Recommended Weekend Reads

Trump’s Major Focus on Latin America, Trudeau Resigns – Now What?,  Agriculture Is A Major Factor For Ukraine Peace, Africa Needs A Payments Union, and The Evolution of Remote Working

January 10 - 12, 2025

Please find below 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 Americas 

• This Administration is Shaping Up to Be Latin America-First    Ryan Berg/Foreign Policy

  One of former U.S. President Ronald Reagan’s most lasting slogans of governance is that “personnel is policy.” Judged using Reagan’s mantra, it appears as though the incoming Trump team could be rightly described as the United States’ first Latin America-focused administration in at least a century—and perhaps ever.
  

• Eric Farnsworth on Canadian Prime Minister Justin Trudeau's Resignation  Americas Society/Council of the Americas

  On January 6, Canadian Prime Minister Justin Trudeau announced he would be resigning from his role after nearly a decade in leadership. The decision was announced ahead of planned October elections for this year and days before U.S. President-elect Donald Trump, who has threatened to annex Canada and place 25 percent tariffs on its exports, takes office. Trudeau’s resignation triggered the shutdown of Canada’s Parliament until March 24.  “Canadian politics will be fairly chaotic over this year, 2025,” explained Eric Farnsworth, vice president of AS/COA and head of the Washington office. “You could have as many as three prime ministers in the country in a period of nine or 10 months. You have a scenario where Canada itself lacks the firepower to really push back against the United States.” Farnsworth discusses what to expect from Trudeau’s resignation, the state of the opposition, and Canada’s place in the Western Hemisphere.
  

• How COVID Changed Latin America   Oliver Kaplan, Michale Albertus, Diana Senior-Angula, and Gustavo Flores-Macías/Journal of Democracy

  Abstract: Covid-19 was a pressure test for democracy in Latin America. The pandemic hit the region harder than any other in the world, particularly in terms of covid death rates and rising poverty. The pandemic also created opportunities to consolidate and abuse power, resulting in selective human rights repression, power grabs, militarization, and corruption. However, the effects were not uniformly negative. The pandemic also prompted renewed economic crisis management, social mobilization, and local checks to central power. Drawing on the experiences of countries such as Brazil, Colombia, Costa Rica, El Salvador, Mexico, and Peru, this essay illustrates that although the pandemic strained democratic politics, good pandemic management may have stemmed democratic decay. New forms of mobilization and policy implementation emerged, as well as new openings for political challengers that will shape the coming decade of governance in the region.

Russia’s War on Ukraine

• Farming Frontlines: How Food and Agriculture Will Impact Negotiations in Ukraine  Center for Strategic and International Studies Futures Lab Audio Brief

  Russia’s recent attacks on Greater Odesa port infrastructure and foreign-flagged grain-carrying vessels in the Black Sea marked the most intense attacks on Ukraine’s agricultural infrastructure in over a year. Four of the ships hit in October were carrying agricultural commodities, including vegetable oil for the UN World Food Programme in Gaza, as well as corn and grain shipments for Egypt, Italy, and Southern Africa, according to statements by the Ukrainian and UK governments. As widely reported by CSIS and others, Ukraine’s agriculture sector has been a major front in Russia’s war in Ukraine since February 2022. With the September and October 2024 attacks, Russia continues its system-wide attacks on Ukraine’s agriculture infrastructure, negatively affecting Ukraine’s agricultural production and exports and thereby undercutting a major source of Ukraine’s export revenue.
  

• How Suicide Drones Transformed the Front Lines in Ukraine   New York Times Magazine

  Outnumbered and desperate, the nation began hacking cheap consumer drones with explosives — bringing a brutal new form of violence to 21st-century warfare.

China

• Charting China’s Export Controls: Predicting Impacts on Critical U.S. Supply Chains  The National Bureau of Asian Research

  The PRC’s export control regime has grown and formalized in recent years in response to an increasingly active and complex landscape of U.S. and allied export controls. The PRC’s system of export controls has historically been piecemeal, and its administration poorly understood. Recent formalization of the system beginning in 2020 and escalating in 2023 is consistent with the PRC’s increased exercise of lawfare and demonstrates greater regulatory capabilities. PRC authorities are able to weaponize supply chains by targeting specific critical minerals under new export controls. 

• What Gold’s Crazy Run Says About China  Bloomberg YouTube Channel

  Gold prices have been on a rampage, hitting record after record. While driven in part by geopolitical tensions, economic uncertainty and the prospect of lower US interest rates, unrelenting demand from China has also played a big part.
  

• Measuring China’s Manufacturing Might  Center for Strategic and International Studies

  China’s manufacturing sector has been pivotal to the country’s rapid economic rise. Yet China’s industrial might has become a source of friction as the United States, Europe, and other economies seek to defend and nurture their own manufacturing sectors. In the face of mounting geopolitical tensions, Chinese leader Xi Jinping is doubling down with repeated calls for China to become a “manufacturing power” (制造强国) and lead the world in producing high-value, high-technology goods. This ChinaPower tracker examines these dynamics through 10 charts, visualizing the rise of China’s manufacturing sector and Beijing’s efforts to cement its industrial superpower status for future decades.
  

• China – North Korea Evolving Relations: A Conversation with Dr. Feng Zhang  China Power Podcast

  In this episode of the ChinaPower Podcast, Dr. Feng Zhang joins us to discuss China-North Korea relations in light of the growing Russia-North Korea relationship and the deployment of North Korean troops to support Russia. Dr. Zhang discusses how the China-North Korea relationship has suffered in recent years, in part due to China joining UN sanctions against North Korea in 2016, the COVID-19 pandemic, and North Korea’s involvement in Russia’s war against Ukraine. Dr. Zhang explains that China has a waning influence over North Korea, evidenced most strongly through the recent further alignment between Pyongyang and Moscow. 

Geoeconomics and Demographics

• The Evolution of Remote Work Across Industries: From Potential to Practice   Federal Reserve Bank of St. Louis

  As the St. Louis Fed has reported before, work from home (WFH) rose rapidly in the U.S. following the onset of the COVID-19 pandemic. Although WFH rates are down from their pandemic peak, they have stabilized well above prepandemic levels. For example, the share of those working from home all workdays rose from 7% just before the pandemic to 32% in May 2020 and has remained at about 12% since 2022. This raises the questions: Why are some workers continuing to work from home when they did not before the pandemic? And why have others resumed commuting even though they worked from home during the pandemic? In this blog post, we focus on one key factor in understanding WFH variation across workers: the industry in which they are employed.  Industries matter because job tasks vary widely across them, and some tasks are much easier to perform remotely than others. This variation in WFH feasibility, or potential, plays a crucial role in determining how much industries were able to pivot to remote work both during and after the height of the pandemic.

•   World Depopulation: Prospects and Implications   Nicholas Eberstadt/AEI Foreign & Defense Working Paper

  Abstract: Though few yet see it coming, a momentous turning point for humanity is looming immediately ahead. We are about to enter a new age of human history. Call it the epoch of the “population implosion”. Because it is arriving quietly, without fanfare—almost on tiptoes—it is catching us by surprise. The world population explosion is almost over. With birth rates plummeting and sub-replacement fertility taking hold around the world, we are heading into an era of pervasive and indefinite de-population: starting already—and not just with countries, but entire geographic regions—eventually encompassing the planet as a whole. There is no avoiding the great depopulations that lie ahead—they are already “baked into the cake”, fused into the foundations of societies all around the world by birth choices today’s parents have already made. The only question is how soon and how fast these coming depopulations transform life as we know it.

• Are Big Cities Important for Economic Growth?   Mathew Turner & David N. Weil/NBER

  Abstract: Cities are often described as engines of economic growth. We assess this statement quantitatively. We focus on two mechanisms: a static agglomeration effect that makes production in bigger cities more efficient, and a dynamic effect whereby urban scale impacts the productivity of invention, which in turn determines the speed of technological progress for the country as a whole. Using estimates of these effects from the literature and MSA-level patent and population data since 1900, we ask how much lower US output would be in 2010 if city size had been limited to one million or one hundred thousand starting in 1900. These effects are small. If city sizes had been limited to one million people since 1900, output in 2010 would have been only 8% lower than its observed value.

Africa

• The Case for an African Payments Union:  Lessons from the European Experience  Carnegie Endowment for International Peace

  The realities of the global financial system make it nigh impossible for African governments to deliver employment and growth amid social and political instability and when financing is needed to transition away from fossil fuels.

