How Global Catastrophe Has Only Made Billionaires Richer

Hong Kong in a minute. We also have some hard numbers on the soaring wealth of the world's billionaires, and we take a few minutes to consider the new traffic light coalition in Germany and Angela Merkel's legacy after sixteen years as Chancellor. Stay tuned too if you want to find out what her staff gave her as a going a Way present this week. Clue, it's not socks and

it's not a watch. But first, here's our senior correspondent in the current in Hong Kong with that vital update for anyone who has yet to finish their Christmas shopping m it's shaping up to be an expensive Christmas for Santa Claus. As the big supply crunch of one pushes up prices for toys. There's even a risk of some

presents won't get to Santa Sligh in time. So I went along to meet Dave Cave, the owner of Dragon Eye Toys in Hong Kong, whose products include the Mighty Mega Hunter t Rex that you just heard, to find out the latest state of play for toymakers. But before we dive into the details, here's a dem of one of his dinosaurs. What we've done really well with should do a talk back junior megasaur. It has three play me functions on the actual dinosaur. It's about seven or

eight in she's long, same in the height. It's a really cooled dinosaur. So when you press its foot, you hear it walking. When you press its tummy you can hear it's munching away there. And when you press its back you can hear it roaring. And when you press the top of the dino's head and you say something like welcome to Dragon Eye Toys, this is the talk back Dinoh, welcome to Dragon Eye Toys. And I can tell you parents and kids absolutely love it. Cave cells

to leading retailers around the world. Unlike every other toymaker. He has spent a year dealing with surging prices and mathsfully disrupted transportation. While he's seeing some signs of stabilization in the supply crunch, Cave reckons the spike and costs still flowing through to consumers. Everybody's toys, everybody's kettles, everybody's

whatever they're buying. If it's come from China and it's arriving in the last quarter of one and the first quarter of two, there's going to be pricing creases anything from five to depending on the product. Recent data in Asia is pointing to some easing of congestion at the region's biggest ports, and economists say and easing energy crunch in China will also help supply chains. But Cave is looking to Chinese New Year in February as a potential

circuit breaker for the global supply crunch. That's the time of year when China's factories shut down for annual holidays, and it's normally associated with a lull in global trade. Recent data in Asia is already pointing to some easing of congestion at major ports, and economists say an energy crunch in China is easy and that will also boost supplying,

so the supply chain is still difficult. The general feel is that Chinese New Year tends to be where everything breaks off and we restart everything, and so I think a lot of people are thinking maybe end of February early March things will change. Still cave cautions, it's not just supply chain snags that are hitting toymakers. The strength of the yuan and high oil prices could leave an

impact long after ships are sailing on time. Again, I would say over the last eighteen months, we've had from the factors between a three and ten twelve percent increase over that eighteen months, which we've had to pass on to our customers as best we can because we you know, in our industry you have to be lean and mean, and there isn't that extra margin. And I think the buyers out there globally realized that prices will go up. The question they're all asking is are they going to

go up again in two Nobody knows. Logically they shouldn't go up next year unless something quite fundamental happens within the industry and China. So we're looking to stabilize the pricing in two. But obviously, as I say, when we reset the market in end of February early March, we'll get a better indication of where the market is going. For now, Santa is going to have to dig a

little deeper to fill his sleeve. Well, Santa, if you're out there, try your best to keep those prices down, but unfortunately, I think they're going to be a little more expensive than you deliver them last year. Santa for Bloomberg News in Hong Kong. I'm end the current now.

You might have noticed it was a pretty big week for Germany, with Angela Merkel stepping down as chancellor and a new traffic light coalition taking over under Chancellor Schultz, the Social Democrat leader who's featured on this podcast not so long ago. So our Berlin producer Aggie Cantrill is at the German Parliament and I think could campaint the scene a bit for us, Aggie, I should say, we're talking about an hour after the official handover of power

took place in the German Chancery. But it's it's been a pretty momentous day. Just tell us what's going on. Yeah, highest Japanese, So it has been quite a long day really in the in the Bundestag because firstly the Bundestag has to officially vote in the new chancellor, which they did um with he gained a majority, I believe of

three and nine round about um. But then after that he was sworn in as Chancellor along within you roster of ministers, ministers that come from the Greens, the SPD and the Liberal Free Democrats, and then he went to meet Merkel at the Chantrey and have the official hand over this afternoon. And it's the coalition you just described it briefly, but it's it's been known as the traffic Light Coalition, which sounds very exciting, but just talk us through.

