316. Why the world’s economic glue is becoming unstuck
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Why is the global economic “glue” starting to come apart?
Is the world's economic glue coming unstuck as war continues to rage in the Gulf and in Ukraine, closing shipping lanes and forcing up the price of energy, transport and pretty much everything? Does this mean we're stuck with years of inflation? Or might we experience the kind of trade shock that causes recession or even inflation? a depression. These vulnerabilities are exposed in Ed Conway's excellent new book, Trade World, which asks the question why governments and economists have ignored the way globalization has made all nations more dependent on each other than they know.
This year on The Rest Is Money, we're proud to be partnered with Octopus Energy. Octopus's Greg Jackson is with me. Before we get on the show, I've got a quick one for you. Andy Burnham announced plans to cut VAT on electricity. Is there anything we could also do on the supply side to bring down costs?
First of all, it's good that the government have recognised the importance of energy costs. They took VAT off electricity, and prior to that, by the way, some of the levies off electricity, which means that despite the underlying rising cost of energy at the moment, and our gas bills are going up with the next price cap, electricity bills are actually staying roughly where they are during this price cap. That's a good start, but you can't paper over the cracks with these kind of tax changes forever. Fundamentally, we need to drive down the cost of our electricity system. There's a lot of ways of doing it. We need to review the plans to build 100 billion pounds of new grid and networks because new technologies like super cheap batteries, flexible use electric cars, all mean we might not need that expensive infrastructure and we can push the costs of electricity down.
Our thanks to Octopus Energy for powering the rest is money this year. Listen out for Greg on our future episodes.
Hiya, great to see you. Your assertion is that the glue of the global economy is getting unstuck and that is something that we should all be worried about. So I think we better start by looking at what you mean
by the glue. Yeah, well, I mean, the glue is mostly invisible and the glue is, you know, there are various different... forms of life support system around the world. There's the stuff that's keeping us fed, the various supply chains that provide us with food. There's the financial underpinnings of the world, which, as you very well know, are kind of invisible, but incredibly important. And when they go wrong, everyone notices. But above all else, there's the fact that 90% of all of the items that you're buying in the supermarkets or ordering from online, they physically have to get traded. They come along supply chains, on ships that come often from the other side of the world. Sometimes it's the finished item, sometimes it's the components that go inside them.
I think we're kind of mostly just semi-oblivious of the extent to which pretty much everything in our lives is has this kind of hidden journey that we don't spend all that much time thinking about. The example I like to give is, you think about a pack of fish fingers that you buy in the supermarket, fish that comes inside them. Maybe that was caught in the North Sea, but often instead of being sent directly to the kind of processing plant where it's breaded and turned into a final fish finger, Often it's sent to the other side of the planet to china to be processed fifteen thousand miles and then fifteen thousand miles back again To grimsby or wherever to have the bread put on the outside before ending up at the supermarket And if you if you're buying the pack if you're looking at the label And it's similar something similar goes for you know, a pair of jeans or whatever it is If you're looking at the label that only tells you a tiny fraction of this extraordinary kind of hinterland that the everyday items actually kind of have and
The worry I have is that because we're so oblivious to the incredible exoticism of everything around us, whether it's just a slice of bread or indeed a car or an item of clothing, when things go wrong, which right now we're living through a period of things kind of going wrong with what we're seeing in the Strait of Hormuz and what we're seeing elsewhere, when things go wrong, you're liable to face an even bigger shock because all of a sudden you can't get the fish fingers or you can't get the jeans or you can't get the car that you want.
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Chapters
6 chapters
1
Why is the global economic “glue” starting to come apart?
0:01–5:16
2
How are rising energy costs and VAT changes affecting UK consumers?
5:16–12:17
3
What does Ed Conway mean by the “invisible glue” that holds global supply chains together?
12:17–18:10
4
How do everyday products like fish fingers illustrate hidden supply‑chain fragilities?
18:10–25:33
5
Why is Britain the last country still offering tax breaks to fast‑fashion giants like SHEIN and Temu?
25:33–34:20
6
What are the inflation risks from higher container‑shipping, fuel and insurance costs?
34:20–45:46
Speakers
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