Reccomended Weekend Reads

September 22 - 24, 2023

Here are our recommended reads from reports and articles we read in the last week. We hope you find these useful and that you have a relaxing weekend.   And let us know if you or someone you know wants to be added to our distribution list.

International Economy

• “Irrational Expectations: Long-Term Challenges of Diversification Away from China”  The Rhodium Group

  Some observers assert that diversification away from China is already well underway. Others caution that global value chains are simply too integrated to untangle, and the Biden administration’s de-risking policies are unlikely to succeed. Which camp is right? This new research note explores these issues using a wide range of available data points.

• “The Global Economy’s Real Enemy is Geopolitics, Not Protectionism”   Dani Rodrick/Project Syndicate

  The author, a Harvard Professor of International Economy, argues that what some decry as protectionism and mercantilism is really a rebalancing toward addressing important national issues. The biggest risk to the global economy stems not from this broader reorientation – which should be welcomed – but from a Sino-American rivalry that threatens to drag everyone down.

Indo-Pacific 

• “What Do We Know About Chinese Industrial Subsidies?”  CEPII (Centre d’études prospectives et d’informations internationals, Paris, France)

  While Chinese industrial subsidies have been one of the key drivers of international trade tensions, the details of the phenomenon itself are often overlooked.  Reviewing the existing datasets and methodologies used to assess Chinese public support, this Policy Brief tries to bring more clarity on what is known, and what is not.  The most frequently used datasets in the literature are dated and/or largely incomplete, and find limited industrial support compared to more specific analyses.  To further complicate things, the new development model pursued by the current leadership seems to champion the idea of “guiding” economic entities to align with Party-State objectives, which, by diffusing public intervention throughout the economy, makes it more difficult to assess the scale of subsidies.  The Chinese authorities’ highly structured and detailed communication and policy planning offers alternative metrics to assess the distribution and evolution of public support to the industry, enabling a complementary approach to triangulate the actual subsidies to industrial production in China.

The Arctic 

• “Arctic Geopolitics: The Svalbard Archipelago”  Center for Strategic and International Studies

  The Arctic is increasingly viewed as an arena for power projection and spillover from conflicts elsewhere. In this regard, the Svalbard archipelago is an important case study because it has economic, scientific, political, and security implications for states in the High North, the United States, and the North Atlantic Treaty Organization (NATO) alliance. Svalbard’s unique status as a sovereign territory of Norway with provisions for foreign nationals, Russia’s presence on the territory, and its interests at sea, as well as the archipelago’s proximity to critical Russian military locations, make Svalbard a potential geopolitical flash point. This brief examines the geopolitics of Svalbard and the security implications for Norway, the United States, and NATO.

Russia’s War on Ukraine

• “Understanding the Risk of Escalation in the War in Ukraine”  The Rand Corporation

  Russian President Vladimir Putin's invasion of Ukraine in February 2022 has imposed devastating losses on the Russian military and on Ukraine's military and civilian populations, but both sides have avoided certain escalatory options. Putin has been restrained for several reasons, including fear of NATO's military response, an information flow that filters out negative facts, promoting the view that Russia can win a protracted war, and incremental increases in NATO support for Ukraine.  The fact that Putin has avoided certain escalatory options to date does not mean that he will avoid them in the future. The Kremlin's control of Russia has become brittle, potentially encouraging Putin to consider options to shorten the war.  This paper examines what the risk is to Putin taking up any of these options.

• “Why Is Russia Blocking Ukraine's Food Exports?”  Center for Strategic and International Studies

  Russia’s termination of the Black Sea Grain Initiative (BGSI) was a main topic of discussion in United Nations General Assembly meetings this past week. The United Nations and others continue to urge Russia to rejoin the deal, while Russia declares its willingness to rejoin if its demands are met. It likely has no such intention. Continuing to block Ukraine’s agricultural exports is in Russia’s economic and political interest, while Russia manipulates its own food exports to appease food-importing countries. And its exit from the deal has not contributed to a global food price spike—for now.

• “Perseverance and Adaption: Ukraine’s Counteroffensive in Perspective”  War on the Rocks

  The outlook for Ukraine’s summer counteroffensive increasingly hinges on the attritional nature of the war. Which side has more reserves? Who can better manage their combat power in a prolonged standoff? Carnegie Endowment for International Peace Senior Fellow Michael Kofman, who recently returned from the Ukrainian front lines, has written a fascinating account of what it will take to sustain Ukraine’s war effort. Kofman outlines how Washington should support Kyiv’s preferred approach to pushing the Russians back and what the West can learn from this summer’s experience to help Ukraine improve its ability to conduct operations at scale in the future.

Chart of the Week

Looking for a Job?  Federal, State, and Local Governments Are Hiring… A Lot

As the Federal Reserve raises rates, employment opportunities begin to taper off, and corporations begin to hold up on new hires (or so the Fed hopes), there remains one place that is still hiring: Federal, state, and local governments.

According to the Bureau of Labor Statistics, more than 327,000 new positions have been created among government agencies.  The Wall Street Journal (which produced the excellent chart below), estimates” that is close to 1/5 of all new American jobs created in the first eight months of the year.  In contrast, public-sector jobs accounted for 5 percent of employment during the equivalent period last year [2022].”

According to the Journal, most of the hiring at the state and local levels are filling backfill jobs in teaching and police departments where many public servants quit during COVID.