Transcript: Episode #201: Navigating the Financial Landscape

Below is the complete transcript for this podcast episode. This transcript was generated using an AI transcription service and has not been reviewed by a human editor. As a result, certain words in the text may not accurately reflect the speaker's actual words. This is especially noticeable when speakers have strong accents, as AI transcription may introduce more errors in interpreting and transcribing their speech. Therefore, it is advisable not to reference this transcript in any article or document without cross-referencing the timestamp to ensure the accuracy of the guest's precise words.

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0:09

In Myanmar say the country's economy is on the brink of collapse. Some have seen losses of more than 70% Since the military coup, and they believe things will only get worse.

0:21

It would be more difficult for international countries to work here if Myanmar is put under sanctions. If that happens, then they will leave Myanmar to maintain their image

0:46

Earlier this month, Myanmar made it compulsory for all foreign currency in the country's bags to be automatically converted to the local chat.

Host 0:56

During this current crisis, we have been working around the clock to increase our podcast and blog production to the highest possible level, knowing that every little bit counts. However, we're still limited in this effort due to budget constraints. All of our work relies on the power of donation. So if you find this content of value, please consider supporting our mission so that we can continue our efforts.

Host 2:34

And welcome back. Our guest today should be familiar to pretty much everyone who's been paying attention to the Myanmar contexts since the coup, Sean Turnell, a man who should need no introduction. But nevertheless, I'm going to introduce invite you to introduce yourself now for the two people in the audience who don't actually know who you are. Sean.

Sean Turnell 2:57

Thank you. My. Yeah, my name is Sean Turnell. I've been back in Australia now for about 11 months. But of course, prior to those 11 months, I was a prisoner in Myanmar for 650 days after being sentenced for three years, essentially for espionage. Although technically, I was charged and convicted with breaching the Mars Official Secrets Act. But prior to that I've been economic adviser to the civilian government in Myanmar from 2016 to 2021. happened to the Yangon, the time of the coup was arrested by the military five days after the coup kept for a while at a police station for about two months locked inside a box moving to insane they don't do they get all where I was on trial for you with door suing me the other ministers convicted as I mentioned, and then finally released in November 2022. And came back from Australia, a longtime worker on Myanmar, particularly on aspects of the economy, both historically in present day and as an economist, and since coming back certainly remain really interested in me mas economic situation and hoping to contribute as much as I can for as long as I can.

Host 4:18

Excellent. It's quite a quite a robust introduction. And our discussion today is mostly going to focus on the economic which, which is your wheelhouse and so it was right off the bat. The fact that you were detained, essentially, on the espionage charges when your your function was an economic adviser. And not You're not even in the government. You're not a Myanmar citizen. You're just an adviser to the people in the government. And yet apparently, you had a massive target on your back from from the military. So just just sort of try to contextualize this for us. Why would someone Who is an economic adviser be such as sort of an enemy of the military?

Sean Turnell 5:09

Yeah, two things, I think to that right. Number one is sort of an instrumental aspect to it, which was I was useful to get a dossier on the others. So if they could somehow make out that door, Sue and the other ministers of the NLD government, were acting under my direction, or collaboration with me sharing national secrets, things like that. I think they hope to damage them and hoped indeed, of course, then pin charges on them in that way. So I think the first thing is just instrumental as a way of getting the door soon, the minister. So that's number one. I think the second thing, though, is probably a little bit more important, in a sense. Because the economic reforms that were being undertaken by the NLD government, really were beginning to run up against the military, and the connected entities all around them. So the whole direction of the reforms was something that the military didn't like, and increasingly didn't like. And I think had the second term occurred, that that would have been even more apparent. So. So I think there was a sort of genuine anger there as well from the military, that they really were starting to come under pressure from the sort of reforms that we were doing and, and I was sort of like a little bit of a bogeyman, I think, for them in that regard. So yeah, so a mixture of those things instrumental on the one hand, but then a certain animus and a face to pull on that animus with respect to the economic reforms themselves.

Host 6:41

And so this is a really interesting one, because the military, as we know, as we understand, had phenomenal independence under the sort of pseudo democratic governments that we saw whether it was the government of Tanzania, whether it was the NLD government, but we often don't think of the the economy in that way. Well, I think those of us who were outside, you know, growing up in Western countries, we think of the economy as something that governments, you know, try to manipulate when they can they try to improve them when they can, but ultimately, are beasts completely unfettered and independent and, and beyond the control of, of individual institutions and organizations. Now, to what extent did the Myanmar military have control over the Myanmar economy?

Sean Turnell 7:32

To a great extent, but increasingly less so. And I think that was the issue. So we often use expressions like transition economy, for all sorts of, you know, economies around the world, and it was a labeled become popular after the fall of communism, etc. But Myanmar sits right firmly in that camp, where it was genuinely transitioning from what in the 1960s was an extreme command economy in which the state and the military is really what we're talking about whenever we use the expression, the state in May in mass where the military was in complete control to something else. And so by the time we get to the mid teens of the 21st century, Myanmar's economy it was it was a mix of things, it still had a large portion completely under state control. And then variations of that leading out to you know, the informal economy, which is about the only bit that was beyond state control. So it was moving along that continuum, but towards the more economic free end of things. And so it wasn't just the state itself that was beginning to retreat. And, you know, a lot of activities that are traditionally done in socialist countries beginning to move towards the private sector, but even some of the crony conglomerates and some of the military corporations, were beginning to find their market share across different areas erode. Now, I don't want to sound too sanguine on that, because I'm not saying at all that they didn't have very great control, which they did. And in fact, that's partly what we're talking about, of course, is that ultimately, the power thus bestowed, bounce back and I think was significant in the coup itself. But they were coming under pressure. So yeah, so I think it's always important to think of me in my genuinely transitioning from something, and that something was complete control. And that, I think, is what the military started to glimpse, a possible future and with which they couldn't control was arriving, because

Host 9:30

you mentioned this transitioning, and I think it can be a little bit confusing to follow because there seem to have been multiple transitions in the Myanmar economy, I think the creation of this socialist state, I mean, if we can take it that far back, was there was there a period in Myanmar where they tried to do what we saw in a lot of other socialist states like China in the USSR, where you just simply did not have private enterprise as such, was that ever an objective of the regime?

Sean Turnell 10:06

Yeah, it sure was. Yeah. So in the early years of the Burma Road to socialism, that's exactly what they had in mind. And we saw a nationalization of economic activity that went just about further in me and more than any other country apart from, again, the other really extreme examples like North Korea, and so on. So yeah, it really reached large scale and, and yet, almost complete. By the time we get to the late 1960s, then in the early 70s, it starts to move off a bit. And then we get some big changes then happening towards the end of the 80s, into the 90s, the fanzine government and so on, so the direction really from the late 1980s is a gradual retreat of formal state control. But again, really important to acknowledge that, that less than formal state actors began to fill some of the gap as well, whether it be congruently crony conglomerates or military owned corporations, but yeah, but at one point, it really was the the full Stalinist state control.

Host 11:17

And it's, it's interesting, because the stories that we hear from the 70s, the 80s, the early 90s, are, are ones in which the military themselves not not the high level generals, but the officers who received certain goods like actual goods as part of their compensation, selling those goods on street corners to make ends meet, and people who don't have access to those types of commodities, or at least not sort of reliable access to those commodities, whether it's, you know, petrol, whether it's rum, engaging in a black market economy. So was there a sense of the military establishment trying to create a completely regulated and controlled economy, while simultaneously the military themselves being the main drivers of the illicit on official economies on the side?

Sean Turnell 12:08

Yeah, absolutely. And you put your finger on it, actually, which was the military at one level, again, back to that earlier period in the 1960s, or almost complete state control. That model didn't work. And so we moved move to something else, and essentially, to shore up its own power and to, I guess, make sure that people went along with their their control of the economy, we see Myanmar's economy moving almost completely to a rent seeking one. So the military's role is to really grab the commanding heights of the economy. But then, as you've mentioned, all the way down through the system as well. And that distribution of rents or distribution of economic benefits that come not through economic activity, but just simply power over resources, that becomes the essential feature of Myanmar's economy, I'd say over the last 50 years of just grabbing control of the country's resources, distributing those resources to favored entities in larger amounts at the top of the pyramid, that crony firms and all that, but then all the way down to the bottom. So it's about grabbing control of the state, whoever controls the state controls the economy. But yeah, so it sort of changes a little bit through time. But that central essence of Myanmar, really being a rent seeking economy, rather than the sort of economy that was fast developing around the rest of the south of Southeast Asia, becoming the Tigers becoming productive economies mean, Missouri was never really about that it was all about just grabbing control, whatever there was, and distributing that in order to maintain power.

