Waffle House Signals U.S. Reopening, But It Won’t Be Simple

What you just heard was company spokeswoman Neary Boss explaining how they're going to make waffle eating a socially distant activity. And the past week, the state governor of Georgia, Brian Kemp, has given restaurants like waffle House the green light to reopen. Also, tattoo parlors and Jim's. Federal health officials thought it was too soon, so did the mayor of Atlanta, so did President Trump. But the governor ignored all of them and went ahead with the reopening. He's not the only policymaker

to ignore expert advice. Since the COVID crisis hit, we've seen quite a lot of governments try to ban the export of food or key medical supplies, for example, despite official advice to keep trade flowing and borders open. In a little while, i'll talk to the economist Richard Baldwin about economic nationalism in a crisis and whether it ever makes sense. Keep listening if you want to find out the answer and how it all relates to Alexander the Great.

But first I want to hear more about those waffles. Mike Sasso is Bloomberg Real Economy reporter based in Atlanta, and he's gone to see for himself. So it turns out you're at the cutting edge of the reopening of America. Tell us about what's opened up in Georgia the last

few days and what people think about it. Sure, the Governor of Georgia controversially came up with a opening plan for the state of Georgia in which he allowed some tattoo parlors, nail salons, gymnasiums, and barbershops to open up last Friday, and then he was going to be allowed for some restaurants in movie theaters actually to open up Monday. Now, you went to a waffle house, which I know is is pretty popular in some quarters. It's a great place to go late night after a show. Tell me what

it was like with with the people there. Did you have a waffle I I didn't. It was a there were not many people there actually over there. I was there for you know, perhaps about an hour Monday morning, and they had they had just opened a couple hours earlier than that, um and when I was there, there were maybe three people who wandered in and getting take out orders. There was nobody actually at the restaurants sitting down and eating. Now, some of that, to be sure,

may have there was. It was quite a scene where where it was quite a number of local and national media there to document people as they wandered in. So it's it's possible that some people would just camera shy and stayed away. I did venture out to another waffle house that was not the scene of such a media frenzy, and there were about two people sitting at the counter. There was another man enjoying some coffee and unfurling a newspaper at a booth. You know, certainly not a ton

of people. I did speak with one gentleman. He had kind of left the kids in the suv while he ran in to pick up his takeout order. He believes that within a week or two he and his his whole family of four kids and a wife would probably venture in for dine in service. And I I think that's probably what you're going to see here in Georgia, as over time people are going to start getting bolder,

just like this gentleman was in. They'll start with perhaps a takeout order than perhaps in a few days or a week, I think you'll see them start to venture in. And we are starting to see a surprising number of restaurants like waffle House, Um out Back Steakhouse, another huge American chain, is opening its units in Georgia as well. And so while you've seen some opposition amongst sort of prominent high end restaurants in Atlanta, some of these more

mainstream outlets have opened and are going full full bore. Well, Mike, I hadn't thought about the added risk to your health and social distancing of having large numbers of reporters all around you as you try and order your your waffle. That's a whole extra hazard for all these people. But I mean, we'll talk a bit about the politics of it in a minute, but it is I know the conversation you had with the representative from the waffle House,

which is this big national chain. You know they're taking it pretty seriously in terms of the steps they have to take to make this safe. I guess it'd be nice to hear that conversation you had with her now run through the steps that you've taken again too. Okay, about six weeks ago, when we were limited take out only, we all and and social distancing had been recommended. We took those steps to heart. We actually had locations in the store on the floor, located where customers could come

in and stand. They were very respectful of that. When they came into place, their warders wait for their food. If they needed to wait outside, we had six ft of distance outside, a couple of chairs outside on our front porch. We also took our condiments off at that time six weeks ago, off of the tables, so we've kept that as well. And of course our associates are wearing their masks. As a restaurant, we've always had food safety protocols that we've had to follow in place. That

includes regular hand washing. Folks have been really respectful of that. Employees are probably bound to be a little bit nervous about plumbing contact where customers. How did you treat the employees? Were they able to say, no, I'm not ready to come in yet. How did you treat that with him? Of course, we're not asking anyone to come in who wasn't ready or comfortable in the covering U they weren't ready to come in, We went and talked to to associates who were ready and willing and able. Most of

