Speaker 1: Hello, Welcome to Stephanomics, the podcast that brings the global
Speaker 1: economy to you. This week, the global economy has just
Speaker 1: had another bucket load of uncertainty thrown onto it, courtesy
Speaker 1: of the new COVID variant O Macron. The economist Stephen
Speaker 1: King has his own take on what COVID nineteen has
Speaker 1: done to the global economy and on what happens next.
Speaker 1: My conversation with him is coming in a few minutes.
Speaker 1: We also have a report from Bryce Batchuck in Switzerland
Speaker 1: explaining why it's potentially bad news for the unvaccinated in
Speaker 1: the developing world that trade ministers didn't meet in Switzerland
Speaker 1: this week. But first at Bloomberg, we spent quite a
Speaker 1: lot of time digging out interesting numbers, plowing through public statistics,
Speaker 1: finding the stories that are hiding in plain sight, and
Speaker 1: sometimes it's being Bloomberg. Those stories move financial markets, but
Speaker 1: we often have one that makes it almost immediately to
Speaker 1: the Senate floor is Ohio Senator Cheryl Brown earlier this
Speaker 1: week at a hearing on the US economy. One final
Speaker 1: point on inflation. Just this morning, Bloomberg released a story
Speaker 1: with the headline pretty much says it all. Fattest profits
Speaker 1: since nineteen fifty de Bonk wage inflation story of CEOs.
Speaker 1: The f d i C also just released its quarterly
Speaker 1: report shocking No One bank profits are up. The idea
Speaker 1: that these corporations can't afford to pay workers higher wages,
Speaker 1: wages that actually reflect the value of the work they
Speaker 1: do to make these companies profitable, is ridiculous. One of
Speaker 1: the authors of the story quoted there was US economy
Speaker 1: reporter Matthew Bosler. Matt, thanks for coming on Stephanomics again.
Speaker 1: So just tell us what was so interesting in your
Speaker 1: piece that it got picked up in this way. Well,
Speaker 1: the two signal numbers from the piece were corporate profits
Speaker 1: up thirty seven percent over the last year, employee compensation
Speaker 1: up twelve percent. And so you take those two numbers
Speaker 1: and you put them together, what do you get The
Speaker 1: highest profit margin for corporate America since nineteen fifty, So
Speaker 1: absolute boom times for American business. You know, we're hearing
Speaker 1: a lot about labor shortages and how fast wages are
Speaker 1: going up. Profits are going up about three times is fast.
Speaker 1: So you can see why democrats will be interested in
Speaker 1: this story because you've had so much discussion of rising
Speaker 1: wages and shortage of labor, and chief executives have been
Speaker 1: complaining about that, saying that was all the reason for inflation,
Speaker 1: that wages were going up. I mean, in the sense
Speaker 1: your story was suggesting that that line is just not true, right,
Speaker 1: because you know, look at the profit margins, right, they're
Speaker 1: going up, which means you know, wages are going up,
Speaker 1: costs are going up, yes, but the prices that consumers
Speaker 1: are paying, that businesses are charging are going up much faster.
Speaker 1: And so that's kind of the flip side of the
Speaker 1: whole inflation story, right, when you're paying higher prices as
Speaker 1: a consumer, someone else is charging higher prices. Uh. And
Speaker 1: in this case, the people charging higher prices are certainly
Speaker 1: coming out well ahead, as evidenced by that profit data. Well,
Speaker 1: I guess one thing the Republicans have said is that
Speaker 1: the inflation has been driven by the big spending of
Speaker 1: the government, the enormous stimulus packages that continued under President Biden.
