 0:09:18.400 --> 0:09:20.959 I think in part that is actually a product of geopolitics. 0:09:21.280 --> 0:09:23.920 You know, China is less sure of its trading relationships 0:09:23.960 --> 0:09:25.880 than it was a few years ago, and there's a 0:09:25.880 --> 0:09:27.800 bit of a sort of fortress China approach to that. 0:09:27.880 --> 0:09:30.440 So it is stockpiling this stuff at home and it 0:09:30.559 --> 0:09:33.719 is not available for its its trading partners and other 0:09:33.840 --> 0:09:39.400 nations to feed their own shortages. Yeah, it's terribly how 0:09:39.400 --> 0:09:42.120 many billions are at least hundreds of millions of people 0:09:42.200 --> 0:09:44.480 are looking at a spectrum all the way from just 0:09:44.559 --> 0:09:46.920 food and security, which is bad enough on its own, 0:09:47.120 --> 0:09:50.880 all the way through to famine. Yeah, well, it's very concerning. 0:09:51.280 --> 0:09:52.800 You know, if you look at some of the numbers 0:09:52.800 --> 0:09:55.040 that have been coming out of the world's food program 0:09:55.080 --> 0:09:58.200 in a typical year, they feed I think, around about 0:09:58.320 --> 0:10:00.559 a hundred and fifty million people, or they they ensure 0:10:00.600 --> 0:10:02.520 that there's food supply to about a hundred and fifty 0:10:02.520 --> 0:10:05.600 million people. And I think I think there was a 0:10:05.640 --> 0:10:08.040 report they did a couple of months ago. They're saying, 0:10:08.160 --> 0:10:10.920 you know, there's a there's about fifty million people around 0:10:10.960 --> 0:10:14.600 the world who are in an emergency situation in terms 0:10:14.600 --> 0:10:17.640 of food food security. So um, so that is a 0:10:17.679 --> 0:10:20.560 sort of ongoing problem. It's something the World Who program 0:10:20.640 --> 0:10:23.760 deals with all the time. And in terms of a 0:10:23.800 --> 0:10:26.520 sort of lower level of food insecurity, the sort of 0:10:26.520 --> 0:10:29.520 thing that leads just to um, you know, growth stunting 0:10:29.559 --> 0:10:33.800 among children. Um, we're talking about significantly more, you know, 0:10:33.840 --> 0:10:37.480 you're talking sort of hundreds of millions. UM. The world, 0:10:37.559 --> 0:10:39.880 I should say, has been very good at dealing with 0:10:39.920 --> 0:10:42.760 this over the twentieth century. It's it's nothing short of 0:10:42.760 --> 0:10:46.080 a modern miracle that we have managed to feed so 0:10:46.160 --> 0:10:50.360 many people, and we've seen hunger decline so dramatically, But 0:10:50.600 --> 0:10:54.480 it is a year after year struggle. If there was 0:10:54.480 --> 0:10:57.880 a famous economist, Thomas Malthus sort of two years ago 0:10:58.080 --> 0:11:01.440 who predicted that there would be massed starve because population 0:11:01.520 --> 0:11:05.640 growth was faster than than agricultural output growth. And it's 0:11:05.679 --> 0:11:08.400 it's a it's a miracle for the past few centuries 0:11:08.440 --> 0:11:11.640 that not only has population growth not been as fast 0:11:11.679 --> 0:11:14.920 as as he predicted, but also agricultural yields have just 0:11:15.400 --> 0:11:20.239 risen and ritten and continue to rise at an astonishing pace. Um. 0:11:20.640 --> 0:11:22.840 That gives me a lot of confidence that actually we 0:11:22.880 --> 0:11:26.680 are seeing temporary problems here, but human ingenuity will be 0:11:26.760 --> 0:11:29.599 able to solve it. Um. But I don't think we 0:11:29.600 --> 0:11:32.240 should underestimate the how much we're sort of dancing on 0:11:32.280 --> 0:11:35.040 the edge of the precipice here. Every every year that 