these folks have been with us already. In the six weeks. We tried to keep on as many associates as possible working. But if someone said does hey, I'm I just don't feel safe or I don't feel comfortable or whatever the reason, maybe maybe childcare because the daycarees are closed schools or closed that they needed to stay home. So we said that's fine. Could they keep their jobs or how would you treat their jobs if they didn't want to come

in yet. Well, we furloughed several people, over a thousand UH managers. We furlowed three hundred and fifty folks from our support team, which includes the corporate office and those who worked in the field. And so we haven't at this point brought back furloughed folks yet, but these were individuals either were working very few hours for us already. If in the opera two, you maybe have a few

more hours. We're hoping that with this limited dine in service option that we will see the kind of response from the customers that will allow us to bring more associates back to work, more shifts that can be open throughout the day. This doesn't seem like a lot of people. I didn't see anyone in there dining in. You maybe you saw a couple take out? Is that how it's going so far? When I came on this morning at about seven fifty this morning, there was a gentleman sitting

at the high counter enjoying his meal. He finished and he left. We had two more people come in, sit down and enjoy their meals, but most of it has been take out, as it has been for the past six weeks. We weren't expecting that we were going to be overwhelmed with customer demand. Customer demand right away. We

know it's gonna take some time. We're just hoping that people goes, especially those who come in and they've seen they've been coming in and getting take out, that maybe instead of eating in their cars or taking it all the way back home. We're taking into their job, or take a few more minutes to sit down and enjoy a hot meal. And just last question, and uh, take me through the deliberations of all why they chose to reopen what well went what we're what was in the

decision making process. Well, like I said, we've always been open. We've only unfortunately had the closed seven hundred stores nationwide. Uh, temporarily, We hope the decision is very simple. There are two sides to this equation. One is the very real public health crisis of the virus and how it's affected people. The other half is the brewing public health crisis that is coming because of people who are unable to earn a living, the despair that comes from that, the inability

to take care of the obligations that don't stop. So we really want to be there for our associates to allow those who want work, who are able to work, to come back to work. Mike, it's striking because we spoke last week to Sharon chen Uh, the bureau chief in Beijing, about her time in Wuhan, and it was quite a different story that the businesses were opened up, but really no one was going into the restaurants, and they didn't seem to be a great desire to go

out and consume. I wonder if that's just the very different experience that Wuhan had or is it almost a cultural difference that people, maybe particularly in Georgia, do feel a bit more libertarian, a bit more determined to go out and exercise their freedoms. How do you think that that the politics of exiting lockdown is going to work in in your state? Yeah, I I do. I do.

There's an interesting political component to all this. More libertarian in conservative minded folks are being a little bit more willing to get out and explore and get out of the house and frequent some of these businesses. We certainly saw that when I visited Cartersville, Georgia, a small town up or North Georgia, it tends to be more conservative. Those folks wondered what the fuss was all about, uh,

and they were eager to get out here. In Atlanta, which is a little bit more liberal, there is a sense of of more caution. So there are certain you know, certainly range of opinions. I think one of the more interesting things that I've found is there's an element of competition here that I think will weigh on business owners I did hear from. I have heard from businesses that didn't want to open up this quickly, but they're seeing their competing businesses open and so they're being sort of

forced to open. I heard that from a gym owner um in Cartersville, Georgia, who wanted to wait another couple of weeks. However, competing gym's were starting to open, and so he had to open. And in fact, interestingly, he's actually done fairly well by opening. He was shocked learned that he had picked up thirteen additional fitness center customers who were defecting from a gym that didn't open this

past Friday. So there are people who want to get out in Those people may be voting with their pocketbooks in some case by helping those businesses that choose to to open earlier. And I do have to worry a

little bit about that competition. You talked about the national restaurant chains maybe a little bit easier for them to establish careful protocols and get hold of all of the protective equipment for their employees than these small time restaurants who will feel they have to open up because the big guys have opened up. So you have to wonder

what the what the implications will be. And also I guess the what's the what's the threshold at which people start to change their mind if it looks like the coronavirus is not under control in the state, I guess there'd be two different sets of opinion on that as well. Might Yeah, to to your point about a lack of

protective equipment. You know, one of the gym owner that I mentioned in Cartersville that sort of felt forced to open before he wanted to, he admitted at the end of my call with him that they are already running

low of sanitizer and wipes to wipe down the equipment. Certainly, there are a lot of people watching Georgia and a lot of people who are opponents of the governor's move And if it turns out that the COVID nineteen cases spike here, as some people think, the governor will be under tremendous pressure and this could be a a real challenge for him when it comes re election time. Well, and I bet the people who go to the gym probably think they're already very fit and that will protect them.

