David Fickling details how close hundreds of millions of people are to hunger, stunted growth, and worse as the world's bread baskets fail to feed. Ruth Pollard details Sri Lanka's chaos from Colombo and why international investors are studying Sri Lanka's default as a case study for other developing economies. And Jonathan Bernstein on the House January 6th Committee public hearings which start next week: Will they engage viewers, aka voters? Hosted by Vonnie Quinn.
Welcome to Bloomberg Opinion. I'm Bonnie Quinn. This week they've been very, very slow to move towards this. Jonathan Bernstein on the public hearings from the House January sixth Committee, which start Thursday, and the impression the six Countom six sessions will make. Later, we'll speak with Ruth Pollard in Colombo, Sri Lanka which defaulted for the first time since it won independence from Great Britain, and the country is a potential bellweather for investors on developing economies post pandemic. First though, to the intensifying and global food crisis. Here's the U. S. Treasury Secretary Janet Yellen last week. Russia's war against Ukraine has exacerbated the issue of food security for people around the world, particularly in emerging and developing countries. I spoke with David Fickling for an overview of just how bad the situation is for global economies, particularly those dependent on food imports. I think we're approaching a quite unusual turn in the sort of history of global food security. To be honest, if you look back at the long history of this, you know, one of the crucial things that helps keep the world fed over the past fifty years, while the world population has doubled, is actually trade. People talk a lot about the growth of sort of chemical fertilizers and farm machinery, which have both been very important in the twentieth century in keeping the world fed, but trade is a really important part of that because, of course, if you have drought and crop failures in your region, then there's no amount of fertilizer or farm machinery that will solve the fact that your crop just won't grow. So a really important thing that I think is underappreciated is that the cost of ocean trade in the nineteenth century dropped by about and so you suddenly have this global trade in grains and about a quarter of all the calories we consume it and now traded across borders. So it's very important that this is a global trade. But I think something's undappreciated is that it's quite a concentrated trade. The world's bread baskets are rather few. There's probably about six of them the US Midwest, the South America, sort of Argentina, Brazil, that area, areas of western Europe and the Ukraine and the former Soviet Union and Russia. And I think most importantly the plain between the Indus and the Ganges in northern India and Pakistan and eastern China, between the Yank Sea and the Yellow Rivers. Those six red baskets are absolutely crucial to the world's growth. Of these relatively few number of crops that we depend on, wheat, rice, corn, soybeans. More than half of wheat and rice and corn are grown if you put those those areas together soybeans described Now, for most of the time, that's not too much of a problem because although there's just half a dozen of these bread baskets, if you get a drought in one region, it tends to pair with good rainfall and another region that leads to higher crop yields, because essentially the rainfall has to go somewhere. It evaporates on one side of the ocean, it tends to drop on the other side of the ocean, and when we talk about things like El Nino and Landinia, that's essentially about rainfall ending up in different places. However, as the climate is changing, a lot of va is getting a lot less secure than it has been in the past, and I think that's really putting pressure on some of the fairly sort of shaky system that we have there in place over the stage of half a dozen bread baskets to keep the world said, were seeing several weather events right now, even just in the United States alone, where Montana is suffering drought, North Dakota can't get anything seated because of rain. So weather has a lot to do with the fact that there's going to be a shortage. It is not just Russias war in Ukraine. Absolutely, And of course you know you see that weather event in the US. Prices for spring red wheat in Chicago here fourteen year high in March, So there is a wheat problem in North America. Now, in normal times you would look to the world's other big wheat producers. Now one of the world's top three wheat producers may be slightly surprising in fact, is India. You don't think of India as a big wheat producer. It's not a big wheat exporter normally because it's almost all consumed at home for chapaties. And now, well, exactly what we've seen in India over the past couple of months. We've seen this very extreme heat wave and that has caused India to embargo exports of wheat places like the Middle East, they were very dependent on wheat from Ukraine. That's obviously been damaged by the war in Ukraine. The places they were hoping to get their wheat supplies from with India, but now injuries not supply that either. Obviously you see these high prices in the US as well, So you really see how some relatively small changes, and especially if you throw geer politics in the mix, as with the war in Ukraine, suddenly what looked like a decent spread of food baskets can very quickly that are rather short. You also point out on a recent piece food dependent nations can import nutrition, but they must have the