Recommended Weekend Reads

20 Trends to Watch in 2025 and 9 U.S. Political Issues that Bit the Dust in 2024, What Do Chinese Citizens Think of the Communist Party? And The U.S. Assessment of China’s Military

December 27 - 29, 2024

Please find below 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.

 We hope you have a wonderful New Year and our warmest best wishes for a joyful and prosperous 2025!

Global Trends& Events to Watch in 2025

• 20 Gallup Trends to Watch in 2025   Gallup

  Next month’s transfer of power in the U.S. could reshape American views on politics, the economy and societal issues. Generational shifts and technology are also driving change. Gallup lays out 20 trends they are tracking 2025 to see how Americans react to the new political landscape and how society continues to evolve.
  

• The Real Stakes of the AI Race: What America, China, and Middle East Powers Stand to Gain and Lose   Reva Goujon/Foreign Affairs

  A sense that global technology competition is becoming a zero-sum game, and that the remainder of the twenty-first century will be made in the winner’s image, pervades in Washington, Beijing, and boardrooms worldwide. This angst feeds ambitious industrial policies, precautionary regulations, and multibillion-dollar investments. Yet even as governments and private industry race for supremacy in artificial intelligence, none of them possess a clear vision of what “winning” looks like or what geopolitical returns their investments will yield.
  

• Global Summits to Watch in 2025: Priorities for a Splintering World   Council of Councils

  Global summits give leaders an opportunity to come together to advance solutions and prepare responses, but can they keep up with the pace at which the world’s most urgent problems are intensifying?  Here is a list of the most anticipated summits set for 2025, where newly elected leaders, increased participation from the Global South and emerging powers, and reframed conversations could help answer that question.
  

• 9 Political Issues That Bit the Dust This Year   Politico Magazine

  The end-of-year obituary packages are publishing — remembering the people who shaped our world in ways large and small.  Politico decided to do something a little bit different. This year, we asked POLITICO reporters to tell us: What are the trends in politics that died in 2024 — or that are at least heading into obsolescence?

  China

• Do Chinese Citizens Conceal Opposition to the CCP in Surveys?  Evidence from Two Experiments  The China Quarterly/Cambridge University Press

  There has been a number of questions about the support among average Chinese citizens for the ruling Chinese Communist Party.  In this research paper, it is noted that most public opinion research in China uses direct questions to measure support for the Chinese Communist Party (CCP) and government policies. These direct-question surveys routinely find that over 90 percent of Chinese citizens support the government. From this, scholars conclude that the CCP enjoys genuine legitimacy.  However, the researchers who conducted this study found from two survey experiments in contemporary China that make clear that citizens conceal their opposition to the CCP for fear of repression. When respondents are asked in the form of list experiments, which confer a greater sense of anonymity, CCP support hovers between 50 percent and 70 percent. This represents an upper bound, however, since list experiments may not fully mitigate incentives for preference falsification. The list experiments also suggest that fear of government repression discourages some 40 percent of Chinese citizens from participating in anti-regime protests. Most broadly, this paper suggests that scholars should stop using direct question surveys to measure political opinions in China.

• Military and Security Developments Involving the People’s Republic of China 2024  U.S. Department of Defense Annual Report to Congress

  The Defense Department’s annual report charts the course of the PRC’s national, economic, and military strategy and offers insight into the People’s Liberation Army’s (PLA) strategy, current capabilities, and activities, as well as its future modernization goals.  In 2023, the PRC continued its efforts to form the PLA into an increasingly capable instrument of national power. Throughout the year, the PLA adopted more coercive actions in the Indo-Pacific region while accelerating its development of capabilities and concepts to strengthen the PRC’s ability to “fight and win wars” against a “strong enemy,” counter an intervention by a third party in a conflict along the PRC’s periphery, and project power globally. Working-level and senior-level military-to-military channels of communication resumed following President Biden and PRC leader Xi Jinping meeting in November 2023. This report illustrates the importance of meeting the pacing challenge presented by the PRC’s increasingly capable military.
  

• China Ousts Two Military Lawmakers as Xi’s Defense Purge Widens   Bloomberg

  China abruptly ousted two military lawmakers from its national parliament without explanation, as a purge of key personnel in the upper echelons of the nation’s defense establishment shows no sign of easing. Xi, China’s most powerful leader since Mao Zedong, has been intensifying his grip on the military. He ordered a reorganization of the armed forces this year, replacing the Strategic Support Force created in 2015 with three new branches. He also held the first military-political work conference since 2014, a conclave he previously used to assert his authority over the PLA. 

• The China-Russia relationship and threats to vital US interests  Brookings Institution

  This piece is part of a series titled “The future of U.S.-China policy: Recommendations for the incoming administration” from Brookings’ John L. Thornton China Center. Four leading scholars of Chinese and Russian foreign policy look at the growing alignment between the People’s Republic of China and the Russian Federation – an alliance that has significant implications for vital U.S. interests and the interests of U.S. allies and partners. Animated by shared grievances against the configuration of the international order and mutual concerns about perceived external threats, principally from the United States, the Sino-Russian partnership has deepened over the last decade across the military, economic, and diplomatic domains. Beijing and Moscow’s strategic alignment will pose a significant test for the incoming Trump administration.

Americas

• A Journey Through The World’s Newest Narco-State: Drugs Transformed Ecuador from a Latin American Success Story into a War Zone  1843 Magazine

  Over the past ten years, cocaine has transformed Ecuador from one of South America’s most stable nations – with safer streets and higher living standards than many of its neighbors – into the most dangerous country on the continent. More than 8,000 murders were recorded last year. Victims are wide-ranging: ten volleyball players, nine shrimp fishermen, six mayors, five tourists, two state prosecutors, a presidential candidate and the leader of a political party are among those shot or assassinated since 2023. The industrial city of Durán – where much of the governing apparatus has been hijacked by mobsters – has a good claim to being the murder capital of the world; on average, someone is killed there every 19 hours.

Europe

• Offensive Strategy: the EU’s Economic Security  Carl Bildt/European Council on Foreign Relations

  ‘Economic security’ has become a Brussels buzzword in recent years, shaped by a blend of pressure from Washington and Brussels’ own protectionist instincts. In sports, playing defense rarely wins championships. The economic security agenda is defensive; it might slow the decline, but it will not reverse it. What Europe needs is a bold, offensive strategy.

Podcast Recommendation of the Week

• China Considered  Hosted by Elizabeth Economy, the Hoover Institution

  Elizabeth Economy is arguably one of the finest China scholars out there.  She now hosts a podcast sponsored by the Hoover Institution at Stanford University. that features in-depth conversations with leading political figures, scholars, and activists from around the world. The series explores the ideas, events, and forces shaping China’s future and its global relationships, offering high-level expertise, clear-eyed analysis, and valuable insights to demystify China’s evolving dynamics and what they may mean for ordinary citizens and key decision-makers across societies, governments, and the private sector.

Recommended Weekend Reads

What The Trump Tariffs May Mean for Latin America, Why Syria Matters So Much to Russia, China’s Irreversible Demographic Crisis, and Why Javier Milei Has Surprised Almost Everyone

December 6 - 8, 2024

Latin America

• ·What Would Trump’s Tariff Proposals Mean for U.S. Trade With Latin America? Americas Society

  President-elect Trump’s proposed tariffs could mean big changes for industries in and outside the United States, North America's supply chains, and U.S. trade partners in Latin America. The United States has six free trade agreements in effect with 11 Latin American countries. The region is home to some of the country’s largest sources of imports, including its biggest trade partner, Mexico. These potential trade barriers could become a sticking point when it comes to the scheduled 2026 review of the United States-Mexico-Canada Agreement (USMCA). What could these tariffs mean for the United States’ trade partners in Latin America?

• Ending the Strategic Vacuum: A U.S. Strategy for China in Latin America Center for Strategic & International Studies

  The alarm bells are ringing in Latin America. Chinese president Xi Jinping’s recent visit to Latin America caps off a decade of remarkable advances for China in the United States’ shared neighborhood. Both Xi and President Biden attended the Asia-Pacific Economic Cooperation (APEC) forum in Lima, Peru. Both then traveled to Brazil for the G20 Summit meeting. The public imagery of the two meetings said a lot about China’s advance in Latin America with little to no U.S. pushback.

