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Global recession risk rises as IMF lowers growth forecast

This podcast was originally published at https://www.bbc.co.uk/sounds/play/w172ydq1zf6tjvb

The IMF says the risk of a global recession has increased as it lowers its growth forecast for the coming year. Its managing director, Kristalina Georgieva, said the gloomy outlook was fuelled by Russia’s invasion of Ukraine and the continuing impact of the Covid pandemic.

Hong Kong has relaxed several of its coronavirus restrictions in recent weeks. Now it’s giving away 500,000 airline tickets worth $250 million in a bid to boost visitor numbers. Will it succeed?

The Rooney Rule was adopted by NFL teams in the US in 2003, with the aim of creating equal opportunities for Black coaches. But there’s criticism that it hasn’t achieved what it set out to do. Gus Garcia Roberts from the Washington Post has been investigating and shares his findings with us.

Sam Fenwick is joined by Tony Nash, chief economist at Complete Intelligence in Houston, Texas and Zyma Islam from the Daily Star in Dhaka, Bangladesh to discuss these stories and the other big money and work issues of the day.

Transcript

Sam

Hello. You’re listening to the BBC World Service. I’m Sam Fenick, and this is Business Matters. Welcome to the program. Today we’re going to be talking about the risk of a global recession. It’s apparently creeping close. It’s the stark warning from the International Monetary Fund. We’ll be talking about what it might mean for businesses and consumers around the world. Why the price of oil affects more products than just the petrol in your car.

Tony

So natural rubber has gone up, oil prices have gone up, and therefore the tire industry margins, margins have come down.

Sam

And have you ever quit your job? Is it liberating? We’re going to be talking about that. We’ll be joined throughout the program with two from my two guests on opposite sides of the world. And pleased to say that Tony Nash joins us. He’s in Houston, Texas in the USA. He is the CEO at Complete Intelligence. Hi, Tony.

Tony

Hi, thanks for having me.

Sam

And Zyma Islam is a journalist at the Daily Star newspaper in Dakar in Bangladesh. Hi, Zyma.

Zyma

Good morning, Sam.

Sam

Hi. Good morning. It’s Friday morning with you. It’s Friday morning with us, but it’s still Thursday with Tony.

Tony

Yes, it is.

Sam

And have either of you ever quit a job?

Tony

Yes.

Sam

Have you?

Tony

Yes.

Sam

Was it liberating? Worrying?

Tony

Well, I had a better opportunity in both cases, so I guess it was liberating.

Sam

Zyma, have you?

Zyma

Oh, I’m terrified by the very thought, even when I’ve had better opportunities.

Sam

Yeah, I’m with you. Maybe it’s a female thing. Well, we’ll be talking about that a bit later in the program. But first, shall we look at the global economic outlook? Because the International Monetary Fund warned on Thursday that the risk of a global recession is rising because of Russia’s attack on Ukraine and shocks caused by the COVID pandemic.

Sam

Tony, I think we should start with you on this because you are an economist. Some of the quotes that I was reading in the speech, which she gave greater uncertainty, higher economic volatility, geopolitical confrontations, more frequent and devastating natural disasters. It doesn’t sound great, does it? It makes for quite grim reading.

Tony

Yes. And if it’s going to be more volatile than the last two years, look out. I think part of this is obviously post pandemic. Part of this is the backside of a lot of the stimulus that we saw over the last two years. Part of it, of course, is because of the war. Part of it is because of the other side of supply chains. There’s so much that’s happened over the past couple of years and there’s always the other side of it. Right. And I think that’s what we’re seeing right now is the other side of all of this drama that we’ve all lived through over the past two years.

Sam

The IMF is going to downgrade the economic forecast for next year, 2023. Explain what that means.

Tony

Well, in civil terms, it just means things will grow slower or they’ll do the opposite of growing and they’ll contract. So that’s really what they mean by contracting economic growth.

Sam

And energy prices are a big problem here, aren’t they? You mentioned them. The war in Ukraine is really causing a problem with gas into Europe, but also oil prices.

Tony

Sure it is. Yeah. I mean, Russia has been selling that to Asia primarily, but it has disrupted, obviously, the flow of oil to Europe, and that’s just dislocated global prices. Of course. In the US, the president opened up the Strategic Petroleum Reserve, which put millions and millions of barrels on the market and alleviate prices somewhat. That will end in November. And so we should see some at least in the crude market, we should see energy prices rise toward the end of the year once that slack is cleared from the market.

