This podcast is originally published in BBC Business Matters with the link here: https://www.bbc.co.uk/sounds/play/w172ydph59lnj14
US House of Representatives Speaker Nancy Pelosi has become the most senior US politician to visit Taiwan in 25 years, despite China warning that Washington would “pay the price” if she visited the island. Beijing warned it would respond to any potential visit from Pelosi, who has not been backed by the White House to visit Taiwan.
The first grain ship to depart Ukraine since Russia’s invasion – The Razoni, has arrived at Turkey’s Bosphorus strait. The vessel which is carrying 26,000 tonnes of corn, will be inspected on Wednesday morning before continuing its journey to Lebanon.
Roger Herring: Tony. Well, let me come to you because you know this part of the world extremely well. You live there, of course, for a while. You know the ins and outs of it. What do you make of the US position on it? Because Biden has said he doesn’t support what Nancy Pelosi is doing. But is there a bit of, give and take, I mean, underneath, is he perhaps quite glad that it’s been brought to a head like this?
Tony Nash: I think both sides are glad it’s been brought to a head. So bear with me for a few seconds, Roger. The economy in China is pretty bad. The political situation is pretty bad. There are a lot of difficult domestic issues in China. So a galvanizing event before the November senior political meeting is helpful for China domestically. And in the US, with the economy the way it is, with a number of kind of political issues, this is helpful for Pelosi and potentially for retention of the House representative. So this is, yes, on the front there’s a lot of conflict, but in the back, this really helps the politics of the ruling parties in both countries.
RH: Yeah, that’s a really interesting insight actually, the real politique, I suppose, is a terrible cliched word does seem to be there. In fact, maybe, Tony, President Biden, at the moment, he’s already had a hit on Al Qaeda, which I guess he probably likes, might help his ratings. But certainly a major crisis in Asia and a war isn’t going to help, is it?
TN: No, I don’t think it would help anybody just given where the world economy is and given where some of the lingering kind of post-COVID problems are, I don’t think anybody would find it helpful. I don’t think it serves China or the US.
RH: Because apart from anything else, of course, we’re in the middle of another crisis in another part of the world, and many think they are related, that we are seeing confrontations with the two biggest and most powerful authoritarian regimes on the planet and confronting the west in all kinds of ways. And what, of course, I’m alluding to is what’s going on with Ukraine and the difficulties there with the Russian invasion, the consequences, one of the big consequences for the world from that, of course, has been the lack of grain coming from Ukraine, because it’s effectively borcaded now that…
I’m not much of a sailor, but I have to take my hat off to the crew who steered through that area of the Black Sea. It must have been absolutely hair raising.
TN: Yes, they definitely are in their pay. It sounds like.
RH: Well digested, literally, of course, when it gets to wherever it’s going, we hope, because that’s the whole point of it. But Tony, let me pick up on this, because it’s something that puzzled me. I’m interested your view on it. Why is Russia allowing this to happen? Because I can’t see how it plays into Vladimir Putin’s endgame?
TN: I think, on some of it, it’s Middle East relations in the US, from Russia. Russia doesn’t want to be seen as starving out people in Lebanon, Egypt, other parts of the Middle East. And I think that is probably a clear consideration for them.
RH: Yeah. And I mean, it also exposes hugely the fragility. During COVID, we learned about the fragility, of course, of supply chains.
But Tony, this means that food globally, it seems almost on a hand trigger. One thing in a country far away from an awful lot of people changes everything.
TN: But this is what happens with global supply chains, right? As we concentrate sourcing of food, manufactured goods, commodities, so on and so forth, we concentrate risk in supply chains and they become very fragile, and we realize they’re COVID exactly how fragile global supply chains are.
RH: Yes. A lot of rethinking, I think, going on in a lot of countries and also a lot of companies as to where it all comes from. Tony, how solid is US backing now for Ukraine in the midst of all this? Because there are lots of crises. We’re talking about Taiwan, of course, taking up a lot of bandwidth, if you like, in the State Department. But is it still solid behind Ukraine, do you think and unmoving?
TN: Roger, it’s $40 billion solid. So there’s quite a lot of financial backing. So I don’t think there’s much doubt that there’s US back in there.
RH: Yeah, okay. Well, it’s solid and remains. And hopefully the food issue in all this could be moving towards the solution. But we’re going to talk about a wider problem in the moment in the next part of the program. Tony, what about you, just on that principle, the idea. In the States, I imagine federal workers get paid the same whether they’re working in California or Idaho, don’t they?
TN: I don’t know, but I don’t think they should. Obviously, they need to be paid according to the costs around where they live.
RH: That’s interesting. So you back the idea, really? You think it makes sense?
TN: Absolutely. Look, I’m a pretty rational, data driven economic mind. And so if somebody is paid for a salary, if they’re based in DC, but then they move to, say, Texas, where the house cost is a third or somewhere around there what it would be in DC, should they make the same wages they made in DC? I don’t think so.
RH: But I suppose the argument we had there from Jagged at Chad was actually it attracts when you put money into an area like this, a, you get the best people, I suppose, working in difficult areas, and also they will fuel the local economy anyway when they spend.
TN: Well, it’s very… That kind of clustering theory, used to economic development consulting around
clustering about 20 some years ago, and there are a lot of dependencies there. So you don’t necessarily just attract kind of the best people just because you pay the most or something like that. There’s a lot of social infrastructure and other things that are required to capture kind of the talent that you need. So I do think the reality is private sector companies don’t really work that way. People are paid according to kind of where they live. It’s kind of indexed. And I think if I don’t really follow UK politics
and I don’t really have opinions on UK.
RH: Lucky you. I think most people feel at this stage.
