Recommended Weekend Reads
February 16 - 18 2024
Here are our recommended reads from reports and articles we read in the last week. We hope you find these useful and that you have a relaxing weekend. And let us know if you or someone you know wants to be added to our distribution list.
The Middle East
“Inside Johnny Depp’s Epic Bromance with Saudi Crown Prince MBS” Vanity Fair
With his willingness to spend billions of dollars in a relentless drive to transform his country into a cultural and economic superpower, Saudi Deputy Crown Prince Mohammed Bin Salman (MBS), is shaking up the world order. To decipher his increasingly consequential moods, methods, and moves, global leaders rely on thousands of diplomats, linguists, and spies. They should probably just call actor Johnny Depp. Over the past year, Depp has spent more than seven weeks in Saudi Arabia, staying in royal palaces and camps, traversing the country by yacht and helicopter, and even flying to London and back on MBS’s personal 747 for a quick trip to attend the Jeff Beck Memorial Concert at the Royal Albert Hall. In that time, Depp and MBS have become real friends. “They made a genuine connection,” says a friend of Depp’s. “It’s a shock to many of the people who know [Depp], but it’s what happened.” Insiders say Depp is now weighing a seven-figure annual contract to promote Saudi Arabia’s cultural renaissance.
“Troubled Waters in Conflict and a Changing Climate: Transboundary Basins Across the Middle East and North Africa” Malcolm Kerr Carnegie Middle East Center
North Africa is home to key transboundary water basins with significant differences in their rivers’ capacities to cope with drought, rising temperatures, and increasingly limited water supplies. Climate change adds a layer of insecurity, as it is causing protracted droughts, lower yields of food crops, sea-level rises, greater frequency and intensity of sand and dust storms, accelerated desertification, reduced snowpack, and increased human displacement from low-lying coastal areas. All of this has become quite evident in the region. The eastern Mediterranean experienced protracted droughts during the 2000s, and predictions of rising temperatures and decreasing precipitation have been borne out in recent years. Indeed, extreme summer heat waves were recorded across the eastern Mediterranean and beyond in 2020 and 2021, with Iraq and several Gulf countries experiencing temperatures that surpassed 50 degrees Celsius (122 degrees Fahrenheit). Flooding displaced people and caused damage in Egypt in 2020, and wildfires spread through parts of Lebanon and Syria in 2019 and 2020. As droughts increase in intensity and frequency, water resources, food security, and food production are adversely affected. The problem is exacerbated by unsustainable practices such as wasteful irrigation and the depletion of groundwater aquifers.
China
“The increasing challenge of obtaining information from Xi’s China” Merics
The online availability of crucial information on contemporary China is under threat. While the government is becoming less forthcoming in sharing information with the public, they are also requiring third-party data providers to implement restrictions on foreign access. This increases challenges in assessing China’s future development in key fields for companies, governments, and researchers alike. Geopolitical tensions are a principal driver behind the disappearing data. China’s authorities are concerned that online information can be used in ways to harm its development or discredit its policies. Controlling the sources foreign observers can use to study and analyze the country is one way for Beijing to control the narrative. Still, non-geopolitical considerations are also at play. Internet bottlenecks, concerns about personal information protection, and even the discretion of individual webmasters are adding to the risks of information disappearing.
“China’s Pathfinder Update: Lack of Policy Solutions in Second Half of 2023 Belies Official Data” Rhodium Group
Through the second half of 2023, the gap between China’s impressive official data and visibly underwhelming consumer demand, unresolved local government debt problems, and an unprecedented drop in foreign direct investment was stark. The China Pathfinder framework scans for evidence of market policy reorientation to fix these problems. But in this coverage period (July–December 2023), Beijing’s response was limited. Officials redoubled efforts (and incentives) to encourage foreign investment and trade, pledged to loosen cross-border data transfer rules, and increased deficit spending limits to stoke anemic demand. China’s government also simultaneously threatened economists with consequences for even talking about bearish signals and discontinued unflattering economic data, severely aggravating credibility concerns. Policymakers did next to nothing to tackle the real structural problems. Though we expect the severity of 2022–23 declines to set China up for a modest cyclical rebound in 2024, long-term growth potential will disappoint until fundamentals are addressed.
Estonia/Baltic Security/Russia
“International Security and Estonia 2024” Estonian Foreign Intelligence Service
In their 9th annual report, the Estonian Intelligence Service reports make clear the country is increasingly concerned about Russian military aggression against the NATO member nation and the greater Baltic region if Ukraine is defeated. It goes on to “focus on China and Russia’s relationship and their common opposition to the West, even though China’s plans are much more global and longer term than those of Russia, which is preoccupied with its war. China’s ambitions to reshape the rule-based world order are exemplified by its efforts to build a technological ecosystem on Chinese terms, aiming to create deliberate dependencies.”
U.S. Economics
“Has Intergenerational Progress Stalled? Income Growth Over Five Generations of Americans” Federal Reserve Board’s Finance and Economics Discussion Series
Abstract: We find that each of the past four generations of Americans was better off than the previous one, using a post-tax, post-transfer income measure constructed annually from 1963-2022 based on the Current Population Survey Annual Social and Economic Supplement. At age 36–40, Millennials had a real median household income that was 18 percent higher than that of the previous generation at the same age. This rate of intergenerational progress was slower than that experienced by the Silent Generation (34 percent) and Baby Boomers (27 percent), but similar to that experienced by Generation X (16 percent). Slower progress for Generation X and Millennials is due to their stalled growth in work hours—holding work hours constant, they experienced a greater intergenerational increase in real market income than Baby Boomers. Intergenerational progress for Millennials under age 30 has remained robust as well, although their income growth largely results from higher reliance on their parents. We also find that the higher educational costs incurred by younger generations are far outweighed by their lifetime income gains.
Supply Chain Issues
“Preparing Supply Chains for a Coming War” American Enterprise Institute
In this report, the authors make the point the U.S. urgently needs to build resilience apart from China and not be singularly dependent on Taiwan for key national security needs – something the US has significant dependence on. Addressing US dependency requires inverting Congress’s approach from inputs, such as critical minerals, to outputs, such as planes and missiles. While the fiscal year (FY) 2024 National Defense Authorization Act contains language addressing supply chains, the Department of Defense should submit four key changes in the FY2025 president’s budget.
Charts of the Week
Trade Flows in the Red Sea, Around the Cape of Good Hope, and through the Panama Canal October 2023 – February 2024
The Reserve Bank of St. Louis published this week a new report on the impact of Houthi attacks on the Red Sea on shipping as well as the impact of the ongoing drought slowing shipping through the Panama Canal. The report shows shipping prices that have experienced the greatest increase in recent months have been those in the Suez region, as expected.
Shipping costs in this region increased by approximately 180% on average from Oct. 20, 2023, to their peak on Jan. 26, 2024. As firms reroute shipments, the companies that continue to ship through the Suez Canal are likely raising prices to compensate for the higher risk, as well as to take advantage of the reduced shipping supply.
More surprisingly, according to the St. Louis Fed, shipping costs increased globally despite the local nature of the shock. Indeed, global freight rates, according to the Freightos index, increased by approximately 120% relative to those in late October. While some of this increase captures the impact of higher shipping costs in the Red Sea, prices have risen across all routes. For instance, shipping costs along the Pacific routes have increased by roughly 70% relative to those in late October, while those along the Atlantic routes have done so by around 20% over this period.