So the traffic Light Coalition, I mean, it gets its name from the colors of the parties, as do all the coalitions. And thankfully this isn't one with clumsily named flag as many of the other coalitions are named. But this one is a coalition of the SPD that represents the red, the Social Democrats, the Greens that are obviously as their name would suggest, and the Liberals that are classically a yellow color. And there is a bit of a distance, especially between the Greens and between the FDP

on it. A few issues when it comes to economic and fiscal policy, especially the Greens were always seen as these big spenders, all of these party that had questioned the merits of things like Germany's constitutional debt break, and yet now because of the compromises reached during the coalition agreement, we actually see probably a more fiscally conservative government than we would have expected if it were just, for instance, the Greens and the SPD, because there's a moderating force

of the FDP that now are in charge of the finance ministry. And later on I think we're going to get a little bit into how these three parties could possibly agree because they sound very different. But one of the one of the striking points to come out of the coalition agreement that I think court people's eye outside Germany was the lowering of the voting age to sixteen. And that was I gather that was in a responsive part to a big grassroots movement. How did that happen?

I think something that's really notable about that lowering of the voting age is it's something that actually appeals also to those parties. Specifically, the Greens and the FDP have

a very strong support with among younger Germans. And I think there's an interesting conversation to be had about whether or not it's not a question of the c DU and the SPD losing out over all, but the fact that they're losing dominance within younger voters, and those voters are looking for a sort of alternative to the left right or progressive conservative dichotomy, but within two other parties, a party, one party that stands for digitalization and modernization,

and another party that stands for a lot of progressive social issues and environmental policy. That's the Greens. Yes, that would be the Green. It's been quite low key though, or maybe it's just that I'm not sitting in Germany, but Angle and Michael has been around for sixteen years, has been this momentous figure. I mean, as it is, it just not a big deal this week because you've had you feel like you've been saying goodbye to her for at least a year. I actually think it has

been quite a big deal. But I think the real momentous occasion was the election itself, which of course happened a couple of months ago now. And I think it's because now everyone's been wrapped up in the coalition agreement that it's sort of passed them by that this was actually Merkle's official last day. I think the real, the real drama happened around the around the election itself, and of course Merkele's party losing out on another term without

her in charge. Well, it didn't pass us by on Stephanomics. What do you think Angler Mike is going to do now? I'm pretty sure she's going to go on a lot of hiking trips. That was her present from the chancellery

staff today. They brought her some some hiking sticks and a tind to bring some sandwiches in on her trips, and I think she's probably going to take up quite a long time sped sped exactly, I can thank you very much, but I'm joined now by Holger Schmiding, chief economist for Behrenburg Bank and a wise observer of the

German and broader European economy for many years. Holger thanks very much for joining Stephanomics and Angela Merkel has had sixteen years in office, one of the most influential politicians of our era by any measure. I don't feel like if it was any other country or any other chancellor, we'd be making much more fast about her departure. Now, Well, indeed, what we are seeing is a very smooth condition of power in Berlin, and it really does mark the end of an era. But it does not mark a major

change in policies. And that's probably why there is only limited excitement about it. We'll get it, we'll get onto that the new government in a minute. And I think in any other country would seen more exciting. I know you're you're gonna carefully explain to us why we shouldn't be too excited. But if you think about when the history books have written, what are the main contributions that you think a Glamrker will be remembered for, she will

not be remembered for one single contribution. She will probably be remembered most for two things. First of all, she presided over one of the best periods you could say, in German history, sixteen years of stability, of peace and prosperity, with a record rise in employment. The number of jobs where you earn enough who have to pay part payroll taxes on her watch rose by in a population that did not increase very much. So that is indeed one thing.

