Slate Money – The Bureaucrats Gone Wild Edition (May 27, 2017)

Overview

This episode of Slate Money, hosted by Felix Salmon alongside Anna Shymansky and Jordan Weissman, dives into the interconnected worlds of political corruption, economic reform, oil markets, and bureaucratic language. The team offers a whirlwind tour of recent headlines: Brazil’s turmoil over corruption scandals and economic reform; Saudi Arabia's struggles with oil market transformation in the age of fracking; and the World Bank's internal fight over economist Paul Romer’s campaign against “bankspeak.” The tone is sharp, witty, and deeply informed, with each topic tied back to big-picture questions about governance, growth, and the power (or powerlessness) of bureaucracies.

Key Discussion Points & Insights

A. Brazil’s Political Chaos and Market Fallout (01:13–14:43)

• Backdrop: President Michel Temer's corruption scandal after audio tapes surfaced tying him to bribe payments. Temer himself had only recently succeeded Dilma Rousseff, who was impeached (not for corruption, but “creative accounting”).
• Systemic Corruption: The discussion highlights the pervasive nature of bribery, particularly emphasized by the “Lava Jato” (Car Wash) scandal involving state oil company Petrobras and nearly every major political party.
  • Anna: “If you look at like world corruption lists, Brazil isn’t even in the top 10. I don’t even think they're in the top 20.” [05:07]
• Impact on Markets: The Brazilian stock market (Bovespa) and real fell dramatically amid political turmoil. The underlying concern for investors is not corruption per se but the threat to much-anticipated economic reforms, particularly pension, tax, and labor reforms.
  • Anna: “The reason the markets are freaking out is because they think that pension reform isn’t going to go through.” [09:23]
  • Felix: “How do you price in corruption when you’re looking at an economy as a place to park your money?” [11:09]
  • Anna: “If you have just endemic corruption, it stops a number of foreign investors from the US and Europe from really getting involved…they can’t get involved with systems that are quite that corrupt.” [11:24]
• The Corruption Cycle: They link corruption with entrenched inequality and the tendency of elites to resist economic modernization, keeping countries mired in the “middle-income trap.”
  • Anna: “What corruption does is it really solidifies income inequality...the elites...have no incentive to modernize the economy.” [13:35]

B. Saudi Arabia, OPEC, and the Fracking Revolution (14:43–31:06)

• Economic Strain: Saudi Arabia’s budget is under strain due to persistently low oil prices, imperiling the social contract by which the state subsidizes the population to ensure domestic stability.

  • Jordan: “The way you kind of keep [extremists] under control is by throwing money at them.” [15:55]

• Oil Market Power Eroded: Saudi strategy has shifted:

  • Act 1: Boosting production to undercut U.S. frackers (hoping to wipe them out).
  • Act 2: Cutting production (OPEC and Russia) to try to support prices.
  • Act 3: Exploring future diversification, e.g., floating Aramco on public markets.
  • Felix: “They thought that the frackers wouldn’t have as easy a time getting access to affordable capital, which ended up not being the case.” [25:20]

• Why the Frackers Survived: Despite huge losses “…private equity types…doubled down, and now there’s a real war.” [19:49] The fracking industry became more efficient, achieved lower break-even costs, and was propped up by eager private equity, fundamentally shifting market dynamics.

  • Anna: “These [surviving] companies are potentially much more profitable now...the break-even price has declined.” [21:37]

• The Aramco Question: Saudi’s plan to diversify its economy and list Aramco publicly faces skepticism. The hosts express doubt about the touted $2 trillion valuation and question whether the IPO will proceed as planned.

  • Jordan: “It’s an interesting open question whether they are going to do it or not.” [26:57]

• Changing Energy Landscape:

  • The conversation touches on the rise of renewables and the specter of “peak demand” for oil, with even BP predicting a likely peak around 2035.
  • Felix: “After one storm hits, there’s another coming for them...” [29:58]
  • Anna: “If a lot of petro states would be forced to diversify their economy, I think that would be really good for the population...” [30:36]

C. Paul Romer and the War on Bankspeak at the World Bank (31:06–42:29)

• Paul Romer’s Crusade: As newly minted World Bank chief economist—with a Nobel-worthy reputation—Romer tried to tackle the impenetrable, jargon-laden language (bankspeak) dominating the Bank’s reports, pushing instead for clear, grounded analysis.
  • Jordan: “He’s turned into a scourge upon the profession, let’s put...maybe a good scourge.” [32:14]
• Literary Analysis: The episode references a Stanford Literary Lab study tracing the shift in World Bank language from tangible (“food, health, agriculture”) to bureaucratic abstraction (“strategies, programs, policies”). Romer’s focus: What does all this language mean for real-world poverty reduction?
  • Jordan (reading from the study): “The words surrounding the term ‘poverty’ are things like total cost, income, services… The words surrounding ‘poverty reduction’ are ‘strategies, programs, policies, focus, management…’” [36:57]
• Resistance and Fallout: Romer’s efforts to reform language and mission met fierce internal resistance. His management authority was stripped. The hosts speculate on whether this was just style, or the substance of his challenge to the institution.
  • Felix: “He may have had the right idea and been the wrong guy.” [42:55]

Notable Quotes & Memorable Moments

• Anna Shymansky on gender and corruption:
  “Lula apparently got $50 million in bribes, while Dilma only got $30 million in bribes. So women just don’t exactly get paid as much as men.” (03:46)

• On the intractability of reform in corrupt economies:
  Anna: “You get...lots of discontent among the population because they have no opportunity. So then…they elect populist leaders, but then the populist leaders are often the worst in terms of frankly, corruption.” (13:35)

• Jordan Weissman on Saudi social policy:
  “…the way you kind of keep them under control is by throwing money at them.” (15:55)

• Felix Salmon taking a victory lap on fracking predictions:
  “Several years ago…I suggested this might happen, that essentially that US frackers would now become the new swing producer…you told me, no, that’s not going to happen. That’s ridiculous.” (19:49)

• On management-babble at the World Bank:
  Jordan (quoting): "...promote corporate governance and competition policies and reform and privatize state owned enterprises and labor market social protection reform. There is greater emphasis on quality responsiveness and partnerships, on knowledge sharing and client orientation and on poverty reduction.” (38:20)

Important Segment Timestamps

• Brazil’s corruption and markets – 01:13–14:43
• Saudi Arabia, oil markets, and fracking – 14:43–31:06
• World Bank, Paul Romer, and bankspeak – 31:06–42:29
• Numbers round – 43:11-end

Numbers Round Highlights (43:11–end)

• Felix Salmon: 38,000 tons – sand needed for 1 mile of American interstate, referencing a New Yorker article on looming sand shortages.
• Anna Shymansky: 164% – China's corporate debt-to-GDP ratio, cited in the wake of a Moody’s downgrade.
• Jordan Weissman: 16% – Estimated drop in international tourism to the U.S. as observed by Foursquare data, possibly due to the anti-immigration rhetoric of the Trump administration.

Tone and Style

The hosts balance intellectual rigor with humor and frankness. They’re skeptical of easy answers and self-important bureaucrats, always pushing for clarity, groundedness, and real-world impact. The episode is packed with pithy asides, teasing, and occasional deadpan jokes about economics, politics, and the particular madness of the week’s financial news.

Recommended if you want:
– A sharp, globe-hopping discussion of political corruption and economic reform
– An accessible, entertaining dive into oil market power shifts
– A war story about an economist’s doomed struggle to make bureaucracy speak plainly
– Plenty of quips, skepticism, and wonky yet real-world analysis