WEBVTT - Global Virus, Global Trade—Global Impact 0:00:04.120 --> 0:00:07.120 Hello, and welcome to Stephanomics, the podcast that brings the 0:00:07.160 --> 0:00:14.160 global economy to you, and this week we're giving you 0:00:14.200 --> 0:00:16.560 a sneak preview of a day in the life of 0:00:16.600 --> 0:00:20.239 global trade, an exceptional project we pulled together for a 0:00:20.280 --> 0:00:24.360 special issue of Bloomberg Markets magazine devoted to trade. I 0:00:24.440 --> 0:00:27.159 also discussed the long term future of globalization with the 0:00:27.160 --> 0:00:30.920 economist and author Stephen King. But first we felt we 0:00:30.920 --> 0:00:33.000 should spend a few minutes on the big story of 0:00:33.000 --> 0:00:35.959 the week, which is the global march of the coronavirus. 0:00:40.200 --> 0:00:43.880 At times like this, markets get nervous, epidemiologists get a 0:00:43.920 --> 0:00:46.720 lot of calls from the media, and economists attempt to 0:00:46.880 --> 0:00:49.320 estimate what the impact on the global economy will be, 0:00:49.720 --> 0:00:52.839 usually without very much to go on. Tyler Cowen is 0:00:52.840 --> 0:00:55.600 a professor of economics at George Mason University and co 0:00:55.800 --> 0:00:59.400 author of the very popular Marginal Revolution blog. He's also 0:00:59.480 --> 0:01:02.840 a regular columnist for Bloomberg. I don't think he's an 0:01:02.840 --> 0:01:05.440 epidemiologist in his spare time, but he has written some 0:01:05.480 --> 0:01:08.760 wise columns on the coronavirus since the outbreak first hit 0:01:08.800 --> 0:01:11.200 the news. He's on the line now, Tyler, thanks very 0:01:11.280 --> 0:01:14.280 much for joining us. Thank you Now, you haven't been 0:01:14.319 --> 0:01:17.200 coming up with guestimates for the impact economic impact of 0:01:17.200 --> 0:01:19.440 the virus, but you've had something to say about the 0:01:19.520 --> 0:01:23.880 kinds of institutions and cooperation you need to respond to 0:01:23.959 --> 0:01:26.600 these kind of outbreaks. I guess one question is do 0:01:26.640 --> 0:01:30.000 you think America's health system is up to the task 0:01:30.080 --> 0:01:33.119 of dealing with this if it continues to spread? Well, 0:01:33.160 --> 0:01:36.240 if any pandemic comes along, it's very important. How good 0:01:36.319 --> 0:01:40.440 is your local public health infrastructure? Do your emergency rooms 0:01:40.440 --> 0:01:44.280 have surge capacity? Two? People trust the messages they're receiving 0:01:44.319 --> 0:01:48.640 from public health authorities rather than overreacting. Do you have 0:01:48.720 --> 0:01:51.800 the ability over longer stretches of time to gear up 0:01:51.880 --> 0:01:55.760 vaccine production once you have a vaccine? So the best 0:01:56.440 --> 0:02:00.240 way to approach remedying the costs of a pandemic it's 0:02:00.280 --> 0:02:03.480 not to quarantine everyone, which is usually not going to work, 0:02:03.760 --> 0:02:06.960 but to think about response and trust within your system 0:02:07.000 --> 0:02:10.240 and just the robust, decentralized properties of how you're going 0:02:10.240 --> 0:02:13.520 to deal with all of the various small issues. And 0:02:13.600 --> 0:02:15.960 if you just we're just thinking domestically here. I mean, 0:02:15.960 --> 0:02:18.640 there's obviously is a big international anguera, but within America, 0:02:19.040 --> 0:02:23.200 you know, we tend to think that faith in government institutions, 0:02:23.280 --> 0:02:28.880 investment in um public infrastructure has got worse over the 0:02:28.960 --> 0:02:31.959 last few years. Is that something that will then sort 0:02:31.960 --> 0:02:34.919 of feel feel, particularly the impact of with the spread 0:02:35.000 --> 0:02:36.880 of this kind of virus, or do you think actually 0:02:36.960 --> 0:02:39.400 was still in a fairly good shape. Well, we did 0:02:39.440 --> 0:02:42.359 some pandemic planning around two thousand six when there was 0:02:42.400 --> 0:02:45.239 a possibility that a v and fluid spread, and it 0:02:45.520 --> 0:02:48.640 turns out that was not a major emergency. But in 0:02:48.680 --> 0:02:50.880 some ways we're in a better position than we were 0:02:51.520 --> 0:02:54.600 I say, twenty years ago. Keep in mind, a lot 0:02:54.600 --> 0:02:57.200 of the planning is not just public sector, it's also 0:02:57.320 --> 0:03:00.880 private employers. So say, for instance, at schools are shut 0:03:00.919 --> 0:03:04.360 down and children stay at home, a lot of parents 0:03:04.400 --> 0:03:07.680 can't get to work. Are there robust workforce plans in place? 