0:11:35.800 --> 0:11:38.880 you know, the growth of agricultural yields doesn't match the 0:11:38.920 --> 0:11:42.320 growth of population is a year year that brings the 0:11:42.320 --> 0:11:45.640 world population closer to starvation. And we need to keep 0:11:45.640 --> 0:11:48.719 increasing that. Finally, David, if there was to be a 0:11:48.800 --> 0:11:50.880 letter up on Russia's war in Ukraine, if there was 0:11:50.920 --> 0:11:53.320 to be an opening of some of the boards that 0:11:53.360 --> 0:11:55.760 have been blockaded, for example, how much would that alleviate 0:11:55.800 --> 0:11:59.920 the situation. It wouldn't happen immediately because actually, to some extent, 0:12:00.000 --> 0:12:02.320 a larger problem with Ukraine at the moment is of 0:12:02.360 --> 0:12:06.240 course that we've we've missed the planting season largely for 0:12:06.240 --> 0:12:09.040 for a lot of the crops for this year, and 0:12:09.080 --> 0:12:11.480 that's that's pretty significant. And if you look at some 0:12:11.600 --> 0:12:15.560 of the US Power of Agricultures projections, the bigger supply 0:12:15.640 --> 0:12:18.360 crunch for wheat, if I remember rightly, is actually for 0:12:18.400 --> 0:12:21.600 the for thecoming marketing year, not the one that's you know, 0:12:21.720 --> 0:12:23.480 not the wheat that's just done its way to port 0:12:24.280 --> 0:12:26.200 for the coming marketing year. They lose about a third 0:12:26.200 --> 0:12:29.559 of their fair output. So that's that's going to be 0:12:29.600 --> 0:12:33.200 the more significant one. Um. Of course, you know, a 0:12:33.280 --> 0:12:35.760 big factor on behind this is what happens with the 0:12:35.800 --> 0:12:39.559 global climate. We are three years into a landinio event 0:12:39.720 --> 0:12:42.800 and the sort of climate shifts that that causes. It's 0:12:42.920 --> 0:12:44.679 likely that we're going to see a shift into an 0:12:44.840 --> 0:12:49.319 alnnio event, which favors different bread baskets um. But when 0:12:49.360 --> 0:12:52.440 we move into that, we have the the you know, 0:12:52.480 --> 0:12:54.840 the real core of the high prices that we're seeing 0:12:54.840 --> 0:12:57.960 for agricultural produced is that stocks are low um, and 0:12:58.040 --> 0:13:00.439 stocks have been running down essentially over this three year 0:13:00.520 --> 0:13:03.720 learning neer event UM. So we need to rebuild those docks. 0:13:03.720 --> 0:13:05.400 And that's not going to come overnight. That will that 0:13:05.400 --> 0:13:07.600 will be the product of a number of years um 0:13:07.640 --> 0:13:12.040 I suspect um climate change. Notwithstanding um that we will 0:13:12.080 --> 0:13:15.880 again see very cheap prices for food over the next decade, 0:13:15.920 --> 0:13:17.360 but it will it will be a number of years 0:13:17.400 --> 0:13:22.160 before things really get back on track. David Fickling there, 0:13:22.400 --> 0:13:24.480 and don't forget to get in touch. All thoughts and 0:13:24.520 --> 0:13:27.360 opinions very welcome. I'm at Vanney Quinn on Twitter or 0:13:27.400 --> 0:13:30.400 email v Quinn at Bloomberg dot net. And by the way, 0:13:30.440 --> 0:13:33.440 Bloomberg Opinion is also available as a podcast on Apple, 0:13:33.559 --> 0:13:36.720 Spotify and wherever you get your podcasts. I feel for 0:13:36.800 --> 0:13:39.439 the people of Sri Lanka. This is a tremendous shock 0:13:39.520 --> 0:13:43.800 for them. We would like to see progress made and 0:13:43.840 --> 0:13:48.320 we are already engaging with Sri Lanka's creditors to appeal 0:13:48.840 --> 0:13:54.640 for fast action on that restructuring. Of course, to help 0:13:54.640 --> 0:13:58.200 a country, the country needs to help itself first. Christian 0:13:58.440 --> 0:14:00.600 your Gafa. They're managing director of the i m F 0:14:00.640 --> 0:14:04.320 on efforts to restructure of Sri Lanka's sovereign debt. The country, 0:14:04.480 --> 0:14:07.160 which is needed sixteen i m F agreements since ninet, 0:14:08.240 --> 0:14:11.080 is officially in default for the first time since independence. 