Recommended Weekend Reading

April 14-16, 2023

Here are our recommended reads from stories we saw in the last week. We focus this week on the rapidly accelerating search for critical minerals needed for alternative energy and electric vehicles. Let us know your thoughts and if you or a colleague want to be added to our distribution list. Have a great Easter and a week ahead!

·       “A Fresh Look at North Korea at Night” 38 North

In January 2014, astronauts on board the International Space Station (ISS) took a photo that dramatically illustrated the economic divide between North Korea and its neighbors. It showed both South Korea and China bathed in nighttime light while North Korea was largely dark. Nine years on, has anything changed? And what does that mean for assessing North Korean risk to the region (and the world)? 38 North (a publication of the Stimson Center in Washington, DC) offers an in-depth interactive assessment of what has changed and why.

·       “How Indonesia Used Chinese Industrial Investments to Turn Nickel into the New Gold” Carnegie Endowment for International Peace

China has become a global power, but there is too little debate about how this has happened and what it means. Many argue that China exports its developmental model and imposes it on other countries. But Chinese players also extend their influence by working through local actors and institutions while adapting and assimilating local and traditional forms, norms, and practices. This study shows how China’s Belt and Road Initiative helped build an industrial complex in Indonesia—but contestations at the local and national levels compelled Chinese players to adapt to rapidly shifting Indonesian cross-currents.

Will the scramble for rare earth produce a transatlantic trade accord?  Peterson Institute for International Economics

As the world invests heavily in the digital economy and green transition, the need for these rare earth elements—including bauxite, cobalt, lithium, and nickel—will increase five to six times by 2030 and seven times by 2050, according to estimates by the European Commission and the World Bank. But the European Union and the United States import 98 and 80 percent, respectively, of these rare earth from China, which controls large parts of the world’s mining and processing. In a recent meeting, EU Commission president Ursula von der Leyen and President Joseph R. Biden discussed a rare earth/critical mineral strategy and jointly announced that they would immediately begin negotiations on a targeted critical minerals agreement. A future deal could lead to the EU being treated as an equal partner in an equivalent of a free trade agreement, thereby qualifying the EU for certain tax credits for electric vehicles in the IRA. The objective is to have an agreement where critical materials sourced or processed in Europe are recognized as sourced or processed in the US. 

Several countries in the EU have minerals deep underground—for instance, France, Greece, Greenland, Portugal, and northern Scandinavia. LKAB, the state-owned mining company in northern Sweden, estimates that most critical minerals can be found in Swedish territory, with reserves measuring a million tons, potentially making Sweden the biggest supplier in Europe.

·       “Schell on the Long Arc of US-China and Long Reach of Leninism” ChinaTalk podcast on Spotify

How did Chinese President Xi Jinping’s formative years influence how he views the world today?  Very few in the West understand what formed him. Veteran China scholar Orville Schell, the Arthur Ross Director of the Center on U.S.-China Relations, looks back at decades of writing and working on China, weathering the cycles of the country opening up and shutting down, and gives his two cents on what’s going on in Xi’s head.

Chart of the Week 

The Spiking Demand for Critical Raw Materials And the Few Countries Which Produce Them

China has moved to restrict the export of raw materials critical for green technologies.  But they are not alone – India, too, has placed new restrictions on their exports.  But China dominates the production supply chain, as the chart below shows.  As the US and EU move to aggressively ramp up the production of electric vehicles and alternative energy production facilities, there is a only a few countries that produce these raw materials – setting up a major geopolitical race for access.

Recommended Weekend Reads

February 3-5, 2023

We thought you might find the following useful reading.  Let us know what you think and if you or a colleague want to be added to our distribution list.  Have a great weekend.

·       “More Cite Government as Top US Problem; Inflation Ranks Second” Gallup

In Gallup’s latest poll, more Americans name the government as the nation’s problem. The government ranks as the top problem for both Republicans and Republican-leaning independents (24%) and Democrats and Democratic-leaning independents (18%).

·       “Putin’s Oil Makes a Stop Off Spain en Route to China”  Bloomberg Opinion

Sanctions are making it riskier and pricier for the Kremlin’s crude to get to Asia, but the EU is still a transit hub. via the town of Ceuta – a tiny Spanish enclave that sticks out of Morocco into the Mediterranean Sea like a thumb. Ceuta is just in the right place: inside the Mediterranean Sea, it’s sheltered from the stormy winds and winter swell of the North Atlantic. 