0:03:07.760 --> 0:03:10.280 For instance? And you were asked before you know, how 0:03:10.320 --> 0:03:13.480 ready are we for this? No one is ever quite 0:03:13.480 --> 0:03:17.280 ready for a major pandemic if that turns out to 0:03:17.320 --> 0:03:20.040 be the case. And again we still don't know, but 0:03:20.080 --> 0:03:22.720 I think there's a lot of improvisation along the way, 0:03:22.880 --> 0:03:26.120 and I'm cautiously optimistic that the United States at least 0:03:26.440 --> 0:03:29.280 is in a better position than many other countries. Well, 0:03:29.320 --> 0:03:30.959 it's interesting you to say that. I mean in China, 0:03:31.000 --> 0:03:34.320 obviously there is there's often been concerned, and we had 0:03:34.360 --> 0:03:38.080 we saw it with Stars that local officials don't have 0:03:38.160 --> 0:03:41.400 the right incentives to get ahead of crisis and certainly 0:03:41.440 --> 0:03:45.280 to be open about something when it's first starting. It 0:03:45.280 --> 0:03:48.360 seems to have have been a bit more transparent in response 0:03:48.400 --> 0:03:52.520 to this virus, but the levels of social trust and 0:03:52.560 --> 0:03:55.880 the sort of local institutions and not is not necessarily 0:03:56.280 --> 0:03:57.960 as high as it is in the U S. Where 0:03:57.960 --> 0:04:01.320 do you think China stands on that. Well, they're doing 0:04:01.960 --> 0:04:05.320 some things quite effectively at the national level. They're trying 0:04:05.320 --> 0:04:08.600 to be transparent. You've probably read the stories about them 0:04:08.600 --> 0:04:11.360 trying to erect a hospital in six days in Wuhan, 0:04:11.920 --> 0:04:14.080 and that sounds good, but they don't have the doctors 0:04:14.160 --> 0:04:16.919 to staff the hospital. Health Care has been one of 0:04:17.040 --> 0:04:20.599 China's weakest points for a long time. So I think 0:04:20.839 --> 0:04:24.400 mostly they're very badly prepared compared to how well they 0:04:24.440 --> 0:04:27.200 do certain other things, like say putting up buildings quickly 0:04:27.320 --> 0:04:30.279 or doing high speed rail. If I think from an 0:04:30.320 --> 0:04:34.080 economic standpoint, you know, the state of international economic cooperation, 0:04:34.360 --> 0:04:36.320 it feels like it's worse than it was. I mean, 0:04:36.360 --> 0:04:39.440 the levels of kind of mutual trust between leaders as 0:04:39.520 --> 0:04:43.520 worse than it was a few years ago. How's the 0:04:43.560 --> 0:04:46.840 international health cooperation? I mean, is that something? Obviously it's 0:04:46.920 --> 0:04:49.360 very important at times like this for countries to work together. 0:04:50.279 --> 0:04:53.039 I think a lot of the recent international problems will 0:04:53.080 --> 0:04:55.919 go away in light of an emergency. If this turns 0:04:55.960 --> 0:04:58.560 out to be one. In some ways, it could bring 0:04:58.600 --> 0:05:03.400 the United States and China closer together again. So within 0:05:03.440 --> 0:05:07.480 the United States, pandemics typically have been bipartisan issues. So 0:05:07.520 --> 0:05:10.160 there's so much talk about how we're polarized, but the 0:05:10.240 --> 0:05:13.320 response so far in this country has been quite transparent 0:05:13.720 --> 0:05:16.800 and not a political issue per se. I'm heartened by 0:05:16.800 --> 0:05:21.479 your optimism. I mean, it's qualified arguments. Some chance, you know, 0:05:21.600 --> 0:05:23.680 quite a few more people will die. We don't know 0:05:23.839 --> 0:05:26.520 what that chance is, and much of that we can't 0:05:26.520 --> 0:05:28.479 stop no matter what we do. And of course we 0:05:28.480 --> 0:05:32.080 should remember how many many people die of influenza every 0:05:32.200 --> 0:05:35.280 year um and become part of our system. I mean, 0:05:35.320 --> 0:05:38.480 I guess finally, just we when we again, when we 0:05:38.520 --> 0:05:41.080 worry about maybe the changes that have happened in the 0:05:41.200 --> 0:05:43.680 US and other places in the last few years. You know, 0:05:43.800 --> 0:05:47.520 social media we now worry, you know, takes a particular 0:05:47.520 --> 0:05:51.320 political trend and then makes it worse, tends to magnify it. 0:05:51.560 --> 0:05:55.760 Could it also magnify the downsides of this epidemic, for 0:05:56.200 --> 0:05:59.920 by spreading fear misinformation? Is that something we can worry about. 