Covid’s Long Year of Economic Destruction

the world in Brazil, Canada, Mauritius, and Moscow. The economist and author Dan Bisa Moyo. It is also going to tell me how things look from her perch on the board of two major global companies. But first, we surely have to talk about the Suez Canal. Now, regular listeners of Stephonomics will know we have a fascination with the basic plumbing of the globe of economy, and especially container ships.

This is usually a minority sport, but in the past couple of weeks the whole world has been getting into the subject thanks to the Ever given that massive container ship which got stuck on the Sewers Canal, it was longer than the Eiffel Tower, weighed two and twenty thousand tons. It was freed eventually this week, but not before causing a massive traffic jam on the most important strip of

water on the planet. Our chief energy correspondent, have you a blast, understood better than most what was at stake in this snarl up. He's with me now, have you. Let's start with a quick update that the ship has been freed, but how long will we be living with the after effects? It's going to take a few days to definitely need to clear. There are about four hundred bestsells waiting on both sides north and south of the canal, and a few actually the wet trap inside the canal

and what we call the Baad legs um. It's just probably going to take a good week before things go back to normal because the Egyptian authorities, first of all, they need to clear all that backlog and then also deal with the usual fifty to sixty vessels a day that that that call onto the Swebt Canal to to translate. So it's not just clearing the they accumulated a number

of vessels. It's also just starting to a low passage of the of the vessel that regularly crossed, So I would think that things will get normal by the middle of April. That's probably the easiest. And and I suspect that they authorities are going to be a bit more caucious, particularly we have strong winds which are seasonally a strong this time of the year in in in that part of of of the canal. They don't want, certainly to see another vessel running the ground, So I think that

they're going to be extremely caucious. Well, I was surprised looking at one of your articles about this, and you certainly pointed up about the weather that the wind is quite happens quite a lot that you get that kind of wind, But I was struck by how difficult it sounded to actually go through. So it's canal. You think it would be something that pilots and of these ships would be quite relaxed about, but they were saying it's

it's pretty difficult every time. It's quite eaceiving because you see and and and it looks quite quite easy, a strip of dessert on both sides of the canal, a channel of water, and and and it's not open sea, it's a canal, so it's it's almost like a pond. Do you think what could go wrong? Well, many things

go wrong, and it's very narrow. Um. The deepest part of the canal, which is the part of these vessels and the big oil tankers need, is about two only wide, and these pasils are about fifty to sixty Why so there is not a lot of another lot of runoff maneuver to to make a mistake, So a distraction, a human error, a strawn push of the wind. And then is also the fact that, in the case of the ever Given, was not using an escort took boat, which is normal for vessels of that size. We don't know

why it was not. It was not a legal requirement by the canal. But but we know that the two vessels in front of the ever Given, we're using one, and probably if a talk aboat have been there, it will have been most likely able to prevent the accident of at least minimize the grounding of the ever Given. Um. But yes, I spoke to several captains who have crossed the Sweat canal many, many, many times, and they say, there it's quite the sivin and it can be quite tricky.

Should we be surprised that it doesn't happen more often. I mean, this feels like the first time it's happened in a long time. It is actually the longest closure of the canal since the six Day watered in nineteen sixties seven. At that time the canal was closed for eight years. In mind, in the world of today, we have to face an eight year closure of the of the of the Sweat Canal. I mean, certainly we could say goodbye to to click on Amazon dot Com and

getting achievement the following day with whatever we want it. Mhm. So you mentioned Amazon. I mean this is one of those things that once caught short. You know that there's this disconnecting the global economy that seems more and more stark between. We live in this kind of cyber age one touch internet shopping on the one hand, but we're still also living still in the age of ships and crates and cranes, and that the two very much reliant

on one another. Yes, the reminder of the of the events of recent days of the canal have been that is still the wall needs physical goods, and those goods, whether they are commotives or they are consumer goods, and they're transported in a container. They need to be sheep over great distances and that is mostly done by by by bye see. And that requires an enormous infrastructure that we often take for granted. It needs a functioning imports in China and the workshops of of Asia. It needs

functioning shipping lines. It needs obviously the Sweb Canal, and it needs also ports and custom officials able to clear all these enormous amount of traffic that is coming into the consumer countries in the West, whether it's Europe, of the United States, Canada, etcetera, etcetera. And and that infrastructure we take it for granted, but a lot of it

it creates chalk points. It's not used the Sweatcanal. There are other geographical points like the Strait of Malacca or pipelines for oil or ports that they really are essential for the global economy. And and a problem there and all of the sudden that kind of new economy that we have got used to, particularly in this last year of the pandemic, where we can buy everything online, will