• The Price of Neglecting Latin America: Guns, Drugs, and Migration have Destabilized the Region – and Fed Dysfunction in Washington Foreign Affairs

  Backlash to the post-2020 spike in undocumented immigration from Latin America weighed strongly in Donald Trump’s favor. He made “closing the border” and the “largest deportation program in American history” centerpieces of his campaign, and voters rewarded him for it. Immigration turned out Trump’s base and was neck and neck with inflation in pushing swing voters to cast their ballots for him. But mass migration to the United States would not exist in its post-2020 proportions if Latin America’s economically diversified crime groups, and the states with which they have fused, were not pushing millions of people to flee north.

• Javier Milei Has Surprised Almost Everybody Americas Quarterly

  Milei’s successes were undeniable. He had beaten the budget into submission, slayed inflation, and did so without igniting social unrest or setting off a paralyzing brawl with organized labor. Inflation, driven by overspending and the wild printing of pesos, had dropped from 25% a month in December to below 3% per month today. The government now spends less than it takes in from taxes. “Country risk,” a measure of bond prices, is at a five-year low, meaning investors are confident they will be repaid. Milei’s radical economic policies hardly cost him public support. In his inaugural address, he warned that “there is no alternative to shock” and a year later, most Argentines apparently agree. In the November Poliarquía survey, Milei registered a 56% approval rating, the exact level of support he attracted in the election. Consumer confidence is rising. There have been several national strikes by confederations of labor unions and two multitudinous protests against spending cuts at public universities. But generally, Argentines are calmly sipping mate.

• State capacity, mining and community relations in Peru Chatham House

  With its rich reserves of copper, Peru is poised to play a key role in global supply chains for projects to reduce carbon emissions and enable the transition to a green economy. However, the polarized nature of Peruvian politics is a significant obstacle to realizing this potential. Political instability and the steady turnover of ministers and civil servants in relevant ministries over recent years have affected the capacity of the Peruvian state to promote an inclusive national vision for its mining industry. At the same time, fragmentation among political parties has hampered the capacity of the political system to represent consistent and coherent policy interests.

Syria and the Greater Middle East

• Why Syria Matters to the Kremlin The Atlantic

  As consuming as the war in Ukraine has been for Russia, the Kremlin does not see it as superseding its Middle East ambitions. That’s because Syria is not just a military outpost. It is a cornerstone of Russia’s claim to great-power status, a theater where it can demonstrate its diplomatic reach and its counternarrative to Western interventionism. This explains why Russia continues to invest in Syria even as it fights a costly war in Ukraine. Moscow may adjust its tactics, but abandoning Syria would mean surrendering something far more precious than territory: Russia’s hard-won position as an indispensable power broker in the Middle East.

China’s Demographic Crisis

• ·Is China’s population crisis irreversible? South China Morning Post

  In a new six-part series, the Post examines how China’s marriage and fertility rates remain on a downward trajectory, fueling a demographic crisis that threatens the nation’s economic and social stability. In this six-part series, we examine the far-reaching consequences of a shrinking and ageing population, from the rise of a “companionship economy” to the challenges faced by the “one-child generation” and the economic risks associated with losing the demographic dividend.
  

• Xi Jinping Doesn’t Have an Answer for China’s Demographic Crisis Foreign Policy

  Chinese President Xi Jinping’s recent article in Qiushi, the Communist Party’s flagship journal for outlining core ideology and policy, frames China’s demographic challenges as a strategic opportunity. It offers Xi’s most detailed vision yet for addressing the country’s aging population: shifting from a labor-intensive, population-driven economy to one powered by innovation, education, and productivity. Yet beneath the lofty rhetoric lies a familiar and contentious concept: renkou suzhi, or “population quality.” On the surface, it advocates for cultivating a healthier, better-educated, and more skilled population. But its implications run deeper—and are more divisive. Historically, suzhi has been used to draw lines between urban elites and rural or migrant populations, carrying connotations of class bias and, at times, embracing eugenicist thinking. Implicit in calls for a “high-quality population” is the judgment of a “low-quality” counterpart, reinforcing societal divides in a way that is rarely acknowledged outright.

Geo-economics, AI, and Trade Policy

• The Rapid Adoption of Generative AI Alexander Bick, Adam Blandin & David J. Deming/National Bureau of Economic Research

  Generative Artificial Intelligence (AI) is a potentially important new technology, but its impact on the economy depends on the speed and intensity of adoption. This paper reports results from the first nationally representative U.S. survey of generative AI adoption at work and at home. In August 2024, 39 percent of the U.S. population age 18-64 used generative AI. More than 24 percent of workers used it at least once in the week prior to being surveyed, and nearly one in nine used it every workday. Historical data on usage and mass-market product launches suggest that U.S. adoption of generative AI has been faster than adoption of the personal computer and the internet.

• Semiconductors and Modern Industrial Policy Chad Brown & Dan Wang/American Economic Association

  Abstract: Semiconductors have emerged as a headline in the resurgence of modern industrial policy. This paper explores the political economic history of the sector, the changing nature of the semiconductor supply chain, and the new sources of concern that have motivated the most recent turn to government intervention. It also explores details of that turn to industrial policy by the United States, China, Japan, Europe, South Korea, and Taiwan. Modern industrial policy for semiconductors has included not only subsidies for manufacturing, but also new import tariffs, export controls, f

Recommended Weekend Reads

The 2nd Trump Presidency, Ukraine: What Happens Now?, And China’s Axis of Losers

November 8 - 10, 2024

 Please find below 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 2nd Trump Presidency

• The 2024 Election Results   Tiber Creek Group

  One of Washington’s leading government consulting firms offers a comprehensive and superb overview of the November 5th elections from the Presidential race to the Congressional elections, all the way down to state and local elections.

• Mandate for Leadership: The Conservative Promise   Project 2025/The Heritage Foundation

  Much criticized during the presidential campaigns, the Washington, D.C. based think tank the Heritage Foundation published a comprehensive, highly detailed set of policy recommendations for Donald Trump to consider. While Trump went on to repudiate his relationship with Project 2025, it will undoubtedly play a role in policy development in the new Trump Administration as well as with the newly elected Republican Senate majority and what appears to be a likely House Republican majority.

• Policy Issues  America First Policy Institute

  Established by a group of senior advisors to then-former President Donald Trump, the American First Policy Institute (AFPI) set out define policy positions for a future Trump Administration.  Like the Heritage Foundation’s Project 2025, their policy ideas will play a major role in policy development in the newly elected Trump Administration.

• Donald Trump just won the presidency. Our experts answer the big questions about what that means for America’s role in the world.   Atlantic Council

  When Donald Trump returns to the presidency on January 20, Trump’s inbox will be full of global challenges. How will he respond? And what will the consequences be? Below, our experts provide answers across twenty-four of the most significant policy matters awaiting the next administration.

• The 2024 Trump Campaign Policy Proposals: Budgetary, Economic and Distributional Effects   Penn Wharton Budget Model

  We project that conventionally estimated tax revenue falls by $5.8 trillion over the next 10 years, producing an equivalent amount of primary deficits. Accounting for economic feedback effects, primary deficits increase by $4.1 trillion over the same period.  While GDP increases during part of the first decade (2025 – 2034), GDP eventually falls relative to current law, falling by 0.4 percent in 2034 and by 2.1 percent in 30 years (year 2054). After initially increasing, capital investment and working hours eventually fall, leaving average wages unchanged in 2034 and lower by 1.7 percent in 2054.  Low, middle, and high-income households in 2026 and 2034 all fare better under the campaign proposals on a conventional basis. These conventional gains and losses do not include the additional debt burden on future generations who must finance almost the entirety of the tax decreases.

• What Does Donald Trump’s Win Mean For U.S. Foreign Policy?  National Security Journal

  It is time to discuss what a foreign policy under President-elect Donald Trump would mean. First, there are two blazing wars to settle that have no easy answers. Next is the Taiwan question and what to do with China overall. Then we have border security. Don’t forget North Korea, which is in bed with Russia and threatening to go to war with South Korea. There is also the problem of a nuclear-equipped Iran.

• How Europe Should Woo Trump  The Strategist/Australian Strategic Policy Institute

  Donald Trump’s re-election as US president is a shock to Europe, which is woefully unprepared. His promised protectionism threatens the European Union’s struggling export-led economies, and his transactional attitude toward NATO endangers Europe’s already feeble security. Ukraine could soon be sacrificed to Russia, and by emboldening nationalist fellow-travelers such as Hungarian Prime Minister Viktor Orban, Trump may cause EU unity to be further undermined from within.  Shell-shocked Europeans will be tempted to hunker down and hope that Trump does not make good on his most extreme policies: slapping blanket tariffs on European exports, abandoning Ukraine and quitting NATO. But this would be a catastrophic mistake. Europeans must swallow their pride and try to win Trump over.