foreign exchange to pay for it, and we know that because of the dollar strength, that's in short supply in many of these countries. Yeah. Absolutely, and of course a wheat currency becomes a problem for especially the poorest in the country, even if there is the availability of imported nutrition. I mean, another interesting example you look at Brazil. Brazil recently not a country that you really associate with a sort of open trade policy, but they've been drastically cutting the tara frights essentially to zero for all food imports. The idea of values. Of course, that inflation is very high in Brazil, and it is a problem for people in Brazil that they can't afford to eat. Well. That is a decent policy approach, but the problem is it's not nearly sufficient, because if you look at the way that the real the currency has fallen in recent years, Brazili the big food producer anyway, and it's probably not going to lead to any increase in food imports because Brazilians simply can't afford the market global price of food. Now, David, how bad does this get in terms of people actually starving people in places you might even associate balmon and food and security with I mean, the past few decades mostly have been an extremely successful period of bringing down rates of under nutrition under nourishment. That progress continued to slow down through but then just in and then particularly since of course the code pandemic, we've really started to lose ground on that. Now, part of that is essentially driven by the pandemic and driven by incomes. People don't have the money to spend on food that they used to have, but it's not just because of that, and I think particularly at the moment, we see all sorts of factors are leading to a much more insecure environment for food. Clearly, you have the crop failers that we're seeing. We're in the third year of a Landinia event, which causes all sorts of disruption to the food system in that way, that's why you see a lot of these low yields on crops from Latin America. That tends to be the case with that with a landing near event. On top of that, of course, energy prices are very high and that pushes up the cost of fertilizer, so that's another thing that decreases yield. And then you throw into the mix the war in Ukraine is a factor. Ukraine and Russia are both big food exporters for that matter, and then led up at ports in Ukraine and Russia that just won't get out now absolutely absolutely. Then you can add some of these export embargoes obviously, you know, an interesting one was India's wheat embargo follows very rapidly on the heels of an export embargo in Indonesia for palmer which has actually now been revoked, but went on for a while injuries. One of the biggest importers of palm oil. India needs palm oil for basic nutrition for Indians, they lose that nutrition from Indonesia, they embargo their wet exports elsewhere, and you see these knock on effects everywhere. Malaysia embargoing exports of chicken. But of course you've got an avian influenza atbreak around the world at the moment, and the price of corn, which is essentially the price of raising chickens, is also very high. So there are all sorts of impacts like this, and the World Food Program, for example, do much about this. Well. Traditionally, that's exactly what the World Food Program is for, and in fact, it's its origins essentially are as a US export program. It's deep origins are in World War One when Herbert Hoover was seeing sort of famine in Belgium and decided to use some of the US's significant agricultural surpluses to solve that problem. So that is what the World Food Program does. It uses the agricultural surpluses from from the US and to a lesser extent, Europe as a way of applying supplementary nutrition around the world. That works as long as you don't have these simultaneous bread basket failures and as long as they don't come repeatedly. But that's the risk with climate change. And you know, I think a key instance here in ten you had very dramatic heat waves and drought in Russia that caused a real collapse in the agricultural production there, and they were paired with flooding in Pakistan. Normally, of course, the rainfall it was the same climate system. Normally, you would say, you know, there's a drought one place, there's rainfall elsewhere. But the flood in Pakistan was so severe that Pakistan also suffered a collapse in production. So two of the world's big wheat belts collapsed at the same time, which is not something that we've seen before, but it is something that as global warming increases the risk of that. And remember that only you know six or some of these red baskets around the world, the risk of that goes up quite substantially. Is easter in China at least a functioning bread basket for the world at moment. China is an interesting case, but it also an interesting case around geo politics. You see occasional reports out of China saying that you know, they're the agricultural yields are not as good as expected, and there are you know, there as of food problems, but I would say China is pretty well supplied with food at the moment, and actually over amplic supplied. If you look at the stockpiles that they have of key grains, they are extremely high. They've got enough stockpiles to last, you know, in most cases well beyond a year, when a lot of other parts of the world are very short. Now. I think in part that is actually a product of geopolitics. You know, China is less sure of its trading relationships than it was a few years ago, and there's a bit of a sort