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By Bilal Hafeez 06-03-2020
In: post | Newsletter

Macro Hive Podcast Playlist: COVID vs Globalisation / Biden’s Comeback / Intangible Wealth Inequality

(6 min read)
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Our podcasts picks this week feature the two big themes driving markets, namely fears over COVID-19 and the US election.

We feature the Brussels-based think tank Bruegel discussing opposing views on whether the virus will result in de-globalisation. A theme we also explored this week in one of our Exclusives.

For the latest on the US election we feature Talking Politics. They dissect the Super Tuesday results and Joe Biden’s latest comeback.

Finally, we feature a podcast on the changing nature of wealth which is particularly relevant given the climate of reduced global integration.





Changes in Globalisation

Will Globalisation Survive The Coronavirus? (The Sound of Economics – Bruegel, 44 min listen)

• Bruegel experts present opposing views on what the coronavirus means for the future of globalisation, in particular international supply chains and dependence on Chinese manufacturing.

• On the optimistic side the macro hit will be relatively contained to the first half of the year and the global economy will recover quite quickly. Moreover, while diversification can help to reduce future supply disruption, pandemics can happen anywhere and the virus is no longer contained in China.

• China’s 35% share in global intermediate goods trade reflects economics. The country’s vast size matters as does the industry clusters that have developed. A temporary supply disruption cannot offset these factors.

• More generally support for globalisation remains despite some populist sentiment (CETA ratification), also epidemics are linked to people not economic or financial integration. Economic engagement with China will continue, albeit will some caution over political / security issues.

• More pessimistic take is that the economics no longer makes sense and COVID (and the trade war before it) will accelerate a production shift that has already been underway for a while. Chinese wages now higher, on average, than in Malaysia given 10% growth p.a over the last decade. Samsung already left for Vietnam a while ago and South East Asia now receives more FDI than China.


Why does this matter? De-globalisation is already under way with global trade volumes contracting last year. A continuation of this trend due to COVID-19 will mean less efficient production, higher costs and ultimately slower global growth. There are no winners in such a scenario as even where production is shifted closer to home companies could face higher wage costs, reduced supply-chain infrastructure and a shortfall in workers with required skills.  



Super Tuesday Special: Biden’s Back! (Talking Politics – LRB, 57 min listen)

• Comeback kid: Joe Biden has been the favourite four times already in this race. After Super Tuesday he is now the overwhelming favourite. Biden has managed to gain support of suburban, older, and African American voters. Simply more votes here than Bernie Sanders younger, Latino and leftist support base.


Joe Biden Super Tuesday

• Turnout is another element. Voter turnout increased in South Carolina and in the southern states. A well organised African American voting block helped.

• There were reports that Obama encouraged Amy Klobuchar and Mayor Pete to drop out which helped the moderate Biden. Meanwhile, the left does not have an equivalent behind-the-scenes person who could have encouraged Elizabeth Warren to drop out ahead of Super Tuesday (she has now since the podcast was recorded). If all her votes went to Bernie he would have won more states. Admittedly, Warren is a different kind of left to Sanders.

• Who will be Biden’s VP nominee? It matters because he has already had “vacant” moments. Black vote is important so potentially Kamala Harris or Stacey Abrams (this would also satisfy pressure to have a woman VP). Klobuchar  is the other commonly mentioned name – she would please “Republican” suburbanites.

• What happens if Biden gets the nomination then he has health issues before November? It has never happened that a presidential nominee doesn’t make it. Is there a Democratic party rule on this? Maybe VP nominee but no automatic claim.


Why does this matter? Biden’s success in Super Tuesday is perceived as leaving the Democrats with the stronger challenger to Donald Trump given his more centrist policy stance than Sanders. A Biden presidency, should it happen, would return America to a more considered and less antagonistic policy stance than seen under Trump. And despite Biden’s centrist stance compared to Sanders he is committed to addressing the country’s widening inequalities.




Private Wealth

How Wealth Has Changed (The Indicator – Planet Money, 10 min listen)

• Charles Kenny from Centre for Global Development contextualises the structural shift in global wealth by highlighting that the economy of California is currently bigger than the entire global economy in 1870 despite having only 0.5% of the world’s population.

• Nearly two-thirds of wealth is now generated through human capital (or intangibles), capital goods account for just over one quarter and the rest natural capital (e.g. land, oil).  In contrast to the latter two, human capital is not zero sum and it is more valuable with wider use.

• Given this shift to wealth creation through ideas the world now needs greater co-operation across countries, not less. The US tightening of IP rights has been a mistake and a cost to the world. Given around 70% of global R&D is done outside the US it will also mean the US becomes a smaller share of global economy. The move backwards in global integration is foolish.


Why does this matter? Another potential downside to de-globalisation is that new ideas and technologies could become less integrated. This could reduce the opportunities for less developed economies to shift up the value chain.




Bilal Hafeez is the CEO and Editor of Macro Hive. He spent over twenty years doing research at big banks – JPMorgan, Deutsche Bank, and Nomura, where he had various “Global Head” roles and did FX, rates and cross-markets research.
(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)