Ukraine: What Happens Now?

• The Perfect Has Become the Enemy of the Good in Ukraine: Why Washington Must Redefine Its Objectives  Richard Haass/Foreign Affairs

  Most U.S. policymakers would probably define winning in Ukraine in a way similar to how Kyiv defines it, including in its most recent “victory plan”: ousting Russian troops from the entirety of Ukraine’s territory, Crimea included, and reestablishing control over its 1991 borders. There is good reason for adopting this definition. But Washington must grapple with the grim reality of the war and come to terms with a more plausible outcome. It should still define victory as Kyiv remaining sovereign and independent, free to join whatever alliances and associations it wants. But it should jettison the idea that, to win, Kyiv needs to liberate all its land. So as the United States and its allies continue to arm Ukraine, they must take the uncomfortable step of pushing Kyiv to negotiate with the Kremlin—and laying out a clear sense of how it should do so.  Such a pivot may be unpopular. It will take political courage to make, and it will require care to implement. But it is the only way to end the hostilities, preserve Ukraine as a truly independent country, enable it to rebuild, and avoid a dire outcome for both Ukraine and the world.

• What do North Korean Troop Deployments to Russia Mean for Geopolitics?   Brookings Institution

  In early October, Ukrainian intelligence reported that several thousand North Korean soldiers were undergoing training in Russia in preparation for deployment to the Ukrainian front line later this year. South Korea’s National Intelligence Service (NIS) later corroborated Ukraine’s assertions, sharing satellite images of Russian vessels transporting the first batch of 1,500 North Korean special forces to Russia’s Far East. On October 23, White House National Security Communications Advisor John Kirby confirmed the presence of at least 3,000 soldiers. The Pentagon now believes that 10,000 North Korean troops are in Russia with a contingent heading toward the Kursk region in western Russia to battle Ukrainian forces. The large deployment of North Korean troops in Russia represents a troubling new phase in the Russia-Ukraine war while carrying deeper implications for global politics. We address five key questions related to accelerating North Korea-Russia military cooperation.

• Crossing the Rubicon: DPRK Sends Troops to Russia   Center for Strategic and International Studies

  The U.S. government has confirmed and released evidence that North Korea (DPRK) sent troops to Russia. Speaking in Italy after a trip to Ukraine, U.S. secretary of defense Lloyd Austin called this development a “very, very serious issue” and warned of impacts not only in Europe but in the Indo-Pacific as well. While the U.S. government is still uncertain of the role the North Korean troops will play, Austin suggested that this is an indication that Vladimir Putin “may be even in more trouble than most people realize.”  But what is in it for North Korea?

China

• Xi Jinping’s Axis of Losers – The Right Way to Thwart the New Autocratic Convergence  Stephen Hadley/Foreign Affairs

  The United States is contending with the most challenging international environment it has faced since at least the Cold War and perhaps since World War II. One of the most disconcerting features of this environment is the burgeoning cooperation among China, Iran, North Korea, and Russia. Some policymakers and commentators see in this cooperation the beginnings of a twenty-first-century axis, one that, like the German-Italian-Japanese axis of the twentieth century, will plunge the world into a global war. Others foresee not World War III but a slew of separate conflicts scattered around the globe. Either way, the result is a world at war—the situation is that serious.  What should be done about this cooperation is another matter. Washington’s aim should be to make clear to Chinese President Xi Jinping how counterproductive and costly to Beijing’s interests these new relationships will turn out to be. That means effectively countering Iran, North Korea, and Russia in their own regions, thereby demonstrating to China that tethering itself to a bunch of losers is hardly a path to global influence.

• China’s long shadow over Asia’s critical minerals   Hinrich Foundation

  When it comes to securing supply for critical minerals it does not possess in sufficient quantities at home, China has been investing heavily overseas. In Southeast Asia, Beijing has invested about US$4 billion since 2012 in 12 projects, a lot of it concentrated in Indonesia, which exports 16% of the world’s nickel. From a long-term geopolitical, economic, and sustainability perspective, it is not in ASEAN’s interests to be drawn exclusively into one Great Power’s sphere of influence.

 Geoeconomics and Trade

• Did Tariffs make American Manufacturing Great?  New Evidence from the Gilded Age  Alexander Klein & Christopher Meissner/National Bureau of Economic Research

  We study the relationship between tariffs and labor productivity in US manufacturing between 1870 and 1909. Using highly dis-aggregated tariff data, state-industry data for the manufacturing sector, and an instrumental variable strategy, results show that tariffs reduced labor productivity. Tariffs also generally reduced the average size of establishments within an industry but raised output prices, value-added, gross output, employment, and the number of establishments. We also find evidence of heterogeneity in the association between tariffs and value added, gross output, employment, and establishments across groups of industries. We conclude that tariffs may have reduced labor productivity in manufacturing by weakening import competition and by inducing entry of smaller, less productive domestic firms. Our research also reveals that lobbying by powerful and productive industries may have been at play. The era’s high tariffs are unlikely to have helped the US become a globally competitive manufacturer. 

Recommended Weekend Reads

Entering the Age of Global Depopulation, The Surprising Resilience of Globalization, and How Brazil Could Become the Global Engine for Global Clean Energy Revolution

November 1 - 3, 2024

Global Demographics

• The Age of Depopulation: Surviving a World Gone Gray   Nicholas Eberstadt/Foreign Affairs

  Although few yet see it coming, humans are about to enter a new era of history. Call it “the age of depopulation.” For the first time since the Black Death in the 1300s, the planetary population will decline. But whereas the last implosion was caused by a deadly disease borne by fleas, the coming one will be entirely due to choices made by people.  With birthrates plummeting, more and more societies are heading into an era of pervasive and indefinite depopulation, one that will eventually encompass the whole planet. What lies ahead is a world made up of shrinking and aging societies. Net mortality—when a society experiences more deaths than births—will likewise become the new norm. Driven by an unrelenting collapse in fertility, family structures, and living arrangements heretofore imagined only in science fiction novels will become commonplace, unremarkable features of everyday life.
  

• To Combat Demographic Decline, Moscow Must Focus on Mortality Rather than Fertility   Jamestown Foundation

  Russia’s continuing population decline means it will soon not have enough people to run its economy and fight in its wars. Russian President Vladimir Putin is talking ever more about falling fertility rates but doing little to decrease the increasingly high mortality rates. Russia’s birthrate reflects underlying social changes, such as urbanization, and is at about the same level as other industrialized countries. Its mortality rate, however, is far higher, in part due to Russia’s failure to support the health of its citizens. Putin is loath to address the mortality rate, as it would be both expensive and require him to change his goals in Ukraine. As a result, Russia’s demographic decline and the restrictions it will impose are likely to last as long as he remains in power. 
  

Geoeconomics

• The Surprising Resilience of Globalization: An Examination of Claims of Economic Fragmentation   Brad Setser/Aspen Economic Strategy Group

  This paper evaluates the current landscape of global trade and financial flows and proposes a set of reforms to support healthier forms of integration. Setser finds that, despite the growing bipartisan skepticism about the value of liberal trade, global economic integration remains surprisingly resilient. In fact, Setser argues, the immediate risk facing the global economy is more accurately described as unhealthy integration than fragmentation. Setser identifies two unhealthy forms of globalization that have proven to be resilient – those driven by corporate tax avoidance strategies and persistent trade and payment imbalances with China – and offers three policy reforms to address these risks.
  

• Geopolitical fragmentation in global and euro area greenfield direct investment  The European Central Bank

  As companies and policymakers increasingly look at ways to reduce the vulnerability of their supply chains, understanding recent dynamics in greenfield investment is important as these may foreshadow a reconfiguration of global trade networks, the fragmentation of which could be particularly detrimental for the euro area. In the last decade, annual FDI outflows and inflows amounted to 1.4% and 0.6%, respectively, of euro area GDP and 1.0% and 1.2%, respectively, of global GDP excluding the euro area. The euro area is the largest source of outward greenfield FDI, accounting for 19% of global outflows in the last two years, followed by the United States, which accounted for 15%. Ex-ante, the effect of geopolitical fragmentation on the direction of FDI flows is ambiguous. On the one hand, firms and policymakers might look to friend-shore and/or near-shore production to make supply chains less vulnerable to geopolitical tensions or to safeguard their assets from potential future violations of property rights. On the other hand, firms might increase their investments in geopolitically distant countries, i.e., countries that take an observably different stance on foreign policy issues, if they think that future trade tensions might impede their access to local markets.