of fortress China approach to that. So it is stockpiling this stuff at home and it is not available for its its trading partners and other nations to feed their own shortages. Yeah, it's terribly how many billions are at least hundreds of millions of people are looking at a spectrum all the way from just food and security, which is bad enough on its own, all the way through to famine. Yeah, well, it's very concerning. You know, if you look at some of the numbers that have been coming out of the world's food program in a typical year, they feed I think, around about a hundred and fifty million people, or they they ensure that there's food supply to about a hundred and fifty million people. And I think I think there was a report they did a couple of months ago. They're saying, you know, there's a there's about fifty million people around the world who are in an emergency situation in terms of food food security. So um, so that is a sort of ongoing problem. It's something the World Who program deals with all the time. And in terms of a sort of lower level of food insecurity, the sort of thing that leads just to um, you know, growth stunting among children. Um, we're talking about significantly more, you know, you're talking sort of hundreds of millions. UM. The world, I should say, has been very good at dealing with this over the twentieth century. It's it's nothing short of a modern miracle that we have managed to feed so many people, and we've seen hunger decline so dramatically, But it is a year after year struggle. If there was a famous economist, Thomas Malthus sort of two years ago who predicted that there would be massed starve because population growth was faster than than agricultural output growth. And it's it's a it's a miracle for the past few centuries that not only has population growth not been as fast as as he predicted, but also agricultural yields have just risen and ritten and continue to rise at an astonishing pace. Um. That gives me a lot of confidence that actually we are seeing temporary problems here, but human ingenuity will be able to solve it. Um. But I don't think we should underestimate the how much we're sort of dancing on the edge of the precipice here. Every every year that you know, the growth of agricultural yields doesn't match the growth of population is a year year that brings the world population closer to starvation. And we need to keep increasing that. Finally, David, if there was to be a letter up on Russia's war in Ukraine, if there was to be an opening of some of the boards that have been blockaded, for example, how much would that alleviate the situation. It wouldn't happen immediately because actually, to some extent, a larger problem with Ukraine at the moment is of course that we've we've missed the planting season largely for for a lot of the crops for this year, and that's that's pretty significant. And if you look at some of the US Power of Agricultures projections, the bigger supply crunch for wheat, if I remember rightly, is actually for the for thecoming marketing year, not the one that's you know, not the wheat that's just done its way to port for the coming marketing year. They lose about a third of their fair output. So that's that's going to be the more significant one. Um. Of course, you know, a big factor on behind this is what happens with the global climate. We are three years into a landinio event and the sort of climate shifts that that causes. It's likely that we're going to see a shift into an alnnio event, which favors different bread baskets um. But when we move into that, we have the the you know, the real core of the high prices that we're seeing for agricultural produced is that stocks are low um, and stocks have been running down essentially over this three year learning neer event UM. So we need to rebuild those docks. And that's not going to come overnight. That will that will be the product of a number of years um I suspect um climate change. Notwithstanding um that we will again see very cheap prices for food over the next decade, but it will it will be a number of years before things really get back on track. David Fickling there, and don't forget to get in touch. All thoughts and opinions very welcome. I'm at Vanney Quinn on Twitter or email v Quinn at Bloomberg dot net. And by the way, Bloomberg Opinion is also available as a podcast on Apple, Spotify and wherever you get your podcasts. I feel for the people of Sri Lanka. This is a tremendous shock for them. We would like to see progress made and we are already engaging with Sri Lanka's creditors to appeal for fast action on that restructuring. Of course, to help a country, the country needs to help itself first. Christian your Gafa. They're managing director of the i m F on efforts to restructure of Sri Lanka's sovereign debt. The country, which is needed sixteen i m F agreements since ninet, is officially in default for the first time since independence. In let's get to Ruth Pollard in Colombo. Ruth details some of the chaos and trilina for us, what does a country in default look like? Well, one thing that is really obvious is very very long queues for fuel, and that's petrol, diesel and also LPG cooking gas. People are standing in line or sitting in line in their cars or their bikes for days at a time trying to get this most basic commodity, and that of course has flow on effects because people can't get to work, children can't get to school, people can't get to medical appointments or get to hospitals. Patients are telling their doctors that they've started