The State of the World Economy with Liam Halligan
Episode Stats
Length
1 hour and 1 minute
Words per minute
183.50395
Harmful content
Misogyny
7
sentences flagged
Toxicity
28
sentences flagged
Hate speech
21
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Summary
In this episode of Trigonometry, Francis Foster and Constantine Kissan talk to Liam Halligan, an economist, writer and broadcaster. They discuss what's going on with the UK economy, the global economy, and the slowdown in China.
Transcript
00:00:00.560
What is going on with the British economy, the global economy, et cetera?
00:00:05.320
Well, the world has not actually managed to get out of second gear since lockdown.
00:00:10.060
The long kind of lingering tale of the pandemic is still with us.
00:00:16.260
China is not, at the moment anyway, the global growth locomotive that it has been
00:00:22.280
for most of the last two or even three decades.
00:00:24.940
But people don't like to hear it, but UK exports to the EU, right, have never been higher.
00:00:33.240
At least we can now have a discussion and raise issues about net zero, not about the ultimate
00:00:38.720
direction of travel, but the speed and the cost and the distribution of those costs.
00:00:42.900
We have to have those discussions, because if we don't have those discussions, this isn't
00:00:48.200
Obviously, the war in Ukraine has accelerated and accentuated a process that was already
00:00:54.580
happening, a process that's shifting power away from the West and towards the East.
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Because we don't like to talk about it very much in the West, because it's awkward and
00:01:22.480
And this is a show for you if you want honest conversations with fascinating people.
00:01:27.520
Our terrific and returning guest today is an economist, writer and broadcaster, Liam Halligan.
00:01:35.600
And we always invite you on whenever we want an update on what's actually going on.
00:01:40.200
We talk a lot about culture on the show and politics, but you are someone who's got real
00:01:44.180
substance and a real economic, you know, strong background and analysis.
00:01:50.720
What is going on with the British economy, the global economy, et cetera?
00:01:55.800
Well, the world has not actually managed to get out of second gear since lockdown.
00:02:00.280
The long kind of lingering tale of the pandemic is still with us.
00:02:06.080
The UK economy is just about growing, avoiding recession.
00:02:09.700
Germany, Europe's biggest economy, is in recession.
00:02:14.240
But China, which has been the engine of global growth, the locomotive, if you like, for at least the last 20 years, contributing a lot more to the global economy in terms of raw numbers and GDP than the US even.
00:02:29.640
Now, that doesn't mean China's going into reverse.
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It means instead of growing at 8%, 9%, 10%, as it has been from basically, you know, 1980 all the way through to a few years ago, China's now growing at 4% or 5%.
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And it's not just that China's growing quite slowly, which means there's less growth elsewhere.
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It's also the Chinese property sector, the Chinese shadow banking sector.
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It's now big enough, systemic enough, ugly enough, if you like, that it could cause another kind of layman moment.
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There's a lot of people in the market, there's a lot of research notes going around saying things along the lines of these big Chinese property conglomerates that have been massively bloated over many years.
00:03:15.580
A huge amount of the country's wealth is in residential property.
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It's very difficult for middle class Chinese people to save any other way.
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These big property companies, could they be on the verge of collapse?
00:03:28.540
Could there be some kind of systemic layman-style moment coming out of China?
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And that's a big fear that in recent months has been stalking global markets and the broader global economy.
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And I don't want to jump in because there's lots more for you to cover in terms of everything that's going on.
00:03:45.100
But on this particular issue, if that were to happen, you say layman-style event, would it have a global impact of that sort of significance?
00:03:55.760
China's the second biggest economy in the world.
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It's the biggest economy in the world on some definitions, on what we call a purchasing power parity basis when you adjust for currencies.
00:04:08.860
But I don't actually think it's going to happen.
00:04:12.300
I think a lot of people in the markets are putting scare stories out there, as they always do, when they want to get the Fed to stop raising rates or even to start cutting rates.
00:04:22.520
The main reason I think that is because, unlike layman, in the run-up to layman in 2008, you had people buying houses with sort of 5% deposits, no deposits, you know, negative deposits, where the mortgage company actually gives you money for furniture and stuff when you buy a house.
00:04:39.560
But in China, for years and years and years, the rules have been very strict, certainly in the big cities.
00:04:47.240
So there's a lot less chance of these big companies going into negative equity, of ordinary people going into negative equity.