will suffer and it will become impossible to sustain. It is interesting though, because the SERIEUS Canal has what's going through the service can has changed a lot in the last few decades, even though it continues to be remarkably important for world trade. And that's something I guess you're particularly attuned to because you're normally focused on the energy and commodities. But yeah, for me, if these crisis have happened twenty years ago, the big impact would have not

been on the container market. It will have been on the oil market. We have we will have seen oil prices spiking because it was the time where the Sweat Canal was the main waterway to send the Middle East oil into the consuming markets of Europe and particularly the United States. Today, that oil doesn't mean the canal because it goes to the East, it goes to India, it goes to China. So um, the the and the market. Remarkably,

we are still on the oil market. We talked about ease and words of Suez as the kind of the geographical split of the market. Many traders a specialized on ease of swept market, and that market was for many yes, a bit of a residual market. It was a big demand of Japan and South Korea. But I was about it today, Really the demand is on the East, so

the oil doesn't meet the canal. But over the last couple of decays, the canal has become more and more important for the transit of containers transporting goods that they are produced in China and other countries in Asia into the consumer markets in Europe and into into the America's

But it's still very important for certain commodities. I mean, one of our biggest concerns of the commodities team over the last few days was whether the coffee supply, which is something that I care quite a lot because I do like my Ethiopian coffee every morning, and and and coffee is transported by container and mostly from East Africa into the Sweb Canal, into the coffee roasters of Netherlands

in particular, and then to the consumers in Europe. So one of the consequences of the closure of the Web can I will have been that my my morning coffee will have been seriously disrupted, and potentially also tea, which is transported this a very same way. That could have been completely disastrous. Well, you have you've written a fantastic but with your colleague Jack Facci, about the world of commodity trading, the world for sale. It's called and apart

from just giving it a plug. I would did it did wonder whether the reporting for that book and you're reporting generally meant that you're aware of other sort of real vulnerabilities within the global economy that we might not think about now, but we could overnight suddenly realize their importance. Well, the swift kind of was one of those places where we have seen a lot of a lot of the

biggest commority traders of of this wall of today. You think about names like Beatalk, which is the worlds lagert oil trader, or Cargill the worlds lagest agricultural trader. They may money over the years at times because supply disruptions link to this swift canal. I mean, when there was war in the mid at least there was an opportunity because they were always the threat of closure of the

Swebt canal and for these traders was essential. But yeah, to me, what really reminds the Swebt Canal and researching about the role of the commoti traders is that this wall of today still requires an enormous amount of physical goods, most of them commotives, and those those goods need to be transported physically and that relies on pipelines, on pores, on export terminals, the physical assets that they are vulnerable

to any kind of disruption. It could be whether we recently so coal prices in Australia jumping just because it was the strongest range in a hundred years in that particular region of Australia. Recently we saw a drawn attack by geminy rebel hoodies into the rast and Ura terminal in Saudi Arabia that is potentially the most important real estate peace or in the oil industry, that de terminal where Saudi Arabia sport most of his oil. That was attack and destroy. We will lose about ten per cent

of global oil supply. And it's a good reminder at times that a lot of the things that we take for granted rely on physical infrastructure that could fail. And in an economy that is today more globalized and more just in time, where companies carry fewer and fewer inventories, it makes the world really suffered a lot in that loan supply chain of just in time commodities and goods

get disrupted. Of course, one of the things that did disrupt that in a big way a year ago was the pandemic, and we've been been living with the with the trade consequences and the cues of containerships, along with all of the economic and the and the public health consequence as well. Have you I suspect we could have a conversation about what, in what specifically are the most

vulnerable points of the US economy. We might get in trouble for that be giving too much away, so we will we will leave it there, but thank you very much. Thank you. M Now back to the pandemic. We asked Bloomberg economic reporters around the world to tell us what the world looked like to them after a year of living with COVID ninet. Here they are our postcards from the pandemic, starting, of course, on the beach, the world

famous Corpla Alana Beach is unusually quiet. I come here for some people watching and cocktails, but like in most of Brazil, the party has been shut down. Lockdowns are being reinstated to fight a second wave of the coronavirus. Their latest measures to try and contain one of the world's worst phrase and they're assigned that after year of pandemic, a health and physical crisis is spiraling out of control. Last week, Brazil became only the second country at the

top three thousand coronavirus deaths. Brazilians are increasingly blaming President Jay R. Bosonaro. Critics say he tried to put jobs over lives. Since the onset of the pandemic. He's played down the virus and fought restrictions while his government had pushed through one of the world's largest stimulus packages last year. It was an all out effort to keep the economy rolling, but it may have backfired. The problem is that far