0:06:01.440 --> 0:06:03.600 We should worry about it. But I am hopeful so 0:06:03.640 --> 0:06:07.359 far that social media will do more good than harm 0:06:07.360 --> 0:06:10.760 and does give people accurate information if you know where 0:06:10.839 --> 0:06:13.880 to find it. I would just suggest to listeners not 0:06:14.000 --> 0:06:16.960 to jump at scare stories, not to panic. Make sure 0:06:17.000 --> 0:06:20.600 anything you're reading or passing along actually is true. If 0:06:20.640 --> 0:06:23.479 there's anything that makes a response to a public health 0:06:23.520 --> 0:06:26.640 problem worse, it is false information and panic. And the 0:06:26.760 --> 0:06:30.640 same thing applies to the many remedies that are already 0:06:30.680 --> 0:06:33.440 coming online as well. Tyler Cohen, thank you very much 0:06:33.480 --> 0:06:41.279 for joining us. Thank you m h. Now let's turn 0:06:41.279 --> 0:06:44.200 to that special project I mentioned for once. We wanted 0:06:44.200 --> 0:06:47.240 to get past those breathless headlines about trade wars and 0:06:47.279 --> 0:06:49.720 trade flows to see the nuts and bolts of the 0:06:49.760 --> 0:06:53.080 global trading system up close. So on a single day, 0:06:53.440 --> 0:06:57.080 December fourth, last year, reporters around the world went to 0:06:57.080 --> 0:07:01.200 a particular place in the global trading system. Watch, listen 0:07:01.400 --> 0:07:03.880 and learn who went to the banks of the Mississippi 0:07:03.920 --> 0:07:06.479 in a French vineyard in the Rhone Valley, the Nigeria 0:07:06.560 --> 0:07:09.560 Benin border, and the Panama Canal, the West Bank, a 0:07:09.680 --> 0:07:13.360 shopping mall in downtown Tokyo, and a favorite meeting point 0:07:13.440 --> 0:07:17.040 for Chinese tourists in Sydney Harbor, all on the same day. 0:07:17.240 --> 0:07:20.000 And we learned a lot more than I can describe 0:07:20.080 --> 0:07:22.680 right now. But here's a taste from our chief Asian 0:07:22.680 --> 0:07:39.600 Economy reporter and the current in Hong Kong. Oh, thank 0:07:41.600 --> 0:07:44.520 that noise you hear is the sound of global commerce 0:07:44.640 --> 0:07:47.280 in action. The Port of Hong Kong is one of 0:07:47.320 --> 0:07:50.720 the biggest shipping junctions in the world. On this morning 0:07:50.720 --> 0:07:53.960 in December, it's a buzz as hundreds of employees pour 0:07:54.080 --> 0:07:58.040 in for their shift, crane's load and unload containers onto 0:07:58.040 --> 0:08:02.560 trucks and chips. Overall, there are six thousand direct employees 0:08:02.680 --> 0:08:05.520 at the port and in estimated one hundred and eighty 0:08:05.560 --> 0:08:14.200 thousand in related roads. On this day, there are a 0:08:14.240 --> 0:08:16.800 few obvious signs of the trade war between the US 0:08:17.040 --> 0:08:20.520 and China. It might look like business as usual, but 0:08:20.680 --> 0:08:23.080 Hong Kong has been caught in the middle of trade 0:08:23.120 --> 0:08:27.800 and political tensions between the world's two largest economies. And 0:08:28.000 --> 0:08:30.640 that is not all volumes in Hong Kong have been 0:08:30.640 --> 0:08:32.719 on the decline to the last several years, so it's 0:08:32.720 --> 0:08:35.440 hard to pinpoint everything on the trade war. There are 0:08:35.480 --> 0:08:39.679 other issues here. Peter Levesque is the CEO of Modern Terminals, 0:08:39.720 --> 0:08:43.040 one of the companies that runs Hong Kong's port. When 0:08:43.040 --> 0:08:45.360 I talked with him, he was about to return to 0:08:45.400 --> 0:08:48.320 the US in a different role, but as twenty five 0:08:48.440 --> 