Speaker 1: I mean, there's is there any truth to that? Yeah,
Speaker 1: there's certainly truth to that, right. I Mean, we've talked
Speaker 1: a lot about the inflation story in the United States
Speaker 1: and around the world. M Obviously there have been big
Speaker 1: changes to both supply and demand that have been brought
Speaker 1: about by the pandemic um, a lot of fiscal stimulus
Speaker 1: in the United States that's kind of pumped a lot
Speaker 1: of demand into somewhat narrow supply chain infrastructure that has
Speaker 1: not been able to keep up. And so they're absolutely
Speaker 1: is some truth to that, and that's also why profits
Speaker 1: are up so much, right. I mean, you have a
Speaker 1: situation where, um, the government bolstered household incomes, actually boosted
Speaker 1: household incomes in the middle of a slump, which is
Speaker 1: totally unprecedented, and that meant that households had more money
Speaker 1: to spend, and they spent it. That's a point we
Speaker 1: tried to make in the story is that when businesses
Speaker 1: pay higher wages in aggregate, a lot of that money
Speaker 1: comes back to them. US households and aggregate don't save
Speaker 1: that much money. Um. The savings rate is on the
Speaker 1: order of say five to eight percent. And then of
Speaker 1: course they're also paying some of that money that they
Speaker 1: receive in their paychecks back to the government in taxes,
Speaker 1: but most of it goes right back to American businesses
Speaker 1: and aggregate in the forms of revenue. Well, that was
Speaker 1: the the original insight of Henry Ford when he started
Speaker 1: paying his workers more was that they were all then
Speaker 1: going to go buy cough a long time ago. UM.
Speaker 1: I guess it's quite a you things in this story
Speaker 1: that you could imagine politicians being interested in. But is
Speaker 1: there really a sense that Democrats are trying to to
Speaker 1: stop profit margins going up? Well, that's certainly become a
Speaker 1: bigger part of their rhetoric in recent weeks, as this
Speaker 1: inflation conversation has reached a bit of a fever pitch
Speaker 1: and Republicans have UH taken a stronger attack in trying
Speaker 1: to use it as a political cudgel against Democrats. Democrats
Speaker 1: are turning the argument around and saying this is not
Speaker 1: so much about UM over stimulating the economy. This is
Speaker 1: really about big companies UM raising prices more than they
Speaker 1: need to UM and that is what is sending inflation higher.
Speaker 1: And so UH President Biden specifically called out the gasoline industry. Obviously,
Speaker 1: gas prices, what you pay at the pump, is a
Speaker 1: major point of contact for American consumers. Wholesale gasoline prices
Speaker 1: have gone down in the last couple of weeks with
Speaker 1: this rolling over, but we haven't seen that pass on
Speaker 1: to the pump yet in the form of lower retail prices,
Speaker 1: and so he's kind of trying to point the finger
Speaker 1: at them and place the blame there. Now, that's a
Speaker 1: pretty common dynamic that we've seen historically. The thing is,
Speaker 1: it's not obvious that there's much that Democrats can actually
Speaker 1: do about this in terms of actually bringing anything to
Speaker 1: bear other than using the bully pulpit, and so it
Speaker 1: remains to be seen where exactly they are going to
Speaker 1: take this. And we should say the bully pulpit included
Speaker 1: the Speak of the House, Nazi Pelosi's office, which put
Speaker 1: out a statement also based on your piece, so you know,
Speaker 1: famous famous for a day. Um, there is a big
Speaker 1: question coming out of lots of conversations around the Federal Reserve,
Speaker 1: which you mentioned at the end of your piece, and
Speaker 1: that's the when you talk about whether inflation is transient
Speaker 1: or not, the measure of that is often are you
Speaker 1: seeing wages going up as well? And the Fed is
Speaker 1: kind of not so worried if it doesn't see wage growth,
Speaker 1: but if it does see wage growth rising as fast
Speaker 1: as inflation, or even faster than inflation, that's a signal
Speaker 1: that it should clamp on the Brakes and the traditional
Speaker 1: view of monetary policy. One of the questions raised in
Speaker 1: your pieces, well does that is that a long term
Speaker 1: recipe for labor, the labor share of total income remaining
Speaker 1: static when it could potentially be rising relative to the
Speaker 1: share for profits. Yeah. I think that's one of the
Speaker 1: most interesting parts of this conversation that tends to go
Speaker 1: a little bit under the radar because we're not used
Speaker 1: to talking about monetary policy in these terms, but it's
Speaker 1: something that has kind of crept into the minetary policy
Speaker 1: conversation over really the last couple of years, even going
Speaker 1: back to just before the pandemic and the you know,
Speaker 1: the bottom line there is there's an arithmetic here. Uh,
Speaker 1: there's wage growth, there's inflation, and if wage growth is
Speaker 1: rising in excess of productivity growth, then you might get inflation.