• The gradual decline in dollar dominance could quicken   OMIF

  The dollar’s share in world currency reserves could decline until 2050 to 40-45% from around 60% at present, under scenarios discussed by the OMFIF advisory council. The gradual fall, alongside an increase in the importance of the euro and the renminbi, is seen as a natural consequence of the gradual reduction in America’s relative importance in the world economy. Factors that could speed up the fall include more aggressive action by emerging market economies to promote the use of non-dollar currencies as well as persistent US budget and current account deficits, according to participants at the advisory council meeting on 15 October. Kamala Harris and Donald Trump, the contestants in the US presidential election on 5 November, show little readiness to take action on this issue. Concerns about the use of US power over the dollar system in sanctions against Russia and allies in the war with Ukraine could worsen, as well as worries about ballooning American deficits, depending on the next White House incumbent. These anxieties are also helping spur the latest spurt in the gold price.
  

• Not Picking Sides Is Paying Off For These Countries   Bloomberg

  Geopolitics is shaping the flow of trade and investment around the world in ways it hasn’t in decades, fueling talk of another Cold War. Sandwiched between a US-led Western Bloc and another dominated by Russia and China sit at least 101 nations that we’ve dubbed the “New Neutrals.”  Members of this informal group are betting they can attract investment from both blocs and benefit economically if they avoid picking sides. And there’s evidence that’s happening. More than 100 nations are embracing a new kind of geopolitical neutrality. For many, it’s working.

• Can BRICS Finally Take On the West?   Foreign Policy

  One of the more remarkable developments over the last 25 years is that an investment banker’s arbitrary acronym for a quartet of emerging market economies has become the rubric for rebellion. The BRICS countries—or BRICS+, since the original grouping of Brazil, Russia, India, China, and later South Africa has since further expanded to include four more members—are meeting this week for their headline summit in glitzy Kazan, Russia, on the banks of the Volga. On the agenda this year, the first full summit after the formal incorporation of Iran, Egypt, Ethiopia, and the United Arab Emirates into the bloc, will be the usual talk of creating a truly multipolar world order to challenge U.S. and Western hegemony. A big part of that, especially for sanctions-battered members such as Iran and Russia, will be efforts to come up with viable alternatives to the global dominance of the U.S. dollar.

Latin America

• The Past, Present and Future of Soy in South America   Americas Quarterly

  Over the past five decades, the continent has become a soy-growing behemoth, feeding much of the world.  But is the boom over?  And what does it mean for South America?
  

• What does the U.S. Election mean for Latin America?    Canning House

  Canning House is a UK-based think tank focused on Latin American.  In their new paper, they consider the potential impact of either leading candidate's victory on Latin America and how the region sees the contest for the White House.  This includes analysis covering: The Latino vote, The Border Czar story: success or failure?, Harris and Trump - global policy positions, The view from Mexico City, The Bolsonaro factor in Brasília, Outlook for the 'Northern Triangle', A tricky trio, How the rest of Latin America sees the race for the White House.
  

• Brazil’s Critical Minerals and the Global Clean Energy Revolution  the Wilson Center

  Brazil has all the elements for becoming an engine of the rapidly evolving global energy transformation. The country boasts some of the world’s largest deposits of critical minerals essential to make possible the transition from fossil fuels. Brazil is already an exporter of some of these minerals. But beyond exporting raw materials, the country is also looking to develop critical minerals value chains at home, leveraging its leadership in renewable energy. In the process, Brazil could emerge as a trailblazer in green technology and climate change solutions.

Recommended Weekend Reads

Our U.S. Election Special: Election Integrity, Who Your Neighbors Gave To, and How Economic Indicators Impact Votes. Plus, Why Europe is Unprepared to Defend Itself, and Mexico’s Economic Challenges

October 25 - 27, 2024

Please find below 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.

U.S. 2024 Elections

• “The Good, the Bad and the Ugly” of Election Integrity   The Hoover Institution Podcast

  Are battleground states better prepared this election cycle than in recent election cycles? Ben Ginsberg, the Hoover Institution’s Volker Distinguished Visiting Fellow and a preeminent authority on election law, examines whether battleground states are better prepared this election cycle than in recent election cycles. Ginsberg also explores possible legal challenges that might happen before, during, and after the vote count. 

• See How Your Neighborhood Is Giving to Trump and Harris  Washington Post

  Want to know which political campaigns your neighbor contributed to?  The Washington Post makes it easy: Enter your zip code and find out which campaign your neighbors gave money to!  In every state across the country, more people donated to Vice President Kamala Harris than to former President Donald Trump. Registered voters in the suburbs were about twice as likely to give to Harris as to Trump. A vast majority of Trump’s donors under 35 were men. And in the battleground state of Georgia, where Black voters make up one-third of the electorate, less than 4 percent of Trump donors were Black. Those are among the findings from a Washington Post analysis of online contributions to the Trump, Harris, and President Joe Biden campaigns, combined with voter registration data. There are outside groups that don’t have to disclose donors and that make up some of the spending for both Harris and Trump, so this is only a part of the funds backing the two candidates. The result is still a detailed snapshot, down to the Zip code level, of who clicked and tapped to send a few dollars to the leading candidates since Trump launched his campaign in November 2022.

•   How Do Electoral Votes, Presidential Approval, and Consumer Sentiment Respond to Economic Indicators?   National Bureau of Economic Research Working Paper/Robert J. Gordon

  Abstract: This paper studies the effect of economic indicators on the Michigan Consumer Sentiment Index, Presidential approval ratings, and Presidential election outcomes since 1956. How closely do the indicators predict sentiment, how well does sentiment predict approval, and what role does approval have in explaining election outcomes measured by electoral votes? How much of the variance of approval ratings depends on non-economic factors like the “honeymoon effect”? Is there a role for economic indicators in explaining election outcomes once the contribution of approval ratings is taken into account? Regression equations provide answers to these questions and allow new interpretations of political history. Equation residuals and the contributions of specific variables are graphically displayed, providing insights into time intervals when sentiment was above or below the prediction of economic indicators, when approval differed from its usual relation with sentiment and the indicators, and when and why the electoral vote totals in each election since 1956 exceeded or fell short of the predictions of the econometric equations.
  

• As the U.S. elections nears, Russia, Iran, and China Step Up Influence Efforts  Microsoft Threat Analysis Center

  With two weeks until Election Day 2024, the Microsoft Threat Analysis Center (MTAC) observes sustained influence efforts by Russia, Iran, and China aimed at undermining U.S. democratic processes. Since our last two reports, the U.S. government has taken many actions revealing cyber and influence activity from foreign adversaries related to election 2024. Most recently, that includes revealing malicious Iranian cyber actors’ sending of “stolen, non-public material from former President Trump’s campaign” to both individuals then associated with President Biden’s campaign and U.S. media organizations, and the indictment of three Iranian actors for the hack-and-leak operation targeting the Trump-Vance campaign. 

Africa

• How Can African Countries Participate in U.S. Clean Energy Supply Chains?  Carnegie Endowment for International Peace

  The combination of key mineral endowments in African countries and U.S. objectives to reorient clean energy supply chains away from competitors like China can serve as the foundation for a new economic and strategic relationship.

Europe

• Why Europe is Unprepared to Defend Itself   Bloomberg

  For decades, European NATO members curbed defense spending to fund other priorities. What remains, in the view of some US military experts, is a “Potemkin Army” that couldn’t stand up to an invader without American support.

• Is a UK rapprochement with the EU possible?  The Peterson Institute for International Economics

  A clear majority of Brits consider the decision to leave the EU a mistake. A You Gov poll from August this year shows 51 percent saying that the negatives of Brexit have outweighed the benefits; only 17 percent think the opposite.
  

• Macroeconomic implications of the recent surge of immigration to the EU   Francesca Caselli, Allan Gloe Dizioli, and Frederik Toscani/Center for Economic Policy Research

  This research piece discusses the macroeconomic implications of this immigration surge and suggests a positive effect on potential output in the range of 0.2-0.7% by 2030 for recipient countries. On the flip side, the large inflow had initial fiscal costs and likely led to some congestion for local public services, such as schooling. Future policy efforts should seek to continue to integrate immigrants into the Labour force while ensuring the supply of public services and amenities keeps up with the population increase.