Host 13:45

So I mean, I'm not an economist, so forgive me if I'm if I'm incorrect in my characterization, but when you talk about rent seeking, as a, as a as an economic idea, or ethos, it sounds very much to me as as a layman, what I would simply describe as scamming off the top, so not actually contributing new goods, new commodities, to the economy, but rather taking things that already exist, taking control of those things, and trying to artificially inflate the prices and the values of those things so that you can line your own pockets, while again, not actually contributing to the overall production of the economy as a whole. Is that Is that an accurate description of what's going on?

Sean Turnell 14:29

I think it's magnificently accurate. That that's exactly what we're talking about. Yep.

Host 14:35

So that kind of an economy in in such a structure succeed. Can it grow? Is there any long term plan for that?

Sean Turnell 14:45

No, no, essentially can't grow. It's only going to grow through population growth, and then whatever can be brought in around the edges from outside. And again, that's really the essence of the story of Myanmar's economy over the last few It guides, you know, we've seen the other countries become leaders in export industries and so on it with a very firm idea about where they want to go and, and what to do to get there. In Me and mas, yes, there's been improvements around the edges of, you know, technologies have been brought in, and so on. And so we've seen some economic growth, and again, some population growth that's going to inflate the economy anyway. But other than that, we've not seen anything like the transformational change that we saw in other parts of Asia. And the reason for that, again, it really comes down to the political, essentially, what it was about, as you've described, it's just grabbing hold of that pie, and carving that pie up, it was never about how can we make a bigger pie that that was never really the central question of economic decision makers in Myanmar for much of the last half century. And so

Host 15:53

I couldn't forgive myself, if I had an economist on and I didn't, I didn't go there. So if we can spend a moment talking about 1985, and 1987, when General near when, basically, unilaterally abolished most of the high value currency notes in the economy and thereby erased most common people's life savings, can you can you speak at all to what was going on in the minds of the leadership when they made that phenomenally, phenomenally disastrous decision, and what the actual economic impacts of that were?

Sean Turnell 16:30

Yeah, so again, that really comes out from a fear of loss of control. So the specifics, there were essentially that a lot of black market activity was being taken, taking place in cash, in fact, particularly then it was exclusively cash. And it was seen as a way of hitting back that part of the economy, part of the economy completely out of the control of the state. So again, you know, at that period, that the failure of the full socialist model was in full bloom. And there was this burgeoning informal economy, which the state had very little impact over. But the one thing that they did have control over a course was the basic currency unit, within which most of that activity took place. So the idea was, if you demonetized, the most important currency notes in that system, it was a way of bringing down that formal economy and in a sense reasserting state control. So that that's essentially what what it was. But of course, it was very strange on top of that, so as we know, you know, part of that story was the replacement of a decimal currency system into one based on the number nine and all the rest of it. So it's sort of infamous amongst the monetization episodes around the world because of its does bizarre numerical aspects, but in many other ways, that sort of a very typical thing actually done by totalitarian regimes in particular, as a way of sort of pushing back against elements that are starting to get out of beyond the control of this state.

Host 18:02

Fascinating. So, I mean, just what, what what actually happened then, because people, people lost life savings, like the the initial wave that was done in 1985, eliminated, if I remember correctly, the 50 and the 100. And that's what most people were keeping their savings, and those were the highest value currencies. Did the people themselves try to find alternatives? Did they try to find ways of, I don't know, move to a different currency? Did they? Did they lose faith in the banks? Or did they start relying more on the military infrastructure? Did it did it succeed, in a sense, in shutting down the black markets? What was the reaction?

Sean Turnell 18:47

Yeah, no. So the first thing is that it didn't work at all. And so people just moved into other assets, assets, absolutely beyond state control, so into gold and physical commodities and into foreign currencies, to the extent that they could. Also though the damage on the economy was so severe that some of the people, of course, never recovered, the resources that they had before the D monetization episode. So in other words, it wasn't that they replace that money with anything, they, they just didn't have anything. And then the economy entered a period of a great shock to private productivity. So it wasn't like you know that there was lots of wealth, looking for a new way of storing that wealth. A lot of that wealth just simply disappeared. But you used an expression a moment ago, which is really important to highlight. Whenever we talk about money, which is the word faith. That's the critical word, because the most important thing that that de monetization episode did, and then that's been backed up again and again and again in May. It is a loss of faith in the monetary unit. And when we think about the monetary unit or money, we're talking about the most important institution there is in a country because we weren't for money. We Saving money, we survive through money, it's the it's the, you know, it's the blood of the system, that if you bring doubt into that, then suddenly people no longer work for money saved for money use the national monetary unit to buy, sell, invest, and all that sort of thing, instead of economic activity gets diverted into just defensive ways of keeping the state at bay. Again, you know, nothing can be trusted you you investment takes a huge hit. And you just start doing all the all the things you need to do to protect yourself rather than those longer pants in the future. That is that that requires a stable currency unit. You know, so when we think, in the 21st century about the innovations of the big tech firms, and, and internet entrepreneurs all around the world, notice that all that is found out is founded upon some sort of faith in the monetary unit, if you're going to put money out there with an expectation of return, but then find out that that return is itself in doubt, because the most fundamental institution money itself is in doubt, the economic activity just begins to freeze up. And yet the entire economic system really becomes perverted. And so that that episode, I think, just lay the floor, and then the groundwork to what would be subsequent decades of similar sorts of moves, or of which I will say the coup, and some of the things that have happened seem so more examples of

Host 21:36

so So then moving forward after that, it absolute debacle, something that we're going to come back to because it seems to have many, many elements of that are repeating themselves today. And definitely the loss of faith in the chat is is something that's been going on since the restrictive currency measures they took in 2021. But So moving forward, the military then knows ahead of time that they want to have the veneer of democracy, they want to open up the country, at least at least in a PR sense. And so they privatize. They privatize a lot of the the industries of the nation into M EC and M HL, which they somehow still controlled. Can you explain what is going on? Because we hear me see me IHL again, and again and again, and again, they keep popping up in everything? What are they really?

Sean Turnell 22:36

Well, I would say that the more socially accepted or internationally acceptable, if you like, means of doing the same thing as before, which is just divvying up the rates. But you do it in different ways that make it seem perhaps almost on the surface of a bit of reform, even it but again, just superficially rather than in actual fact. But but you're right in that I think what the military was trying to do, of which the creation of MEC and MBH all their transformation into what they become, is an example of which is, again, some sort of superficial demonstration that that the military understand that the the economy was important, they needed to pull back in that really obvious Stalin that sort of sense, come up with something else, but not do anything, too much to endanger those flow of rents. And so I think we see MEC and MBH, just come out of that this this desire to present a country perhaps under reform, and possibly some of them will not possibly, I think probably some of the military officers did genuinely have an idea about reforming the economy anyway, not not perhaps for good reasons. But just simply because they wanted to be about to become a more productive place and become wealthier. And they would advantage from that as well themselves, of course, and Myanmar would be a more powerful voice in the world, if it wasn't as poor as it was. So I think there was also a bit of recognition of some in the military thought that, okay, we've got to change things. The old, complete state control model doesn't work. Let's try out some other things. Let's have a look at what's going on in the rest of Asia. And they would have seen some countries beginning to make economic progress, even in the absence of political progress. So I think there was a little bit of of trying to copy that sort of model. But yeah, I would see m EC and M eh, coming out of that as, as an example of the appearance of giving up state control, while not in any way, giving, giving up the distribution of reins

Host 24:37

and so on on a more strict technical level. who actually owns MEC and me IHL. Is it? Is it a series of individual military commanders? Is it their friends, or is it the military as an entity that owns it?