Speaker 1: But you also might just get a compression and profit
Speaker 1: margins because businesses could theoretically choose to instead of raising prices,
Speaker 1: allow profit margins to contract and allow the labor share
Speaker 1: of income to rise. Now we're having this conversation in
Speaker 1: a moment where the labor share of income has fallen
Speaker 1: to really historically low levels. Uh, certainly in the wake
Speaker 1: of the two thousand and eight crisis, and since then
Speaker 1: it's started to creep back up a little bit, but
Speaker 1: it's still really um, you know, at historically low levels.
Speaker 1: Even so, and so the question that some people at
Speaker 1: the FED are raising is just if we are going
Speaker 1: to clamp on the breaks with monetary policy every time
Speaker 1: we start see wages rise, we we really are lacking
Speaker 1: in the labor share at these low levels. And so
Speaker 1: that's something that at least some people at the FAD
Speaker 1: want to be mindful of going forward as they contemplate
Speaker 1: how to read these inflation numbers and how to respond
Speaker 1: with monetary policy. Yeah, just where the FED doesn't want
Speaker 1: to be there, right in the middle of a very
Speaker 1: hot political topic. Well, Matthew Bosler, I know that you're
Speaker 1: actually supposed to be listening to what the Chairman of
Speaker 1: the Federal Reserve is saying right now. So I'll let
Speaker 1: you go, but thanks very much for joining us. Thank you.
Speaker 1: So now we have a treat for me and I
Speaker 1: hope all dedicated Stephonomics listeners. Conversation about the state of
Speaker 1: the world with the economist, author and former chief Global
Speaker 1: economist for HSBC, Stephen King. It's Stephen. What I always
Speaker 1: enjoy about your work is you take the long view.
Speaker 1: In your case, the long views often very long, indeed
Speaker 1: sometimes a few centuries. But this has been one of
Speaker 1: those weeks when the longer term outlook seems to be
Speaker 1: changing every day, with news of this new COVID strain,
Speaker 1: putting governments back on the defensive and market sea soaring
Speaker 1: wildly on the back of different assumptions about the recovery.
Speaker 1: So I guess we should start with a macron how
Speaker 1: much has that caused you to rethink the shape of
Speaker 1: the recovery West? Definitely. I think it's an issue of
Speaker 1: uncertainty more than anything else that you know. The reality
Speaker 1: is that when you've got a bit a new virus,
Speaker 1: you haven't got years and years of data to to
Speaker 1: look at to pretend you know what's going on, which
Speaker 1: is what economists do. You've got something which has just
Speaker 1: come along very recently, which of course has a nasty
Speaker 1: habit of mutating, and the result is that all the
Speaker 1: sort of beliefs that people had are going from a
Speaker 1: kind of pre pandemic world to post pandemic world has
Speaker 1: all become frankly a lot more blurred, a whole bunch
Speaker 1: of other things have begun to change, notably the fact
Speaker 1: that over recent months we've had we've had an awful
Speaker 1: lot of inflation coming along with that rather limited growth.
Speaker 1: So there are two big questions. The verst is how
Speaker 1: much of that, to use the dreaded word, is transitory
Speaker 1: and how much of it reflects a kind of lasting
Speaker 1: change really, and how economies are are behaving well. I
Speaker 1: do want to get into that, but I'd like to
Speaker 1: talk a bit more about the challenge that central banks
Speaker 1: are facing, and an interesting move by the US Federal
Speaker 1: Reserve this week, with the chairman J. Powe suggesting that
Speaker 1: the US Central Bank might accelerate the end of quantitas
Speaker 1: of easing, so stop pumping money into the economy sooner
Speaker 1: than people were expecting. And that was despite the worrying
Speaker 1: news about the new variant. It's very different from what
Speaker 1: happened in the UK, where the feeling is that the
Speaker 1: news about a micron is going to make the Bank
Speaker 1: of England postpone the interest rate rise is that we
Speaker 1: might otherwise have expected this week. So if you think
Speaker 1: about the different responses of those two central banks, is
Speaker 1: the UK just being more cautious or what's going on. Yeah,
Speaker 1: they might be, And like I guess, it's coming back
Speaker 1: to the uncertainty that if you've got a fundamental uncertainty,
Speaker 1: you can come up with all sorts of different depensions
Speaker 1: as to what you do about it. One of the
Speaker 1: problems though, that central banks have is that they're they're
Speaker 1: looking at this and saying, oh my gosh, growth could
Speaker 1: be weaker, there could be greater uncertainty. You know, things
Speaker 1: that we thought would be happening are not gonna happen. Therefore,
Speaker 1: GDP is going to come in lower than expected. You know,
Speaker 1: there's more spair capacity. Therefore everything's going to be more disinflation.
