Net losses: plunder of the oceans

Hello and welcome to the Intelligence on Economist Radio. I'm your host, Jason Palmer. Every weekday we provide a fresh perspective on the events shaping your world. Where do people get their stock tips? Well, it depends on how old they are. We take a look at the habits and trends among millennial investors, how they're changing the day trading game, and what kinds of companies will be getting their attention. And seventh time lucky. Tomorrow, a new airport in Berlin will launch. After six planned grand openings, it's nine years behind schedule. Our correspondent goes along to a dress rehearsal of sorts and explains that the airport's headaches aren't over yet. But first, The world's oceans are under increasing pressure from fishing. Just a fifth of the world's commercial species are sustainably caught. But the legal known end of the industry might literally be only the half of it. 20 to 50% of the global catch is illegal or isn't reported or is woefully unregulated. That comes at an enormous cost, and not just to dwindling species. It robs poor coastal states of billions in revenue and much of it wreaks havoc on underwater ecosystems. And the crews of all those ships are subject to dangerous conditions, abuse and worse. Much of the illegal trade is just coming to light thanks to new ways of spotting it. In particular, revelations about the vast number of what are called dark fleets.

Well, for a number of years, hundreds of rickety wooden fishing boats from North Korea have washed up on Japanese shores. And it's been a mystery because the big question is why these unseaworthy vessels have put so far out to sea in the Sea of Japan, which is notorious for its storms.

Dominic Ziegler writes Banyan, the Economist's column on Asian affairs.

Well, only this year has the mystery been solved. It turns out that nearly a thousand large industrial sized Chinese fishing vessels have been heading every year into North Korean waters to suck up the squid. And because of the presence of these Chinese fishing vessels cleaning North Korean waters out of seafood. So North Korea's own fishermen in their much more rickety vessels have had to head further and further out to sea. The discovery of this Chinese fleet has put dark fleets quite literally on the map.

What do you mean by dark fleets?

Well, dark fleets are groups of fishing vessels that don't want to advertise their presence because their presence in North Korean waters is wholly illegal. It's either in breach of UN sanctions against North Korea or the Chinese vessels are there illegally without North Korean permission. But either way, China's vessels don't want to be spotted now, the fact that this fleet was discovered is thanks to some pretty clever work by a number of NGOs and governments using various types of imagery, satellite imagery, cloud busting, radar and the like, using artificial intelligence to overlay different images and thereby discover the presence of all these vessels.

And so this kind of dark fleet approach is responsible for all of the illegal fishing that goes on in the world.

It's responsible for some of it, but not all of it. The whole topic of illegal fishing has come into focus as the world struggles with declining fish stocks. The dark fleets in North Korea constitute blatant illegal fishing. There's also fishing that goes unreported and there's also fishing that is unregulated. That's to say, fishing for species that don't have a management program controlling catches. All three types of fishing, illegal, unregulated and unreported, count as what is called IUU fishing. And IUU fishing matters because it may account for over $30 billion worth of fishing. And of course, this has a severe impact on fish stocks that the world very badly needs to manage better.

So a lot of what you're describing as knotty fishing actually happens on ostensibly legal fishing operations?

Well, that's right. I mean, fisheries enforcement is stretched extremely thin over a vast area. And so it's relatively easy, for instance, for a vessel licensed to catch the relatively common albacore tuna in the Pacific to in fact fill its hold up with the more valuable bigeye tuna, but declare it as albacore. It's easy to use nets that have too finer mesh in order to catch more fish, even though the ecological damage of these fine nets is quite severe. And another aspect of this is that if a fishing vessel is inclined to commit one kind of crime, it's probably quite likely to be committing others. So for instance, if a vessel is using too fine a net, it may also be finning sharks. And above all, vessels such as this may may also be abusing their crews. Many of these crews are migrant labour, foreign labour hired particularly from Southeast Asia. There is a grim tale of abuse on many vessels that take part in long distance fisheries.

So what's to be done with all this lawlessness then? How can governments clamp down both on the illegal end of the fishing and the mistreatment of these crews?

Well, there's actually lots that can be done. The first route is technology. Technology on board could actually transform the surveillance of fleets for illegal activity. That's to say, tamper proof. Cameras that are linked to a hard drive, the data on that hard drive is then inspected when ships are back in port. And tech experts say that there's tons of scope for AI and machine learning to spot unusual behavior. And unlike fisheries observers that vessels often have to carry, they can't get seasick, they don't sleep, and they can't be knocked on the head. Because another abuse that takes place in the fleets is the regular murder of fisheries observers.

And what about beyond technology? What else can be done?