Sean Turnell 24:52

Well, the first thing we'd have to say with both of those is that they're an utter black box. They remain certainly a black box looks to someone like myself during the period of NLD government, but likewise to many others in the government as well. Now, in saying that, I don't want to suggest that, you know, there could have been some people who would have made some big inroads in understanding those two institutions. But if they were I didn't know any. It Yeah, that they are units that remained under the control of the military. little tidbits of knowledge would come here and there, but you know, that their ownership, even their ownership is quite, extremely mysterious, you know, that they were originally set up to provide funds for the sort of quartermaster associations, and were meant to benefit, fairly regular ranks of the of the military. But I didn't think there's any question that those entities are controlled by much higher elements, they they're not in any way, mutual associations or anything, as innocuous as that. So they remained very much in control of powerful figures within the military and, and the broader military state. But but the exact, I think configuration of the power structure within them, certainly is something that I never knew, even though again, you know, you you certainly get the impression that the powerful interests in military control them and and I guess they weren't why I'm sounding doubtful about about the exact structure of them, I think there was, it was very interesting, for instance, the question of, you know, to what extent were these owned by current leaders of the military as opposed to past ones, and so on. So there was a lot of gray and things like that. So

Host 26:41

we don't actually know, we just have a sense that these two massive entities that basically just own, most of the businesses in the country, are definitely, in some way controlled by and funding the military. But we don't fully understand the mechanisms of that.

Sean Turnell 27:02

I think in the case of those two institutions that, that tried that there was a wonderful work being done on all of this around in the early 2000s, by some great Myanmar researchers and so on, but it sort of came to an end when when various publishers and so on, got cold feet. But you know, so there had been some inroads in roads in it. But the secrecy of these institutions, of course, is for a reason, you know, so So cracking them open is never going to be easy. But also, just getting confirmation of information from the boat is likewise extraordinarily difficult, I

Host 27:42

can imagine. And do we have an estimate for like, how much of the economy is actually in their hands?

Sean Turnell 27:48

No, not really, except a sizable chunk, little rule of thumbs, like, you know, up to about 20% was something that I used to carry in my head. But but you know, whether that was true or not just really, really difficult to quantify. So much of you know, even apart from MEC and MBH, so much of what the military does in the economy is is under their own Well, within that black box that I mentioned. So. Yeah. And any sort of precision on numbers, I think is is a bit of a fool's errand. It's good

Host 28:23

to know. But nevertheless, so we were in the situation now where the military in whatever way, but apparently lawfully put that in inverted commas, owns a huge slice of the economic pie. And they've got this notional democratization. They've they've started to see increased acceptance internationally, the country is opening up and under the insane era, and under the NLD era, it seems that there was actually genuine investment into the country. And there seems that there was genuine economic growth and development of that economy. Can you sort of try to quantify how much the economy was changing and developing during that period?

Sean Turnell 29:09

Yeah, so I think quite substantially, and again, this gets back to that original point that I mentioned that, that so much so that I think the military started to feel that its control was being rapidly eroded. But yeah, it sort of began by something that I hinted out early that there were elements within the military regime that understood that Myanmar was slipping further and further behind other countries, and that this would become a longer term problem. And that specter of me and my just disappearing into becoming a province of China, I think was becoming a very real threat. So we see as the 2000s Go on, a bit of an understanding that change needed to happen, and particular our hope, I think of many, many in the military, that maybe they could open the economy without On opening the politics too much that they can enjoy faster economic growth, have a bit of a transformation of the economy, increase wealth all round, get their cart and so on and move move Myanmar to a better place. And that then I think is sort of the vision of the Tanzanian government is my reading of it that, that what they were looking at were the sort of authoritarian models in much of the rest of Southeast Asia, Southeast Asia. So yet, it was never, in my view about democracy or anything like that. But it was about I think, opening up enough freedom on the economic side to rapidly improved growth, but always with a view of benefiting themselves. And so, you know, so they opened a lot to foreign investors and all that. But that was always very tightly controlled. And so in exchange for entry would come all sorts of partnerships, sometimes with MEC and me, ah, by the way, but sometimes otherwise, as well sometimes just, you know, favorable decisions given to particular cronies, in exchange for kickbacks along the way, but, but nonetheless, delivering growth. But yeah, alongside that, a lot of benefits to the military as well. And so that, again, as I say, is, to me, the sort of thing we saw through the the insane government changes a little bit along the way, I think, as time went on, they were part of the some of the economic ministers of that time, had were probably going further than the military really wanted. And I think we saw that in lots of tensions within the US dp and other groups around that time, then the NLD come in. And to my my way of thinking into my experience, I think the vision was very different. It was still about moving along, opening Myanmar's economy, etc, to drive growth, and to actually allow me and Mark to catch up to some of its peers and neighbors in Asia. But to me, there was always a very, very strong political economy aspect tool as well, which is that you could make political change to get economic change, but also economic change could actually lead to political change. And I think probably the most powerful statement of this was the most important economic document of the NLD government, which was the so called me and my sustainable development plan or MSTP. And if you have a look at that there's a very powerful declaration of the interactions between economics and democracy, in both direction that good economics was good for growth and all that, but it was also about opening the economy up, it was about dispersing economic power. And by dispersing economic power, that there would be a dividend politically to that you would actually begin to dilute some of those really powerful instruments that that control memorize economy have such a long time, that it included the military, but even included, a lot of the powerful groups connected to them as well. And that you'll get a virtuous circle was was the hope that you will get economic change, leading to more change to the fundamental political economy, which would then beget further economic change, further political change, etc. And that's the trajectory that certainly the people I worked with. That was their firm belief, and I think it's very nicely set out in that msdp. So, yeah, so a little bit of continuity, I think narrowly just in terms of economic war, greater economic liberalisation under the Clinton government, they named to the NLD. But the NLD, my view would be that that narrow economic part of their objectives was greatly accelerated. But it also had that political economy dimension.

Host 33:58

Now, so one thing that you mentioned quite a few times is is the cronies. And again, we have a general understanding of what cronies are, but they seem to have a very particular role to play within the the economic and political spheres in Myanmar. How would you categorize and define a crony? What makes a businessman a crony?

Sean Turnell 34:22

Well, a crony you would really define as someone who makes money by proximity to power. So in other words, a lot of their wealth comes from that expression that we've used again and again, that is simple rent seeking. So it might be an entity that gets a monopoly license, say to import motorcycles or be the exclusive exporter of cane sugar or, or have some sort of special import rights over fuel motor vehicles or buses, or tractors or whatever it is. So in other words, you you get some sort of exclusive Right, given by the state, and then invariably there be some kickbacks along the way. So the relationship between the crony and the government is utterly symbiotic. But the largest part of the wealth, it's important to note, again, it's not really coming from innovation or entrepreneurial activity or putting your money at risk, it's usually about just carving out some sort of space. So I think it may impose case. That's primarily what we're talking about. But that's not to deny that there was a little bit of entrepreneurial activity as well, usually funded by the rent seeking activities. So if we look at some of the major conglomerates, what you usually find is that there's some initial way in which they earn their money, say, you know, teak extraction and exports, something like that. But then that money is then funneled back into some sort of other activity, property development, construction, and airline. And then once you've got all that up and running, you usually want to open a bank as well to be able to distribute some of these large shares and carry further favor with with powerful interests, both in the government and amongst your, your fellow cronies. So you sort of get it get up in your head from there. But yeah, I think the important thing about the cronyism, and we can see it almost crony by crony, you'll find some sort of monopoly semi legal activity that kicks the process off, that's protected by the state. And then a sort of broadening out, but but very often at its heart remains a sort of protected economic activity. And it's also why, you know, I mentioned that I think the military felt under threat as the reforms were going on under the NLD. Government. But I think many the cronies were as well, because I think a lot of a businesses were starting to face much stiffer competition. But yeah, so whichever way we're talking about when we think about, I think the political economy in Myanmar that was developed, it really is a story of protected entities.