The other thing is, of course her very contentious decision during the refugee crisis to not close Germany's borders again after the first rush of refugees from Hungary had been led in, and the subsequent webs and the subsequent wave of migrants, of course did sharpen and exacerbate divides in the country. In Europe, it probably contributed a bit to the British debate about Brexit. So that is one thing, the refugee crisis and are dealing with it, that she

may be remembered for. But let's put that into contact. On the European level, she after some deliberation, did a lot to keep the EU, the Eurozone together as well as she could. She kept Greece in the Europe, overruling her own finance minister on that matter when she really had to. She put a lot of German money on the table during the pandemic to support heavily affected countries

during the euro crisis. So she was in one sense a very strong European despite the controversies she triggered during and in the aftermath of the refugee crisis. I mean, you mentioned the refugee crisis. I suspect that was a time when Angela Merkel as a as an individual politician, really crossed people's radars outside of Europe because you had those pictures coming from the German train stations and the borders, and then her speech effectively saying to open the borders

and that that anyone could come in. I mean, that was that was quite a moment at the time. What was the more long term impact on the political scene of that whole crisis on the German political scene, that crisis, the discussion about many, many migrants coming in, did revive the fortunes of the flagging far right a f E party, which now is a presence in the German Parliament with a good ten percent of the vote. It had been

scoring below five before the refugee crisis. So it did sharpen the political debate in Europe in Germany and did add to support for right wing far right parties. Having said that, first of all, her big decision to let in refugees from Hungary was widely applauded across the political spectrum.

It was her subsequent hesitation about closing the border again, her refusal coming from East Germany having been hemmed in by a wall for much of her life, while Germany was divided and she was on the wrong side of the war her refusal to erect a wall at the German borders figuratively speaking, that is, to strongly police the borders against migration. That refusal in the end proved to

be quite controversial. She is still hugely popular today. Yes, she leaves office as the most popular policymaker in Germany, a position she has held through most of her time. With some ups and downs, you could say she leaves very much on a high note. And when it comes to the refugee segation, what we also have to say now, with six years having passed since the integration within Germany

is not proceeding too badly. So the verdict is open whether in the longer term net net the problem sharpening divisions within the country or the benefit a country with an adverse demographic actually gets young people. Most of them are eager to work whether this net net will be a positive or a negative longer term. Simply, the verdict

is not out yet. Certainly, from the outside, Germany seems to have been despite and maybe, as you say, perhaps in part because of the way immigrants have been able to be integrated in the labor force. But despite all those debates around the refugee crisis, Germany seems to have been largely spared the kind of extreme polarization and the toxic politics that we've seen, certainly in the UK and the US over the last few years. Is that is that right or is that just wishful thinking? That is

absolutely right. Germany has been spared much of the um ooxification of politics that we see elsewhere. We have traces of it, but not to the extent that you see in many other countries. One reason for that is, of course history, having had far too much of a polarization of society in the ninet twenties and early thirties, and we all know the terrible consequences of that, Germans shy

away from taking extreme positions. On top of that, the German constitution, the federal nature of it, de facto enforces

a kind of consensus. Yeah. The government of Angla Merkel for three of her third terms included, apart from her center right Conservatives, the center left social Democrats, which meant that compromises between the two big strands of political thought, the center right and the center left, had to be struck within the government and also the strong role of the Constitutional Court and the upper house of Parliament, where typically the party that is in opposition in the federal

government has a veto the fact to enforces that mainstream parties have to talk to each other and come up with a joint view. And as a result, Germany rarely does big policy shifts which do not enjoy broad political support across the isle. So you do have i mean on paper, just turning to the new government that we

have that that takes power this week. Um, it's as you said, it's the Social Democratic Party along with the Free Democratic Party and the Greens, which in any as you said yourself, it's sort of crosses the political spectrum in Germany. In any other country, it would sound pretty difficult to manage, is it. Is it going to be