Source: Bloomberg

·        “What are Large Banks Doing About Climate Change?” The US Federal Reserve Board International Finance Discussion Papers

This new paper by Federal Reserve staff looks at 30 of the biggest banks in the world and their commitments so far to finance green projects.  So far, they have collectively put in $1.2 trillion a year, which will bring them $33.6 trillion by 2050.  But, the paper argues, that will only be approximately 25 percent of what is needed to reach net zero emission goals.

Chart of the Week

Hey Buddy, Looking for Some Eggs?:  We have been hearing a lot lately about the soaring price of eggs, spiking more than 60 percent in recent months (happily, I live on a farm, and our chickens have been quite productive).  The reason for the price surge?  Avian flu outbreaks have decimated chickens across the US.  As a result, egg smuggling from Mexico is becoming a big business.  Bloomberg examined the situation and learned seizures of smuggled eggs have surged more than 300 percent, with many of the seizures being only a few 30 egg flats.  Here is their chart showing what the hottest new smuggling business in America looks like and where eggactly (sorry – couldn’t help myself) it is happening the most:

A Good Read… 

In the Nation’s Service: The Life and Times of George P. Shulz 

George Schultz was a remarkable American by any standard.  In his new, highly illuminating biography of Schulz, former New York Times reporter Philip Taubman reminds us of the extraordinary life Schulz lived and the critical role he played in transforming the country and the world.

Schulz’s resume was long and distinguished (an understatement if there ever was one).  The son of a New York Stock Exchange executive, Schulz was a Marine Corps officer in the Pacific theater during World War II.  When he returned home, he earned Ph.D. in industrial economics at MIT (studying under Robert Samuelson) and then taught at MIT.  He then stepped into public service in  1955 to serve at the Council of Economic Advisors under President Dwight Eisenhower.   

He then went on to become a professor and then dean of the Booth School of Business at the University of Chicago.  He returned to Washington in 1969 to become Secretary of Labor under President Richard Nixon, then Director of the newly created Office of Management and Budget, and then Secretary of Treasury. Leaving public service, he joined the Bechtel Group, where he became its President and a member of its board of directors.  He then returned to public service in 1982 when President Ronald Reagan asked him to serve as Secretary of State. 

What Taubman sheds considerable light on is Schulz’s considerable efforts – and success – at integrating public schools in the South.  Historians tend to focus on Schulz’s herculean efforts under Reagan to bring down the Iron Curtain and skip over Schulz’s championing of civil rights.  He also made considerable inroads with Big Labor, building a strong working relationship with the legendary AFL-CIO President George Meany.   

On a personal note, when I was a very young staffer in the Reagan White House, Schultz was seen as legendary even then within the Administration.  I would occasionally see him in the hallways, and, despite the tremendous sense of gravitas that naturally swirled around him as he headed into a National Security Council meeting or over to the Oval Office, he always had a smile and a hello for us juniors.  That was a really big deal for us.

This is a well-deserved and well-written biography and a great read for anyone with an interest in economics, foreign policy, civil rights, and the history of the last 70 years.  It is also a commentary on how the “best and the brightest” like Schulz are rarely seen in Washington anymore.  Hopefully, this book will inspire more men and women of Schulz’s caliber to serve.

Recommended Weekend Reads:

January 27 -29, 2023

We thought you might find the following useful reading.  Let us know what you think and if you or a colleague want to be added to our distribution list.  Have a great weekend.

·       “China Increasingly Relies on Imported Food. That’s a Problem” Council on Foreign Relations

China has increased its reliance on food imports over the past two decades – reaching a record high of 687 million tons in 2022 – prompting concerns among officials who worry that disruptions to food supply chains could trigger domestic unrest. In particular, this reliance has heightened China’s sensitivity to food supply disruptions caused by geopolitical tensions, such as Russia’s war in Ukraine.

·       “U.S. LNG: Remapping Energy Security” Center for Strategic and International Studies

This interactive report details how the natural gas market radically shifted in 2022 following Russia’s invasion of Ukraine. Since then, energy security in Europe—and globally—now rests on U.S. natural gas exports. So what is the future of US LNG production and which countries are increasingly dependent on it?

“The US Demographic Outlook: 2023 to 2053” Congressional Budget Office

In CBO’s projections, the U.S. population will increase from 336 million in 2023 to 373 million in 2053.  Population growth is increasingly driven by net immigration, which accounts for all population growth beginning in 2042.

·       “Dolphins Spotted Swimming in New York City’s Bronx River” New Scientist

Once an industrial waste dumpsite, the Bronx River is now healthy enough to host marine species – including dolphins – that it hasn’t seen in years

Charts of the Week:

The first chart we wanted to highlight this week goes to the Congressional Budget Office report on the U.S. demographic outlook noted above.  Within two decades, America’s population gains will be entirely driven by immigrants.  And much of it will come in the so-called prime-age bracket (25-54 years old).