Another solution is how consumer demand can shape behavior in the fisheries fleets. Some countries fleets are notorious. Taiwan's stands out. Now if the EU and the US refused to buy seafood from Taiwan, well then that would quickly change Taiwanese habits. It's also really important to chase crime ashore as well as afloat. Going after fisheries crime is very similar to going after mafia crime or white collar financial crime. And here fisheries inspectors and enforcement agencies are not enough. You have to follow the money. But the biggest issue of all are the $35 billion a year of fishing subsidies. Because without subsidies, especially for diesel fuel, these dark fleets and other operators would not be able to travel such distances to make their catch. Something like $22 billion of the $35 billion a year of subsidies are ones that directly harm global fish stocks. Now if those subsidies went and if labor abuses were also tackled, well, then overnight half of the high seas fisheries fleets would be unprofitable and would return to port. That would take valuable pressure off fish stocks.

So do you think there's political will for that, just cutting those subsidies?

There's another powerful reason for countries to rethink subsidies. If only a fraction of the subsidies were instead repurposed to help manage coastal fisheries. By including no take zones, but creating areas where there is no fishing so that, so that fish stocks can multiply by providing social and income support for fishing communities whilst they let fish stocks regenerate, well, that would have huge benefits. It would make inshore fisheries, which are always the most productible, much more sustainable. It would create jobs for millions of nearshore artisanal fishermen and it of course would underwrite livelihoods. So a repurposing of subsidies is something that I hope very much will be discussed at the wto. It's certainly something that could have a profound and positive impact on fish stocks around the world.

Dominic, thank you very much for joining us.

Thank you, Jason.

As online platforms make market trading easier and cheaper, new investors are trying their hand.

I heard about bitcoin and every few days I saw it, it was up a thousand, up a thousand, up a thousand. So I was like, wow, that's pretty interesting. And then when everything started dropping, I realized, wow, I know nothing about this and I just lost a bunch of money, so I have to learn.

Vincent Yantomazi was just a teenager for his first loss. Now 22, he gives advice to others just starting out over TikTok.

What up, guys? Simple tip. When trading stock, the price tightens up until it explodes. Don't chase the trade. Let the trade come to you. Have fun trading. Well, it was a lockdown thing. I had more time, obviously, during the lockdown, so I was posting videos every day. I was making new videos. There's some of them where I'm like, dancing or something. But most of them, I try to make them educational or, you know, to have some sort of value behind them.

Mr. Yantimazi isn't alone. As well as managing their portfolios online, a growing community of millennials share tips and tricks on sites like Reddit and Discord.

I feel like the trend is growing a lot, especially now because, you know, the stock market is in use everywhere. Since the COVID crash, we've seen extremely high gains. So I think there's more people that are, oh, you know what, let me put $1,000, $2,000 into it, just for fun.

But that fun is the start of a major generational shift in markets, even if more established investors aren't exactly impressed.

So there's been a lot of attention paid to millennial investors in the lockdown.

Alice Fulwood is the Economist's U.S. finance correspondent.

And this is because it seems as though there's been this surge in interest in daily trading or active investment. And in general, this new enthusiasm, coupled with the slightly strange companies that millennial investors have been picking, has led to this mockery of the generation.

And is that justified? Should we be taking millennial investors seriously?

So millennials currently hold a very small share of total wealth. They hold just 7% of the total in America, around $9 trillion worth of assets. And they're behind where other generations were when they reached the age that millennials are now. In general, that means that millennials haven't necessarily been a particularly important share of investors or share of asset holders in the past. But that is about to change for two reasons. The first is that all millennials are now in the workforce and are therefore in the prime wage earning years. The second way this is about to change is that millennials are about to inherit an awful lot of wealth. Baby boomers are a large share of the population. They hold an enormous amount of wealth Right now. And as they begin to bequeath their wealth, either in life through gifts, down payments for houses, that kind of thing, or as they eventually die, they will pass a lot of that wealth on to millennials. Millennials are set to inherit $22 trillion by 2042, according to one research firm, Cerule Associates.

But doesn't that sort of coming of age and passing of a generation mechanism happen with every generation?

It does happen to every generation. But what is interesting about this transfer is how differently millennials are likely to manage their wealth than their parents did. So, for example, if you look at pensions in the 1970s, almost all pension schemes were defined benefit, which meant that as baby boomers saved through their workplace, those funds were not really managed by boomers and they were guaranteed a certain level of pension cushiness. But in the 70s, that started to change and most schemes have shifted towards defined contribution, which has a more active role for for the holder of the pension in managing which funds they are in, and also has a more active role in determining how wealthy you'll be in retirement. And at the same time, there have been shifts that have affected the way that everyone is investing excess cash outside of pensions.

You mean this kind of online investing from tips being shared over TikTok?

In general, there's been a very big shift in technology, which has made a wide variety of different investment options available to young people today that weren't when their parents were entering the workforce. Back in the 70s, it would cost around $6 to trade $100 worth of shares on a stock exchange. Electronic trading means that that fee has fallen to less than a thousandth of a penny now, which is why you have this frictionless and free stock trading on all of these major platforms like Robinhood, like E Trade, Schwab, they all cut commissions to zero towards the end of last year. But at the same time, that technology has had an impact on other ways that you can gain access to markets. For example, Millennials are very, very likely to say that they are interested in a robo advisor, which is basically an algorithm that allocates any capital that you have spare across a range of very low cost index funds. Those kinds of schemes are much less expensive and much more sophisticated than what might have been on offer when millennials parents were young.