rationing really important medications like heart medication and diabetes drugs because they're running out and they don't know when the next ship shipment of medication will arise. And of course there's armed soldiers on the streets. Some of them are controlling accused at petrol stations, but others are just making their presence felt to try and implement some kind of order into Sri Lanka. It's deeply disturbing to watch. We of course saw all of the protests in the streets and now we're seeing that there's government being formed and trying to put some order on all of this, but it seems to have happened extraordinarily quickly. Is that the case was it post pandemic, it just disintegrated. It's been disintegrating for some time. This all started way back when the Rudger puckss were in power from two thousand and five onwards, when they started doing a lot of borrowing and establishing credit lines that have subsequently become unsustainable. And now Sri Lanka is facing the prospect of its principle being the same amount as the interest rate payments. So obviously this is an unsustainable situation for the country to find itself in. Now. It has had extein I MF bailout packages since x five, so now it's going for one. But the I m F and the World Bank are going to want to see some significant progress in macroeconomic policies in Sri Lanka before another package will be entered into and it's difficult to see how that happens without tourism resuming, which of course has really fallen away because of the pandemic and other reasons as well. Now investors are looking at Shri Lanka and saying this could be a bell whether for other economies in Southeast Asia and other developing economies. More broadly, give us a few economies that investors are comparing Sri Lanka too well. The most obvious one is Pakistan. It too is going through a political crisis. Now we have a new prime minister, Shebaz Sharif. But the question for him is can his government be brave enough I guess to implement the austerity measures that the IMF requires of it to access I m F funding. And now those austerity measures are very similar to those in Sri Lanka. Her the I m F wants the governments in both those countries to stop very high fuel subsidies and remove other subsidies that are sucking up a lot of the public money and adding to the economic crisis. Now, once you remove fuel subsidies, that in turn makes feel unaffordable for the population, which in turn runs the risk of creating civil unrest, and that brings with it a whole host of other problems. So these countries are facing very very complex situations to sort of try and dig themselves out of these crises. The latest inflation reading was closed to thirty percent and there are forecasts that the next one might be forty percent. How does somebody live with an inflation read at forty present, Well, they live by cutting back on absolutely everything, and that includes food. So daily wage journalists, who make up a very large part of Sri Lanka's workforce, are seeing what little they're managing to earn just get completely eroded by very high food cost very high fuel costs, and also very high medication costs. As the generic version of medications run out, doctors are having to prescribe to patients much more expensive versions of drugs, and so they can't afford them. What happens is parents are now saying that they're going to only take one meal a day so their kids can have three meals a day. Now, that's going to have long term consequences on a population if this continues much longer. Is the current Prime Minister, who by the way, has been the Prime minister at least half a dozen times in the past, running with we're messing a is he qualified to let Sri Lanka out of this mess? You know, Sri Lanka only has one day of fuel left each day, and so you know, trying to manage that as a government is incredibly difficult now. While he has the respect of the international community and the i m F and the other international agencies, his appointment hasn't calmed the mood of the protesters who are down on Goldfaced Green in the capital Colombo. They're satisfied with renewal Riquam Singer as Prime Minister. They see him as part of the political old guard. They want a slate claimed whole new government in place that's going to do or not just with the economic crisis, but also look at the future and make sure that Sri Lanka isn't going to be back at the I m F looking for an eighteen bailout package. Ruth Pollard in Colombo. The January sixth Committee is due to finally start public hearings this Thursday. Six of them to prime time hearings, four morning hearings. It took eighteen months to put these hearings together, and in comparison with hearings passed, the effort seems well a little slim. I spoke with Jonathan Bernstein on how these hearings compare with successful hearings of eras passed, such as the Watergate hearings. So Jonathan next week, we see the start of the public hearings on the January sixth events. It seems insane that it's taken this long for public hearings to happen. But give us a little bit of context. How do public hearings end up coming to the table. Well, you know, it depends on the event. They're all different. One of the things about Congress is that they can do whatever they want hunt in terms of format, and so, you know, it's been different over the years. Generally, Congress has moved away from public hearings. Overall, there's way fewer public hearings of every type of committee than there was twenty thirty years ago. But in particular on the January