less effort went into actually containing the pandemic. Now the health system is being pushed to the brink by contagious new strains of the virus, while the government scrambles to supply vaccines that stashing hopes of a speedy recovery. The central Bank recently hyped interest rates the most and more than a decade to help ease investor fears. As more aid as being dispersed, the worry goes beyond just rising

inflation in Brazil's shaky public finances. Hundreds of Brazil's top businessmen and economists recently signed a warning that the recession won't end until the pandemic is controlled. Bilsonara seems to be feeling the heat. He's still a little mail. Can't you finish? Thank you? After spending a year of voicing doubts about medical advice and vaccines, he pulled a U turn in the national address last month's declaring that would be the year of the vaccine and promising that life

would return to normal soon. Many were unconvinced. Across big cities, pots and pans clang that a former protest here called upon a lasso. I had heard a few who sends arriving to Rio, but not as loud as this one. Bolsonaro seems to be trying to change course, and he just resuffled his cabinet. Still, if he doesn't turn things around, will likely be hearing a lot more of this in Rio de Jnedo. I'm Andrew Rosatti. Here on the Indian Ocean island of Mauritias. The situation is almost identical to

a year ago. Last year we were a complete lockdown to stop the propagation of the coronavirus in this country of one point three million people. Now we are struggling through a second one. New cases are coming intense, There

are fears and choices to make. Do we need a partial reopening of non essential businesses like head dressers, or should the government impose a very strict lockdown and sanitary few There are no clear answers, but from today non essential economic activities including fast food or scheduled to be accessible again. While we debate the ifs and whatnots of COVID nineteen, the Finance Ministry is facing a dounting task.

Can you imagine? Public sector debt has sold eighty five percent of gross domestic product, far higher than the sixty percent level required by institutions like the International Monetary Fund. But this is the problem on the treasuries on making. When the pandemic hit our economy, we knew what could happen with tourism of a flagship industry being brought to a stencil. Massive layoffs would be inevitable. One estimate was four hundred thousand job losses, a huge number in this

relatively small nation that risks economic and social turmoil. Hence, the choice was made to support companies and the economitry Wage Assistant scheme Already coping with lower revenue, The treasury paid part of the wages of the private sector. When the first confinement was lifted last year, most of us rushed to spend money accrued in our accounts, But after that initial adronal in rush of shopping, we became more cautious in spending as the economy was still wrobbly with

only uncertainty insight. Now we are in a second lockdown and the tourism industry is still on life support. The government has dispersed about seventy five million dollars, with more money expected, but this time we don't expect the prolaunched geniversity from the government that other countries are seeing. Even as Mauritius tries to clow its way out of its biggest clop in forty years, the treasury is already trying

to cut spending. Now. The money needs to be spent in a way that will help desil in economy onto the path of recovery, and such a path, as all Mauritians would agree, is still a distant line. We are far from herd immunity and vaccines are getting scarce on the world market, but we are playing on our diplomatic ties with India, China, Russia. If not, just like our confinement will be lengthened and there will be more cattle

on our beach than people. A knife in the heart for our tourism reliant economy in Mauritius um Comers book. Since the earliest days of the pandemic, Canadians were looking at the US with shock at how the pandemic was unfolding there. The US was seen an explosion of COVID cases and deaths in hospitals were getting overrun well. Canada at the time was able to keep its case counts

relatively low last spring and throughout the summer. But it's now been more than a year into the pandemic in parts of Canada are experiencing a third wave which is threatening even more lockdowns. Well south of the border in the US, many states have reopened and back seeing rollouts

are accelerating. So in a way, Canadians have gone from looking at the US with complete horror to now looking south and seeing their counterparts being able to get vaccinated and able to enjoy activities that some Canadians still can't, like eating inside a restaurant or going to a yoga class.

I've been able to witness this change in the tone of Canadians from being accepting of the lockdowns in the beginning to now feeling frustration around the government's policies and how they have not been able to figure out a

way to reopen safely. I actually returned to Texas, where my family lives, during the holidays around in December, and that was around the time when Canada's most populous provinces, Ontario and Quebec, we're experiencing a second wave of virus cases and they decided to shut everything down again for more than a month. So the restrictions were even tighter than what they experienced last spring. In Texas. Why was there the governor announced everything could return to a percent

capacity and they ended the mass mandate. While they're on Ontario, you couldn't go inside a non essential store. So certainly Canada's tighter restrictions have meant a better health outcome, even though they have been less restrictive on people's personal freedoms. Canada has had fewer deaths and case counts per million people in the US, but it's clear there have been

economic trade offs. So last year, the US economy outperformed Canada's, contracting only three and a half percent, whereas Canada's economy

contracted by five point four percent. In Canada is expected to continue under performing this year because it does have a slower vaccine rollout, there is lower natural immunity in Canada, a fewer people have been exposed to the virus, so there's more chance of the third wave and future waves then in the US, and Canada has not deployed as much fiscal stimulus as we have seen in the US.