00:04:56.120
But look, be in no doubt, this is a major moment in the evolution, the astonishing evolution of the Chinese economy.
00:05:06.360
But I, for one, don't think we're going to see a big systemic lurch coming out of the Chinese property market.
00:05:12.040
I think we're much more likely to see a big systemic lurch, by the way, on Western markets, government debt markets, as we unwind QE.
00:05:20.180
And that's a big sort of theme in my thinking at the moment.
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The Western world are the emerging markets now, and the emerging markets are the West.
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Well, we'll talk about that, Francis, before you take over.
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But I just want to finish with China, because there's a guy we've had on called Peter Zehan.
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I don't know if you're familiar with him, whose central argument is China is in a demographic collapse.
00:05:41.880
And it's just that's going to continue, going to get worse, et cetera.
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Yeah, I mean, look, that's been going around the markets for years.
00:05:51.480
And the question is, will China get to a sort of GDP per head, a purchasing power per head,
00:05:56.940
that can sustain the economy and get it out of what we call the middle income trap
00:06:00.960
that emerging markets go through as they become advanced industrialized economies?
00:06:10.640
I think China is, you know, through its closeness with the other emerging markets.
00:06:16.560
Since the war in Ukraine, we've seen a massive consolidation of the BRIC concept.
00:06:20.780
It's very fashionable to dismiss that as a nonsense.
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Just like people dismiss OPEC sometimes as a nonsense.
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It shows that they don't actually know anything about geopolitics.
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So I don't see China as the main source of global systemic danger in the world at the moment,
00:06:40.960
though absolutely China is not, at the moment anyway,
00:06:44.460
the global growth locomotive that it has been for most of the last two or even three decades.
00:06:52.280
Because they're doing supremely well, aren't they?
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India is doing very, very nicely out of the war in Ukraine.
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It's importing a lot of Russian oil and then turning it around, refining it,
00:07:05.160
re-exporting it as Indian oil, making a lot of money.
00:07:08.980
I think, though, there are, these are very big countries and there are tensions, you know.
00:07:13.000
So you'll know, Constantine, about the close relations between Russia and India over many years.
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India was part of the non-aligned group in the 60s.
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You know, when I lived in Russia, constantly kept coming across very sophisticated Indian people
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They'd often been to the top Russian universities.
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Obviously, Russia sells India most of its arms.
00:07:35.700
So there's a closeness there, but there's also a tension because India, of all the bricks,
00:07:40.500
is probably the one that's closest to the West, certainly closest to America politically,
00:07:47.420
And, of course, there's tensions between China and India.
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You know, China and India are technically at war over parts of the Himalayas,
00:07:54.900
literally troops standing off against each other.
00:07:57.680
So this bricks conglomerate, it's not entirely plain sailing.
00:08:03.600
But, you know, NATO doesn't make complete coherent sense.
00:08:06.240
The Allies in the First and Second World War didn't make complete coherent sense.
00:08:10.260
But they were very, very powerful forces in the affairs of men.
00:08:15.220
So I do think India is pretty soon going to overtake China officially as the most populous country in the world.
00:08:22.840
And, of course, despite all the bureaucracy, it is a more attractive place to invest for the West.
00:08:28.880
It's got – I wouldn't call it open, but it's a lot less closed than China.
00:08:34.960
And I think culturally it's a lot more attuned to the West.
00:08:38.080
And I think very, very importantly, without mentioning the B word, Brexit – oh, I just did –
00:08:44.320
if the UK, right, manages to sign a trade deal with India, that will be noticed, not just here in the UK,
00:08:51.260
that will be noticed around the world because India does not sign trade deals very, very often.
00:08:55.220
And if it manages at the height of this kind of brick mania, when it's, you know, not on the West side in the war in Ukraine,
00:09:02.420
very much riding two horses, very much realigning itself with the fast-growing economies of the East, as it must,
00:09:08.820
finally getting out from under the sort of colonial yoke of Europe and the Brits in particular.
00:09:13.600
If, despite all that, Modi greenlights a comprehensive trade deal with the UK,
00:09:20.320
that will be a major moment, not just for the British economy, not just for the debate on Brexit,
00:09:23.980
because, of course, you couldn't do that within the EU, that would be a big moment geopolitically for the world
00:09:28.940
because it would say to the world, India is open for business.
00:09:32.920
And Liam, let's talk a little bit about Brexit because things are not good economically here, to put it mildly.