six committee, they've been very, very slow to move towards this. And you can compare it to Watergate and the Senate Watergate Committee hearings went on. There were fifty one hearings that went on for six months, and they really did capture the imagination of the nation. It's questionable how much effect they had in terms of President Nixon's approval ratings, but it was an important thing in people's lives. We're going to get here. Six hearings over two weeks, and it's just not sufficiently after whatever it is eighteen months after the event, and in a very different media environment in which these are also competing against things like the Johnny Depp amber Heard trial. You know, the thing about Watergate and the Watergate hearings is that occurred at the peak really of central eised television. Most people in the country had at most five TV channels. They had three networks ABC, NBC, and and CBS. They had a PBS channel, and they had one independentization, and and medium size and small towns didn't necessarily have even an independent stations. Some sounds only had two of the three networks, so an enormous number of people watched them. Now, at this point, we've already had a lot of digestion of what the January six Committee has been doing. We've had a lot of the members of the January six Committee come on and do interviews, I mean constantly. In fact, what's different about a public hearing than private hearings. Well, one of the things that's happened, unfortunately, because of the way that this has developed, is that most of the publicity has been on the fights between the committee and the witnesses, and so we've had a series of subpoenas and then people fighting subpoenas and the Committee deciding whether the issue subpoenas and court cases about it, and sentary stuff almost although extremely important, of course, yeah, and and and the thing is that people don't care about the fight over evidence. People care about they might care about an attempt to overthrow the government of the United States. And so yes, a lot of the details are out, but proper hearings would lay them out in a way that was compelling, that would be interesting. You would see the people involved, and we're getting at some of that. We just don't know how much we can get in only six hearings. You know, see some of these people who have pled guilty to criminal acts, who were involved in leadership roles in organizing this event of people from some of these fringe groups that Trump was encouraging to come to the capital. The Committee wants to spend a lot of time, and rightly so, connecting the dots of these groups Proud Boys or whoever it is, with signals sent by the Trump administration. And we don't know to some extent whether we're going to get not just connecting dots, but some very serious lines between them, and some of that has been reported. Some of it we just don't know yet, and we don't know what's going to be coming out in the hearings. But I think that, you know, one of the things that it's hard to do were only six hearings, is to sort of develop the storylines and get people to sort of get involved in the unfolding story of it and the characters. And you know, one of the things that happened with Watergate is you had some just wacky characters who would come and and get give testimony for a day, and people pay attention. People knew who these characters were, and they were talked about on the Johnny Carson Show back then, and they would be quoted on the evening news and all that kind of stuff. I hesitate to compare this to a trial, because we obviously don't want to be judge an executioner before any of this happens. That's not really the point of this anyway. But at the same time, it does feel like the private hearings were to prepare the public six days. Is that what happens? Yeah, And some of that back in Watergate, And I keep going back to that because those were generally recognized as an extremely successful set of hearings that the Senate Watergate Committee that was set up basically a couple of weeks after the original cover up collapse. The cover up held back in seventy three for about six months, then it collapsed. Then the Senate authorized this committee two months later. They started holding heres not eighteen months later. But what the Senate Watergate Committee group did is they would pre interview everybody, they would take the positions, and then the witnesses that they thought would be compelling they would put on not on the as you say, it's not a trial, but but it has you know. It was the kind of compelling thing. And one of the things that I wonder about. You know, people say, well, these days we don't have an attention span, and but the truth is people love trials absolutely, and there's something about the sense that you don't know what people are and it's live and it's it's real, you know, in the same way the reality television is real. So even if the Watergate Committee had a pretty good idea of what where the testament was going, or in some cases where it wasn't because some of the witnesses were hostile from the administration. Um Famously, the former Attorney General John mitchell I didn't remember anything that happened in the year of nine and that was good TV too, and that was good for the committee because it showed the depths that people were going to not cooperate. And so it seems to me that this particular committee, rather than thinking of the public side of things as one of their major things to do, they seem very focused on the report they're writing, and I