19/01/2016 Newsnight


A look at the potential warning signs of a new global recession. Is democracy under threat in Poland? The political fallout of the Alexander Litvinenko murder inquiry.

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How to tell what's going wrong in the world economy right now.


Now, desperately touting for business.


Our average rate is $2600 per day. That compares with a peak of the


teen 250,000. For those who thought China


would grow at a lightning speed forever, find themselves


disappointed - the world is dealing We'll ask Jeffrey Sachs how we got


here, and how we might Is Poland's new government eroding


democracy, and should For all that we made


for the last 25 years. Donald Trump gets endorsed


by Sarah Palin no less. Is he just a joke candidate


with a new punchline or the unstoppable


republican nominee? You might have noticed that we've


been covering different items of economy news lately -


low oil prices, problems in the steel industry,


a slowdown in China and a resulting We could add today's


inflation figures here - What's particularly interesting


is that these are all in their own way, manifestations of the same


global economic story. One that's summarised


in the word overcapacity. The world economy is beset by it -


we've got more steel, more oil, more stuff


than we currently know how to buy. That's why inflation remains


dormant, it explains why we're finding it hard to export more, -


how can we sell more, when there's too much


out there already? Overcapacity explains why it's


turning out to be hard to make We'll talk more about it shortly,


but if you want another example of it - a metaphor for the dashed


optimism of recent years, take a look at the extraordinary


events in the global These ships setting off Gibraltar


are being buffeted in the wake of global forces. Owners of big car go


vessels are bleeding money at the amount they can charge is


collapsing. It tells you a lot about how global trade has been weakening.


There are three categories of merchant ship. Tankers which carry


liquids, container ships which carry stuff in shipping containers.


Finally, dry bulk carriers, ships that carry coal or Ireland. It is


the cost of that which is measured by the dry bulk index. It tells you


what is happening to the cost of shipping loose stuff. It is used as


an economic indicator to show demand for those sorts of goods. At the


moment it is at an all-time low. It is under shooting the prices


registered. It has never been a worse time. At the moment the


average rate for a ship which carries 180,000 tonnes is $2600 per


day. That is incredibly low. That compares with a peak rate of between


200,000-250,000. That was an incredibly high market just as this


is an incredibly low market. Our ship owners losing money?


Absolutely. That is well below expenses, takes no account of


depreciation or funding. You can hire exactly this kind of ship for


less than $3000 per day. The cause of this is massive overcapacity.


World dry bulk capacity was 177 million gross tonnes. By 2014 it was


more than double. You've got rather desperate ship yards out there in


places like Korea and China. They've been offering huge discounts. They


want to place big orders. They've had these big deliveries on the


premise that China would keep going. There is a huge mismatch between the


supply of ships and the demand to move stuff. You can see how much


China matters when you look at what is allocated to keep size ships. The


key routes are from South America through to China and from Australia


through to China. All the largest mines are in South America and


Australia. You can see why if China is having a bad time, it will hit


these carriers. Yes, if China is struggling then these are the groups


these carriers. Yes, if China is where you will be seeing


increasingly less activity. where you will be seeing


similar process to dry bulk. Tankers are different. The tanker market is


2012, 2013, it was rotten, nobody 2012, 2013, it was rotten, nobody


ordered new ships. You did not have the problem of having a big glut of


new ships trashing rates. The the problem of having a big glut of


waiting is further cutting tanker supply. By contrast, there is not


enough like this busy. You might think


overcapacity as like this busy. You might think


the world economy is a nice problem to have.


And to make it worse, the people who paid for that


overcapacity - who've built unnecessary ships,


or who've invested in oil, thinking the price would be 100


a barrel, or who have shares in steel factories -


they will all find the money they thought they'd


So - how did we we get into this, and how do we get out of this?