Speaker 1: But again, what's happened over the last few months is
Speaker 1: that activity has been probably in anything, a little softer
Speaker 1: than expected. But we know now I think that a
Speaker 1: lot of that software activity is because of not so
Speaker 1: much demand side constraints, but supply side constraints. And you
Speaker 1: look at the UK over a million vacancies currently, which
Speaker 1: is you know, the highest since this current series began
Speaker 1: back in two thousand and one, UM. And you look
Speaker 1: at the the US and that you know, last week's
Speaker 1: jobless claims with a with the lowest since nineteen six nine.
Speaker 1: So you know, whereas I think originally central banks could
Speaker 1: sort of console themselves with the idea that there are
Speaker 1: a few little shots coming through the second hand car
Speaker 1: prices or semi conductor sales, you've now got this much
Speaker 1: more complex picture of shortages appearing not just in product
Speaker 1: markets but labor markets too. And I think to a degree,
Speaker 1: what's happening with the fair is is a sort of
Speaker 1: grudging recognition that even if activity is not that strong,
Speaker 1: there are other indicators of passia in the economy, which
Speaker 1: is mostly driven by the supply side. The UK kind
Speaker 1: of there, but not perhaps quite as confident about that.
Speaker 1: So let's let's go to the long term. We have
Speaker 1: got used to a long period when inflation was always low,
Speaker 1: and actually all the shocks that central banks had to
Speaker 1: deal with we shocks that we're going to reduce inflation
Speaker 1: on balance with disinflation. So what we're having to get
Speaker 1: our heads around, and I guess why people mentioned the
Speaker 1: seventies is it feels like we've got shocks coming now
Speaker 1: that are inflationary or even potentially stagflationary, so increasing inflation
Speaker 1: and also reducing growth. And it's it's hard for central
Speaker 1: banks to do very much about that. It is, although,
Speaker 1: of course, eventually in the seventies and eighties, you know,
Speaker 1: Paul Vocal was appointed, he did something pretty savage relaciously
Speaker 1: apply a sledge how much of inflation and into each
Speaker 1: of the US and in need the global economy at
Speaker 1: the same time. So things have actually may have to happen,
Speaker 1: but it maybe a sort of reluction process. So why
Speaker 1: have we got lots of inflation? And I think one
Speaker 1: reason is that at the micro level there are fundamental
Speaker 1: information failures, and there are failures of stations with locking
Speaker 1: down markets for months and months on end. If you
Speaker 1: think about what markets do, they transmit information. They transmit
Speaker 1: information between buyers and sellers, touch uses and consumers, whatever.
Speaker 1: And if you shut them down, then you lose their
Speaker 1: information and the last sort of historic price record, it
Speaker 1: might be months earlier, it is no longer particularly relevant
Speaker 1: for what happens when things reopen. I'm talking very simple
Speaker 1: terms here, of course, but but broadly speaking, that's what
Speaker 1: I think has happened. So you have this lot of information,
Speaker 1: but it's not just lots of information in say the
Speaker 1: said being conductive market or in secondhand cars. It's a
Speaker 1: loss of information across multiple markets. So it's a lot
Speaker 1: of information about the number of waiters you're require in
Speaker 1: London restaurants. It's a lots of information about the number
Speaker 1: of truck drivers you require to keep your logistics back
Speaker 1: to normal. All these things and losses of information. Now,
Speaker 1: of course, if you apply this at the macro level,
Speaker 1: the way you probably interpret this and say, well, if
Speaker 1: you've lost all this information and resources can't be allocated
Speaker 1: particularly efficiently, you're going to end up with a sort
Speaker 1: of shift downwards in productive potential. You're worse off than
Speaker 1: you were. You've got less productive potential than you had expected,
Speaker 1: so your supply performance is worse than it was, but
Speaker 1: at the same time because you've got rising demand, because
Speaker 1: that's what the sort of political demands are to get
Speaker 1: back to where you were before the pandemic. So in
Speaker 1: one sense, this is a sort of I mean, it
Speaker 1: is a bit stagflationary in the sense that you've got
Speaker 1: a lot of potential, a bit like we saw in
Speaker 1: the nineteen seventies. There are to be fair some big differences.