Now in recent months, Canada's government has deployed a series of measures to curb the spread of COVID and its variance. As we saw that second wave takeover in December, so we had the Canadian government extend its border closures. Borders have been closed for more than a year. They ramped up COVID protocols for people entering the country, including mandatory

COVID test and mandatory hotel quarantines. But unfortunately this just hasn't been enough, and the country is experiencing a third wave of virus cases that is threatening to close down more businesses once again. Since COVID, he'd here in Russia year go, like many around the world, I've been working from home, but for the majority of Russians, the stay at home mode lasted only a few months, and some

never even had it. President Vladimir Putin boasts that the economy shrank class than many of its peers, but he didn't impose a second major lockdown, and many industries continue working throughout the pandemic. Also, Russia's service actor is smaller than in other nations, so while it suffered as people preferred to stay at home, it didn't drag the economy

down as much as in other places. The Kremlin gets credit for giving support and even direct handouts to families with kids, but the measures are now winding down and businesses complain it wasn't enough. As a government, you can spend on this so much, especially when you know that oil prices may take another dive or harsher sanctions may come, curtailing your ability to borrow. Russia is back to building its financial fortress, and you cannot do both. Give lavish

support and build or redoubt. But keeping things open and having fewer restrictions it comes with the price. Russia's death doll was among the highest in the world last year. Incomes have fallen again then now ten percent down from and a drope in the rubble, and the spike in food prices have further deteriorated living standards. Russians who do have the money to spend have now picked up consumptions

so much that even it added to inflation pressure. The central bank got concerned and started raising rates earlier than expected, and those higher rates make cool of the recovery. Even where things are open, COVID is living its disconcerting mark. I went to a theater here in Moscow recently and there was a mannequin sitting in every other seat, marking the separation. Actually it was just the torso with no

arms and wearing a black turtleneck. It creeped me out, but then again, so many experiences are different now because of the pandemic. While we are looking at the performance, I thought that we the spectators were also quite a spectacle to see from the stage a bunch of armless torsos and people wearing masks from Moscow and Andrea Anama

Bloomberg News. Now we've heard quite a lot from reporters and economists in the past year on stoephonomics, but this week, at a special Bloomberg work Shifting event, I interviewed someone in the unusual position of being not only a respected author, and economist, but also on the board of two major global companies. Dr Danbisa Moyo is on the board of Chevron and three Am. She's written many influential books on the global economy and as a new one out called

How Boards Work. We're going to end this week's show with a few minutes of that conversation, what is the most pressing thing right now as we look for You know, we got optimism about the recovery, but also a question mark about the future of work life, balance, the future of cities, all these things. Where do you start if you're if you're a big global company. Well, first of all, I would just say that you know, there's no doubt

we're going to see a rebound this year. I mean, you've seen the FED new forecasts, look at China's forecast for growth this year. But I think we shouldn't delude ourselves into thinking that this is a fundamental recovery. We have not solved the debt problem that has gotten even bigger. So there's are still a lot of structural challenges, many structural challenges that we need to address, and we shouldn't think that we're out of the woods. Um now that

aggregant demand, we will be back up. UM. But I think that the it's your specific question about what, to me is the most important question is really defining what a worker is, what is an employee? UM. What has become clear is that you know, although on paper you could have ten thousand full time employees, but you can very easily have a hundred thousand subcontractors. UM. During the pandemic, we had to UM. You know, as as business leaders

understand that that delineation was was a falsehood. And I think as governments and UH and business leaders think about the recovery and think about how digitization and remote working are going to become even more central to the discussion of who a worker is. UM. I do think that this is the big issue. It leads to questions around mental illness, mental challenges, and who's going to pay for

those costs. It leads to more stark brings into more stark relief, the questions around retooling and reskilling workers in a world that we know is becoming more technical, technologically focused, and so you know, who exactly are your workers, how do we define those workers and what does that mean in terms of obligations for business leaders? And for government.