Economics professor at Columbia and the. Bestselling author. Thank you


for joining us. Do you see some connection between what has


happening in the global steel market, what we've heard about


happening in the global steel shipping, the price of oil, is it


just overcapacity that is the general theme here? Your story told


it just right. China has slowed down more than expected. It was going to


be the machine which would pool in commodities from all over the world,


commodity prices were very high just a few years ago, China has slowed


down significantly. Those prices have plummeted, not only oil but


metals as well. The shipping prices themselves. This is the China first


story, China is now slightly ahead or behind depending on whose numbers


you believe. You've got to be amazed, the capacity, we have more


than doubled it, the price has come down by 95% from the peak. Those are


extraordinary ructions in the global economy. It was expected that China


would continue to grow, it is growing depending on who you


believe, still growing but significantly less than believed. It


was not only the great machine pooling the commodities but also a


great exports engine as well. With all the optimism, money flowed into


China, pushed up the value of the currency, and the currency is now


overvalued, but instead of the market is pulling it down, China has


been resisting depreciation of the currency because they fear that


would create even more ruckus, though I believe it is part of what


is needed to keep China's exports growing. When you've got too much


stuff, the world should try and stoke up demand and find people to


buy it, then everybody lives happily ever after. It feels like for the


last 20 years we've been trying to get global demand up and have not


been able to do it sustainably. I think you said it quite properly, we


have a lot of capacity, good capacity to build a lot of things


that we would like, and infrastructure and consumer goods,


people have needs, it is a shame for these factories to lie empty. The


question is how that demand is to be manifested. The usual way that has


been attempted is through trying to boost consumption spending, but


consumers do not want to spend so much, they want to save, and what I


believe we need to do more is boost investment spending. Investment


spending in countries which desperately need infrastructure.


Here we have the great capacity to build exactly those urgent needs,


but those needs require government cooperation, financing systems, and


the government have not taken the time to build the public investment


which would be vitally used by the world and keep demand high. That is


an alternative way of spending money in those infrastructure investments.


Reflect on the problem for savers. It feels to a lot of elderly people


who don't have mortgages and have money in the bank that for the best


part of the last 15 years they've been earning very little on their


investments. It feels like there is virtually no way you can invest.


You're certainly not going to be investing in building ships or


manufacturing. What is going on for savers? Why has it been so hard? An


excellent question. The big long-term saving goes through


pension funds and insurance funds. Ironically that has then been put


into the casino marketplace in short-term investments, trying to


time the market and in the market, whereas if our pension funds and


insurance funds which are long-term savings, we are investing in


long-term infrastructure worldwide, whether it is in the ports or the


power generation, the clean energy that we vitally need, then there


would be a good match of the long-term saving needs and


investments that would be the counterpart. But many investors have


noticed in the last few years that investment has become a short-term


game and we don't yet have what in the jargon is called the acid class


of infrastructure, which is the proper use of this long-term saving.


How worried are you at the moment? It feels like it's been a very


gloomy year. A lot of people talking about financial problems and global


implosions. How worried are you? You've got to be a bit nervous.