Host 37:02

So would it be fair to say that the fundamental distinction between a crony and a successful businessman is that the cronies would rely more on nepotism, corruption and special legal exemptions and protections to run their businesses? And therefore, that the cronies would also be funneling wealth back to the people in positions of power? Who are protecting them? Yeah, I think that's a really accurate description of it. Okay. And so And you're saying that these are these are monopolies that they're that they're running? How common is is sort of monopolistic activity and other types of business structures and business activities that are generally considered to be non competitive or outright illegal in in western economies?

Sean Turnell 37:51

Yeah, very common. So. And so we've mentioned monopoly, but then as you've mentioned, as well, illegal activities. So in other words, they're the sort of activities that you don't have to worry about some big foreign company coming in and doing just simply because that company, probably from regulators back home, would forbid them getting involved in it. So yeah, so it's some sort of activity, it might be. When we say monopoly, it might be, say, a regional monopoly. So you might have, you know, an exclusive import license for motorcycles in, say Karenni state or, or in the Delta, or in Shan state, or whatever. So you can actually have the same activity, but regionalize monopolies and so yeah, so needn't even be a nationwide monopoly. Or again, it can be an illegal activity, which is protected by its very nature, because there's a lot of other business entities that that just can't participate. So, yeah, so So that's the sort of activity that we're talking about which great wealth can be assembled. And so

Host 39:04

it's so it just seems like there's evolved this this symbiotic relationship between a corrupted corporatist class who are who are protected by the leadership, and therefore a corrupt leadership, who are willing to sell out the nation's economy, to their corporate friends. And that this, this is just a feedback loop. And it's, it just stops anything from from working. Because nobody would want to invest in a country like this. And nobody can really get big in a country like this because the protected monopolies are going to ensure that you can't compete with them. So did this just enforce state like, to a large degree, this is slow the progress of the economy, even during the insane era?

Sean Turnell 39:54

Yep, surely. Yep. And that's what makes economic reform in countries like me, imagine so difficult, because you're confronting vested interest all away, you know, not only within the cronies themselves, not only within within the military, but of course, within the civil service, and so on as well, where you've got all all of this going on to lots of corruption. They're huge vested interests just right across the entire political economy. And it just makes things insanely difficult. And so but but I guess, you know, the tactic then is to try and do it quickly. If you can, to disperse power quickly enough, that you, you can actually set up other centers of power, you start to get countervailing power interest. And that that's really the the rub of of economic reform is to try and get those benefits of reform out there quickly enough, and in significant magnitudes enough that other people then have a vested interest in favor of form rather than resisting. So yeah, but it just means that it's all incredibly difficult when you've got a structure like me in mind.

Host 41:06

And so that that I think segues us very, very neatly into the meat of it now that we've understood the context and the history of the economy, and the corruption of the economy. What is it that under the NLD government, you and your colleagues were able to actually do because the NLD, government's power was very hypothetical, in a lot of cases, the military time and again, showed that they don't actually take seriously the idea of a civilian government getting in the way of their interests. So what what was actually at the disposal of the of the government and the infrastructure of the day to reform the economy?

Sean Turnell 41:47

Well, it was just to move on as wide or front as possible, and do what you can when you can be man is one of those places where grand plans just don't work. In fact, actually, there's not many countries that grand plans work and life is too messy, but But yeah, a very broad front to try and reform things as much as you can, when you can, as often as you can. And hope for sort of spin offs from that, to begin to reform other areas, one of the things about reform, once you start to really get going is that the disruptive process itself can become quite productive. Disrupting one part of the economy requires deep disruption in another, and so on. And then you start to be big, build coalitions and other interests in favor of reform, as I mentioned, so So the hope was that if you could get really things going along, that you would be able to get enough incentives out there, to bring other people along with you. And you know, that the whole motivation for great many people across the economy would be to keep those reforms and, and, and, you know, I mean, I'll get on to some of the division, or some of the, the resistance to that in a tick. But just to say, we can see that, you know, there were moments of, of, of clarity and optimism, where you saw, particularly young people grabbing ideas that are locally generated, or seeing things that were happening overseas, and people in Myanmar coming up with things themselves, sometimes coming back from overseas, and just running with them, you know, and there was, I think, you know, from about the mid 2010s, around 2015 2016, etc, a real building momentum of new businesses, new ideas, and in very, really young people. So you can see, the Promised Land was was almost there, if I could, if I can say that. But against all of that. We're always vested interests, as I mentioned, and the NLD government just hit so many roadblocks. I mean, the most obvious one and ever threatening one was the military. So it's sitting there as a presence all the time, and issuing vague threats, which I'm not sure how many people can remember, you know, but men online and others within the military, we're constantly sending shells over the, you know, over the rigging of the NLD government. But even apart from that the bureaucracy itself, of course, had been built up to serve originally this style in the state and then this rent seeking state that we've been talking about. So the bureaucracy was extraordinarily resilient against change, resistance against change and resilience. It was a you know, it's both. And so, one of the biggest barriers was not even just the very obvious resistance of the military, but the passive and sort of just background resistance of the public sector. So it was incredibly difficult to get things down, get things through, I would say either, you know, much of the Bureau bureaucracy, meanwhile, was sclerotic. And so, you know, it was just hard to get anything through. And I think I mean, we'll probably touch upon this later, I guess. But you know, if one was to look forward, one of the first things will reform as government should probably due with a lesson of the nlds experience in mind was, the first thing was to, you know, really clear out that civil service. But yeah, so all just extremely difficult. And it just became a process then of trying to attack points for reform on multiple fronts. And, again, I would draw people's attention if they is because it is still exist online, that me and my sustainable development plan, you'll see from that, that just the wide range of liberalisation measures from every area we could think of but but but it wasn't grain planning, it was literally just about opening things up he there in every way, just little explosions of freedom, if you like, was meant to sort of kick things off. And I do think, you know, there was a great deal of progress on that. And, and again, that's what partly inspired the full on resistance to it.

Host 46:14

And so this is where it gets into like a weird territory, because you said before that the Thanksgiving government was trying to improve the economy, selfishly, they wanted to improve their own lot in life, but they recognized that they needed a stronger economy, for there to be more economy to scam off the top off. And so when you have the scale of investment in Myanmar, and you have these Western companies coming into Myanmar and creating new opportunities, and and creating employment and and improving the strength of the economy, that presumably would also have benefited the landed established economic heavy hitters who would be best positioned to be able to to exploit these new opportunities. But it would also one presumes have threatened the monopolies they'd spent a long time establishing what was going on with the cronies in this in this time? Were they seeing a net benefit as a result of this expansion of the economy? Or were they seeing their fiefdoms worn away?

Sean Turnell 47:20

Yeah, so that we're seeing both, which I think is exactly the point you're making there. So So yes, they, they would probably have seen that in the longer term, they were going to be smaller fish in a bigger pond. So in a sense, the choice for them was that they were enormous fish in a tiny, tiny pond. And they could see the limits of that. So I think there was an idea that the pond needed to grow, but a recognition that they would become relatively smaller fish, but bigger absolute fish, just to continue that metaphor further. So that they you know, that they would become wealthier by a wealthier Myanmar. But at the same time, their absolute control over the particularly particular industries they were in, would begin to weaken. So and I think that that, by the way, is something you see economic reform everywhere. The point you make is absolutely right. People with money and power will always benefit from from reform. But the key is, so will others. And over time, one would hope that those others and I think we saw evidence of that in Myanmar, as we have everywhere around the world, that over time, those older vested interests begin to be well, not not so much competed away. But but a certain countervailing power tends to tends to erode some of the some of the dark dominance of those of those players. So yeah, that that's sort of the story. I think, just to reiterate, too, though, I think there were elements in the tentang government that that were not completely selfish. I mean, I think, again, the state objectives, I think were quite narrow, and were absolutely about incorrect, you know, this dark vision that they were beginning to see of me and my just slipping off all sorts of global indexes, power and all the rest of it. But yeah, I think there was some with a bit of a broader vision as well. Interesting.

Host 49:19

And so then the next corollary, if it is economic expansion, it foreign investment reform, that allows these cronies to see their own bank account numbers go up, basically, whether or not they own the show, they themselves now have more purchasing power than they did previously. Does this wear away at the symbiotic relationship between the cronies in the military that had previously propped up their economic prosperity?