But we know that's not necessarily the case. Okay, I guess my only question, which is more frivolous, is what restaurant opening would actually get you ordering some food if you didn't get a waffle at the waffle house? What what will you what will you want to order when it opens up? What? Interestingly, Atlanta is a is a very diverse community. We have in the suburb where I live. It's sort of the Duluth Lawrenceville, Georgia area northeast of Atlanta.

They have a large Korean population, and I happen to have My favorite restaurant is a Korean taco place that's in Duluth, Georgia. And so if and when I've not been by that restaurant, but if and when it opens the dine end service, I will be frequenting the Korean Taco place. And I went I saw you there, we went out for a meal at the end of last year. You didn't take me there next time you have? Yeah, Okay,

thanks very much, Mike Sassa. So I'm delighted to welcome back to Stephanomics Professor Richard Baldwin, Professor of International Economics at the Graduate Institute of International and Development Studies in Geneva. Richards just co edited with Simon Everett a book for the European think tank, the Center for Economic Policy Research, which is called COVID nineteen and Trade Policy. Why turning

inward won't work. Richard, we have had a lot of talk on this program and generally about countries turning inward in response to this crisis, and maybe companies wanting to be less global um and maybe be more self sufficient in key ways reduced their reliance on China. But we've also seen some very short term, sort of knee jerk reactions by countries just in the last month or two trying to safeguard their supplies of key medical equipment and food.

So I see. You know, Russia has tried to limit its exports of grain, for example, Vietnam put limits at least for a while on its export of rice. You know, when we hear about these things, they it sounds selfish, doesn't sound very kind of civic spirited when governments do this. But I think a lot of people will instinctively have more sympathy with policymakers doing that at a time of crisis. When people are really worried about, for example, getting that

personal protective equipment. But you think it's it's just as misguided in times of crisis as it is in normal times. Why is that, Well, the basic problem is that we live in the twenty one century where to make almost anything you have to import products. So, just to take an example, respirator mass use inputs from a number of countries, and so blocking exports of the mask, which may trigger retaliation, can come up the whole supply chain, therefore make it

harder for everybody to make masks anywhere. The way manufacturing works today, it is globalized, and we can't change that. During the COVID crisis, there are factories all around the world, including in China, and blocking exports of American mass for example, risk retaliation which will essentially build walls in the global factory. So trying to keep more products at home to boost local availability is actually hindering the world's ability to produce

this good. And if the retaliations go far enough, then we'll have a real disaster, like where everybody's banning exports and that makes it hard for anybody to make anything. So that's the real danger is that this thing con spire out of control. Yeah, and I natued in then the forward to your your ebook of Golden Brown, the former Prime Minister makes exactly that point, makes the reference back to the twenties and and fears, and you make the interdependence point. And I have to say I wasn't

aware of this. So the US is heavily dependent on the imports of personal protective equipment, but also is a major exporter and even an exports to China. So if you're you can't you can't necessarily unpick this. I mean food. You know, we've talked a bit about the medical side. Food is the other thing that quite a few countries have reached to try and limit exports. You know, the opposite of what we often see when we see these kind of competitive situations in trade, where actually you're trying

to maximize your exports and minimize your imports. We've had the opposite here. People are trying to keep hold of their imports, but stop those exports of of key of food. You can see the logic of it when something like Russia, somebody like Russia tries to make sure that they can

hold onto their grain supplies. But what's the implication in practice. Well, so, just to give you a little classical reference, you may enjoy Alexander the Great, right before he went off to conquer the world, he forbid the exports of all food from Greece exactly because he wanted to keep the food prices low in grease and therefore keep the population happy. Now we live in a different world than Alexander the Great. The last time this happened was in two thousand and six.