Sam

We’ve discussed some of those inflationary pressures come from the rising cost of crude oil. Crude oil derivatives make up nearly half of the cost of producing vehicle tires. About seven gallons of the black stuff is used to produce a single tire. Apollo Tires is India’s largest manufacturer of tires. Their annual revenue is $2.6 million. But over the past couple of years, their prices have gone up by about 30 or 40%. The vice chairman and managing director of Apollo is Near Edge Canoe, and he told me that he’s had to put his prices of his tires up.

Sam

Tony, I just wanted to come briefly to you just off the back of that. Mr. Kamwa there was talking about how they try and reduce costs. But it takes a lot of infrastructure to get those costs down, isn’t it? A lot of capital expenditure. And then it’ll be a while before these businesses start to see the reduction in cost because of the investment that they’ve made.

Tony

Well, it could. I mean, some of it could just be changing processes. I think when things like the input costs like crude oil or natural rubber are cheap, there’s very little incentive to refine your processes. Right? And so I think those first steps, him talking about going to the factories and getting, say, the same output with less input in the factories, that sort of thing, those are obviously the first steps. And I think every business, if they’re honest, can probably ease out productivity gains. I don’t know. I wouldn’t estimate what percentage they could, but those are obviously first. But part of it could potentially be, as you say, investing in equipment, investing in automation, other things which could produce a lot more. But I think what I found really interesting about what he was talking about was you’re seeing the primary impacts of inflation, which is crude oil and rubber. The secondary impacts of inflation is the tire price, and that the tertiary what we call the tertiary impacts of inflation are the freight costs that he talked about. So in that interview, we saw three different phases of inflation impacting the economy. It was really interesting.

Sam

Great. Well, thank you very much. Well, we are going to now move to another update on Twitter. Billionaire Elon Musk, he says he aims to complete his purchase of Twitter by the end of the month, but the company will not take yes for an answer.

Sam

And Tony, I mean, so many countries have no travel restrictions for COVID at all now. That you tend not to go to places where there are restrictions, because why would you?

Tony

I’ll be honest, I really miss Hong Kong. I used to go there once a month when I was at The Economist. Our original headquarters was there and I was there a lot. But even with small restrictions, it’s just an inconvenience. And so there would have to be a serious incentive to go and put up with really any restrictions.

Sam

I was looking at the various different restrictions that have been kind of removed over the past few weeks. So, Japan, so from next Tuesday, the 11 October, there will be no border controls in Japan similar to the US. But the thing with Japan is that China was the largest source of tourism revenue before the Pandemic, and of course, people can’t leave the other parts of China.

Sam

Welcome back to Business Matters on the BBC World Service. We are live in Salford in the UK. I’m Sam Fenix. Thank you for your company. We’ve got Tony Nash with us. He’s in Austin, Texas. He’s an economist. And Zyma Islam is a journalist from Dakar and she joins us from Bangladesh. We’re going to start the second half of the program by talking about whether it’s a good idea to quit your job. It’s often seen as a negative thing to do, but it doesn’t have to be. One in five of us are expected to quit our jobs this year, according to PwC’s Global Workforce Survey.

Sam

So, Tony, you said earlier in the program that you have quit a job. Tell us about what happened.

Tony

So I got a job at one point with a company that I thought was fantastic. After a couple years there, I realized that kind of everyone who had worked there for more than five years had really just kind of settled and they stopped being excellent and the best at what they could do. So I told myself at the time that I would stay there for five years and then I would find another job. And I did. And I moved on to a job with quite a lot more money and less work to do, which was really nice.

Sam

Did you listen to your body like we heard in that clip?

Tony

I guess so. In a kind of a silly way, I guess so. I just knew that I wasn’t comfortable being mediocre, but I didn’t want to leave the job right away, so I had to stay there for a period of time, do my time, and then find something where I could do great work? 

Sam

It doesn’t always look good on a CV, does it? To have lots of different jobs in very short space of time.

Tony

I don’t necessarily think that’s the case anymore. Look, my company is a tech company and in tech you stay at least in the US, you stay for a year and you move on. That’s pretty common with, say, developers in tech. So I think it depends on the industry. But I don’t think moving around jobs, say, every few years is necessarily seen as negative as it once was.