0:14:11.080 --> 0:14:16.000 In let's get to Ruth Pollard in Colombo. Ruth details 0:14:16.000 --> 0:14:18.760 some of the chaos and trilina for us, what does 0:14:18.760 --> 0:14:22.880 a country in default look like? Well, one thing that 0:14:23.040 --> 0:14:26.200 is really obvious is very very long queues for fuel, 0:14:26.440 --> 0:14:31.000 and that's petrol, diesel and also LPG cooking gas. People 0:14:31.200 --> 0:14:33.760 are standing in line or sitting in line in their 0:14:33.760 --> 0:14:36.320 cars or their bikes for days at a time trying 0:14:36.360 --> 0:14:39.680 to get this most basic commodity, and that of course 0:14:39.720 --> 0:14:42.600 has flow on effects because people can't get to work, 0:14:42.760 --> 0:14:46.040 children can't get to school, people can't get to medical 0:14:46.080 --> 0:14:49.280 appointments or get to hospitals. Patients are telling their doctors 0:14:49.320 --> 0:14:53.640 that they've started rationing really important medications like heart medication 0:14:53.760 --> 0:14:57.240 and diabetes drugs because they're running out and they don't 0:14:57.240 --> 0:14:59.960 know when the next ship shipment of medication will arise. 0:15:00.240 --> 0:15:02.880 And of course there's armed soldiers on the streets. Some 0:15:02.960 --> 0:15:05.560 of them are controlling accused at petrol stations, but others 0:15:05.560 --> 0:15:08.640 are just making their presence felt to try and implement 0:15:08.760 --> 0:15:11.680 some kind of order into Sri Lanka. It's deeply disturbing 0:15:11.680 --> 0:15:13.880 to watch. We of course saw all of the protests 0:15:13.920 --> 0:15:17.360 in the streets and now we're seeing that there's government 0:15:17.520 --> 0:15:20.120 being formed and trying to put some order on all 0:15:20.120 --> 0:15:23.840 of this, but it seems to have happened extraordinarily quickly. 0:15:24.320 --> 0:15:27.440 Is that the case was it post pandemic, it just disintegrated. 0:15:28.120 --> 0:15:32.080 It's been disintegrating for some time. This all started way 0:15:32.120 --> 0:15:35.920 back when the Rudger puckss were in power from two 0:15:35.920 --> 0:15:39.360 thousand and five onwards, when they started doing a lot 0:15:39.360 --> 0:15:45.800 of borrowing and establishing credit lines that have subsequently become unsustainable. 0:15:45.920 --> 0:15:49.880 And now Sri Lanka is facing the prospect of its 0:15:49.920 --> 0:15:53.720 principle being the same amount as the interest rate payments. 0:15:53.760 --> 0:15:57.120 So obviously this is an unsustainable situation for the country 0:15:57.120 --> 0:16:00.640 to find itself in. Now. It has had extein I 0:16:00.800 --> 0:16:04.560 MF bailout packages since x five, so now it's going 0:16:04.560 --> 0:16:08.080 for one. But the I m F and the World 0:16:08.160 --> 0:16:11.440 Bank are going to want to see some significant progress 0:16:11.480 --> 0:16:15.920 in macroeconomic policies in Sri Lanka before another package will 0:16:15.960 --> 0:16:18.560 be entered into and it's difficult to see how that 0:16:18.600 --> 0:16:22.160 happens without tourism resuming, which of course has really fallen 0:16:22.160 --> 0:16:24.440 away because of the