an unworkable coalition at first? It may sound unworkable. I mean you have to imagine in the US as if sort of the Democrats were to cooperate with of the Republicans for one government within one government, that's roughly what we are. Biden can only dream of having that exactly, get the Democrats to cooperate with exactly, so, at least in Germany, we have seen that these three different parties

have come up with a joint program to govern. Germany has a long tradition, at least a long postwar tradition of such coalition governments, which against threddled the political divide for us. This is normal that you try that you campaign on your own platform, but you basically know that once it comes to governing, you are not implementing your

own manifesto. You are trying to combine your manifesto with that of your coalition partners of a different persuasion, and probably it will work simply because in this government the three parties have granted each other a bit of leeway when it comes to social policy, such as hiking the minimum wage. It is not a compromise. The social Democrats the center left have said we want the minimum wage

twelve euros per hour. They get it. The Greens have said we want a faster exit from code, they get it. The Liberals have said no tax hikes to fund all of that, and they get it, which of course means we need a few tricks to actually fund the expert investment spending. But it's not just a compromise that is all murky. It is something where all of the three parties can say the government's programs it does bear to some extent our imprint. Hence we can and could sell

it to our members. So events always happen. If it is never easy in government, stuff will happen. There will be discord, But I do think this government is as likely to be stable as previous German governments and full of super reasonable politicians who don't do any of the things that other politicians and other countries seem to do. When we think about the big challenges for the country obviously,

and the environmental is one, the energy transition. People for a long time, particularly economists who are not German, have criticized Germany for being too dependent on its export sector and heavily reliant on that on that sort of manufacturing side of the economy, which has remained so much stronger

than it is in many other European countries. I'm interested given the current climate concerns about US and China relations affecting um the integration of the global economy, and the now right now the supply chain issues that we're seeing, how has Germany been affected by that? The current supply chain is affect Germany a lot. What we are seeing is very subdued output in the car sector, say at least below what German companies could produce and what they

could sell given that order books are full. So Germany's very dependence on manufacturing, which requires a lot of inputs, including semi conductors, forcast, for machine too its is now in the near term the significant weakness. It is one major reason why Germany in the recovery from the pandemic, is now lagging far behind or not just a little

behind France. Having said that this is probably an issue that will no longer be that relevant, say two years from now, my private guess is that two years from now, with almost every government subsidizing seemi conductor production, we may have a glut or at least sufficient, if not too many seemi conductors. What we can say if we look back at the last twenty years. But all in all, Germany's focus on top not manufacturing has not served the country badly and it hasn't paid to bet against Germany

in the last few decades. People, certainly in Britain and the UK in the US are a bit worried about getting their toys in time for Christmas. With all these supply chain issues are you Are you nervous of people in Germany nervous about that rushing out to get your toys early. Supply chain issues are a major problem in Germany, but they are more a problem on the production site

affecting the car industry. There is much less talk than some other countries about the delivery problem, that is, getting that what arrives in the ports by truck towards the shops. There is a bit of anxiety here and there are people are being encouraged to buy their toys early, but at the moment this does not seem to be a

big issue. One reason for that is probably that Germany is wide open with its land borders, so even if truck drivers asking us in part of the country, they could come from other part of the country, or more precisely, they could come from Poland from Romania. This is a pan continental European logistics market which is strained, but which does not seem to be anywhere near breaking point where you would have to fear that Santa Claus would not

be bringing what the kids would love. And thank goodness for that Oldish Median, thank you very much, You're welcome. The pandemic has been a golden age for billionaire wealth. You might have suspected that to be true looking at stock markets and property prices soaring around the world, even when we were in the midst of the COVID slump. But now we have some hard numbers to prove it. Courtesy of the Global Inequality Lab, the research group established

by the French economist Thomas Picketty. US economy reporter Augusta Surreva wrote up the story for US and is here for a quick chat about it. Augusta, thanks for joining us. What are the most eye popping numbers in this report? Thank you so much for having me. I think the most surprising thing of the studies not that billionaires have lots of money and control lots of wealth, right, but it's the fact that during the pandemic, that's when they