And what about on the other end, where the millennials money is going? Are there patterns in the kinds of investment they're making?

Yeah. So millennials seem likely to both manage their wealth in a different way and also use it to achieve different goals. Nine in 10 millennials think that corporate success should be measured by factors other than just performance, like impact on the environment or social goals. They also seem likely to act on that with their portfolio investments. So people, people under 35 are twice as likely as others to sell a company that they're holding if they think that it's done something unsustainable or unethical. They may become a bit more hard nosed about these social goals as they grow up, but they also may not.

So do you reckon these millennial investors really could change the landscape overall?

The way that millennial investors seem likely to impact the investment industry through time is firstly to chase funds away from expensive and old incumbent firms into newer, more modern and much cheaper firms. And they're also possibly likely to have this much broader impact on society writ large. Companies that currently ignore their environmental goals or don't have women on their boards may find that it's much, much more difficult for them to be included in index funds that people want to buy. Or they may find that their shareholders are quicker to sell them when they do things wrong. And so those trends can have a much larger impact on society, society as well as just the investment industry.

Thanks very much for joining us, Alice.

Thank you, Jason.

For the kinds of insights you won't find on TikTok, take out a subscription to the Economist. Get a great introductory offer@Equality.com IntelligenceOffer the link is in the show Notes. For years, if you flew into Berlin, you had a choice of three airports. Tempelhof is now partly Parkland, Schonefeld closed down this week, and tiny Tegel, well, it's still there for now. The long running plan was that eventually the city would have just one Berlin Brandenburg.

For a few months, the airport has been recruiting volunteers to go through kind of dry runs where you're given a fake ticket and you check in with fake luggage, you go through security and then you board a fake airplane, which is actually a bus.

Our Berlin bureau chief, Tom Nuttall, recently went along for something of a test run.

In a few minutes, we will begin boarding your EasyJet flight.

I had been given a ticket to board a flight to Anatolia in Turkey, and I had to go and pick up a hunting rifle as well as an accompanying license for it that would enable me to take it onto the plane. So that's what I did. After a long wait, the police were summoned and then they told me, and this is a very typically German experience, that although I had some documentation, it was the incorrect documentation.

The airport will open at Last tomorrow.

This is the seventh planned opening date. It was originally supposed to open in 2011. This time it actually looks like it's going to happen.

So wait, how did all of this play out?

So, I mean, the original plan to open a big new airport in Berlin emerged soon after German reunification in 1990. And one of the original sins was actually that the site that they chose straddles Berlin, which is its own state in Germany, and Brandenburg a separate state. That meant that it was close to several residential areas and that meant that there were lots of lawsuits, that it was incredibly expensive to buy land and so on. And then you had all sorts of problems with the ownership structure behind the company that was charged with putting this thing together. Essentially it was a three way thing. The state of Berlin, the state of Brandenburg and the federal government. They had roughly equivalent stakes in the company. And they decided, the politicians who were running this company, that they could do a better job of managing the project than the private sector sector could do. So they took it upon themselves to get the thing up and running. And that's when the problems really started.

What do you mean? What problems started then?

Well, the true disaster really came to light after the second failed attempt to open it in June 2012. That was when they realised just how disastrous the construction had been. There was an official report that found literally hundreds of thousands of problems, ranging from the trivial to the serious. Some of the more serious ones include fire doors that didn't open properly, many kilometres of cables that had just been sort of shoved under the floor, totally sort of haphazardly, smoke extraction system that was so big and complicated that it was nicknamed the Monster. That didn't work. And the scale of the thing only really became apparent as years went by. And that's why it took so long to finally get this thing open.

But this time it really does look like it's going to take off, as it were.

It looks like it is actually going to take off, or at least the planes will be taking off. And one of the ironies about this, of course, is that this airport is finally opening just at the moment that air travel has collapsed because of COVID A year ago, the fear for this new airport was that it was basically going to be at capacity from the moment it opened, because air travel to Berlin has been increasing so quickly over the last few years. Overall passenger numbers for Berlin this year are probably going to be 10 million, down from 36 million in 2019. So in one way, Covid has solved one problem, the capacity problem. But it's created another which is financial. So? So fbb, the state backed company that is in charge of Berlin Airport, is in serious financial trouble. Its state backers have promised it 300 million euros this year. There's talk of half a billion for 2021. This of course, is partly because air travel itself has collapsed. But you talk to people who have dug into the numbers and they think that actually the financial problems are much more fundamental than that and that Berlin Airport could become some sort of financial black hole for years to come, sucking in taxpayers money. So basically, I think that the headaches that this airport have caused Berliners for years and years and years, they may be changing, but they're not going away.

Tom, thanks very much for your time.

No problem. Cheers.

That's all for this episode of the Intelligence. If you like us, give us a rating on Apple Podcasts and see you back here on Monday.