Sean Turnell 49:53

Yeah, very much so. And I think we saw that without mentioning any names, but I think if we Look at there were certain crony businesses that had developed quite strong ties with international firms with very strong governance requirements. And were we were beginning I think, to see a transformation. And we saw that in banking, we saw it in airlines, we saw it in hospitality, we saw already insurance, telcos, all sorts of things like that, I think that there was real change taking place. And so that symbiotic relationship, which had been the critical relationship before was beginning to change, where in a sense, if you like the stakeholders, for some of those crony businesses became different, you know, the people they answered to apart from themselves and their owners and all the rest of it. But beyond that, it wasn't just the military anymore. It was other entities. And sometimes those entities were offshore and beyond control of the Myanmar military. So, yes, I think there was a fundamental change between some of the cronies and the military as well. And I think, again, around the time of the coup and post coup, we've seen some of that. We've also seen the opposite. Of course, we've seen some of the cronies, who in a sense, were beyond the pale beyond investable by international investors. And I think some of those, they they stayed much closer to the military, both through the NLD period. And I

Host 51:26

mean, so that makes sense. So there's a sort of bifurcation of the chronic population, into those who see a future for themselves and their interests in the new system. And those who know that their only hope to maintain their power is to drag the country back into the old system.

Sean Turnell 51:44

Yeah, I think that that's right. And I think post coup as well, we've seen some of the ones that had made progress, and had moved further away from the millet military, in water just acts of desperate survival. Just to go back to the military, again, one of the things because I don't want to sound too naive about business, by the way, here in the there's a wonderful line that that basically just says capital is always cowardly, right? So money always flees, and always flees trouble. So, so we've certainly seen that after the coup, that the enterprises that had seemed to be the sort of enterprises that Myanmar might need in the future, when push came to shove, and the military came back, a lot of them, you know, really showed the colors of capital so often through history, and just went back to where power lies.

Host 52:43

Now, that makes sense. And so, on top of this, you've mentioned a couple of times the civil service. So my understanding is that many of the high ranking positions within the civil service sector, actually were held by military officers, former military officers, the family and friends of military officers. And of course, as we know, under the 2008 constitution, I think four of the ministry portfolios outright, had to be controlled by military appointed government ministers. So to what extent were the people working in the civil service? Personally, beneficiaries of this, this corrupted relationship between the military and the cronies? And how difficult was it to get the civil service to get rid of these people who are trying to hold the country back from development? without suffering too much institutional knowledge loss?

Sean Turnell 53:42

Yeah, great question, which I'll break up into about three parts, if I by all means to do to start with, and so one is to say that many in the in the civil service were exactly as you've described, super connected to the rent flows coming from the military. And you mentioned, you know, senior military people being put in very powerful positions within the civil service, so that they were very obvious points of resistance to change in overtly. So and crudely so. So that that's one group. A second group, though, would really just come from the mindset of the civil service, because again, you know, this civil service grew up was established through very strong state, socialist sort of control begins to loosen up, but it's still very much a rent seeking economy. It really is, you know, wealth comes out of your access to the state. And so the mindset, if you like, of the civil service, is likewise I think, quite a powerful, quite a powerful cultural thing in it governing how people behave. And so breaking out of that, like so in other words, moving from a presumption that everything is forbidden unless the state allows it to the reverse that everyone should be basically be free to do things in the economic sphere, particularly, unless for some reason, you know, should not be permitted, that mindset change was absolutely crucial, and very much a work in progress. And when I say work in progress, you know, really only the first tip toe into that. So yeah, so So within the public service itself, I think you've got those two elements, very overt corruption in overt connection of very powerful people to military and other interests. But then this broad, I would say, cultural problem within the civil service. And by cultural I mean, work culture, fashion by incentives down the years of just knowing how to get ahead within the civil service. But yeah, but again, you know, based on a fundamental idea as well, is that it's up to the state to give permission to do things and without that permission, something was forbidden. And so trying to overturn that, trying to make the presumption that, that people were free to do things unless there was some good helpful, you know, whatever other reason for them not to do it. That that was a real battle. And, and I think, partly generational as well, because I think an elephant in the room in this aspect in talking about cultural change within the civil service, and so on, is also just looking at the age structure, in some of the dynamics of the way in which you know, so much in the civil service was dominated by big, frankly, old men, old men who had grown up under a different system, and we're just highly resistant to change whether or not you know, they're in the pay of a particular crony or connected to the military or not. They had a nice little comfortable niche in this in these jobs, and just didn't want to change. And so one of the things I observed and I admired them incredibly was the young people who'd come into the civil service and come into sort of policymaking roles. I admired them for their ambition, for the vision for the courage and all that, but I sort of lamented with them the frustration that they had, of trying to bring about change, and they made victories here and there. But it was just so hard. And and I'd particularly like to call out actually women, young women in this process, because Myanmar has one unusual big picture cultural aspect when it comes to economic ministries, and that is they tend to be dominated by women at the working level. At the top, it's these old men who tend to run the places and make the decisions. But if you look at who does that work, it's mostly women, and who was doing the work and driving the change. It was mostly young women. And, you know, I was lost in admiration within weeks of getting to me in MMA, and taking up my role in 2016. And that admiration lasted all the way to the end and beyond. And, you know, it's just so tragic to think that these young women are often you know, we've had to flee or whatever or worse, etc. Now, so. So there's that aspect then just about the Civil Service. The other point, the third point I wanted to make, that your question prompted can is just to say, it was just a highlight the point you made, that very powerful ministries will be on control of this Indian government. And I think this is absolutely critical. It's critical in so many ways, politically. But it's critical economically as well. Because when you think about it, what a remarkable thing that here you've got a government trying to reform trying to say, fix up the fiscal situation and all that, but that the biggest area of government spending them far away most important fiscal unit, Home Affairs, military, a totally beyond the civilian government to influence and in the case of the military, its budget could not even be questioned by the Parliament, and by the civilian government, let alone determined by that government. So the biggest area of government spending was beyond the control of the government. And so that meant that if you're talking about fiscal reform, the biggest single item of your influence is off the table from the word go. And so you've got to come at things from different angles. And I think that's a very important hurdle that existed all the way through the NLD government and an unresolved, of course right to the end because the military never did give that up. And of course, you know, the coup is just a further assertion of their control in that in so many other ways.

Host 59:56

And so, first of all, I just want to to To echo what you were saying about, in particular, the young Myanmar women, I was having a discussion with one of our other guests who I won't name because we were speaking off the record. And I found it very interesting because we, I expressed the position that was very critical of a lot of the entrenched labor and entrenched mindsets within Myanmar industries, and specifically Myanmar government sectors. And he was pushing back. But eventually, we got to a point where he would basically say, Okay, if we really wanted to improve these organizations, probably we would start by getting rid of everyone who's over the age of 45. And of the people remaining, get rid of 75% of the males and 25% of the females. Because on the whole, young women are the people that you want in these industries. They're the ones that you want in these government sectors, because they are the ones who are going to work the hardest. And they are the ones who are the most open to new things, and new experiences and change, and are going to help implement things that are beneficial. Even if they go against you know, the way everything has been done up until up until now. So you're certainly not the first person that we've had on the channel who's who has expressed this, this admiration for, for the incredible capacity of, of Myanmar women, particularly young Myanmar women, and and lamented that they are very often just overlooked and ignored. And, and very often I've had to flee the country, which is very sad situation to be in. But

Sean Turnell 1:01:37

yeah, it's, yeah, I don't want to be too down on the men in you know, there was some really great guys as well. But But yeah, the broader point. It's a generalization that works. And just another little anecdote on that. Whenever I would go into a meeting, you'd always see the men at the top table. And then you would see the women always in the seat at the back, like lining the walls in there with their pens poised and but if you ever wanted to know anything, it was to the women that you went all the time. And it was just yeah, a pattern right across the whole time I was there. So yeah, just another anecdote, I guess in that in that same direction, but at the same time, just a little bit of a shout out to my mini me and my male friends, many of whom were great as well. But as a general rule, I think we can say that the women were just superb. Absolutely.