00:09:40.840
And there's a lot of people in certain publications and news stations screaming and shouting and saying,
00:09:46.560
this is the fault of Brexit. What did you expect?
00:09:49.120
We've now left the customs union. We've done all of these things.
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Or is the picture somewhat more complex than that?
00:10:02.560
It's very much in the middle of the pack when it comes to the G7,
00:10:06.700
both in terms of how it's grown since 2016 and how it's grown since the end of the pandemic.
00:10:18.920
And people don't like to hear it, but UK exports to the EU, right, have never been higher.
00:10:27.960
Or, you know, thanks Anna Soubry saying on Question Time, our exports to Europe,
00:10:32.000
she literally said we'll go absolutely almost to zero.
00:10:37.660
But she was basically saying we wouldn't export to the EU.
00:10:40.100
Now, utter rubbish, we have never exported more in value terms to the EU than we currently are.
00:10:47.480
Now, part of that is because America is shipping huge amounts of liquefied natural gas across the Atlantic.
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America has become, since the war in Ukraine, by the way, the largest exporter of LNG in the world.
00:11:02.920
And as Western Europe has weaned itself off Russian oil and gas in particular,
00:11:10.560
And a lot of that LNG comes through British LNG terminals, not least at Milford Haven.
00:11:15.720
And then we re-export a lot of that to mainland Europe.
00:11:19.140
But be that as it may, there are many other categories under which exports to Europe are actually doing really well.
00:11:24.880
And the UK has just overtaken France to become the eighth biggest manufacturer in the world.
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00:11:31.500
So, you know, the so-called journalists who say we don't make anything, everything's crap,
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There's a whole class of people in Britain and they will always diss their country.
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And, you know, when Orwell was writing, you know, I wasn't even British.
00:11:52.960
I was, you know, my people were picking spuds in the west of Ireland, right, living in stone huts.
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And yet I would say that there's an awful lot of ingratitude in the UK towards the UK,
00:12:02.860
particularly among families who know that in their past, a few generations back,
00:12:08.980
They're the people who, you know, whose wealth is built off the back of that kind of behaviour.
00:12:14.980
And so a lot of them make it into the top of the mainstream media.
00:12:20.680
And then they get there and they think they have to diss the country
00:12:25.560
Well, a lot of ordinary hardworking people, the alarm clock classes of Britain,
1.00
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the people who make things actually happen and work,
00:12:33.380
the people that drive our economy forward, they're actually quite like the UK,
00:12:37.140
whether they were born here, whether they came here.
00:12:39.900
You know, and I have the sort of gratitude of an immigrant, if you like.
00:12:43.520
Like, when my father arrived here from the west of Ireland in the 1950s,
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England was a properly racist country and it was no blacks, no dogs and no Irish.
00:12:52.680
And we got the photos to prove it, so let's not deny it.
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And of course there's still bad stuff going on.
00:13:01.660
But I actually think the UK, for all the negative publicity we get,
00:13:08.700
And I think in terms of integration and multiculturalism we're doing OK.
00:13:16.340
I just don't think it's nearly as bad as certain broadcasters always tell us that it is.
00:13:21.380
Well, as you say, there are a lot of people whose whole world view is invested in that being true.
00:13:28.340
But coming back to economics, Liam, you've mentioned,
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we've talked about one controversial word, Brexit.
00:13:32.940
There is another thing that you've mentioned about four or five times already,
00:13:38.200
We don't want to relitigate the whole conflict and everything.
00:13:41.000
But what I'd be interested to know is what you think are some of the key impacts of that conflict
00:13:47.540
on the world economy, on the rebalancing and restructuring of the world,
00:13:52.440
and for people here at home, what has been the impact
00:13:55.640
and what will be the impact of the war in Ukraine?
00:13:57.940
Well, once the war in Ukraine began in earnest,
00:14:00.220
because, of course, there was a sort of low-level war, as you and I discussed a lot,
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Constantine, from Medan onwards, from 2014 onwards.
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There's lots of bombing going on in Donetsk and Luhansk and so on.
00:14:10.900
But once Russia actually invaded in February 2022,
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I think a lot of the world suddenly realised what's obvious to those of us
00:14:20.700
that, you know, these countries produce a lot of food.
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And they, you know, Ukraine isn't the breadbasket of Europe for no reason.