We've lost about $5 trillion of market capitalisation in recent


weeks with the stock market decline. But this is still relatively small


compared to the size of the world economy. The problem is if a panic


broke out as happened in Thailand in 1997 or after the Lehman Brothers


failure in 2008. If we fail to keep liquidity and see the market seizing


up then we have serious trouble. If there are big mistakes in this shaky


period it could turn worse, but so far we have the means to avoid any


serious downturn as long as we are vigilant and keeping liquidity in


the market place. Poland - once seen as one of the big


achievements of the EU, with its transition to democracy


and strongly renovated economy - finds itself in the naughty corner


of the EU at the moment. It elected a populist socially


conservative government back in October, one that is giving


a prolonged kick up the backside But that is not to the taste


of the EU establishment which is questioning


whether the new Polish government The issue was debated


in the European Parliament today. One MEP said the Polish government


represented the "Putinisation The atmosphere in Poland


is shifting fast. For the first time since the end


of communism, a democratically elected government has


a majority and is busy implementing its own brand


of Christian conservative You don't really know where this


politics is going to. Everything happened so fast


and it is suddenly a different For several decades Poland has


been the poster nation But its new government has set it


on a course that now sees it accused of eroding the progress made


here over the last 25 years. It has only been in power for two


months, but already the ruling Law and Justice party here has


made some pretty big It has pushed through reforms


to increase its influence over It has sacked managers


and reporters at And it has boosted


surveillance rights For the Law and Justice party this


is about leaving behind what they depict as


the liberal, corrupt elites they say ruled


Poland for too long. But tens of thousands don't buy that


and have taken to the streets to protest, many for the first time


since the collapse of communism. As a flat in central


Warsaw members of the committee for the defence


of democracy, created just a week after the new government


was sworn in, The Standard and Poor


rating agency downgraded Poland's credit rating on Friday


saying Law and Justice has weakened the independence


of key institutions. I'm afraid that the


good changes in our economy for the past 25


years could be reversed because the ratings go down


and the economy could also Germany is being framed by the right


wing media as the enemy to this Angela Merkel recast,


not for the first In the offices of an internet


magazine I wanted to know whether the independent Polish


media is worried the government might try and exert


influence over them next. I hope it is not going to happen


because that is the worst-case I mean if politicians


would like to influence the content of our magazines,


that is the end of the free-speech, I hope that it is not


going to happen. We fear it as the whole


of civic society, that something could happen


in the future. Because you don't really know


where this politics is going to. Of springing bills on Parliament


and holding late-night In just two days


between Christmas and the New Year the country's


media laws were amended. And now the government has


the power to dismiss and appoint the management


of all the state broadcasters. One of Poland's


best-known TV presenters lost his job after his channel


TVP got a new boss. In Poland criticising the government


to foreigners has been It is amazing to us that


for so many people abroad, for so many people in


Western European countries, it is interesting


what is going on in But I really do believe


that it is on us to do our job. It is on us to build a successful


country for every citizen of Poland. You have been sacked,


how can you do your today defending her country's


actions against accusations that they contravene


the liberal values The European Commission


is investigating. But plenty say that Poland


is modelling itself To toe the line on


migrants, for example. That it is flexing its muscles


as part of an increasingly illiberal Some of those who oppose the new


government came themselves in part for what has happened. -- blame.


Poland is the sixth largest economy in the queue. It could have its


voting rights suspended if its government is found wanting. But in


reality it is unlikely there is a will to pick a serious fight with


the country that is so important to the union.


On Thursday, at 10 am in Court 73 at the Royal Courts of Justice,


the former high court judge Sir Robert Owen


He will outline the conclusion of the 18 month inquiry he's been


heading into the death of Alexander Litvinenko


He seems likely to conclude that some Russians were involved.


I hope you were sitting down when I broke that to you.


Now President Putin may be about as popular as Sepp Blatter


in this country, but here's the thing: at the moment,


we kind of want to be nice to him - as he could be helpful when it


Here's David Grossman on the awkward diplomacy of the Litvinenko inquiry.


The Russian Embassy in London's website puts the British-Russian


In recent years, our political relationship has been


characterised by instability and volatility, it says.


By abrupt changes, from relatively good, to overt hostility.


It is certainly not a normal relationship at the moment


and that is partly as a reaction to this kind of misbehaviour by Russia.


The murder of Alexander Litvinenko, a British citizen in London,


in November 2006, was viewed in Whitehall as nothing short


On Thursday the enquiry into his death will report.


The only real question about its findings is how far up


the Russian state it will say the order to kill was taken.


But so much has happened in the interim.


The Ukraine crisis of 2014, the shooting down of MH17 with 290


It was Britain that led the way demanding sanctions.


We have to address the completely unacceptable


situation of having Russian troops on Ukrainian soil.


But then in September of last year, Russia began bombing


Shortly after, in December, Britain too engaged in military


Putting us and the Russians at least notionally on the same side.


Which is why the report into the death of Alexander


Litvinenko could not come at a more delicate time.


The enquiry has heard extensive evidence of Russian


Lawyers for Mr Litvinenko's widow called his murder


The evidence has demonstrated step by


painstaking step that Putin and his personal cabal are directly


That they're willing to murder those who


And that Mr Litvinenko was murdered for that


I think if the finding of this inquest is that this murder


was conducted at the behest of the Russian state,


or that that is where the evidence most strongly points,


the ramifications for the Russian state will be exceptionally serious.


This is a hearing which has been conducted in London,


under the well recognised standards of British justice,


which are still widely admired around the world.


I think a finding of that sort would have real


credibility and I think it would do real damage to the Russian state.


But is a full-scale diplomatic row right now likely,


given that it suits neither ourselves nor the Russians?


We have serious common interests with the Russians in fighting


They have a real problem, particularly in southern Russia,


and one only has to think there are perhaps 400 Britons


or maybe more still fighting for ISIS in Syria and there are many


more times that of Chechens, for example,


who are also fighting alongside them.


That is British and Russian citizens fighting against the interests


So there is clearly a common interest.