Host 1:02:33

And so moving to the comments you made with the military budget. That is an interesting factoid that I came across a while ago, I just want to run past you, right after the coup happened. Some, you know, a friend of mine and I, we were doing some back of the envelope calculations on how much money the military is going through and trying to figure out what how long can the military sustain the CDM, basically, and the economic shutdown that comes with people refusing to go to work and refusing to raise revenue or the rents that the military requires. And one thing that I came across when I was trying to find the military budget was that apparently, not only does the military get its budget, during the actual annual budget announcement, it gets that allotment. But there's a tradition where the military can basically come back six months later, and we'll put in a request for an extension of budget, which is just rubber stamped through the government pro forma. And so you might have a budget of, you know, whatever the case may be. And then you might have, you know, 25 50% increase on that budget six months down the line. Is that also your experience?

Sean Turnell 1:03:49

Absolutely, yep. And there's even something beyond that, which is off the book financing for the military. So so that the the issue that you referred to was still on book, you know, it's still vaguely observable, it was some some sort of process. But one important fact we always have to remember is that the military has control of the printing presses for the money. So push comes to shove and this way, it's interesting with me ma sometimes the economic questions are incredibly basic, you know, in in countries like the United States, etc, that the Federal Reserve you've got, we're witnessing at the moment, you know, the US government might be shut down because of spending bills stuck in the Congress and all the rest of it. None of that in Myanmar in the end, push comes to shove the military print the money. Now, massive damage comes from then you get monetary instability, which is one of the features of Myanmar down the last few decades all come from that that feature, but they can do it so so when, when it comes down to their resources, as long as the domestic currency has some sort of claim over real resources. It can be used to to get stuff for them basically bullying against bullying, really bluntly, and crudely, as long as it has some value, that access to the printers is really the foundation to the military's financing operations. And so yeah, and the control of the printing works has been absolute throughout Influitive you know skullduggery happens when it comes to money printing in me and my down the years. So, yeah, so so just to say that, you know, in a very visceral, physical way, the military has access to finance that is just, you know, completely obscure to anyone. And, yeah, solely available to them and outside any sort of scrutiny any sort of control any outside. So,

Host 1:05:46

I just need to clarify, because what you've just said, is a level of insanity that I even even I did not expect to be the case. Are you telling me that the military actually has senior age, the actual literal right, to create new banknotes without having to get approval from civilian government?

Sean Turnell 1:06:09

Most certainly,

Host 1:06:10

that's, do they have to report it? At least?

Sean Turnell 1:06:15

No, there's nothing that they have to do. Now, sometimes it will be reported. But other times, it's not at all. There are many, many instances over the last few decades of multiple printings of a currency run. So for instance, you might get authorization like, here at the official level, you might get authorization through the central bank to print, say, 1,000,010,000, Jett notes, just just off the top of my head, and that will be allocated a certain serial Ron, well, you could do a duplicate of that printing. So you can even keep the numbers consistent with what the original authorization might be. But in the end, there's still a physical story here, there's the physical production of notes. So regardless what's been authorized, and entered into the books, even literally, in the most basic level, in terms of the serial numbers on the notes, you could do a duplicate printing of those same notes, and use those notes in circulation. And in the country like me and my, you're gonna get away with it. Because, again, the military is the ultimate authority, and it answers only to itself, and to no one else. So as why, of course, we have this other very bizarre phenomenon in Myanmar, where the true limit then, according to the finance of the military is twofold. Number one, the complete collapse of confidence in the jet, but of course, even well, short of its complete collapse, to climbing confidence declining confidence in the jet undermines military spending. So even as they print like crazy, they're simultaneously reducing the value of the jet as they're doing that, that's one aspect. But the other one, again, even more basic and just extraordinary limit to military financing is that they start to wear out the printing presses, like literally, the plates that are used to, to print the image on those banknotes were out. And there's been many times in Myanmar where, where the the printing process itself, the physical printing process has become the problem and parts can't be accessed from Germany where originally the note note Printing Machinery was all imported from sometimes the paper runs out, and they can't get access to the paper. And they've been a number of the times where emergency shipments of paper have come into the country, etc. Yeah, so at the most, again, most basic level, you know, if we're going to say what is the ultimate limit to the financing of the military, and again, we get down to you know, these basic items of, of printing plates and paper

Host 1:08:59

that this is this is so far beyond the notes that I had, you have actually stunned me I had no idea that a situation this fundamentally I don't even have the vocabulary for this. Because this is not, you know, vulnerable. This is not precarious. This is this is begging for disaster. I am genuinely and truly surprised that Myanmar has not yet experienced hyperinflation and a complete loss of faith in the currency like how have they managed with this level of of gross mismanagement and negligence? How have they managed to avoid the complete and total collapse of faith in the economy?

Sean Turnell 1:09:49

Well, I think the the the one thing that has always got the military through and the rulers were Myanmar through is that in the end you you've got subsist Since right so so you're not going to go below that. And you've got multiple local economies. So people will produce goods in Myanmar to survive, right. So people will produce food. And they'll exchange their production with each other. So, so whenever Myanmar is in one of it's really down periods, which it is, at the moment, you'll see things hit that floor, and economic activity can still go on, where the monetary aspects and faith in institutions and again, money being the most basic institution of all, where that starts to matter is the that area of economic activity beyond subsistence into the sort of transformational growth, investment, some sort of projection into the future, because when we think about it, money is really just a projection into the future, it's a bit of paper that you have now, that says that you can consume in the future. So, you know, a monetary unit is a little bit of a time traveling instrument, and is that as that becomes doubtful, it starts to impact on those future projections of economic activity of which, you know, the most important is investment, right? So you investment, you put money down now, with a view to earning into the future, that's what gets damaged to the sort of instability that we're talking about. But me and my, because the economy and the, you know, the the actually topography of the place, the soils, the rivers, it's incredibly productive, and they should be much more productive agriculturally. But that's always put a baseline that the economy tends to bounce down to, and then bounce along, during terrible times. Like, like we're experiencing now. But yeah, but the damage is done at that higher level, at that transformational level. And it's why I think, you know, the economy is, is in such poor state at the moment. And of course, we can see that too, that the monetary disarray comes from the fact that people don't save in the jet. Nobody saves in the jet, if you're rich enough, you'll have gold, you'll have foreign currency, you'll store your wealth overseas. If you're poor enough fuel is stored in food, well, you won't store it at all, you'll be living day to day. But I think yeah, to me, the jet holds up as a unit of exchange as a means of exchange at a fairly basic level. But as soon as you start going beyond basic levels, and particular start thinking about where to people, and how to people storing their wealth, nobody uses the jet to store their wealth. But so

Host 1:12:32

what were you talking about before you were saying like, well, people create things. There's a baseline of economic activity, people make stuff and they can trade it. That's bartering it like you're talking about bartering. That's something that we see when people have already completely lost faith in the economy. Like, I'm thinking of hyperinflation in Weimar, Germany hyperinflation in, you know, post World War Two, Hungary, I'm thinking about all possible the one hyperinflation in Zimbabwe, like those cases where people say, Well, I have a lot of like paper banknotes that I can wallpaper my house with. But more importantly, I have a basket of eggs. And I can trade the basket of eggs to get some petrol from my neighbor. Like, is that what we're talking about that that's the fallback in in Myanmar case?