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You know, the historic importance of ports like Odessa,
00:14:33.660
And so a lot of people have realised that if you blockade Russia,
00:14:42.560
then food prices are going to spike, and that's what happened.
00:14:45.020
And you've got countries in North Africa, around the Horn of Africa,
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who are very, very heavily dependent on Russian and Ukrainian grain,
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all those staple foods that come out of that part of the world.
00:15:00.200
but we've seen a spike in inflation more generally.
00:15:02.960
And you can't attribute it solely to the war in Ukraine,
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when almost no one thought Putin was going to invade,
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inflation in the UK was already at a 30-year high.
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The war in Ukraine knocked inflation up to a 40-year high.
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And we're still living with the implications of that.
00:15:27.720
At the moment, of course, in the UK, the latest numbers,
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inflation has come down to 6.7% in August, from 6.8% in July.
00:15:35.100
And that means that the Bank of England, after these falls,
00:15:37.860
has been able to keep interest rates where they are for now,
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And the UK is in a similar pace to the Federal Reserve in America,
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You know, there may be one or two more rate rises to come.
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But for the most part, we think we've got our arms
00:15:57.980
But it may be that there's another twist this autumn.
00:16:07.900
subsidising households and firms' energy bills.
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but it was less than we thought we were going to spend.
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America, of course, hasn't got that energy problem
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That's why retail electricity prices in America
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partly because of the way we do marginal cost pricing
00:16:31.300
You can ask me about that in another question, if you like.
00:16:38.880
but an expectation that they're going to keep coming down, right?
00:16:42.080
But, but, but, if this war in Ukraine continues,
00:16:48.720
until he knows what's happening in the White House, right?
00:16:55.360
But if he decides to turn the screw this autumn and winter,
00:17:00.940
what's emerged is an axis that no one in the West
00:17:08.280
The Saudis, of course, the absolutely pivotal US ally
00:17:17.840
That's now breaking down because oil has spiked enormously
00:17:26.060
We've gone from just over 70 bucks a barrel in June
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that we've seen in 23 years in percentage terms.
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And Riyadh and Moscow are now working together.
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Look, OPEC controls a half of all global oil production,
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the exporters cartel, and four-fifths of all known oil reserves, right?
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but very much working with OPEC in this grouping called OPEC+,
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then OPEC plus controls two-thirds of all global production
00:18:19.340
isn't because the global economy is growing fast
00:18:22.140
and so people are demanding more oil, which bids the price up.
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the global economy is not really out of second gear post-lockdown, right?
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are deliberately taking oil out of the market now
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And we're not talking about it, but it's completely true.
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and that could very easily complicate the West's ability
00:18:55.940
to finally escape from this cost-of-living crisis,
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which of course would then have knock-on effects
00:19:03.620
for the West's entire approach to the war in Ukraine.
00:19:07.000
So when you say they're taking oil out of the market,
00:19:20.000
The world uses about 100 million barrels of oil a day, right?
00:19:23.420
Instead of producing about 10 million barrels a day,
00:19:25.240
the Saudis will say, oh, we'll produce nine for now
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they can make the same amount of money selling less oil, right?
00:19:36.860
in terms of they are trying to flex their muscles
00:19:40.960
Look, go back to the Yom Kippur War, right,
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OPEC is there, they say, to stabilise oil prices.
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OPEC is there to maximise the revenue for its members.
00:20:03.740
than the world needs in order to push the price up
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And within that, that is obviously a hugely powerful tool
00:20:14.220
But you've also got other very, very powerful economies.
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You've got the Iraqis in there, you've got the Mexicans,
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you've got the Venezuelans, you've got the Iranians,
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it's also about control and flexing geopolitical muscles.
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both of you, with people from other big economies
00:21:20.180
You know, they're building their own ratings agencies,
00:21:22.100
they're building their own payment clearance system,
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which is the kind of financial plumbing of the world
00:21:36.840
Well, a lot of these big economies are pushing back.
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as they get a bigger share of the world economy.
00:22:19.060
and accentuated a process that was already happening,
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and it has a sense of the end of history about it.
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That's the only way we're going to stay independent
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You know they've been caught lying again and again.
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and we'll shortly be announcing exciting new shows
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It was originally very much an Arab organisation
00:25:09.080
It's when American cars stopped being like massive
00:25:13.060
and started to get small and compact in Japanese.
00:25:32.940
Otherwise, you can get free rider things happening