pandemic and other reasons as well. 0:16:24.840 --> 0:16:27.160 Now investors are looking at Shri Lanka and saying this 0:16:27.200 --> 0:16:30.280 could be a bell whether for other economies in Southeast 0:16:30.280 --> 0:16:33.840 Asia and other developing economies. More broadly, give us a 0:16:33.920 --> 0:16:37.880 few economies that investors are comparing Sri Lanka too well. 0:16:37.920 --> 0:16:41.160 The most obvious one is Pakistan. It too is going 0:16:41.240 --> 0:16:44.840 through a political crisis. Now we have a new prime minister, 0:16:45.000 --> 0:16:48.600 Shebaz Sharif. But the question for him is can his 0:16:48.680 --> 0:16:51.720 government be brave enough I guess to implement the austerity 0:16:51.720 --> 0:16:55.640 measures that the IMF requires of it to access I 0:16:55.840 --> 0:16:58.560 m F funding. And now those austerity measures are very 0:16:58.640 --> 0:17:00.960 similar to those in Sri Lanka. Her the I m 0:17:01.080 --> 0:17:04.919 F wants the governments in both those countries to stop 0:17:05.160 --> 0:17:08.560 very high fuel subsidies and remove other subsidies that are 0:17:08.680 --> 0:17:11.560 sucking up a lot of the public money and adding 0:17:11.640 --> 0:17:15.359 to the economic crisis. Now, once you remove fuel subsidies, 0:17:15.440 --> 0:17:18.680 that in turn makes feel unaffordable for the population, which 0:17:18.680 --> 0:17:22.520 in turn runs the risk of creating civil unrest, and 0:17:22.600 --> 0:17:24.640 that brings with it a whole host of other problems. 0:17:24.640 --> 0:17:28.720 So these countries are facing very very complex situations to 0:17:28.760 --> 0:17:31.119 sort of try and dig themselves out of these crises. 0:17:32.080 --> 0:17:34.919 The latest inflation reading was closed to thirty percent and 0:17:34.920 --> 0:17:37.800 there are forecasts that the next one might be forty percent. 0:17:37.960 --> 0:17:42.879 How does somebody live with an inflation read at forty present, Well, 0:17:43.200 --> 0:17:46.200 they live by cutting back on absolutely everything, and that 0:17:46.359 --> 0:17:50.560 includes food. So daily wage journalists, who make up a 0:17:50.800 --> 0:17:54.400 very large part of Sri Lanka's workforce, are seeing what 0:17:54.440 --> 0:17:57.560 little they're managing to earn just get completely eroded by 0:17:57.880 --> 0:18:01.359 very high food cost very high fuel costs, and also 0:18:01.560 --> 0:18:06.160 very high medication costs. As the generic version of medications 0:18:06.240 --> 0:18:10.040 run out, doctors are having to prescribe to patients much 0:18:10.080 --> 0:18:13.480 more expensive versions of drugs, and so they can't afford them. 0:18:13.560 --> 0:18:15.800 What happens is parents are now saying that they're going 0:18:15.840 --> 0:18:18.120 to only take one meal a day so their kids 0:18:18.160 --> 0:18:20.480 can have three meals a day. Now, that's going to 0:18:20.520 --> 0:18:23.960 have long term consequences on a population if this continues 0:18:24.080 --> 0:18:27.400 much longer. Is the current Prime Minister, who by the way, 0:18:27.440 --> 0:18:30.080 has been the Prime minister at least half a dozen 0:18:30.119 --> 0:18:33.080 times in the past, running with we're messing a is 0:18:33.119 --> 0:18:36.440 he qualified to let Sri Lanka out of this mess? 0:18:37.320 --> 0:18:40.240 You know, Sri Lanka only has one day of fuel 0:18:40.359 --> 0:18:44.000 left each day, and so you know, trying to manage 0:18:44.040 --> 0:18:47.280 that as a government is incredibly difficult now. While he 0:18:47.320 --> 0:18:49.760 has the respect of the international community and the