Mexico 

• Forget the US Election, Mexico’s Real Economic Challenges Lie At Home   OMFIF

  As the world anxiously watches the unfolding US election, many analysts are speculating about its impact on Mexico’s economy. Will trade relations be upended? Will the peso come under pressure from political uncertainty? While these are valid concerns, the bigger story might not lie north of the border. Mexico’s real challenge stems from its domestic policies – a challenge that could shape the nation’s economic future more than any external events.

• A U.S. Reset with Mexico Is Still Possible  Shannon O’Neil/Foreign Affairs

  Mexican President Claudia Sheinbaum, who was inaugurated on October 1, has come into office with more political power than any Mexican leader since the country’s transition away from single-party rule in the 1990s.  She received a record 35.9 million votes—nearly 60 percent of those cast for the top office—and effectively controls a two-thirds supermajority in Congress. Her party, Morena, governs 22 of the country’s 31 states. Yet economic headwinds will temper this political gift, as expectations for fast and meaningful action on wage increases, a greener energy grid, expanded public benefits, and other issues will likely outpace Sheinbaum’s ability to deliver.  No matter who enters the White House in January, there is an opportunity—albeit a narrow one—for a reset with Mexico, one that could make both countries safer and more prosperous rather than beset with crises and consistently at odds with each other.

• How Does Debt Affect Ecuador-China Relations?   Latin American Advisors

  Ecuador’s minister of economy and finance, Juan Carlos Vega, met with his Chinese counterpart, Lan Fo’an, in Beijing on Sept. 23 for talks about bilateral cooperation and economic relations. The discussion included Ecuador’s debt to China, which is close to $3 billion, in addition to Ecuador’s energy problems, some of which stem from flaws in Chinese-built energy infrastructure projects that have come to light in recent years. How does Ecuador’s debt influence its relationship to China? How does it complicate President Daniel Noboa’s attempts to improve the country’s fiscal situation? What leverage does Ecuador have in pressing China to address the flaws in its energy infrastructure?

Recommended Weekend Reads

How Will the U.S. Election Impact the Rest of the World? The BRICS’ Growing Power and Influence and the Geopolitics of Port Security in the Americas

September 27 - 29, 2024

Please find below 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.

Geopolitics & the U.S. Elections

• The Global Impact of the 2024 U.S. Presidential Elections  Center for Strategic and International Studies

  The audience for the U.S. presidential election is global and has a global impact. The election takes place at a moment when the demands of two wars in Europe and the Middle East, China’s assertiveness, and coalitions of autocratic leaders are putting unprecedented stress on the rules-based international order. These developments, as much as the election, are compelling changes in how global leaders look at their future with the United States regardless of signals of policy continuity or discontinuity from a Harris or Trump presidency. This report provides concise analysis and predictions covering the globe.

• Why US-China ties will worsen regardless of the US vote    Matt Gertken/Hinrich Foundation

  BCA Research’s Chief Strategist Matt Gertken argues the upcoming US elections will not determine the course of US-China relations.  Regardless of which party wins the elections, the superpower rivalry is set to deepen as national and economic security competition intensifies. Both Washington and Beijing are doubling down on antagonism, and trade ties will worsen in the foreseeable future.

The Growing Influence of the BRICS

• BRICS Considering Petro-Yuan in next de-dollarization attempt  OMFIF

  Unlike the BRICS Summit in Johannesburg in 2023, which was waved off by Western observers as no real threat to the dollar, October’s summit in Kazan, Russia, is set to be ground-breaking for two reasons. First, there have been major changes since the last summit. BRICS – comprising Brazil, Russia, India, China, and South Africa – has been expanded by five important new members: Saudi Arabia, United Arab Emirates, Iran, Egypt and Ethiopia. Saudi Arabia, the world’s main supplier of petrol, has also joined Project mBridge, the Bank for International Settlements’ digital currency arrangement. The country has made comments about considering alternatives to the present dollar-based oil payments system and being open to using the Petro-Yuan for oil settlements.  Second, there is Russia, a country at war with Ukraine and engaging in economic conflict against the whole Western alliance. It will use the Kazan summit as a means to push BRICS members to join this endeavor. Russia is planning a new denomination for oil, – the Petro-Yuan – its own mBridge system to pay for oil and even a common BRICS currency to reduce dependence on the dollar.

• The Battle for the BRICS: Why the Future of the Bloc Will Shape Global Order   Foreign Affairs

  In late October, the group of countries known as the BRICS will convene in the Russian city of Kazan for its annual summit. The meeting is set to be a moment of triumph for its host, Russian President Vladimir Putin, who will preside over this gathering of an increasingly hefty bloc even as he prosecutes his brutal war in Ukraine. The group’s acronym comes from its first five members—Brazil, Russia, India, China, and South Africa—but it has now grown to include Egypt, Ethiopia, Iran, and the United Arab Emirates. Saudi Arabia also participates in the group’s activities, but it has not formally joined. Together, these ten countries represent 35.6 percent of global GDP in purchasing power parity terms (more than the G-7’s 30.3 percent) and 45 percent of the world’s population (the G-7 represents less than ten percent). In the coming years, BRICS is likely to expand further, with more than 40 countries expressing interest in joining, including emerging powers such as Indonesia.

  As the United States and its allies are less able to unilaterally shape the global order, many countries are seeking to boost their own autonomy by courting alternative centers of power. Unable or unwilling to join the exclusive clubs of the United States and its junior partners, such as the G-7 or U.S.-led military blocs, and increasingly frustrated by the global financial institutions underpinned by the United States, such as the International Monetary Fund and the World Bank, these countries are keen to expand their options and establish ties with non-American initiatives and organizations. BRICS stands out among such initiatives as the most significant, relevant, and potentially influential.

• Expansion of BRICS: A quest for greater global influence?   European Parliament Think Tank

  The official Think Tank of the European Parliament explains who the new members of the BRICS are and what this means. The BRICS decision to open the door to new members was taken at its Johannesburg summit in August 2023, sparking a debate about its growing international influence. According to estimates, BRICS+, as the organization has been informally called since its expansion, now accounts for 37.3 % of world GDP, or more than half as much as the EU (14.5 %). However, besides an increase in economic power the new members could bring potential conflicts (Saudi Arabia/Iran or Egypt/Ethiopia) into the group, making the reaching of consensus on common political positions more difficult. Since the new members would only contribute roughly 4 % to the group's cumulative GDP, the significance of the expansion should be seen beyond the purely economic effect, in the form of greater influence for the group and for developing countries as a whole within international organizations such as the United Nations, the World Trade Organization and the Bretton Woods institutions.

• The Battle for the BRICS: Why the Future of the Bloc Will Shape Global Order   Foreign Affairs

  In late October, the group of countries known as the BRICS will convene in the Russian city of Kazan for its annual summit. The meeting is set to be a moment of triumph for its host, Russian President Vladimir Putin, who will preside over this gathering of an increasingly hefty bloc even as he prosecutes his brutal war in Ukraine. The group’s acronym comes from its first five members—Brazil, Russia, India, China, and South Africa—but it has now grown to include Egypt, Ethiopia, Iran, and the United Arab Emirates. Saudi Arabia also participates in the group’s activities, but it has not formally joined. Together, these ten countries represent 35.6 percent of global GDP in purchasing power parity terms (more than the G-7’s 30.3 percent) and 45 percent of the world’s population (the G-7 represents less than ten percent). In the coming years, BRICS is likely to expand further, with more than 40 countries expressing interest in joining, including emerging powers such as Indonesia.

Latin America

• Claudia Sheinbaum and the Shadow of AMLO   Americas Quarterly Podcast

  Claudia Sheinbaum will take office as Mexico’s new president next week, on October 1, 2024. Often described as a technocrat, she also supports some of current President AMLO’s more controversial policies, such as the judicial reform that was just approved. In this episode, Vanessa Rubio, a professor at the London School of Economics and a former senator and deputy minister, shares what she expects from Sheinbaum’s government. Rubio argues her administration will take shape as a new blend—one that could be deemed “techno-populist.”