0:08:52.520 years in Asia and makes his perspective valuable. Levesque was 0:08:52.559 --> 0:08:55.520 noting that not all of the decline and volumes reflects 0:08:55.520 --> 0:08:59.680 the barrage of higher turiffs. There's also stiffer rivalry from 0:09:00.040 --> 0:09:03.640 person Asia slowing global demand, as well as their rise 0:09:03.720 --> 0:09:08.120 of Chinese and regional competition. The uncertainty pieces is something 0:09:08.160 --> 0:09:10.679 that businesses don't really like to deal with, and and 0:09:10.840 --> 0:09:12.319 you want to do a three and a five year 0:09:12.360 --> 0:09:15.560 strategic plan. We're trying to do, you know, plans that 0:09:15.720 --> 0:09:17.880 last one or two weeks depending on you know, which 0:09:17.920 --> 0:09:21.720 tweet comes out, and it's very difficult to try to 0:09:21.760 --> 0:09:24.559 get a handle on on you know, what to expect 0:09:24.600 --> 0:09:27.320 and what we're trying to do is just deal with 0:09:28.080 --> 0:09:32.880 what's in our control. While Hong Kong may no longer 0:09:32.920 --> 0:09:36.200 be the merchandise trade conjured for China that it once was, 0:09:36.600 --> 0:09:39.400 it remains a vital source of capital and know how, 0:09:40.280 --> 0:09:43.960 trading and logistics accounted for around twenty one of the 0:09:44.080 --> 0:09:52.000 territories economy in two thousand and eighteen. On the ports 0:09:52.040 --> 0:09:55.359 key side, I climbed a crane to watch the operators 0:09:55.400 --> 0:09:59.200 doing their jobs. Perched in their cockpits about twelve stories 0:09:59.280 --> 0:10:02.199 off the ground. They are pulling and prodding levers to 0:10:02.320 --> 0:10:05.000 maneuver containers onto and off of the ships. The guys 0:10:05.040 --> 0:10:08.000 in the cranes they can see for themselves whether there's 0:10:08.040 --> 0:10:11.439 a ship underneath or not. And the fewer ships, you know, 0:10:11.520 --> 0:10:14.440 they certainly talk about that they know that the state 0:10:14.440 --> 0:10:30.079 of the market is. Of course, Hong Kong's economic relationship 0:10:30.160 --> 0:10:33.440 with China is about more than just a shipment of goods. 0:10:34.080 --> 0:10:37.959 Months of political protests have raised questions about the degree 0:10:37.960 --> 0:10:40.720 of autonomy that Hong Kong is supposed to have and 0:10:40.880 --> 0:10:44.040 what the political relationship with Beijing will be like the 0:10:44.120 --> 0:10:53.240 common US. Ben Bland is a research fellow with the 0:10:53.360 --> 0:10:56.960 Lower Institute, a think tank in Australia. He's also a 0:10:57.080 --> 0:11:01.480 former journalist in China. I asked him why Hong Kong 0:11:01.600 --> 0:11:05.360 still retains a key economic role for China. Where it 0:11:05.440 --> 0:11:08.160 is really important is as a connector for the financial 0:11:08.200 --> 0:11:10.800 markets between China and the rest of the world, and 0:11:10.840 --> 0:11:13.719 particularly given that we've seen these efforts, initial efforts to 0:11:14.000 --> 0:11:16.360 open up China's capital account to open up the R 0:11:16.440 --> 0:11:18.720 and B kind of stall in the last five years. 0:11:19.120 --> 0:11:20.800 R and B stands for M, M and B, the 0:11:20.920 --> 0:11:23.880 name of China's currency. The nation has been trying to 0:11:23.960 --> 0:11:26.960 promote the use of it globally, but the currency remains 0:11:27.000 --> 0:11:30.880 under tighter control than the US dollar. Hong Kong really 0:11:31.000 --> 0:11:34.520 retains its importance as that key valve, if you like, 0:11:34.720 --> 0:11:43.880 for flows of capital both out of and into mainland China. Yeah. 0:11:46.920 --> 0:11:50.200 I also recently visited the Hong Kong Toy and Baby Fair, 0:11:50.640 --> 0:11:54.000 the world's second larger show of its kind. Hong Kong 0:11:54.040 --> 0:11:57.360 continues to be a vital cog in that industry. Even 0:11:57.440 --> 0:12:00.720 though the territory has long ceased to be the world's 0:12:00.800 --> 0:12:05.080 toy factory, much of the production has merely shifted next 0:12:05.120 --> 0:12:09.000 door to the province of Gongong in mainland China, while 0:12:09.040 --> 0:12:14.360 Hong Kong remains the region's banking