Recommended Weekend Reads

January 19 - 21, 2024

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

China/Taiwan Tensions

• “Why China Would Struggle to Invade Taiwan”  Council on Foreign Relations

  This interactive report makes the case that while China’s ambition to gain control of Taiwan is clear, doing so through force would prove to be enormously difficult and costly.  The maps in the report explaining the tough coastline and limited deep water ports alone are worth the read.

Ukraine

• “The War in Ukraine Has Become a Peripheral Concern for the West”  Carnegie Endowment for International Peace

  What seemed at first to be the start of a Third World War has turned out to be more akin to a Second Yugoslav War: a local conflict on the edge of Europe triggered by a slow-motion imperial collapse. 

Latin America

• “Plunging fertility rates are creating problems for Latin America”  The Economist

  Latin America’s fertility rate fell below the 2.1 births per woman required to maintain a stable population in 2016; the region is home to some of the fastest-falling fertility rates in the world. Together with rising life expectancy and high levels of emigration, mostly of working-age people, this is creating a problem for Latin America: the region is getting old very quickly, and this will leave societies struggling to afford pensions and healthcare.

Energy

• “Geopolitics – Not Just Summits – Will Shape the Transition to Clean Energy”  Foreign Affairs

  In late 2023, a consensus was reached at the UN on reducing greenhouse gas emissions at COP28, held in Dubai.  While the deal was hailed for calling for a transition away from fossil fuels. The deal broadly holds some promise for the transition away from fossil fuels—if not necessarily in the ways advertised. A closer look at the language of the official agreement suggests that some of what was agreed to is less significant than meets the eye. Much of the real work needed to advance the energy transition falls outside the realm of the UN climate negotiating mechanism.  The reality is, according to the authors, a fracturing geopolitical landscape—as much as the growth in climate finance or even advancements in climate technology—will determine just how quickly (or how slowly) the transition to net-zero emissions proceeds.

Global Finance & Trade

• “Geopolitics and the geometry of global trade”   McKinsey Global Institute

  Global trade patterns are reconfiguring. More shifts are likely, and businesses need to be aware of the potential trade-offs of different paths ahead. In this new study, the McKinsey Institute argues five points: 1) Trade in concentrated products binds geopolitically distant economies, 2) Trade reconfiguration is underway, 3) Increased investment into a range of developing economies suggests further trade reconfiguration in coming years, 4) The future of global trade will involve trade-offs—reducing geopolitical distance comes with increasing trade concentration, and vice versa, and 5) Business leaders need to position their organizations for uncertainty. 

• “Jobs, National Security, and the Future of Trade”  Bain Consulting

  As the global economy adjusts to persistent economic and geopolitical pressures and disruptions, the familiar routes that define the world trade map are being redrawn, and trade blocs are playing a greater role. In addition, overall global trade is growing at a slower rate than the world economy, a fundamental shift away from the trend of trade-led globalism that has been prevalent since the end of the Cold War. (See “BCG’s Global Trade Model Methodology.”) World trade in goods is forecast to grow at 2.8% per year, on average, through 2032, compared with an estimated 3.1% growth rate for global GDP in the same period, according to a new BCG analysis.

• “Why Debt Relief Matters to the Wealthy West” Carnegie Endowment for International Peace

  As many low- and middle-income countries (LMICs) grapple with a sharp rise in payments on their sovereign debt in the wake of the COVID-19 pandemic and the war in Ukraine, leaders across the world are calling for urgent debt restructuring and reforms to the development financing system. Their calls are often framed in humanitarian and ethical terms. These ethical arguments are compelling. However, reducing the burden of loan servicing and expanding development financing for LMICs are not just ethical responsibilities for wealthy Western nations—they are also strategic imperatives. The impacts of debt distress are not confined to the borders of indebted nations. High debt servicing costs increase poverty and fragility in developing countries, contributing to political instability. They also reduce those countries’ capacity to combat climate change, the effects of which are felt globally, including in the form of mass migration to Europe and North America.

• “Why global commerce is now in the crossfire” Good Authority

  Modern globalization, dependent on bulk shipping via open seas, is under fire – the real live kind. Most recently, the spillover of the Israel-Hamas conflict has emboldened Houthi rebels from Yemen to attack shipping in the Red Sea. Shipping companies are coping with major new costs as insuring their vessels in dangerous waters becomes more and more difficult.  While the Red Sea developments – and their potential to escalate – are big news, it’s not the first time that territorial or geopolitical conflicts have spilled into the seas. We are watching in real-time as other major powers and their proxies challenge the West’s dominance in sea power – threatening the maritime commerce that makes the global economy run. And what’s happening today won’t be the last time we see this type of threat.

Map of the Week

Russia’s War is Increasingly Spilling Over Onto NATO Soil

As the war in Ukraine continues, Russia’s aerial attacks (missiles, drones, and rockets) are increasingly hitting outside of Ukraine’s border and landing in Romania, Bulgaria, and Turkey – all NATO members.  All of these incidents are not only violations of the national sovereignty of the respective country but a violation of NATO’s mandate – meaning, technically, NATO could invoke Article 5 (the principle that an attack on one member is an attack on all members) and move to defend these member states from Russian attack. 

With the extraordinary warning from German Defense Minister Boris Pistorius this week that Germany believes Russia could attack the NATO military alliance in the next five to eight years, these “accidents” take on new and much more grave significance.