Sam

But you felt in that job you did have to stay there for a certain amount of time.

Tony

I did, and I wanted to stay there for a period of time because I wanted to make sure that my initial feeling wasn’t wrong. And I also wanted to make sure that I could get the most out of the job. You know, good experiences, great people, all that sort of thing. And I did. I enjoyed the next few years, but I also realized that it was time to go. And that’s something kind of early career, mid career, I think people need to do is when they come into a job, understand why they’re at that job, and then understand when it’s time to move on. And it’s not necessarily emotional, it’s just part of a growing process.

Sam

That’s the truth, isn’t it? Tony perhaps in the US, people are more likely to move around because there’s more job security, there are more jobs.

Tony

Possibly. I think especially in the US. Through the pandemic, there is so much work from home and so many people would switch jobs because it was just arbitrage. They could do the same work for more money and stay in their home. So I think that was a big factor in a lot of the job leaving in the US over the last couple of years. As things slow down, it’ll be really interesting as we enter recession or as things continue to slow down, it will be really interesting to see what happens with job leavers and job switching in the US to see if that slows down and what the expectations around jobs really are.

Sam

Well, I’m going to speak Tony.

Tony

It’ll happen. My company automates finance jobs, so highly educated professional workers in developed countries. So automation is going to happen to a lot of jobs where they’re not innovated. That’s just a fact. And so the entrepreneurs and the planning officials in Bangladesh should better get busy because automation of garment jobs is coming pretty quickly. And so.

Zyma

Absolutely, but there’s going to be a gender component to that, Tony. So when you start training garment workers for these more highly technical jobs, what happens is that women, they get cut out of the picture because they’re not as skilled graduating.

Tony

I spent most of my professional life in Asia. My son is South Asian. I understand the cultural issues around many of the workforce debates that happen in Asia. Deeply. I understand them deeply. And so that is a cultural issue that can only be solved by Bangladeshis in Bangladesh. It can only be solved by Bangladeshis in Baghdadesh. And so that’s not something that anybody else can solve. And I hope that there are people in Bangladesh who have the courage, your President is a woman. So I hope that people have the courage to solve that in Bangladesh.

Zyma

We’ll actually need to get our woman to start going to university. Because what happens here is that after high school, they drop out, they get married. When it comes to high school, we do have like an equal there’s, like a 50 50 balance when it comes to graduates. But the minute you go off to the treasury sector, you see fewer female graduates. So with fewer female graduates, they’ll be less eligible for the automated jobs. It’s easier for them to get these brick and mortar jobs involving, say, sitting in a supply chain line of some sort.

Tony

I’ll tell you what will happen with the automation around the garment sector. That won’t happen in Bangladesh. Because of supply chain issues, those automated garment factories will be put in Europe, or they’ll be put in the US or somewhere else closer to where they’ll be consumed. So, to be very honest, those jobs will disappear in Bangladesh if those higher level skills aren’t taught, and now is the time for that innovation to happen.

Sam

Do you see that happening? Any of that innovation, that education that Tony mentions?

Zyma

No, not at all. Absolutely not at all. I simply see women getting replaced in the menial workforce.

Sam

Well, Tony, we are actually on the eve of a big jobs data day, aren’t we? It’s a big day tomorrow in the US on Friday. Indications show that the jobs market might be slowing.

Tony

Yes, and we’re in a position in the US where kind of bad news is good news, I think, because the Fed is hoping that the rate of job growth slows so that they can ease up on interest rate rises. So Americans are kind of hoping that it’s a down number so that there’s less expectation or lowered expectations that the Fed will raise rates. So bad news is good news with that particular print.

Sam

Well, that’s a good thing for our listeners to look out for. Bad news is good news. When did you ever hear that? Thank you both very, very much for joining us. Tony Nash, economist with Complete Intelligence in Austin, Texas, USA. And Zyma Islam, a journalist with the Daily Star in Bangladesh. My name is Sam Fennick. You’ve been listening to Business Matters on the BBC World Service. Thank you to the producer, Hannah Mullane, and the team in the studio here in Salford. Join me again tomorrow at the same time, midnight GMT.

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Podcasts

US-China tensions: Beijing hits out as Pelosi arrives in Taiwan

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.

Transcript

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.