captain. The message from 0:12:14.440 --> 0:12:19.120 organizers was upbeat. Trade officials expect the recent Phase one 0:12:19.160 --> 0:12:23.040 accord to boost export of toys from Hong Kong, and 0:12:23.200 --> 0:12:26.040 they say the holiday shopping season was good, but you 0:12:26.080 --> 0:12:29.160 can still sense the competition the port is facing. Chipping 0:12:29.160 --> 0:12:32.600 cost from shan Jen is chipped in Hong Kong. Ken 0:12:32.679 --> 0:12:36.360 Quok is the chief operating officer of three zero, a 0:12:36.480 --> 0:12:40.680 Hong Kong based company that specializes in action figures from 0:12:40.720 --> 0:12:45.080 popular shows such as Transformers and Game of Thrones. Like 0:12:45.160 --> 0:12:48.920 so many it makes its goods in mainland China. Now 0:12:49.200 --> 0:12:52.559 instead of Hong Kong. More of his customers are choosing 0:12:52.559 --> 0:12:55.400 to have their goods shipped out of Shenzen, which is 0:12:55.440 --> 0:12:59.320 just across the border in the mainland. Secondary is because 0:12:59.400 --> 0:13:03.720 most of the our manufacturer shoot out their products in 0:13:03.920 --> 0:13:08.520 China so that they they can consolidate the groods in 0:13:08.679 --> 0:13:12.600 China's warehouse and China warehouse off cause there's lower price 0:13:12.640 --> 0:13:20.040 than Hong Kong. In one way, the toymakers at the 0:13:20.080 --> 0:13:23.640 trade show have dodged a bullet. The recent deal took 0:13:23.720 --> 0:13:27.360 tarts from toys off the table, but the exhibitors are 0:13:27.400 --> 0:13:29.840 still aware of their risk of tariffs may come back 0:13:29.920 --> 0:13:34.120 later and they are planning accordingly. That means considering where 0:13:34.120 --> 0:13:37.560 to move their supply chains. I dropped by the booth 0:13:37.679 --> 0:13:41.440 of good Baby International, a maker of strollers, car seats 0:13:41.440 --> 0:13:45.640 and other baby products. Amy Goo, the company's general manager 0:13:45.679 --> 0:13:48.959 for Asia Pacific, says the company has manufacturing in both 0:13:49.080 --> 0:13:52.440 China and the US, but she has been pitched by 0:13:52.440 --> 0:13:55.840 officials from Saudi Arabia. The company has also looked at 0:13:55.880 --> 0:14:01.079 manufacturing options in Southeast Asia light and we are consideringly 0:14:01.120 --> 0:14:03.920 because it's not an easy move that the change the 0:14:03.960 --> 0:14:09.280 manufacturing facility to another country, but we are investigating this 0:14:09.920 --> 0:14:13.840 so it could be a potential area for the new 0:14:13.880 --> 0:14:18.200 manufacturing base. That theme of the difficulty in shifting supply 0:14:18.320 --> 0:14:22.160 chains is a recurring one. I actually met an international 0:14:22.240 --> 0:14:25.520 yo yo superstar at the toy fair. His name is 0:14:25.560 --> 0:14:28.680 Hans Van dan Elson, and he's also president of a 0:14:28.760 --> 0:14:32.320 yo yo maker called yo Yo Factory. They're high end 0:14:32.360 --> 0:14:36.040 yoyo's can fetch up to three dollars. I travel the world. 0:14:36.040 --> 0:14:38.120 I teach children how to play yoyo. I'm a professional 0:14:38.160 --> 0:14:40.800 Yoyo instructor. I've been in the Guinness Book three times. 0:14:41.760 --> 0:14:45.760 Van dam Elson creates and designs his products in Arizona, 0:14:46.120 --> 0:14:49.200 but the yo Yo factory itself is actually in Shenzhen. 0:14:50.160 --> 0:14:53.360 I asked him if he's considering moving his manufacturing base 0:14:53.440 --> 0:14:56.240 somewhere else. I want you to imagine a scenario where 0:14:56.240 --> 0:15:00.080 you're making a product and you constantly have to you 0:15:00.520 --> 0:15:02.960 oversee the production and make sure that everything is being 0:15:02.960 --> 0:15:06.520 made correctly, and you're very concerned about that. But imagine 0:15:06.520 --> 0:15:09.400 a scenario where the factory is actually selling the product 0:15:09.400 --> 0:15:11.680 and helping you distribute it. And in my case, I 0:15:11.720 --> 0:15:14.760 make yo yos. So if the children in China are 0:15:14.840 --> 0:15:17.960 directly communicating back to the factory and they're complaining, hey, 0:15:18.000 --> 0:15:20.440 