Two thousand and seven, there was a round of export restraints on food and the price of food rises. Now, once the price of food rises, nations will be worried about shortage of food, and so they very often start buying to build up stocks at that time. So therefore the prices rise more, and to protect the local markets, more exporters block off the exports. And so this this round can lead to very high, very rising prices, as it did in two thousand and seven, And although the

people are blocking the exports, you can understand it. As you said, it keeps the price lower than it would otherwise. It's really a disaster for the developing world and poor people in general. So it's a kind of a for tat thing. That's triggering um behaviors which could be avoided with cooperation. I like to draw an analogy with what

happened with toilet paper early on in this crisis. So there is absolutely no shortage of toilet paper in the world, but when people thought that there might be a shortage of toilet paper, they all decided to stock up at home, And because there is not enough toilet paper in the world for everybody to have a three weeks supply at home at least in the short rue, there was a shortage of toilet paper, and a similar sort of thing

can happen with food. The f a O shows that the stocks to consumption ratios are perfectly fine in the major grains worldwide. There is no shortage of food right now. But if every nation decides to accumulate a two months supply because they're afraid the food exporters are going to ban, then there will be a shortage of food, and the prices will go up and more exporters will ban it.

So we get into this bad balance, this bad kind of outcomes situation where the export bands of food go up, which make people panic and want to buy more food, which then makes it more expensive. Which then makes more people put on the export ban. So it's really a kind of lack of coordination. And we saw that last in two thousand and six, two thousand and seven, right before the global crisis. It was completely unrelated to the global crisis. But that's the last time it happened. Finally,

I think it's just a couple more questions. But that you described what would be, in some sense the nightmare scenario. You get into that big collective action problem where a few export restrictions here and there have spiraled into a complete closure of global supply chains. You know, a lot of governments and certainly international organizations like the International Monetary Fund have been quite aware of this coming into this crisis.

They've seen governments, some perhaps um succumbing to this instinct or risk of succumbing to the instinct. And I've seen groups of countries, even in the last week or so, come together to sign declarations that they're not going to have these kind of export restrictions, especially on food and medical supplies. So would you say, right now that we have that we are really heading down that road, or do you think so far we've managed to stop that kind of downward spiral. No, I think we are in

the danger of the spiraling out of control. So, as you pointed out, there are sensible people around the world who understand that what goes around comes around, and when you start putting on export bands, other people will retaliate. So the countries that you were talking about were signing led lad By New Zealand and others who agreed not to restrict exports of food that did not include Russia, for example, did not include the United States in a

in a binding way. And I think the problem is is we have an American resident who has very strong instincts to close off the border whenever he can. He does not understand the whole point about international supply chains. So I think there is a danger of its spinning out of control. Moreover, two of the biggest producers of the medical products and now we're talking about a medical equipment and and kit it's China and the United States, and they have a trade war going on and this

other this thing could get wrapped up in it. So I think it is a real concern. Now, just just to sort of reiterate with the problem there is that if one country starts putting on bands and the other one starts putting on bands. That can mean that the availability of medical equipment starts to fall everywhere, and that makes more people put on bands to keep at home what makes equipment they have. So again it's one of

these things that tumble out of control. In the nineteen thirties, people were countries were trying to shift demand of themselves with tariffs, and what happened was with the retaliation is they destroyed aggregate demand everywhere. What could happen here is that an attempt to keep supply local with export bands, everybody ends up destroying the factory uh global value chains

and supply chains, and they destroy supply everywhere. So there's another example on the self defeating export bands that we saw when India banned the export of clora quinine, which if you remember a few weeks ago, so the President United States and even some other people, some doctors, we're saying that clora quinine might be a treatment for COVID.

What happened then was India, who has a lot of people, said we're going to ban the export of clora quinine, and that lasted for a day or two before they realized that they import all the precursors for clora quinine from China. So they reversed themselves because they realized an export ban that led China to retaliate with an export ban would actually mean that they had no chloroquinine domestically.

And as as what the example of trying to increase the availability of a supply by building walls within your own factory and it just doesn't work. It's a backfire. It might have made sense in the twentieth century, but it doesn't make sense in the manufacturing world. First of vision, Bobwin, thank you very much, Thank you so thanks for listening to Stephanomics, the podcast that takes you from waffles to toilet paper via Alexander the Great and the history of

global trade. We'll be back next week with more on how COVID nineteen is turning the world economy upside down. But remember you can always find us on the Bloomberg Terminal, website, app or wherever you get your podcasts, and for more news and analysis from Bloomberg Economics, follow at Economics on Twitter. This episode was produced by Magnus Hendrickson, with special thanks to my Sasso in Atlanta and Professor Richard Baldwin in Geneva.

Scott Laman as the executive producer of Stephanomics and the head of Bloomberg Podcasts is Francesco Levi.