• The Geopolitics of Port Security in the Americas Center for Strategic and International Studies Americas Program

  “[T]he truth of the matter is that the People’s Republic of China is rapidly filling the vacuum created by the departure of American military forces from the isthmus [of Panama]. . . .Their presence adds to the danger of using the Colon Free Zone to purchase restricted technology with dual civilian-military use.” This sentiment would not seem out of place in a contemporary discussion of Chinese strategic advances in the Western Hemisphere. It is, in fact, more than two decades old, coming from the testimony of Dr. Tomas Cabal, then professor of business at the University of Panama, who appeared before the U.S. House Subcommittee on Domestic and International Monetary Policy on December 7, 1999.

Alternative Energy

• New Battery Designs Could Lead to Gains in Power and Capacity   The Economist

  In their quest to build a better battery, researchers have blazed a trail through the elements of the periodic table. The earliest prototype cells ran on nickel and cadmium; successors have used everything from zinc and iron to sodium and lead. Instead of the other long-overshadowed components of cells. Those efforts are starting to pay off and several companies are looking to further radically improve the battery as we know it.

Recommended Weekend Reads

September 13 - 15, 2024

Geoeconomics

• The Innovation Paradox     MF Finance and Development Magazine

  We've long assumed that investing more in research and development is a surefire way to spur innovation, increase productivity, and fuel job creation and economic growth. And yet, as the US dramatically expanded R&D spending over the past four decades, the opposite happened. Innovation, productivity gains, and economic expansion slowed. What went wrong?
  

• High and Rising Institutional Concentration of Award-Winning Economists   National Bureau of Economic Research/Richard Freeman, Danxia Xie, Hanzhe Zhang, Hanzhang Zhou

  Abstract: We analyze the institutional clustering of award-winning researchers. We collect nearly 300,000 annual education and career affiliations of nearly 6,000 award-winning researchers across 18 major academic fields in the natural sciences, engineering, and social sciences. All fields, except for economics, exhibit a low and decreasing concentration, which suggests a trend toward decentralized knowledge production.  Conversely, economics shows a high and rising concentration.  We investigate potential reasons for this anomaly, including researcher mobility, reliance on physical assets, the age of fields, the role of prestige, and the influence of the United States in shaping disciplinary norms (Fulcrum Note: So, this proves economists do roam in packs? Hmmm…)

India

• Can India Change Course?  A Conversation with Pratap Bhanu Mehta   Foreign Affairs Podcast

  Pratap Bhanu Mehta, President of the Centre for Policy Research, is one of India’s wisest political observers—a great political theorist and writer as well as a fierce critic, and occasional target, of Modi and his policies. Foreign Affairs Senior Editor Kanishk Tharoor spoke with him on September 3 about what the election means for Indian democracy and where the country goes from here.

European Union

• The Future of European Competitiveness: A Comprehensive Strategy for Europe   Mario Draghi

  Former European Central Bank President and former Italian Prime Minister was asked by EU President Ursula von der Leyen to conduct a comprehensive study on how the European Union could become more competitive with the US and China.  This past week, Draghi published a 400-page comprehensive and wide-ranging report offering recommendations for ten main economic sectors.  Overall, Draghi says the EU needs to invest between €750 - €850 billion per year – close to 5% of the bloc’s GDP – to stay competitive in the face of shrinking populations, the need to rapidly and massively ramp up combined defense capabilities, and offset the supply of previously cheap energy (mostly coming from Russia).  

• A World of Chips Acts:  The Future of U.S.-EU Semiconductor Collaboration  Center for Strategic and International Studies

  The U.S. and the EU have each recently enacted legislation providing for an unprecedented volume of public investments in semiconductors, with the largest portion allocated to the establishment of new onshore chip production facilities. Substantial funds are also allocated to semiconductor research and development, supply chain security, and workforce expansion and training. These parallel initiatives have been prompted by an awareness in both regions of threats to economic and strategic security arising out of their dependency on foreign-made chips. The question posed by the enactment of the two Chips Acts is how such joint activities can be deepened, broadened, and leveraged by direct engagement between the United States, the European Union, and national authorities to address the vulnerabilities faced by both ecosystems.

• The EU has a playbook to de-risk from China.  Is it working?    Brookings Institution

  The European Union’s (EU) decision to raise its tariffs on Chinese electric vehicles (EVs) has prompted speculation about whether the EU and the United States could cooperatively “de-risk” from China. Much like the United States, the EU has developed a “de-risking” playbook with three goals: to protect its economy from outside encroachments, to promote its own competitiveness and resilience, and to partner with others to amplify its economy’s strengths and mitigate its vulnerabilities. In fact, the term “de-risking” was pioneered by European Commission President Ursula von der Leyen and later embraced by the Biden administration and all G7 leaders.   But is it working?
  

China

• China Decoupling Handbook: Where We Are, What To Do    American Enterprise Institute/Derek Scissors

  Scissors writes the case for a smaller US-China relationship keeps getting stronger, arguing that China under President Xi Jinping will not become a better partner.  To achieve this decoupling, which is already underway, additional policies are needed around imports, exports (especially technology), inbound investment, outbound investment, and supply chains.   In his “handbook,” Scissors details how best to carry out such policies in each area.

• Why Catching Up to Starlink is a Priority for Beijing   Carnegie Endowment for International Peace

  China’s push to enter the satellite internet market shouldn’t come as a surprise. The Chinese Communist Party (CCP) has poured significant resources into closing the gap with America’s space-based technologies, and its efforts are starting to pay off. on August 9, a Long March 6A rocket blasted off from the Taiyuan Satellite Launch Center in the northern Chinese province of Shanxi. The rocket carried eighteen low-Earth orbit (LEO) satellites from the government-backed company Qianfan. State media hailed the launch as China’s answer to Starlink, the U.S.-based satellite internet pioneer, and the first step toward breaking America’s dominance in this market. Qianfan intends to grow its constellation to more than 600 satellites by the end of 2025 and to eventually place 14,000 satellites into orbit

Recommended Weekend Reads

August 30 - September 1, 2024

Please find below 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.

Geoeconomics & Markets 

• What is Driving China’s Long-Dated Bonds?  Carnegie China

  The People’s Bank of China (PBoC) is determined to rein in what it fears might be a government bond bubble because of its possible disruptive impact on Chinese banks. Yields on long-dated sovereign bonds have been falling since December of last year when, after a few fairly stable months during which China’s ten-year sovereign bond traded between 2.60 and 2.70 percent, bond prices rose sharply, causing yields to drop 10 basis points during the month.  What is driving this frenzy?

• The Downward Spiral: A Macroeconomic Analysis of the Opioid Crisis   Federal Reserve Bank of Cleveland Working Paper

  There have been more than 700,000 opioid overdose deaths since 2000. To analyze the opioid epidemic, a model is constructed where individuals choose whether to use opioids recreationally, knowing the probabilities of addiction and dying. These odds are functions of recreational opioid usage. The model is fit to estimated Markov chains from the US data that summarize the transitions into and out of opioid addiction as well as to a deadly overdose. The epidemic is broken down into two subperiods: 2000-2010 and 2010–2019. The opioid epidemic's drivers, their impact on employment, and the impact of medical interventions are examined. Lax prescribing practices and misinformation about the risk of addiction are important drivers of the first half of the epidemic. Falling prices for black-market opioids combined with an increase in their lethality are found to be important for the second half.

• Work More, Make Much More?  The Relationship between Lifetime Hours Worked and Lifetime Earnings   Federal Reserve Bank of St. Louis

  Earnings inequality in the U.S. and around the globe is a major topic of research among economists. A key objective of this research is to isolate the quantitatively important forces that shape inequality. In this post, we consider a factor that has been largely neglected so far by the literature, namely differences among individuals in hours worked. In particular, we investigate the relationship between lifetime earnings inequality and lifetime hours worked. In line with many empirical studies, lifetime here refers to ages 25 to 55, a person’s prime working years.  In this blog post, we focus on male workers, who were more likely to have uninterrupted employment histories than female workers during the period we are examining. We are able to construct a sample of 3,006 male workers for whom we have observations of earnings, weeks worked and weekly hours worked for each age from 25 to 55 (either via a direct report or via a simple imputation procedure for missing observations). Since we are interested in lifetime earnings, our sample already conditions on having worked in at least one year between 25 and 55.