TN: But I think it would have been smarter to say, hey, we’re going to appoint a private sector HR advisory firm to index salaries based upon things. Outsourcing, that type of expertise, rather than saying you have regional boards of bureaucrats deciding the stuff is probably sounds a little bit better.
RH: I have to say, Tony, with some experience that they do have such advances and consultants, they’re not popular at all. Of course they’re not. As you can imagine, that doesn’t always get. Our was Michelle Ferry in New York.
Come on, Tony, I’m going to ask you, what would $5,000 a month get you in Houston?
TN: Roger, I’m looking at a listing right now for $4900 a month you get a four bedroom house. 3500 square feet. It looks beautiful.
RH: That’s a rental. We’re in a different world, aren’t we?
TN: Yes, sir.
RH: I got to take a fly here and say that each of us in the past, perhaps when we were younger, has rented. I bet you rented, didn’t you, Jessica? At some point.
Jessica Kind: I currently rent now. My balance sheet light and I can tell you that an average semi detached house in a delicious, delightful quiet estate is 1100 US for 3800 sqft.
RH: That is a lot of space. Yes. That’s nice. That’s good. If I were in Kuala Lumpur somewhere like that, right in the center of the fashionable areas, obviously be a lot more. But because you’ve got a lot of people in the financial I mean, this is maybe the problem in Manhattan. You’ve got people with large amounts of money forcing all this stuff up. I mean, that would be true, Jessica, wouldn’t it? Places Singapore, I guess.
JK: Actually no big gap between KL and Jahor, really. Singapore is now artificially inflated by a lot of escapees from Hong Kong. Refugees from Hong Kong are pushing up the Singapore property market. Rental and purchase.
RH: Yeah. The point in all this, I suppose, is these are unregulated markets. There was an issue a little while back, I think, in Berlin, where there was a strike because regulated rent strike because regulated rents were coming to an end or being lift or being abandoned, and that makes a big difference to people. Is there a case, do you think, for regulating rent?
TN: Gosh. It makes things really hard. There are a lot of economic case studies on that, but rent control in New York was notoriously problematic. So as I heard the story and I heard the woman talk about a 48% rent rise. I spent most of my adult life in Singapore and a 48% rent rise you would have to take in stride every so often. That’s just the way it was. There were years you say, take in. Stride, but you had to be earning a hell of a lot to do that, didn’t you? You would figure out how to get it done and there were years, I think, in 2007, eight, where rent would double. There have been times in Singapore, and I’m sure Hong Kong is similar, where rent would just simply double. Yeah, and there have been times when you found it,
you’ve had to make big changes, you’ve had to take deep breaths. Well, that’s what pushed us to buy a house in Singapore and we had to scrape together the money to buy a property so that we could get out of the path of that because it’s too volatile, life is too risky without that.
RH: That’s interesting. Jessica, you say you travel like you rent, you must have had must have been times when you found rent difficult I guess everybody does, and you have to cut back and I suppose think about other ways of doing it.
JK: Once upon a time, when one was young, Roger and Tony. I remember it vaguely. It was a long, long time ago in my case. A little internal benchmark that I never let rent go above 25% of my take home. So for the New Yorkers, with an average salary of $70,000 pre tax, that five grand, I think bites. I think it’s hard.
RH: Well, we heard in Michel Flores report that 30% was the kind of working rule I mean, Tony, if you were renting, you’re not, but is that a sensible a third of your income effectively? I think people say also the same which you’re paying, if you’re paying a mortgage, should be around that.
TN: Well, it depends on where you are in life, right, Roger? I lived in London when I was in my 20s and my rent was way too high and I could barely afford it, and after a year and a half in London, I left with debt because it was so expensive. So I think it depends on where you are in life and can you really afford it or will you just make ends meet or get roommates or something like that? So we’ve all had to make those trade offs. But I suppose we’re talking about perhaps normal economic times.
RH: But Jessica, I mean, an awful lot of people have gone through COVID when certainly here in Britain, there were lots of rules went in, including people weren’t allowed to be evicted because obviously they couldn’t work, they couldn’t earn, therefore they couldn’t pay rent. Should we perhaps post-COVID take a rather more, I don’t know, involved view of private renting and see if there are ways in which to avoid people who are really vulnerable being put in a really difficult situation like this?
JK: It’s so difficult. I think Tony mentioned earlier in our conversation, didn’t he, that rent controls and those sort of committees and sort of pricing, having foundations for pricing, I think it is all extremely difficult and I have no idea what is the best solution.
But I know that in Singapore now, if you try to rent a flat, you think you’ve sealed a deal with the landlord
in the morning, in the afternoon, you pop back with the deposit you’ve been gazumped. Yeah, well, of course that happens. Property buying as well. I mean, it’s simply another version of that.
RH: But, Tony, what about the principle of social housing? We have quite a lot of it in this country, not perhaps enough, but where there is, it is provided by the local authority in Britain, mostly at a controlled level and affordable level. Is that the real answer to real deprivation, as we’ve heard about in New York?
TN: I don’t have a problem with that. I think there is room for that in society and I think we have to provide for some people, and some people just haven’t had the right opportunities. So I don’t have any issue with that. I think the problems remain when people become, say, you come to an earning level where you can
afford more, but you remain in those places. So I think it can lead to some difficult, say, trade offs. But I do think that… Singapore has that, and again, I was there for a long time. There is housing in Singapore for people who can’t afford more expensive housing. So it’s something I’ve seen work. It doesn’t work well here in the US. It’s a big difficulty and one that we’re not going to come up with an easy answer for a course on a program like this, but it’s always good to talk it through and to get experiences we’ve all had in that market.
RH: So I hope that has been helpful and indeed elucidating, and we hope, entertaining as well. My thanks to Tony Nash, Jessica Kind and to all you for listening.