Speaker 1: One big difference is that you haven't got the pressure
Speaker 1: in terms of unionization that you have in the nineteen seventies,
Speaker 1: and the pressure in terms of pushing wages up on
Speaker 1: an annual basis, that's missing. You haven't necessarily got the
Speaker 1: pressure coming through in lots of lots of other ways,
Speaker 1: big differences. But at the same time, I think this,
Speaker 1: this loss of information is a fundamental feature of what's
Speaker 1: happened in recent months. And the idea that you could
Speaker 1: simply sort of turn the economy off and then switch
Speaker 1: it back on again with no problems whatsoever, which is
Speaker 1: effectually what all the forecasts kind of assume that I
Speaker 1: think has found been found found to be not quite right.
Speaker 1: Once you recognize that, not so surprising that you end
Speaker 1: up with more inflation as well. Well. That's a very
Speaker 1: sweeping and fascinating explanation of what's happening, and I think
Speaker 1: it is an interesting way of looking at it. But
Speaker 1: what you've described seems to me inherently temporary. I mean,
Speaker 1: it's not a permanent loss of information or supply side failure,
Speaker 1: and you can't help thinking, I mean, one of the
Speaker 1: big differences between now and the seventies is we're in
Speaker 1: this highly digitized world with just in time supply chains
Speaker 1: and more and more ways of getting information about demand
Speaker 1: and supply in different parts of the economy. So so
Speaker 1: why should the Federal Reserve or anyone else expect this
Speaker 1: inflation to last? So I think one of the issues
Speaker 1: for central banks is, Okay, it might be a temporary phenomenon,
Speaker 1: but the longer it goes on for the less confidence
Speaker 1: the public will have in what the central banks are
Speaker 1: saying they gained to achieve at some point in the future.
Speaker 1: Um And if the public work with sort of simple
Speaker 1: rules of thumb I think most of us do, most
Speaker 1: of the tiny shortcuts in the shortcut up moment is
Speaker 1: exatically two percent in two years time, So that's what
Speaker 1: centered back to tell is going to be. But if
Speaker 1: after a year or two years inflation is still got
Speaker 1: above that, it's not so difficult to see the public
Speaker 1: beginning to lose confidence in what the center of banks
Speaker 1: are going to achieve, at which point you haven't just
Speaker 1: got a supply side shot, you've got an expectations problem
Speaker 1: beginning to build in as well. Now there is a
Speaker 1: way around that, And in one sense, this is what
Speaker 1: I think j Pal is getting at, which is saying, Okay,
Speaker 1: we recognize that this trade off might get worse to
Speaker 1: be recognized. It might lose the confidence of the people.
Speaker 1: So one way to to reinstill confidence it's a typing
Speaker 1: country policy, is to show that we really mean to
Speaker 1: get control of inflation. So that's interesting. So what you're
Speaker 1: saying is it's not necessarily a permanent rise in inflation,
Speaker 1: even though it lasts for a while, But you have
Speaker 1: this risk that if it lasts long enough, people will
Speaker 1: start expecting inflation to stay higher, and then that becomes
Speaker 1: self fulfilling. So that the most important way to prevent
Speaker 1: us going from stage one to stage two is for
Speaker 1: the central bank to at it right. The most important
Speaker 1: central bank that needs to get it right as the
Speaker 1: Federal Reserve. So maybe if we are going back full circle,
Speaker 1: it's quite important that the Fed did send that signal
Speaker 1: earlier this week. Well, we're talking about the World Trade
Speaker 1: Organization on the program this week. We don't have much time.