gained the most wealth. So last year, for example, they saw billionaire wealth reached three point five percent from simply one percent when they started tracking these numbers. So it's been going up three point five percent of the world's wealth exactly. And that's only and that's fewer than three thousand people. Yes, that's controlled by about two thousand and seven and seven hundred and fifty people and nowadays they

control three point five percent of the world's wealth. And at the same time, the poorest half of the global population controls only two percent of the global wealth. It's crazy. And what of the fact is that the driving the increased during the pandemic, because obviously we did have a recession in many countries, but we did see stock markets go up, I guess yes. And what we happened was also that we saw the rich get rereacher and the poor get poorer, right, so at the same time that

we saw a lot of people going into extreme poverty. So, for example, one of the one of the numbers that the authors of the report mentioned to me when we spoke this week is that the World Bank estimates that a hundred million people are now living in extreme poverty since the beginning of the pandemic, at the same time that we've seen billionaire wealth sort right. So this is happening at a moment in which, as you mentioned, we're

seeing both financial and real estate markets sore. Uh, and we're seeing a lot of people on the bottom half of the income distribution suffer a lot from the lack the lack of income during the pandemic, the lack of benefits, and this is a trend worldwide. Yeah, lack of benefits, lack of vaccine, and I could I also noticed in the report that the over over globally, the richest ten percent control maybe sixty of the wealth, but there is there are quite big distinctions across regions. So are the

one of the most unequal places in the world. Yes, So some of the most unequal places in the world nowadays are of course the Middle East and North Africa, Latin America, and of course Russia and Central Asia. These are places where, of course you doubt in the past, with a lot of inequality. So this is not something new, But what the authors of the report are saying is that nowadays, what we're seeing is a shift from claudio

inequalities into market inequalities in these places. Just showcase that. And I mean, the other thing that I guess was distinctive about this report is they talk about not just the wealth gap, but also the carbon footprint gap. The fact that the wealthier people, although they might talk a good game about helping the environment, actually have a much

much bigger footprint carbon footprint. Yes, and what's surprising about that is some of the some of the highest inequalities are actually seen in some of the richest parts of

the of the world. So for example, one of the regions where are you see, uh, some of the most striking inequalities when it comes to the carbon footprint is North America, where the top ten percent of the population emits on average seventy three metric times per capita each year, compared to last than ten times for the worst half of the population in North America. And that that is

interesting with it within the country. And I found out thinking August, I mean when we've we've obviously talked about inequality before on this show, and that lots of people talk about it, and we've interviewed Thomas Picketty himself for Stephanomics, And there was this feeling in the midst of the pandemic, as it became clear that inequality was being exacerbated by the crisis, that there was going to be this great move political appetite post pandemic to tackle inequalities or at

least start to reduce wealth inequalities in many countries. Do you feel like that that's panning out? Do you see any appetite for that, I mean, I'm thinking about some of the debates we've seen in Congress in the US, for example. Yes, it was definitely part of the conversation in the US for a long time. We saw Treasury Secretary Janet Yellen talk multiple times about it. Aldis not only has to end this race to the bottom when it comes to taxes, but also play a leadership part

in that. But of course, right now we have many conversations happening at the same time on the policy brought right, and we're talking about infrastructure bill, we're talking about taxes, we're talking about building back better, and of course there's this whole conversation seems to be penning out a bit. I think that's also it's interesting in the in the UK there seems to be no appetite for that kind

of action at all. And if anything, on the margins, the the extra spending and the tax changes have tended to benefit and high income people more. It's all interesting. Well, Gustus soever, thank you very much, thank you for having me. Well, that's it for this episode of Stephonomics. We'll be back next week. In the meantime, if you like the program, please take the time to rate it and follow as Economics on Twitter for more news and analysis from Bloomberg Economics.

This episode was produced by Magnus Hendrickson, with special thanks to Ender Current, Augusta Serreva, Aggie Cantrill, and Holger Schmiding. Mike Sasso is executive producer of Stephanomics and the head of Bloombird podcast is Francesco Leafy h