Mexico’s Judicial Reform Crisis

• Last Crusade of Mexico’s President: A Drastic Redesign of the Judiciary  New York Times

  President Andrés Manuel López Obrador (AMLO) is scheduled to step down from power in October, succeeded by recently elected Claudia Sheinbaum.  But before he leaves, AMLO is driving hard to push through a highly contentious legislative effort that would require all judges to be elected and no longer appointed.  Foreign governments – including Canada and the US – and foreign investors have been openly critical of the effort as it will likely not only highly politicize the judiciary but also open it to significant interference by the drug cartels.   The effort is already having a significant negative impact on the Mexican Peso.

• Mexico Will Pay Dearly for AMLO’s Judicial Revenge   Bloomberg Opinion

  The ruling party’s huge constitutional overhaul sets the country on a volatile path, hurting investment potential and complicating the incoming political transition.  Just how intense is the pressure Mexican President Andrés Manuel López Obrador (AMLO) putting on judges?  Mexican Supreme Court judges have been told they can resign now and keep their pensions or risk competing in an election next year and then lose their benefits.  Mexico is in uproar over the future of its justice system.

China’s Unemployment and the World Economy

• China’s unemployment conundrum and its implication for global trade  Hinrich Foundation

  How bad exactly is unemployment in China? Consider these examples: An increasing number of fresh college graduates are joining the gig economy by taking low-skilled jobs such as delivering food as they struggle to find jobs commensurate with their degrees. The number of people under the age of 25 who applied for manual jobs in the first quarter of 2024 surged 165% compared with the same period in 2019. A memo from an airport in Wenzhou city indicated that the airport had hired architects and engineers as ground managers and bird controllers. Since December 2022, over 10 protests occurred at Carrefour stores across the country due to store closures and unpaid wages. Alibaba, China’s e-commerce giant, cut 20,000 jobs, or 12.8% of the total employment in the 2023 fiscal year, following a 7% cut in the previous year.

German State Elections

• Putin’s Next Coup Politico EU

  This coming Sunday, elections are being held in three eastern German states—Brandenberg, Saxony, and Thuringia—that are likely to usher in Russia-friendly parties, giving the Kremlin a foothold once again in Germany.

• Germany’s far-left disruptor claims credit for limiting aid to Ukraine: Sahra Wagenknecht’s party rises in polls ahead of regional elections in Eastern German States  Financial Times
  Sahra Wagenknecht, Germany’s most prominent far-left politician, has taken credit for the government’s decision to limit military aid to Kyiv, saying her strong opposition to arming Ukraine was influencing Berlin’s policy on the war. Her political party, the Sahra Wagenknecht Alliance (BSW)—yes, she named the party after herself—has surged in the polls in the three eastern German states holding elections this coming Sunday.

• German coalition unlikely to last until September 2025  Official Monetary and Financial Institutions Forum/David Marsh

  The Chairman of OMFIF, David Marsh, who is also a noted scholar of German politics and economics, writes that a sense of foreboding is building in Germany about prospects for government stability. Under pressure from all sides, the fractious three-party coalition under Chancellor Olaf Scholz may not last the legislative period up to the scheduled general election in September 2025. Scholz is trying to keep his creaking administration intact given the high-tension international environment, but the forces leading to break-up could soon become overwhelming.  And the ongoing and long-running public bickering among the coalition members over the 2025 budget is not helping. 

Recommended Weekend Reads

The Ongoing Crisis in Venezuela, Demographic Challenges Globally, and How is the Inflation Reduction Act Working Out?

August 23 - 25, 2024

Please find below 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 Crisis in Venezuela

• A Question of Staying Power  Center for Strategic and International Studies

  In response to protests against its brazen election theft, the Maduro regime in Venezuela has unleashed a wave of violent repression. While the exact numbers vary, credible human rights organizations have logged nearly 2,000 arrests, some even of minors and young children, and more than two dozen people killed. Venezuelan president Nicolas Maduro bragged that more than 2,200 arrests had been made and that prisons repurposed to house new political prisoners would feature “reeducation” and “hard labor” camps.  Meanwhile, reports from low-income barrios around Caracas convey that regime intelligence services have marked homes of protestors with a black “X.” Rather than hiding repression, the regime has launched a public campaign called Operación Tun Tun (Operation Knock Knock) meant to instill maximum fear by arbitrarily knocking on doors. The regime has filmed security forces breaking into protestors’ homes and arresting them and openly publicized videos of arbitrary arrests—one of them set to the popular Christmas song “Carol of The Bells.”

• Venezuela: Possible Paths Forward  Americas Quarterly Podcast

  Since the election on July 28, Nicolás Maduro has unleashed a wave of repression not seen in Venezuela before. The question on everyone’s mind is, what now? Will Venezuela move further down the path of a dictatorship, or is there some chance of a negotiated solution that might lead to a democratic transition? In this episode, Roberto Patiño, a civil society leader and a member of one of the opposition parties, discusses the opposition’s strategies, evaluates the positions taken by Brazil, Colombia, the U.S., and Mexico, and describes what he sees as cracks in the Maduro regime.

  U.S. Elections 2024

• Beliefs About Political News in the Run-up to an Election  Charles Angelucci, Michel Gutman, and Andreas Prat/National Bureau of Economic Research

  The closer we get to the election, the more we hear about “fake news” and a lack of neutrality in the media.  From where we sit, there is definitely something to it – the question we have is how much of is intentionally slanted due to reporters’ personal political viewpoints filtering into the story or just poor reporting. But what about the reader’s role?  In this new study, three economists developed a model to look at the influence of elections on the formation of “partisan-driven information universes.”  The study shows a partisan impact on the news during election periods.  Outside of the election season, an individual is 4 percent more likely to choose a true story if it favors their party; in the days prior to the election?  This increases to 11 percent.

Global Demographic Trends

• Europe’s Demographic Winter and the New EU fiscal Rules VOX EU/Center for Economic Policy Research

  The EU recently settled on a revision of its fiscal rules replacing a system increasingly seen as “one size fits all” when it came to debt sustainability analysis for EU members.  While this might make a lot of sense, this paper argues that many EU member states are facing a sustained demographic decline now and in the years to come, a careful assessment of the uncertainty surrounding population projections is needed.

• Korea faces income losses within half a century without more labor migration  Peterson Institute for International Economics

  South Korea is facing a social and economic crisis caused by its rapidly aging population.   Today, South Korea is the second oldest nation in the world with 40 percent of its population being 65 years old or older.  For years, South Korea had highly restrictive immigration policies.  But in the early 2000’s the country began opening the door to immigration to offset the loss of workers.  But it is not enough as the below chart indicates, as Korean income losses per citizen due to aging is expected to decline by 10 percent within 18 years. The only way to avoid this projection (that only get worse in outlying years) to ramp immigration – a true social and cultural challenge to this ancient society.   And it should be noted: Italy, Germany, Spain, and China are not far behind South Korea in facing this demographic catastrophe.

 Geoeconomics and Industrial Policy 

• “Shadow Reserves”: China’s Key to Parry U.S. Financial Sanctions   War on the Rocks

  As the U.S. and China continue to spar over financial and trade issues, Beijing has found a way to insulate their strategic trade away from dollar-based sanctions.  China’s central bank has steadily shed its official U.S. dollar reserve holdings – which means, if China were to decide to invade or blockade Taiwan, the U.S.’ ability to impose financial sanctions on China will be diminished.  But it is not complete – far from it: only a third of China’s goods trade are settled in renminbi.

• Attracting CHIPS Investment: Industry Recommendations for Policymakers  Semiconductor Industry Association

  Chips are integral to the 21st century economy, from electric vehicles, AI data centers, and medical technologies to mobile devices, energy grids, and streaming platforms. Historically, semiconductor supply chain production activities have concentrated in a handful of regions. But as global chips demand increases, and the industry responds to geopolitical uncertainty and other disruptions, companies are diversifying their global investment footprint to improve supply chain resilience.  In our new SIA-BCG report, Attracting Chips Investment: Industry Recommendations for Policymakers, we recommend policy actions governments can undertake to better attract investment based on the following five key factors that semiconductor companies evaluate when making investment decisions.

• Clean Investment Monitor: Tallying the Two-year Impact of the inflation Reduction Act  Rhodium Group/MIT Center for Energy and Environmental Policy Research

  As the United States approaches the two-year anniversary of the Inflation Reduction Act (IRA), this report provides a comprehensive analysis of actual investments in clean technologies and infrastructure since its enactment.  From the second half of 2022 through the first half of this year, actual business and consumer investment totaled $493 billion, a 71% increase from the two-year period preceding the legislation. This report includes a detailed state-level breakdown of clean investment in the post-IRA period.