Speaker 1: I know you have lots of lots of views about it,
Speaker 1: but I mean obviously that the real life side effect
Speaker 1: of the information failures you were talking about earlier is
Speaker 1: all those container ships queuing up outside Long Beach and
Speaker 1: all the issues we've talked about to do with global
Speaker 1: supply chains and trade, and it's also a lot of
Speaker 1: question marks about the future of globalization. So so very briefly,
Speaker 1: you know, how long do you think you will see
Speaker 1: this supply chain problem and will that be a permanent
Speaker 1: shift in the nature of globalization. I think there's a
Speaker 1: shift that's having actually before the pandemic, and one reason
Speaker 1: for that yet was obviously deteriorating lations between the U
Speaker 1: S and China. So the world is I think more
Speaker 1: divided than it was, which itself is not so good
Speaker 1: from a kind of a multilateral trade deal perspective. Of course,
Speaker 1: you can still have bilateral and regional deals, which I
Speaker 1: think will still come through to a certain degree. But
Speaker 1: if you really believe in multilateralism, and that I think
Speaker 1: was always already in difficulty. But i'd also an act
Speaker 1: to that. And I think that the pandemic has created
Speaker 1: this sort of sense of vulnerability to global supply chains,
Speaker 1: and those that can work out how to do it
Speaker 1: might be thinking about how to reduce their dependency on
Speaker 1: those fragile chains. And if you think about globalization, I
Speaker 1: suppose in the last few decades of the twentieth century,
Speaker 1: a big chunk of it was mobile capital going in
Speaker 1: search of cheap labor in other parts of the world.
Speaker 1: But I think it is plausible to argue in a
Speaker 1: lot of different areas that technology would allow supply chains
Speaker 1: to be shortened for robots at home to do what
Speaker 1: cheap cheaper workers who abroad, and that might lead to
Speaker 1: a rather different world to the one that we've been
Speaker 1: used to in recent times, whereby um, there's more home production,
Speaker 1: there's a greater division between the hands and have not
Speaker 1: in terms of countries around the world. And then finally
Speaker 1: they have not. The countries which are no longer going
Speaker 1: to receive this capital are likely to find their labor
Speaker 1: itself becomes increasingly mobile but trying it tries to go
Speaker 1: to countries where there are better opportunities. Um So, if
Speaker 1: we talk about this with a migrant crisis at the momentum,
Speaker 1: given demographic trends over the next few decades, and given
Speaker 1: this idea of robotics and AI, I think that migrant
Speaker 1: crisis might become much bigger. Well, that's definitely fuel for
Speaker 1: future books by you and future conversations, I hope. But meantime,
Speaker 1: Stephen King, thank you very much. Thank you. I mentioned
Speaker 1: the World Trade Organization and trade ministers from around the
Speaker 1: world were supposed to be getting together in Geneva this week,
Speaker 1: but thanks to that new COVID variant, the whole thing
Speaker 1: got postponed. Now you might not care a whole lot
Speaker 1: about that, but it turns out you should. Here's our
Speaker 1: trade reporter Bryce batchuck in Geneva. Goodriz and hello from Switzerland,
Speaker 1: famous for its Alporns chocolate fondue and The World Trade Organization.
Speaker 1: The WTO is the world's top international trade body and
Speaker 1: provides a forum for governments to hash out their trade
Speaker 1: disputes and negotiate new trade deals. This week, the w
Speaker 1: t O is supposed to hold a critical meeting in Geneva,
Speaker 1: where some four thousand officials from around the world would
Speaker 1: gather to talk about the future of the global trading system.
Speaker 1: But the spread of a new virus variant forced the
Speaker 1: debteur to postponent's meeting and delay efforts to rehabilitate an
Speaker 1: alliance that's been battered by years of neglect, trade wars,
Speaker 1: and the COVID nineteen pandemic. The twenty six year old
Speaker 1: trade body hasn't produced a multilateral outcome for the better
Speaker 1: part of the last decade, and it's still reeling from
Speaker 1: former President Donald Trump's attacks over the past four years.
Speaker 1: I would say the w t O was the single
Speaker 1: worst trade deal ever made, and if they don't shape up,
Speaker 1: I would withdraw from the w t O. In the
Speaker 1: coming months, the w t O has a big opportunity
Speaker 1: to show that it's still relevant to the lives of
Speaker 1: regular people by helping to speed the global vaccination effort.
Speaker 1: Advocates from across the globe are demanding that the w
Speaker 1: t O members agree to waive intellectual property rights for
Speaker 1: COVID nineteen vaccines. It's an emotionally charged issue and for
Speaker 1: some the debate is nothing less than a life or
Speaker 1: death battle to save people in the world's poorest nations.
Speaker 1: W TO Director General Goziala described the situation like this.
Speaker 1: Proponents of the wave as strongly ben this is necessarily
Speaker 1: and important to avoid being in this kind of situation
Speaker 1: in the future. Now, now and in the future now.