Sean Turnell 1:13:20

That That's right. There's a couple of aspects of that to this as well. Some of the extreme examples of hyperinflation that have happened around the world have come in places where the state itself is collapsing. And the thing about hyperinflation, of course, is it builds on itself. And it just quickly accelerates. So so we're still short of that. So I'm not suggesting that there is hyperinflation in Myanmar. But we're but we see some of the other aspects that are equivalent to hyperinflation, which again, is this, you know, lack of faith in fundamental institutions, and currency avoidance, right. So I think we what we can say about Myanmar is large parts of the economy are not denominated in the jet. And again, at the low level that we're talking about here at the basic level that most people function as there's just so much for me and my as economy, which is non monetary. And then at the higher levels, it happens in different ways. It's not the jet that that is the monetary unit that that we're dealing with. The other thing is just to say to that the profound inequality in Myanmar also tends to or has tended to avoid hyperinflation because those notes which have been printed hand over fist, as we've been talking about, doesn't usually end up in the hands of most of the population. So it's quite, it's quite narrow in its function. And so for that reason alone, you don't get that excessive demand of people with lots of notes against many less goods, which delivers hyperinflation so so you've got an economy that sort of divided up into different spaces, spaces. that only act and only enacted through foreign currencies, you've got spaces that are essentially barter, as you mentioned earlier, and then you've got other spaces where the jet is very much the means of exchange. But it's the volume issue, there's not sufficient across the overall economy to tip it into hyperinflation. The other thing, I think that Hyperinflation is often masked a little bit in Myanmar, just simply through the non purchase of goods. Okay, so So again, even though there was plenty objects around, they're not in the hands of enough people to deliver hyperinflation. So in other words, people just go without, so So there's, there's still this domain supply problem, but it's manifested not so much in hyperinflation, but by simply people not being able to

Host 1:15:45

buy it. Because that was the the other question that I wanted to ask on that, because when you, when you just have the printing press, I think the technical term for this is quantitative easing, but basically just printing money, that obviously reduces the value of the money that you have. But how much of that is mechanical, which is an unavoidable mathematical outcome of what you've done? And how much of that is psychological, which is people responding to what they think is going to happen? If people don't know about the double printings of currency? If they don't know about an extra couple of billion that were generated and then put into a warehouse? Does that mask the inflationary effect of printing that money? Or is it going to come around eventually, because that money is going to be spent on something somewhere somehow?

Sean Turnell 1:16:35

Yeah, now look, great question. And the two interact with each other, there is a mechanical aspect. And there's a psychological aspect that I think history would show is much more important. So that the mechanical aspect again, because me my economy is segmented in so many ways. The mechanical aspect itself is not enough to lead to the hyperinflation. It's the lack of faith, that really becomes the issue once people start to demand evermore currency units for whatever product that they have on sale, whether it be a bag of rice or, or coffee or whatever. That's that's the critical junction once you make that, that journey into that area. So yeah, the mechanical aspect of it can be avoided for a long period of time. And in fact, I mean, without getting too warm, because you're about this. Economists are much less confident than they used to be about these mechanical aspects. Probably many people listening to this will remember the doctrine known as monetarism, which basically had a very strict relationship between money supply growth and inflation. And one of the things we've experienced down the decades since monetarism came up in the 70s, was a breakdown in that relationship. So the mechanical one is not really the important one. The important one is in fact that that faith in in those foundational monetary, so

Host 1:17:54

as long as the military is able to keep a lid on how much money they're making, and how much money they're spending, presumably on buying a whole bunch of military hardware that they're not supposed to have. They're not actually damaging the economy as much as we would see in a Western country doing the same thing, but announcing how much they've generated.

Sean Turnell 1:18:13

Yeah, and sometimes the damage is disguised as well, because the other way that the military finances itself, of course, is in even more basic way than printing money, which is they just take stuff, right. So they just extract physically, resources, they send the troops out into the field, without giving them food and so on, and tell them to live off the land, which of course, as we know, just means preying upon farmers, etc. So, so the military has a lot of that Direct Extraction. So we don't have to worry about taxation policies. And we don't even have to worry about printing notes, if soldiers can simply simply turn up in a village at the point of a gun, and they extract real resources so that that's also a critical thing. The other thing, of course, we need to think of all of this, which is absolutely important. And which shapes so much of the conversation about Vemma at the moment, is what the military desperately want is foreign currency. Because foreign suppliers of arms, they didn't want Jack's no one. You know, the people in Myanmar don't necessarily want jet for all the reasons that we've mentioned. But nobody overseas does. And so they need the foreign exchange to buy what they need to buy. So So we must always remember that when when I talk about no limits to monetary finance, or military financing within Myanmar, of course, that doesn't, doesn't begin to tell the story internationally, and hence the incredible sensitivity to things like international sanctions in the light. Absolutely. But it's

Host 1:19:45

I think, in terms of what the military is doing today, as in post coup, we might leave that for for another day because I'm conscious of your of your time. But with regards to what's going on before the obsession with foreign currency, particularly the US Dola is quite rampant in Myanmar it has been for a long time. But at the same time, we saw policies being passed, at least under the NLD regime when I was living there, I remember policies being passed saying that people have to be paid in chat, they can't be paid in US dollars anymore. And that I don't know whose policy that was, that was a military initiative or whether that was the government's initiative. But there seems to be a desire to move away from foreign currencies. So what was happening there?

Sean Turnell 1:20:36

That's right, so So he, you've got a real dilemma in the reform area, because in most countries around the world, economic activity is done in the local currency. So I'm talking from Australia. And if I went to a shops, just here in Sydney, and I presented a US dollar, probably a couple of shops would accept it. But most wouldn't, it would be too much hassle, they would have to go to a bank and exchange it into Australian dollars, because it's Australian dollars that they need to pay their employees to pay their taxes to pay the rent, all that sort of stuff. So for most countries, having the domestic currency unit is absolutely critical. It allows government to conduct policy basically do all the things that it needs to do from financing hospitals, schools, roads, blah, blah, blah, the whole thing, you need a currency unit. And, and of course, we then got that concept of legal tender. So most countries declare that their own currency unit is legal tender, which essentially just defines it as a unit that the government will accept for taxes. So until you get a basic value of the currency for that reason, people have to pay their taxes in something, therefore, that something has an initial foundational value. And then that value item then can be used to conduct all the business of a country. So creating a local currency is, you know, basic and fundamental. But it's a little bit of a dilemma, because it does have that aspect of what then do you ban. If you're in a country where there has been such a loss of faith in the local currency that people are not using it, then governments then are in a real dilemma and their ability to do things become really hampered? Because obviously, the government of Myanmar can't print US dollars? Well, not not not legally anyway. So, but it can print its own currency, and it can establish its own currency unit. So creating a domestic currency space is a basic economic function of government no matter what the government is. So but it does mean that a country like Mima government comes in and finds a large part of the economy is not monetized in its domestic currency unit, it's got to try to think well, how can we change this? How can we function as a proper government? How can we raise money to again, do the good stuff, education, health, blah, blah? How can we do that, if we don't have control over the monetary unit, so they're going to try to try to fix that. Now, the best way you can do it is by running really good economic policies, not printing too much money, having a Gordon fair, and seem to be fair taxation system, having all the checks and balances of government that allow you to build up confidence in the whole macro economic framework. That's the best way to do it. But of course, all of that is going to take time and history and people's memory. And, and, you know, that's the basis of long term institutional change. But along the way, it may be necessary at times to say that some activities can't be dealt with in in foreign exchange now, if I so, but you're absolutely right about the directives that came from the central bank about paying in local currency. That was certainly the case. With my hat on, I tend to be someone who argues my default answer to every question is that greater freedom is better than less freedom. So it wouldn't be a policy that it wasn't a policy that I supported, but I understand where it's coming from, you know, from again, that area of profound distrust in the local local guarantee. So it's a part of a number of sort of policy items you could use to try to build up value in the local currency, but it wouldn't be the one that I would

Host 1:24:28

fair enough. But nevertheless, this showed a pretty major shift in in the economic policy in the country. Now how enforceable this was. I mean, that's, that's obviously a very different question. This is a largely cash economy. Country. I definitely continue to be paid in US dollars. I know a lot of my colleagues and a lot of people in my circle continue to be paid in US dollars because at the end of the day, there are a lot of people who just foreigners I mean, who will refuse to work. If you You're paying them in local currency, because it's not considered to be stable, and it's a hassle to exchange and so on. So this is another element, how much of the policies how much of the reforms were readily enforceable in a country that was especially pre COVID? So very, very heavily dependent on cash transactions?