there's a problem, the factory is already on top of 0:15:20.480 --> 0:15:22.960 any problems that are happening, and so I get the 0:15:23.000 --> 0:15:27.600 benefit of of that scenario where the quality control is 0:15:27.640 --> 0:15:30.880 happening right there in China um and there the factory 0:15:30.920 --> 0:15:33.120 is actually telling me when there's problems, rather than me 0:15:33.240 --> 0:15:36.880 chasing the factory. And of course I couldn't help but 0:15:36.960 --> 0:15:40.240 ask him to demo a yo yo. So this is 0:15:40.280 --> 0:15:42.920 like a very professional Yelio sales for twenty five dollars 0:15:42.960 --> 0:15:45.120 per hand. And when I say per hand, we actually 0:15:45.160 --> 0:15:47.920 play with Yoyo's two yeos, you know, one in each hand. 0:15:48.080 --> 0:15:51.520 Sometimes the yoos actually spin off the string. Okay, so 0:15:51.520 --> 0:15:53.200 you can play on string a string, you can play 0:15:53.240 --> 0:15:56.080 the two yalios. You could say that yo yo is 0:15:56.120 --> 0:15:59.160 a metaphor for what these manufacturers have been through into 0:15:59.200 --> 0:16:02.920 past two years, swinging repeatedly between the tower of threats 0:16:03.200 --> 0:16:06.520 and hopes of trade peace. On top of that, the 0:16:06.680 --> 0:16:09.080 protests in Hong Kong show a little sign of fading. 0:16:09.960 --> 0:16:12.240 It all adds up to a less certain future for 0:16:12.320 --> 0:16:16.560 Hong Kong's unique status as a critical economical link between 0:16:16.720 --> 0:16:20.320 China and the rest of the world. Here's the lower 0:16:20.400 --> 0:16:24.600 Institute spend bland again. People are less confident about investing 0:16:24.640 --> 0:16:27.760 in the future because the political relationship is so important 0:16:27.760 --> 0:16:31.000 to Hong Kong's future. Has long been this bridge, as 0:16:31.000 --> 0:16:33.600 I was saying, between China and the outside world, and 0:16:33.760 --> 0:16:36.240 in a different, happier time, that was a great advantage. 0:16:36.240 --> 0:16:39.400 But now, partly because of the domestic tensions and partly 0:16:39.440 --> 0:16:42.440 because of the outside environment, the US China tensions. Being 0:16:42.560 --> 0:16:45.720 stuck between the US and China between the rest of 0:16:45.760 --> 0:16:51.640 the world, and China doesn't necessarily look that advantageous for 0:16:51.680 --> 0:17:05.000 Bloomberg News. I am end the current the economics of 0:17:05.040 --> 0:17:07.760 the Yo Yo there from ender current. I wonder how 0:17:07.760 --> 0:17:10.120 many of you saw that metaphor coming down the track 0:17:10.160 --> 0:17:12.679 a mile off now. I mentioned at the start that 0:17:12.800 --> 0:17:15.760 enders peace from the Hong Kong Docks was part of 0:17:15.800 --> 0:17:19.560 a special project we did for Bloomberg Markets magazine, chronicling 0:17:19.560 --> 0:17:22.280 a single day in the life of global trade, and 0:17:22.280 --> 0:17:25.080 it's well worth a read, and so is the guest 0:17:25.280 --> 0:17:28.320 essay we also have in that special issue on trade 0:17:28.760 --> 0:17:33.440 by HSBC senior advisor and former Chief Global economist Stephen King. 0:17:33.920 --> 0:17:36.399 Some of you might remember Stephen spoke on our panel 0:17:36.400 --> 0:17:39.280 at the New Economy Forum in Beijing a few months ago. 0:17:39.960 --> 0:17:42.960 I wanted to talk here in our last episode of 0:17:42.960 --> 0:17:46.600 the series of Stephanomics about your essay, Stephen, because it 0:17:46.680 --> 0:17:50.080 raises I think some some really profound questions about the 0:17:50.080 --> 0:17:53.479 future of the global economy. Thanks for writing it for us, 0:17:53.520 --> 0:17:56.560 Thanks for being here. We asked a lot of people 0:17:56.560 --> 0:17:58.640 in the same issue whether they thought we were at 0:17:58.800 --> 0:18:02.760 peak globalization and lots of important things You're not engaging 0:18:02.760 --> 0:18:05.160 with that directly in this piece, But you do have 0:18:05.200 --> 0:18:09.960 somber things to say about the direction that globalization might 0:18:10.000 --> 0:18:11.439 be heading in. Do you want to give us a 0:18:11.520 --> 0:18:13.760 very quick