And that gives us a common interest in bringing the Syrian conflict


to an end so that we can turn our attention to defeating


But for Russia the incentive for better


Since the start of the Ukraine crisis in 2014 the price of oil has


It is now well below the point at which experts say Russia can pay


Mr Putin urgently needs Western sanctions lifted.


One only has to look at Putin's speeches to see


that it is beginning to sink in that Russia is facing a really serious


While Putin did gain in the short run from the nationalist outburst


that accompanied the annexation of Crimea,


Russian people can't live off, can't eat, nationalism.


They need something more substantial.


But for all the real politique, there is also British


domestic politics to consider as well.


Pressure on Mr Cameron to take a publicly tough line.


For us it would seem to be very simple.


If people are implicated and named in this report,


which they absolutely should be, and I expect them to be,


then there should be an immediate EU wide travel ban,


there should be an asset freeze, and we should demonstrate not just


to Putin but to anybody else around the world


we will not accept that kind of breach of our sovereignty.


That kind of outrageous act here on our soil.


And so the challenge for the British Government


is to balance outrage at what might prove to be Russian state


murder in London with the need to maintain


A fragile but important relationship with Vladimir Putin. And how should


we respond to the enquiry? Here to discuss the impact this may


have on Anglo-Russian relations are Bill Browder, a former investor


in Russia who fell out with President Putin and has been


campaigning against corruption since his lawyer died in police


custody, and the academic and author Good evening. Bill, do you think


that we can it important diplomatic issues like Syria affect our


response to an enquiry that the Banco enquiry? -- like the


Litvinenko enquiry? First we have a situation where there is an active


nuclear terrorism on British soil. Not only was Litvinenko killed at


this radioactivity was at Arsenal Stadium, in Grosvenor Square, at a


restaurant. You cannot allow Russians to be going around settling


their scores and doing assassinations and putting British


personal lives at risk. And so first and foremost, is public safety and


that demands that there is a sharp response to this otherwise the


Russians will carry on doing it and they do carry on doing it. This is


not the only murder on British soil or attempted murder of Russians


settling scores. Tell us what you would do because we


already have sanctions. What extra would you do give and we cannot


conflict the individuals who might have done it? Good question.


Everybody in the UK thinks they can keep their dirty money safe and put


themselves in London. We can take away their ability to travel and


freeze their assets. The United States government did just that and


I can tell you that truly pierced the imperviousness of Russia. It


touched their Achilles heel. This is what they care about. It would not


affect the average Russian but the people at the top? It is like one of


these targeted cancer drugs, it does not kill the patient. You make a


list of the people involved in this crime and you freeze their assets


and ban their visas. It does not touch the Russian people. It touches


the regime and it shows they are serious. We heard Tim Farrand say it


is quite simple. If the crime is committed, action must be taken. Is


it that simple? Let's think back to when their were IRA people on the


run in America. We have precedents. We have the problem that in reality


at the moment, many Russians, the great majority, think they are


facing economic warfare. Ordinary Russians say the sanctions do hit


and that is creating a mood in Russia that is anti-Western. One of


the reasons for the collapse of communism is nobody believed the


antique Western -- the anti-Western rhetoric. Now, ironically,


antique Western -- the anti-Western seen as being the fault of the West.


The public opinion creates a problem. You saw in Poland, a party


can win an election on an anti-Western ticket. What about


Syria? We might want to cooperate with Vladimir Putin on Monday and


punish him on Thursday. Does that complicated? The real threat comes


not from people who are effectively banned from Britain but from


potential terrorists operating. They have links with people who the


Russians fear. Ironically, whatever problems we have with Russia we also


have possible advantages of cooperation. We did cooperate with


Stalin in the Second World War. Sometimes the moral simplicity of


deciding we are good and the other side is bad, there are grey areas.


