Recommended Weekend Reads
December 29 - 31, 2023
Happy New Year!
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.
Americas
“The Real Impact of Maduro’s Guyana Referendum” Americas Quarterly
Venezuelan President Nicolás Maduro consciously decided to produce a diplomatic crisis to advance his political interests at home, using the Essequibo issue to set the stage ahead of next year’s election. Turnout for the opposition primaries in October was unusually high; organized without state help, they attracted 2.3 million voters. The Maduro government may well have decided to organize a referendum on the Essequibo issue to show that it can mobilize more people. In any event, the Essequibo issue seems perfectly suited for diverting public attention from an economic crisis. It stirs up nationalist sentiment and a narrative of victimhood due to centuries of perceived injustice. Meanwhile, the massive discoveries of oil in the Essequibo add fuel to the fire.
“Did Pandemic Unemployment Benefits Increase Unemployment? Evidence from Early State-Level Expirations” R. Glenn Hubbard/Michael Strain, Economic Inquiry
During the 2021 pandemic year, the generosity of Unemployment Insurance benefits was expanded (Federal Pandemic Unemployment Compensation [FPUC]), and eligibility for benefits was broadened (Pandemic Unemployment Assistance [PUA]). These two programs were set to expire in September 2021. In June 2021, 18 states exited both FPUC and PUA, and three states exited FPUC (but not PUA). Using Current Population Survey data and a wide range of estimation methods, we find that the flow of unemployed workers into employment increased by around two-thirds following early exit among prime-age workers. We also find evidence of reductions in state-level unemployment rates, increases in employment-populations ratios, and reductions in the share of households that had no difficulty meeting expenses.
Indo-Pacific
“Semiconductors in Key European and Indo-Pacific Economies: Geopolitical Risk in the Supply Chains into 2030 and Beyond” The Hague Centre for Strategic Studies
What are the core factors that drive semiconductor supply chains amid the current geopolitical climate post-pandemic and into the near future by 2030? Will there be a secure supply, and if so, why or why not? This article analyses the chip supply chain in the context of multiple geopolitical risks, reflecting the industry and government perspectives of countries involved in the supply chain. It looks specifically at the flow of chip supply between the key EU member states and main chip manufacturing economies in East Asia – Taiwan, South Korea, Japan, and China – amid the ongoing technological conflict between the U.S. and China. The article looks to the EU Chips Act as the source of demand from the European region, along similar lines of other industrial economies, for ‘self-aggrandizing’ in semiconductor manufacturing capabilities by subsidization. In the short term, it looks to U.S. pressures to impose export controls on production in mainland China as a critical source of supply chain disruption, while the new developments in chip foundry construction are still underway for the next few years. In the mid-to-long term, it points to the potential geopolitical clash on the Taiwan Strait as the main source of uncertainty in the chip supply chain.
“Timing is Everything: Italy Withdraws from the Belt and Road Initiative” Instituto Affairi Internazioniali
Italy’s subdued withdrawal from the Belt and Road Initiative (BR) marked the epilogue of a long, laborious, yet ultimately successful diplomatic process that reflected a reassessment of its bilateral relations with China. The origins of this reassessment can be traced back to the government led by Mario Draghi between 2021-2022. The shift reflected the absence of tangible economic benefits from BRI membership for Italy.
“China’s Export-Reliant Growth Model Threatens Its Trade Relations” The Diplomat
China’s latest official figures on the economy confirm two simultaneous truths. First, deflation, lower demand for durable goods, and lower imports persist, even if there has been some consumption rebound. New fiscal stimulus and a strong push for local government bonds to rescue the real estate sector have not impacted new borrowing and investor trust. Moody’s downgrading warning can well justify President Xi Jinping’s reported remark that China’s economic recovery is still “at a critical stage” – and vice versa. Second, there remains policy space to boost the economy. Even officially, China’s currency reserves have risen again, while the true extent of its holdings in foreign-denominated assets is generally underestimated. Official policy has consistently refused monetary expansion on grounds of financial security and because the interest gap with other major currencies has narrowed or disappeared, suggesting there is a risk of hot money outflow. But Xi now talks of an “effective” if stable monetary policy. And exports, after five years of boom, are holding up, even as the Chinese government cites weak international demand as a factor weighing on a sluggish domestic economy.
The Global South & Russia
“From Russia with Love: How Moscow Courts the Global South” European Council on Foreign Relations
Russia’s war on Ukraine has locked Moscow and the West in a contest for global support. Both would like the rest of the world to side with them against the other. But they are both likely to ultimately realize that the rest of the world is not swayed by narratives but by pragmatic engagement. This type of transactional relationship comes easier to Moscow than it does to the West, as evidenced by Russia’s past outreach efforts. Since the beginning of the war, though, Russia has become a one-issue country, with all its foreign relationships now subordinate to the war effort. Russia’s resources to engage with different regional agendas and partners’ needs have shrunk, and it is compensating by doubling down on propaganda. The war forced Moscow to audit its foreign policy priorities and caused policy changes on several files. The West has an opportunity to profit from Russia’s weakened position in this context. But it needs to learn to adapt its normative positions to a more pragmatic approach that focuses on its partners’ – as well as its own – needs.
The Race to Control Critical Minerals
“Lithium, the lightest metal on Earth, carries heavy geopolitical weight” The Interpreter
“Control oil, and you control nations,” former US Secretary of State Henry Kissinger once said. Today, it could be argued that to control lithium – white oil as it were – is to control nations. Lithium has become a critical mineral in green technologies, with lithium-ion batteries used to power electric vehicles and store wind and solar energy. Like oil, lithium is not evenly distributed in the world. Nearly 80 percent of known deposits are in four countries – the South American lithium triangle of Argentina, Bolivia and Chile, and Australia. However, holding less than 7 percent of the world’s lithium reserves, China is the world’s largest importer, refiner, and consumer of lithium, buying 70 percent of lithium compounds and supplying 70 percent of lithium production, largely to domestic lithium battery makers, six of which are among the top ten in the world.
Global Issues
“A Year of War and Little Peace” Richard Haass, The Strategist
The former President of the Council on Foreign Relations reviews 2023 and previews the risks he sees in 2024.
Chart of the Week
Contrary to Conventional Thinking, US Defense Spending Has been Shrinking
Contrary to what most Americans may think, US defense spending has been in an almost continuous decline since the end of the Cold War. The return of geopolitical conflict and tensions suggests the US is now at a key inflection point in terms of increased defense spending in the years to come – or not – all in the face of an exploding federal deficit.