i 0:18:49.880 --> 0:18:53.560 m F and the other international agencies, his appointment hasn't 0:18:53.680 --> 0:18:56.479 calmed the mood of the protesters who are down on 0:18:56.800 --> 0:19:01.119 Goldfaced Green in the capital Colombo. They're satisfied with renewal 0:19:01.160 --> 0:19:04.040 Riquam Singer as Prime Minister. They see him as part 0:19:04.040 --> 0:19:07.320 of the political old guard. They want a slate claimed 0:19:07.760 --> 0:19:09.840 whole new government in place that's going to do or 0:19:09.920 --> 0:19:12.800 not just with the economic crisis, but also look at 0:19:12.840 --> 0:19:14.679 the future and make sure that Sri Lanka isn't going 0:19:14.720 --> 0:19:16.159 to be back at the I m F looking for 0:19:16.160 --> 0:19:20.440 an eighteen bailout package. Ruth Pollard in Colombo. The January 0:19:20.480 --> 0:19:24.200 sixth Committee is due to finally start public hearings this Thursday. 0:19:24.560 --> 0:19:27.880 Six of them to prime time hearings, four morning hearings. 0:19:28.240 --> 0:19:30.800 It took eighteen months to put these hearings together, and 0:19:31.119 --> 0:19:34.320 in comparison with hearings passed, the effort seems well a 0:19:34.320 --> 0:19:37.320 little slim. I spoke with Jonathan Bernstein on how these 0:19:37.359 --> 0:19:40.960 hearings compare with successful hearings of eras passed, such as 0:19:41.040 --> 0:19:43.960 the Watergate hearings. So Jonathan next week, we see the 0:19:44.000 --> 0:19:46.880 start of the public hearings on the January sixth events. 0:19:47.320 --> 0:19:49.440 It seems insane that it's taken this long for public 0:19:49.440 --> 0:19:51.360 hearings to happen. But give us a little bit of context. 0:19:51.440 --> 0:19:54.480 How do public hearings end up coming to the table. Well, 0:19:54.520 --> 0:19:57.280 you know, it depends on the event. They're all different. 0:19:57.440 --> 0:19:59.280 One of the things about Congress is that they can 0:19:59.280 --> 0:20:02.280 do whatever they want hunt in terms of format, and so, 0:20:02.640 --> 0:20:05.360 you know, it's been different over the years. Generally, Congress 0:20:05.359 --> 0:20:08.879 has moved away from public hearings. Overall, there's way fewer 0:20:08.920 --> 0:20:11.359 public hearings of every type of committee than there was 0:20:11.640 --> 0:20:15.440 twenty thirty years ago. But in particular on the January 0:20:15.440 --> 0:20:20.040 six committee, they've been very, very slow to move towards this. 0:20:20.160 --> 0:20:23.040 And you can compare it to Watergate and the Senate 0:20:23.080 --> 0:20:25.800 Watergate Committee hearings went on. There were fifty one hearings 0:20:26.240 --> 0:20:28.800 that went on for six months, and they really did 0:20:28.920 --> 0:20:32.680 capture the imagination of the nation. It's questionable how much 0:20:32.760 --> 0:20:36.240 effect they had in terms of President Nixon's approval ratings, 0:20:36.280 --> 0:20:38.600 but it was an important thing in people's lives. We're 0:20:38.640 --> 0:20:42.440 going to get here. Six hearings over two weeks, and 0:20:42.760 --> 0:20:45.959 it's just not sufficiently after whatever it is eighteen months 0:20:46.160 --> 0:20:48.560 after the event, and in a very different media environment 0:20:48.640 --> 0:20:50.879 in which these are also competing against things like the 0:20:50.920 --> 0:20:54.320 Johnny Depp amber Heard trial. You know, the thing about 0:20:54.320 --> 0:20:57.320 Watergate and the Watergate hearings is that occurred at the 0:20:57.400 --> 0:21:02.119 peak really of central eised television. Most people in the 0:21:02.160 --> 0:21:05.920