Our second chart we wanted to share goes to the announcement this week that White House Chief of Staff Ron Klain is stepping down and is being replaced by Jeff Zients and hints other senior staff are preparing to leave. This chart shows the turnover is well within the norm for second year of an Administration.

Weekend Reads: December 9-11, 2022

We are sharing a few research pieces and notable news stories that caught our eye in the past week. We hope you find it interesting and useful. And please let us know if you would like to add someone to our distribution list.

·       “The EU has a spy problem – here’s why it’s so difficult to catch them” Politico EU

They’re hovering at the bar at the think tank networking event. They’re raising their hand in the press room at European Union briefings. They’re listening in — if a 2019 warning to staff from the European External Action Service is to be believed — at the bars and restaurants near the European Commission’s headquarters. Faced with Russian hostility and Chinese snooping, Belgium has upped its counterintelligence game — but Brussels remains a spies’ playground.

·       “Where Does All the Cardboard Come From? I Had to Know” New York Times Magazine

Entire forests and enormous factories running 24/7 can barely keep up with demand. This is how the cardboard economy works.

·       “The New Geopolitics of Global Finance” Blog by Brad Setser/Council on Foreign Relations

Setser, the Whitney Shepardson Senior Fellow at the Council for Foreign Relations, writes an excellent blog discussing geopolitics and finance. In this post argues that the global balance of payments only adds up if the G-7’s geopolitical rivals are also its bankers.

·       “Biden, Congress Job Ratings Unchanged After Midterm Elections” Gallup 

Despite Democrats picking up one net seat in the US Senate and limiting losses in the House of Representatives in the recent mid-term elections, President Biden’s approval ratings are still at 40 percent. And Congress languishes at 22 percent.  

Chart of the Week: The Top Three Producing Countries in Production of Selected Minerals and Fossil Fuels

This week, the European Union concluded a trade deal with Chile, allowing the EU greater access to critical minerals needed for renewable energy (lithium, copper, etc.). The agreement also allows the EU to pivot away from importing away from China. The below chart from the International Institute for Strategic Studies (IISS) breaks down which countries extract and process the most minerals:

Recommended Weekend Reads: December 2-4, 2022

We wanted to share a few of the research pieces and notable news stories that caught our eye in the past week. We hope you find it interesting and useful.  And please let us know if you would like to add someone to our distribution list.

·       “How to Avoid a New Cold War Over Critical Minerals”  by Cullen Hendrix, Senior Fellow at the Peterson Institute for International Economics for Foreign Policy

Will the 21st century be the century of the “green great game?”  Nations are racing to convert from oil-fueled economies, and having access to critical minerals supply chains is becoming more intense by the day.  To prevent a return to the zero-sum logic of the Cold War, those supply chains need to be widened.

·       “Meet Europe’s Coming Military Superpower: Poland” Politco Europe

Warsaw is turning to major arms deals with South Korea to establish supremacy in Continental Europe as Russia’s war on Ukraine continues on one side, and the rest of the EU is failing to seriously ramp up their military capabilities on the other.

“Why Didn’t More Reporters See This Coming? How SBF sweet-talked the media” New York Magazine

One of the crucial prongs of Sam Bankman-Fried’s big con was his co-opting of the press, which turned out to be very easy for him. Manipulating journalists was a cinch — so few of us actually know how to write about anything having to do with crypto — and he threw money all over an industry that’s notoriously cash-starved. Now, any members of the mendicant media who have ties to him or helped launder his phony philosophies are acting sheepish, pointing fingers, or insisting they barely knew the guy.  Here is how he did and who he did it with.

·       “Navigating geoeconomic risk: toward an international business risk and resilience monitor” by the Finnish Institute of International Affairs

Geoeconomics is the new reality in which European and global businesses operate. From financial sanctions and trade embargoes to rival state-sponsored technology theft and anti-competitive practices, European companies face an urgent need to understand, assess, anticipate and mitigate a whole new range of risks. As state actors play a central role in both enacting geoeconomic measures and responding to them, the need for new forms of public-private partnership and collaboration is likewise rising.  

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Chart of the Week: Africa Is the Worst at Collecting Taxes

According to the OECD, African countries have the lowest rate of tax revenues in the world: 16 percent of GDP vs. other OECD countries (which come in at an average of 33.5 percent) Last week, United Nations members agreed to a resolution submitted by Nigeria on behalf of the 54 member states of the Africa Group to start talks on fundamental changes to how taxes are collected globally. The proposal would establish a UN tax convention and a new global tax body.  This is something a number of developing countries have long sought but have faced resistance from developed countries.