summary and then we can get into some 0:18:13.880 --> 0:18:16.440 of the what lies underneath it. Yes, of course. So 0:18:17.119 --> 0:18:20.200 globalization is something which I think ten fifteen years ago 0:18:20.240 --> 0:18:24.520 people thought we're just naturally advanced. Through technological change of 0:18:24.560 --> 0:18:27.080 one sort from another, we've become ever more integrated over 0:18:27.160 --> 0:18:30.560 periods of time. But history suggests there are different kinds 0:18:30.560 --> 0:18:33.919 of globalization. The kind we've been living through over the 0:18:33.960 --> 0:18:37.439 last few decades is all about building global supply chains, 0:18:37.640 --> 0:18:42.560 about connecting countries and industries more closely around the world. 0:18:42.560 --> 0:18:44.719 That might have been the case in the past. If 0:18:44.760 --> 0:18:46.560 you go back to the nineteenth century, you find a 0:18:46.640 --> 0:18:50.320 very different version of globalization, which was really associated with 0:18:51.080 --> 0:18:54.600 it's a horrible word to use, but the agglomeration of activity, 0:18:54.800 --> 0:18:57.440 so factory has all been built in say the UK, 0:18:57.760 --> 0:19:01.320 or in parts of Germany or France, and the economies 0:19:01.320 --> 0:19:03.440 are scale that these factories gained was such that it 0:19:03.520 --> 0:19:06.920 put industry out of business in countries like India and China. 0:19:07.280 --> 0:19:09.240 So what you saw in the nineteenth century was a 0:19:09.280 --> 0:19:14.840 story of some countries posting significant industrial advance and other 0:19:14.880 --> 0:19:18.639 countries posting exactly the reverse. They became poorer and poorer, 0:19:18.720 --> 0:19:21.800 they kind of de industrialized, they went back to rural 0:19:21.800 --> 0:19:25.280 poverty in many cases. So in India had completely de 0:19:25.359 --> 0:19:27.879 industrialized in this period. Absolutely. So you go back to 0:19:27.960 --> 0:19:32.680 the eighteenth century, India was one of the dominant producers 0:19:32.720 --> 0:19:35.800 of textiles around the world, and by around that nine 0:19:36.200 --> 0:19:39.359 hundred had lost that position completely, largely because of the 0:19:39.400 --> 0:19:43.560 impact of steam and factory technologies being used, particularly i 0:19:43.560 --> 0:19:46.680 would say, in England. So the consequence was that even 0:19:46.680 --> 0:19:51.440 as Europe industrialized, China and India de industrialized, and in fact, 0:19:51.480 --> 0:19:55.480 you go back to the data, late eighteenth century, China 0:19:55.480 --> 0:20:00.520 and India together accounted for almost sixty of global manufacturing output, 0:20:00.960 --> 0:20:03.639 and by was down to about five percent or so. 0:20:04.560 --> 0:20:06.400 And look, the key to this, I mean, I guess 0:20:06.440 --> 0:20:08.640 now we want to know because as you point out, 0:20:08.680 --> 0:20:11.480 there was that model of globalization which kind of increased 0:20:11.520 --> 0:20:14.399 the gaps between the successful and the unsuccessful parts of 0:20:14.400 --> 0:20:17.639 the world. And then the more recent period of globalization 0:20:17.720 --> 0:20:21.560 where actually you had it was more more equalizing, it 0:20:21.640 --> 0:20:24.680 was more you were dispersing income across across the world. 0:20:24.720 --> 0:20:26.240 And of course, you know, people might think that sounds 0:20:26.240 --> 0:20:28.399 odd because we always talk about rising inequality, But the 0:20:28.440 --> 0:20:32.360 gap between rich and poor countries has got narrowed, has 0:20:32.400 --> 0:20:34.920 got smaller, even the gap between the rich and poor 0:20:35.000 --> 0:20:37.480 within countries has tended to get bigger. Yes, it's one 0:20:37.520 --> 0:20:40.960 of the paradoxes of globalization that the gap between nations 0:20:41.000 --> 0:20:43.440 has definitely narrowed. It's what happens when you've got China 0:20:43.520 --> 0:20:49.280 growing it for a while per year, Indo growing at 0:20:49.280 --> 0:20:51.280 maybe six or seven percent a year. When you've got 0:20:51.280 --> 0:20:53.399 those kinds of growth rates coming through inevitable, you're going 