Speaker 1: Those who are non proponents believe that this we wouldn't
Speaker 1: have gotten vaccines in the first place. If you had
Speaker 1: had a waiver in place, it would not have been incentivized.
Speaker 1: This speak of research and innovation. So these are two
Speaker 1: opposing sides, but we are and of course doptwo is
Speaker 1: a negotiative for so we need to bring the two
Speaker 1: sides together. But because views are so strongly held, we're
Speaker 1: talking about people's lives, it's not been as easy um
Speaker 1: to bring those two points of view together. This debate
Speaker 1: has been raging since October, when Indian South Africa introduced
Speaker 1: a proposal to waive enforcement of the Debt Agreement on
Speaker 1: trade related aspects of intellectual property rights or trips for short.
Speaker 1: They argue that without a waiver, poorer nations can't have
Speaker 1: the legal certainty that they need to produce COVID nineteen
Speaker 1: vaccines and medicines that are mostly manufactured in Europe and
Speaker 1: North America. Today, only about seven percent of people in
Speaker 1: Africa have been fully vaccinated against the coronavirus, compared to
Speaker 1: some fort in the rest of the world. While the US, China,
Speaker 1: and scores of other nations support the concept of an
Speaker 1: IP waiver for vaccines, the European Union, United Kingdom, and
Speaker 1: Switzerland have all lined up against the proposal. The idist
Speaker 1: to waive intellectual property Russian particular patient Switzerland's ambassador to
Speaker 1: the d d A Chambau. So it would mean, if
Speaker 1: these proposal is accepted, that all inventions in connection with
Speaker 1: COVID nineteen would not benefit from patent protection. It means
Speaker 1: that the regulator will simply not consider any request to
Speaker 1: get a patent portals product. And it means also that
Speaker 1: the originators, the developers, the companies which have invented those
Speaker 1: products will not any longer enjoy exclusive marketing rights and
Speaker 1: they will not be able to recoup their investments through
Speaker 1: the protection that is provided by the intellectual property protection.
Speaker 1: Switzerland is of course not ready to do this, but
Speaker 1: we remain convinced that the trips waivers you call it
Speaker 1: will not lead to the production of one addition of
Speaker 1: those vaccine and may geopodize existing partnerships that have allowed
Speaker 1: to increase production. Advocates the waiver say the spread of
Speaker 1: the O macron variant brings even greater urgency to the
Speaker 1: need to waive intellectual property rights for vaccines. Here's you
Speaker 1: on who a senior advice or at the International Humanitarian
Speaker 1: Organization MEDS on San Flontia. The postponent of the Ministrul
Speaker 1: conference is a quite ironic but at the same time
Speaker 1: strong wake up call for come try to realize. Without
Speaker 1: control this pandemic um the global trade and other social
Speaker 1: economic issues will go into it, continue to suffer, and
Speaker 1: then the postponent is actually remind us the trips weaiver
Speaker 1: is needed now more than ever. The postponent at the
Speaker 1: debts meeting this week will complicate the trade bodies efforts
Speaker 1: to present a unified and rapid response to the pandemic.
Speaker 1: But more fundamentally, this the labeled hamper efforts to reform
Speaker 1: an organization that's failed to evolve with the massive shifts
Speaker 1: that have incurred in the global economy. If members can't
Speaker 1: agree to collectively move forward on issues aimed at helping
Speaker 1: real people, it could result in less engagement and usher
Speaker 1: in a more serious shift towards fragmentation of global trading system. Ultimately,
Speaker 1: that means greater uncertainty for businesses and higher costs for consumers.
Speaker 1: This is Bryce Bashick with Bloomberg News in Geneva, Switzerland.
Speaker 1: Well that's it for this episode of Stephanomics. We'll be
Speaker 1: back next week in the meantime. If you like the program,
Speaker 1: please rate it and follow at Economics on Twitter for
Speaker 1: more news and analysis from Bloomberg Economics. This episode was
Speaker 1: produced by Magnus Hendrickson and Matthew Bosler's co authors on
Speaker 1: that story about US profit margins were Katia Dmitrieva and
Speaker 1: Joe Doe. Special thanks also to Stephen King and Bryce Batchel.
Speaker 1: Mike Sasso is executive producers Stephonomics, and the head of
Speaker 1: Bloomberg Podcast is Francese and leaving mm hmm.