Recommended Weekend Reads: November 25-27, 2022

We wanted to share a few of the research pieces and notable news stories that caught our eye in the past week. We hope you find it interesting and useful.

“Ukraine’s 15,000-Mile Lifeline” New York Times Magazine

Ukraliznystsia, Ukraine’s national rail system, has been referred to as “a country within a country.”  It employes more than 230,00 employees and, since Russia invaded, it has helped the country withstand the Russian attack and successfully fight back.

“Tracking the State of US-Europe Relations” Morning Consult

The trans-Atlantic economic relationship is the largest in the world in terms of transaction value, and among the most complex. Understanding this relationship is key to predicting the trajectory of trade and capital flows, regulation, technological cooperation, and economic statecraft.  The polling numbers are not great.

Source: Morning Consult

“Reunification” with Taiwan through Force Would Be a Pyrrhic Victory for China” by Jude Blanchette, Freeman Chair in China Studies, and Gerard DiPippo, Senior Fellow, Economics Program, Center for Strategic & International Studies

Many commentators and officials speculate about Beijing’s plans to compel “reunification” with Taiwan. Much of the existing commentary focuses on how or when a Chinese attack on Taiwan could occur, but there is little discussion of the nonmilitary consequences of such a scenario for China and the world. This brief explores the implications of a Chinese attack on Taiwan based on reasonable, albeit speculative, assumptions.  When considered more holistically, the implications of an attack on Taiwan would be grim for Beijing.

Chart of the Week: Breaking Down the US Right Track/Wrong Track Polls By Political Affiliation

Morning Consult polled more than 6,000 adults on their perception of the US is on the right track or the wrong track.  What we found particularly interesting about this latest poll was the huge disparity of views of participants by political party:

·       54 percent of Democrats think the US is on the right track

·       23 percent of Independents think the US is on the right track

·       9 percent of Republicans think the country is heading in the right direction.

Source: Morning Consult

Recommended Weekend Reads: November 18 - 20, 2022

We wanted to share a few of the research pieces and notable news stories that caught our eye in the past week. We hope you find it interesting and useful.

·  "CCP: Who makes up the party" The Lowy Institute

Demography is destiny, as is said – and the numbers in China make for a compelling story. In a series of charts and graphs, the Lowy Institute shows who makes up today's Chinese Communist Party and its senior ranks. The short version: It is overwhelmingly male and well over 60 years old.

·  "Interpreting Chinese Economic Policy: Another Brief Guide"  by Derek Scissors/American Enterprise Institute

Chinese economic policy is seen as increasingly important, including to global investors. But transparency has not risen in tandem, and policy is frequently misinterpreted. Here is a guide to understanding China's economic and monetary policy more clearly.

·  "Global Economic Turmoil Calls for a Modernized Global Financial Architecture to Address Needs of the Most Vulnerable Countries"  by David McNair, Executive Director at ONE.org and nonresident scholar at the Carnegie Endowment for International Peace

·       The author argues that, unfortunately, those Western governments with decision-making power and resources to help vulnerable countries respond to the polycrisis are not inclined to use it, given domestic cost-of-living crises in G7 nations, the ongoing conflict in Ukraine, and limited domestic political appetite for international initiatives.

·  “Russia’s Defense Industry Growing Increasingly Turbulent” Jamestown Foundation

Moscow has actively tried to restore at least part of its arms lost in Ukraine after almost nine months of its bloody war. The Russian national defense budget has skyrocketed. However, the true reality of the current state of affairs appears to be rather complicated for the Kremlin. Even the trillions of additional rubles will make its defense industry less productive and efficient in the short term due to a number of critical difficulties.

·  “Putin’s Fear of Retreat – How the Cuban Missile Crisis Haunts the Kremlin"  Foreign Affairs

History matters and Russian President Vladimir Putin knows it. Putin has closely studied the detailed events of the Cuban Missile Crisis. He understands that then-Soviet leader Nikita Khrushchev was the one who backed down -- not President Kennedy – leading to Khrushchev's removal from office less than two years later. Putin recently spoke of the Cuban Crisis and is clearly desperate to avoid a similar fate.

Chart of the Week: We Reached 8 Billion People Last Week… But Population Growth is Starting to Slow, and India Will Surpass China: 

According to estimates from the United Nations, the world's population surpassed 8 billion people this past week. While populations in sub-Saharan Africa are expected to continue growing substantially over the next 30 years, the annual global population growth rate is now at its slowest pace since 1950 – and moving into negative rates in many advanced economies. Additionally, India will become the most populous country in 2023, overtaking China. By 2050, India's population will be 1.7 billion to China's 1.3 billion.