0:20:53.440 --> 0:20:56.760 to see some kind of convergence of economic activity. But 0:20:56.800 --> 0:20:59.399 it equally is true that within countries you've seen this 0:20:59.600 --> 0:21:03.400 big growth of inequality. And part of that within country 0:21:03.440 --> 0:21:07.680 story I think might eventually apply across countries too. And 0:21:08.000 --> 0:21:10.159 the reason for that is that within countries, it's not 0:21:10.200 --> 0:21:12.840 just about the impact of globalization shutting down factories and so, 0:21:12.920 --> 0:21:15.359 and it's also about the impact of technology. The technology 0:21:15.680 --> 0:21:19.199 through robotics and artificial intelligence and sold has led to 0:21:19.800 --> 0:21:23.040 a huge reduction the number of people employed in a 0:21:23.119 --> 0:21:27.160 variety of different industries in manufacturing most obviously, but also 0:21:27.200 --> 0:21:30.119 increasingly in clerical jobs and so on. Um and what 0:21:30.200 --> 0:21:32.520 happens with these people lose their jobs in those particular 0:21:32.560 --> 0:21:36.200 industries and then find new jobs, but often the lower 0:21:36.359 --> 0:21:41.000 rate of pay. So you end up with maybe a 0:21:41.040 --> 0:21:43.320 limited number of people who are you know, the Facebook 0:21:43.359 --> 0:21:46.680 founders or the WhatsApp founders or whatever, who do incredibly well. 0:21:46.760 --> 0:21:48.720 But at the same time there's large numbers of people 0:21:48.800 --> 0:21:51.280 have been in Once it's left behind. I think what 0:21:51.400 --> 0:21:55.359 is true within countries may begin to also apply across 0:21:55.400 --> 0:21:59.120 countries too, because of the impact of robotics in reversing 0:21:59.160 --> 0:22:01.600 global supplied So we might now go to a point 0:22:01.640 --> 0:22:04.600 where there's more it's winners and losers across the global 0:22:04.640 --> 0:22:08.199 economy rather than I mean, the great justification and the 0:22:08.320 --> 0:22:10.920 case for globalization in the last twenty years has been 0:22:10.920 --> 0:22:13.240 the kind of convergence we were talking about. The good story, 0:22:13.320 --> 0:22:15.960 you know, the ex million people who've been lifted out 0:22:15.960 --> 0:22:18.040 of poverty is always the sort of number one part 0:22:18.080 --> 0:22:20.720 of the justification or that, yes, the pros of of 0:22:20.760 --> 0:22:25.000 globalization if we are if if the technology we're seeing 0:22:25.040 --> 0:22:28.159 now is going to shift us more back to that 0:22:28.280 --> 0:22:31.240 nineteenth century pattern that you were talking about where that 0:22:31.280 --> 0:22:33.760 success is sort of concentrated in different parts of the world, 0:22:33.840 --> 0:22:36.919 because the winners, the winning places are not necessarily going 0:22:36.920 --> 0:22:39.880 to be the same as they were in the nineteenth century. 0:22:40.160 --> 0:22:42.639 Quite possibly not. I mean, you'd certainly argue perhaps that 0:22:43.080 --> 0:22:45.879 parts of North America and Europe would still emerge as 0:22:46.200 --> 0:22:49.760 winners in the story. It also adds I think countries 0:22:49.760 --> 0:22:52.720 like China that would emerge as winners from the story. 0:22:52.760 --> 0:22:55.199 But there are countries and regions around the world that 0:22:55.240 --> 0:22:58.479 have not really properly engaged with global supply chains as 0:22:58.600 --> 0:23:01.760 yet kind of ing up to get to be part 0:23:01.840 --> 0:23:05.720 of that story. But arguably they're not going to get there, 0:23:05.800 --> 0:23:10.000 because if you're a company thinking of investing internationally, might 0:23:10.080 --> 0:23:13.440 choose to invest in the country that itself is quite risky. 0:23:13.640 --> 0:23:16.120 We might instead decide that you can do the same 0:23:16.200 --> 0:23:19.440 thing at home using robots and AI rather than cheap 0:23:19.480 --> 0:23:22.639 workers abroad. And if you think about late twenties century 0:23:22.640 --> 0:23:25.359 globalization was very much a story of capital going in 0:23:25.480 --> 0:23:30.680 search of that nice combination of relatively cheap but productive workers, 0:23:30.720 --> 0:23:32.840