Would you still advocate if I told you on Monday we will be asking


Vladimir Putin for favours and what you are proposing will make that


more difficult and we don't want to prolong the Syrian war, a bigger


thing than worrying about that? Let's look at what we are asking


Russia for. At the moment Russia have interfered in Syria and started


bombing 90% targets that are not Isis. They are basically going after


allies, bombing civilians and creating a larger refugee crisis. I


don't believe we are in a situation where we are working with Russia,


they are operating blackmail in order to negotiate down Ukrainian


sanctions and to staff in these types of issues for when they commit


murders and do another terrible things. Our approach needs to be


firm because Russia laughs at us when we tiptoe around them begging


them for favours. This is a tyrant. Vladimir Putin is not a man who can


be reasoned with or begged. Quick last one from you. Whether we like


it or not, Russia has a role to play. Have we any way of stopping


it? What can we do to make the Russians compromise? We might get


something we would otherwise not get and unfortunately that is what


diplomacy is about. Sometimes, swallowing your pride, I'm afraid


megaphone diplomacy has not worked, maybe we could try something


different and we could get something more in tune with the moral stance.


Thank you. The US is abuzz tonight


with the news that Sarah Palin is about to endorse Donald Trump's


bid for the republican presidential We are joined from by New York Times


journalist Josh Barro. Good evening to you. Let's think


about the similarities between them. He is a metropolitan New York, they


are not entirely on the same wing of Conservative thinking. I think they


are closer together than they look initially. Sarah Palin ran on a


platform of taxing oil companies more. What they represent is


conservatism not really being about small government and low tax. They


had a sense that the country is moving in the wrong direction. They


both reflect that. This is exasperating for a lot of


professional conservatives who say these are not actually about small


government philosophies but it aligns with what voters want. They


are both reality show stars to some extent. They seem to have very good


communication skills. They do. They tap into the frustration. The phrase


it in different ways. You talk about the difference between real America


and not real America. Donald Trump is from Manhattan. He does talk


about how political correctness is terrible. They both signal the


attitudes of the mostly white middle America. We are way ahead of Donald


Trump King is a running mate. Is the expectation that something is going


on here? I doubt that, for a few reasons. We've seen in Sarah Palin's


career, G has a reputation for not being very dependable. She wants to


be a public figure, give speeches, write books and get paid for that. I


don't think she wants to go back into government and I don't think


Donald Trump would find her to be an asset. I think she will be useful in


Iowa. It would hardly be a balanced ticket. Donald Trump would want a


detail person. She hardly qualifies as that. The Republican


establishment, they must have their head in their hands. All the


momentum is around this chap. Every two weeks another story. It is


complicated. They are very frustrated by it. People thought he


was a joke when he announced. On the other hand, the problem for the


establishment is the alternative, Ted Cruz. People are puzzling over


why they don't unload everything at Donald Trump and it is partly


because if they bring him down, Ted Cruz will be the beneficiary and for


a lot of the establishment he is seen as even worse because Donald


Trump is totally unique. There would be nobody like him waiting in the


wings. It would be an intermission and they could come back and do what


they did before whereas if Ted Cruz wins he can take over the party.


They are more scared of that. A lot of people would rather have him as


the nominee. That's why you seen part of this conversation about


whether he is eligible, Ted Cruz, because he was born in Canada. This


is normally a fringe idea but because people hate Ted Cruz so


much, people like John McCain are saying this is a serious issue, it


reflects the fact that the establishment is more petrified of


Ted Cruz than Donald Trump. You've got literally five words, is he


going to be the candidate? I think he's the most likely person. I would


not bet my life on it but I would pick him over the field. Thank you.


There is a very story -- important story in the Financial Times


suggesting Brussels is proposing a change to remove the arrangement by


which the first country into which an asylum seeker lands is the


country which needs to take responsibility. David Grossman is


with me. Fill us in on the details. It is not big news that this


agreement is not working. We've seen massive flows of asylum seekers


across Europe and Angela Merkel said they would no longer be sent back to


places like Greece or Italy but they've not said what it will be


replaced with and that will be crucial in the context in the run-up


to the referendum on whether we will stay in the EU or not. Britain has


an opt out on migration but we opted in to Dublin because it worked for


us. What the new rules would be in to Dublin because it worked for


not clear in to Dublin because it worked for


EU is already trying to share the quarter and it is not working at


all. Migrants sitting in Calais, if there is no Dublin it is not obvious


who's problem it is. Indeed, the system which replaces it will be


crucial but how it can coexist with Schengen is very difficult to


crucial but how it can coexist with Thank you. That is all we have time


for. I will be back here tomorrow. Have a good


A look at the potential warning signs of a new global recession. Is democracy under threat in Poland? The political fallout of the Alexander Litvinenko murder inquiry. Sarah Palin backs Donald Trump's bid to run for president. With Evan Davis.

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