And I think is the really the central question. Is that something that companies have to decide for themselves in their individual case or is it something where you need we need to be thinking about a whole new paradigm, and that's governments in fundamentally setting the rules for that. Well, I think that government is becoming much more involved in some respects. UM. It's a little bit early days, but you know, we're hearing from the SEC and other regulatory

bodies that they're interested in worker audits. UM. If you serve on boards and you've served on the audit committee of boards, you know that we already do a lot of capital audits were required to UM to present financials every quarter. So there's a lot of emphasis on the capital allocation and capital really as a resource. UM. But we haven't really been guided by regulation and government in terms of workers. UM. You know, how do we define

worker productivity? What are the sort of things that we should be thinking about in terms of worker engagement and and enjoyment of being at at the in the workplace, and so those aspects are definitely things that regulators are thinking about. The SEC has been talking a lot about this, and I think that that's a place where government could lead.

But I will say, even if they don't, UM, the reality is that corporations are responding to the general site guys, the mood music of the way we are living now, and and that is also pointing us in the direction of being much more thoughtful about workers and more generally stakeholders. And when we talk thinking about issues around work life balance and the mental health of employees coming out of this, what are the what are the watchwords for for companies

if they're trying to do the right thing. A lot of companies are saying they don't really want people to be now staying at home. UM, but there's clearly a demand from a lot of workers. How do you know what brought that line? Just definitely, I think the word that were words that come to my mind are trade offs. UM. I think one of the problems that I see for the boardroom for pretty much any issue that we're dealing with, whether it's climate change, pay equity, gender and racial diversity,

aspects of worker advocacy, data privacy. I mean, you take your pick of these big issues that we're grappling with. UM, They're all have trade offs. And I love something that present. Obama said, I'm paraphrasing here, but by the time something hits his his inbox, it meant it was very difficult, because if it were easy, somebody else would solve it.

And that's very true for boardrooms as well, and of course issues around workers as it falls squarely um in that in that pile, because we don't know what the

answer is. On the one hand, we are very sensitive and heightened sensitivity around work life balance for sure, but at the same time, there are targets and things that need to get done um and very often that requires much more collaboration, and so having people work from home is not something that would would be ideal, not just for the company's goals, but also for the individual's goals.

There are some jobs and some tasks that require people to be in the office and their productivity increases um uh,

you know, in multiple forms. By being in those spaces, we sort of broaden the lens a bit that we have that we've a lot of the inequalities that were evident before, but maybe perhaps more also site somewhat hidden behind the surface have both been unburied by by covid um and would be harder to ignore whether at a company level or a government level, how does a how can a company do the right thing on that make sure that they're doing the right things under that banner

of e SG rather than just being on a bandwagon. It's it's a wonderful question now. And we're getting pulled in different directions, and I'll give you an example in a moment, But the fundamental point is that we need our hands on deck to solve these problems that you know, you hear about defunding energy companies. You hear about people worker advocacy, needing leaving employees pitted against their employers, and yet you know, this is to me, it seems very shortsighted,

very quick example of this. There one point five billion people who don't have access to energy in the planet today, um in a cost effective, sustainable way UM. And And you know, and at the same time we're talking about defunding the energy companies who really are not only investing in a whole area of new green and clean alternatives, but also UM, we want more diversity in in institutions

and organizations. Well, how will you get the diversity if you don't have this one point five billion people being educated and so there are many aspects of this to me are not sophisticated enough in terms of the discourse.

I was spiraling slightly listening to you and some of your answers, because it strikes me, as someone who started off writing about the challenges of development assistance and development AID, one finds again and again that the problems that you faced, they're actually come repeated in advanced economies, right, Stephanie, because ultimately it boils down to good intentions that generates bad outcomes.

You're absolutely right, is a very regular theme in our lives, and we end up with policies that actually not only are not solving the problem, but they're actually making things worse. And I'm really trying to get ahead of that because we can do better, you know. It's that we can put a man on the moon. Why can't we solve these problems in a way that's equitable and sustainable. And it's deeply, you know, very much at the core as you just pointed out, of how I see the world.

Dr Samoyo, thank you, thank you so much, Thank you, Stephanie. Glad to see you. So that's it for now. We'll be back with more next week in the meantime, I know you hear this a lot, but if you couldn take the time to rate the show, it would really help us to spread the word. And for more news and analysis during the week from Bloomberg Economics, just follow at Economics on Twitter. This episode was produced by Magnus Hendrickson, with special thanks to Javier Blast, Dr Dambisa Moyo, and

Kylie Lambert. Lucy Meekin is the executive producer of Stephonomics and the head of Bloombow podcast is Francesco Levi.