Sean Turnell 1:25:19

Yeah, no know, it's, again, another area where reform is just really, really tough. And you're absolutely right, my experience was the same because the enforcement of these directives, very much lag behind the overall policy directive. And yeah, and again, it's just one of those things, it's just gonna take a lot of time, if at all, and just to in this area, Myanmar is is not, you know, such a special case. So if you go around all of Southeast Asia, but everywhere around the world, basically, there are many, many countries where of course dollarization, meaning in this case, readily acceptance of the US dollar, particularly as a unit for saving is really, really common. And it's just a it's yeah, I'm not sure if it's ever going to be radical, to be honest, except perhaps if there was a safe, stable Bitcoin unit developed, by which I don't mean current Bitcoin, perhaps something like it, you know. So yeah, so it's very common, but it does limit the government and its ability to finance itself. So most governments around the world tried to do something about it. And they were heavy handed ways about it, and lighter handed ways about it. And yeah, as I say, I'd certainly go for the latter rather than the

Host 1:26:33

former. Fair enough. And so in sort of wrapping up the part of the discussion, that's pre coup, it seems that the bowl was definitely rolling. Economic reforms were definitely happening and reforms, not just to the economy, but to the infrastructure, the civil service. And so do you feel that the military felt the pinch? Do you feel that the military were genuinely concerned for the future of the country? Which is to say the concern for their own futures within a country that's that's economically developing? Or do you think that the military felt that they could just weather this storm?

Sean Turnell 1:27:14

No, I think they really did feel under threat. 2021 was going to be a critical year in so many areas, particularly in banking, and some things related to that. So finally, some of the reforms were starting to bear fruit and some real deadlines coming up. And in my view, they were definitely feeling the pinch. Which is not to say I don't want to get all economic determinist about this or even reformed at Terminus, because there were lots of other things, of course, going on at the Myanmar side that were, you know, more important in in many ways, including just individual factors relating to, you know, the leadership of the military. But But I do think that the reforms, were part of the broader trigger for the military, feeling more defensive, if you like, in getting a mindset that they they wanted this particular train to stop. And, yeah, so even though I suspect that there were more important factors, and there were more immediate triggers, as well. But I do think this general direction, had the military wiring.

Host 1:28:20

And so you talk about 2021 being a very big year, obviously, none of that comes to pass because of the curve. February. But what what do you think would have happened? Like if if the if all the deadlines that were planned for 2021 are met, everyone is compliance with the requirements and the requests and the directives that have been set out? And everything is sort of on track with regard to the reforms, end of 2021? With no coup? What do you think Myanmar would be looking at?

Sean Turnell 1:28:52

Well, so I'm realistic enough to know that it's going to be better, but not still transformed. So I mentioned, you know, 2021, as a key year for the reforms, but having lived in the place that will right through that reform period, realistic enough to know that some of these deadlines would have moved. And things not gone according to plan. But I think would have been better, you know, there will be incremental aspect to the reforms would would have continued, it would have been bolder. And one of the things that, of course, we'll never never know now. But the second term of the NLD government was going to be bold in the economic areas, a new set of reform measures have been drawn up and people were extremely excited about them. On top of those key deadlines that I mentioned earlier, so we expected an acceleration of reforms. In reality, we would have got maybe, I don't know just top my head say half of what we wanted, maybe not even 25% but it would have been a had a place the economy would have been that bit better than it had been before, I think the momentum would have been better. I think the COVID outcome would have been dramatically better because amongst those new economic policies that were on a white was a package of issues to deal with COVID. Because, of course, that that that was running at the time. So this big new reboot of the reform program included a very comprehensive approach to COVID. And so we wouldn't have seen that disaster because, you know, the massive damage that did, to me was a common economy, even in addition to the coup, but of course, connected with it, given the incredible banality and incompetence of the regime and dealing with that. Yeah, so the the country just would have been to in my way of thinking, even even being, you know, really realistic about it, it just would have been immeasurably better than it turned out to be, but it wouldn't have been a utopia, it would still have been a struggle, there was still been complaints. You know, a lot of the maladies were still been there. But a lot of them would have been just that little bit better.

Host 1:31:04

I think that's a slightly more optimistic note than we usually have on this on this platform. So I thank you for that. Hypothetical indulgence. So I'm conscious of your time. So I think we can, we can sort of conclude around here. And we can come back at a later date, hopefully, and we can discuss what was going on with economic reforms during COVID. And what has been going on economically, both on the energy side on the military side, later, post coup, but as his as his convention, and I happen to know that you listen to the show. So hopefully, you're aware of this part. We like to end by giving the guests the opportunity to address the audience directly and share some thoughts for the the audience to just consider him all over as they go on about their day. So I'd like to invite you to share some thoughts with our audience now.

Sean Turnell 1:31:55

Well, probably my overwhelming thought given that I know so many people from Myanmar listen to this, is just to express my profound gratitude to the people of Myanmar. Obviously, you know, I spent time in prison and all that, but that was of no fault to the Myanmar people, as opposed to the regime that rules over and exploits them. And I experienced just the most extraordinary kindness, compassion and courage at the hands of people in a much worse position, then this privileged foreigner talking now. And so yeah, my my overall message to the listeners of this podcast, I suppose is is not to give up hope the raw material of Myanmar is its people and I think that that raw material is of the highest quality so that that's my probably my most important message that I'd like to get across. And you know, the way that people have supported me both during the time the prison but since coming out and all that lovely messages I've received I do think that it's there you know, and we just in a better political environment, Myanmar could be a profoundly better place and a better place of the sort that it's, it's people just so profoundly deserve.

Host 1:33:47

We want to take a moment to introduce you to our nonprofit better Burma's online shop, which features handicrafts sourced from artists and communities scattered throughout Myanmar, far from being mass produced knockoffs. The pieces we offer are unique and handmade, reflecting the wide diversity of different peoples found throughout the country. When Myanmar experienced its transition period moving from democracy and the late 2010s, after decades of harsh military dictatorship, many Burmese crafts people hope their beautiful work could finally be appreciated beyond the country. When Myanmar experienced its transition period moving towards democracy in late 2010s. After decades of harsh military dictatorship, many Burmese crafts people hope their beautiful work could finally be appreciated beyond the country's borders. But sadly, this was not to be so. Following the military coup, many skilled artists in suddenly found all possibility of continuing their livelihood closed off and began struggling just to feed their families. With this in mind, we prioritize working with artisans from disadvantaged and vulnerable backgrounds, because we know just how hard it can be to survive at the margins of society and Myanmar. This includes such people as those with disabilities, mothers who have contracted HIV AIDS, civil servants on CVM ethnic and religious minorities and more to view these wonderful pieces Please visit a local crafts.com That's a loca a l o ka crafts C R A F T S one word a local crafts.com. Otherwise, please consider a donation through our usual channels. If you would like to join in our mission to support those in Myanmar who are being impacted by the military coup, we welcome your contribution in any form, currency or transfer method. Your donation will go on to support a wide range of humanitarian immediate missions, aiding those local communities who need it most. Donations are directed to such causes as the Civil Disobedience movement CDM families of deceased victims, internally displaced person IDP camps, food for impoverished communities, military defection campaigns, undercover journalists, refugee camps, monasteries and nunneries education initiatives, the purchasing of protective equipment and medical supplies COVID relief and more. We also make sure that our donation Fund supports a diverse range of religious and ethnic groups across the country. We invite you to visit our website to learn more about past projects as well as upcoming needs. You can give a general donation or earmark your contribution to a specific activity or project you would like to support, perhaps even something you heard about in this very episode. All of this humanitarian work is carried out by a nonprofit mission that are Burma. And the donation you give on our insight Myanmar website is directed towards this fun. Alternatively, you can also visit the better Burma website better burma.org and donate directly there. In either case, your donation goes to the same cause in both websites except credit card. You can also give via PayPal by going to paypal.me/better Burma. Additionally, we can take donations through Patreon Venmo GoFundMe and Cash App. Simply search better Burma on each platform and you'll find our account. You can also visit either website for specific links to these respective accounts or email us at info at better burma.org. That's better Burma. One word, spelled b e t t e r b u r m a.org. If you'd like to give it another way, please contact us. We also invite you to check out our range of handicrafts that are sourced from vulnerable artists and communities across Myanmar. Available at a local crafts.com. Any purchase will not only support these artists and communities, but also our nonprofits wider mission. That's aloka crafts, spelled A L O K A C R A F T S one word alokacrafts.com Thank you so much for your kind consideration and support.