don't quite understand why, because it could be important to turn over evidence to the Justice Department. It does seem that there are crimes that were committed by people who have not yet been indicted, and they've collected information that will be relevant to that. But people don't read government reports for the most part, So who will we here from most It's gonna be up to the committee. They've talked a lot about having multimedia presentations, about having a lot of videotape, and they seem to be afraid of dry question and answer hearings. One of the huge advantages that this committee has is that because of the way it was put together, because Republicans boycotted it after Speaker Nancy Pelosi vetoed two of the Republican suggestions to be on the committee. It's a small committee with two or publicans who are dedicated to take their job seriously. So there are no people here whose job is going to be to disrupt things. So the committee is pretty united in taking seriously what happened on January six. And what I wonder though, is whether they're going to present something that's too polished and too basic, as the kids say, to really have the kind of effect that it should have, especially with it only being over a short period of time. I mean, there's also the question of timing. So it seemed like there was a lot of delays. I mean, as you said, eighteen months, it seems a little crazy, and at the same time, sort of we're in the middle of primary season now, we're also going into summer, and it's sort of a pandemic summer. You have to wonder is there anything that we should read into the timing of this. You know, I'm not worried as much about that a lot of big hearings have happened during summer, is possibly because there's not a whole lot of other news to compete with them. But Senate Watergate Committee hearings were in the summer. The Judiciary Committee impeachment hearings in nineteen seventy four during the summer, and people paid attention to. Of course, that's impeached of a sitting presidents, a little bit different. But the Iran Contra hearings were a summer story also and did well. And we've had some Supreme Court justices, quite a few of them actually, because they tend to announce their resignations at the end of the term in June, and so we've had a bunch of those happened from Bork up through some of the recent ones. So some of those hearings have been the summer, and they don't capture the imagination of everybody, but they've gotten pretty good play in the media. So watch people be watching out for I mean, if they are interested in watching. It does feel like we've heard everything that there couldn't possibly be anything new, could there. I think we're gonna get a lot of new details, But I think what matters is the big picture. There's a question of how much of a story do we have in terms of a deliberate plot involving the White House, possibly members Congress and other people working with some of these fringe groups. But I think even backing up from that, some of it is just getting a perspective on Hey, this thing really happened. The President United States attempted to overturn an election. He called state legislators and said, throw out the vote from your state and pick collectors loyal to me. As you say, even with all that, it may not change anything this time around, you know, I think we have to see what Attorney General says in terms of nitaments all that. I don't think any of this has much to do with midterm elections, but I think that it's at least possible that it could bring the Republican Party as a whole back from the brink. Does the Republican Party really want to oppose democracy is really one of the big questions here. Donald Trump is not in favor of democracy. Some of the Republicans seem to think democracy less important than US ruling or than some policy. Well, it seems to be popular, so they're going with it. Right. Well, it's not clear how popular, you know, but but most people in their everyday lives, they're not thinking, should we be a democracy? Should be an authoritarian state. They're thinking, you know, what's the price of gas? They're thinking, oh, you know, I have a job, that kind of stuff. But I think if you think about it, yes, most Americans actually support democracy and are very happy that the United States is a republic and not a dictatorship. And actually hear you say that sentence, and I think that it's possible that as a result of sort of just facing this, that some Republicans could take a step back and realize, you know what, this isn't the path that we want to go down. I hope that happens. I don't know if it will, but I think that's what you would hope for. And I think that people are very quick to move on from things and to say, oh, well, the parties are sort of pretty much alike, and we really don't have that. We have a Republican party that has as apparently their dominant faction that is perfectly happy to leave democracy behind. And that's a scary thing. But it doesn't necessarily have to stay that way. But it's best to call it what it is. Jonathan Bernstein, There, and don't forget. Public hearings start this Thursday at eight p m. Eastern We're now choosing to end all conversations. Not with you, though, do get in touch. All thoughts, opinions and comments very welcome. I'm at vanniy Quinn on Twitter or email v Quinn at bloomberg dot net and don't forget. Bloomberg Opinion is also available as a podcast on Apple, Spotify and wherever you get your Podcasts were produced by Eric mollow Until Next Time on Bloomberg Opinion