Recommended Weekend Reads

June 28 - 30, 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.

The French Elections

• Emmanuel Macron, destroyer of worlds   UnHerd

  Following the recent shock EU Parliamentary elections, Europe was further shocked by French President Emmanuel Macron’s almost instantaneous decision to call snap elections. In this fascinating and quite detailed report, Macron’s closest political allies and aides seem to be the most shocked of all. What drove Macron to make the decision? This report explains a lot about Macron’s thinking and vision going forward.

• Tracking the French Election Polls and Vote Count   Politico EU

  Politico has set up a great site to allow anyone to track the latest news on the French legislative elections which begin this weekend.

Tensions in the South China Sea

• High noon at Second Thomas Shoal   The Australian Strategic Policy Institute

  China has identified the beleaguered garrison at Second Thomas Shoal as a weak link among the South China Sea features physically occupied by the Philippines and, by extension, the US-Philippines alliance.  While Manila has held its nerve against Beijing’s mounting pressure tactics and holds the moral high ground in the South China Sea, it’s not clear yet that it has a viable strategy to counter Beijing’s maritime juggernaut.  China is obviously willing to escalate. As it does, the Philippines, in trying to hang on, will probably need military support from the United States, its treaty ally. Another violent incident could invoke the US obligation to defend the Philippines against armed attack.

• Second Thomas Shoal   Asia Maritime Transparency Initiative

  What is the Second Thomas Shoal?  Where is it?  And why is China trying to claim it even though it belongs to the Philippines?  This link explains it all via excellent satellite photographs and analysis.

Russia/Ukraine

• How Russia Exports Ukrainian Grain As Its Own: An Investigation    Radio Free Europe/Radio Liberty

  Russian firms shipped tens of thousands of tons of wheat and peas out of occupied parts of Ukraine in 2023 to EU member Spain, NATO member Turkey, and Azerbaijan, the investigative unit of RFE/RL’s Ukrainian Service, Schemes, and its partners have found.  Similar amounts of barley and corn reached Moscow allies Iran and Syria, which have an established track record of buying Ukrainian grain appropriated by Russia.  In an investigation based on official Russian documents and other sources, At least 6.4 million tons of wheat alone were harvested from Russian-occupied Crimea and Russian-held parts of the Donetsk, Kherson, Luhansk, and Zaporizhzhya regions in 2023, according to satellite estimates by NASA’s Harvest program, which tracks food-security threats. SeaKrime, a nongovernmental Ukrainian project that tracks Russia’s illegal grain shipments from Ukraine, has reported that 2 million tons of that harvest were shipped abroad from Crimea’s ports.

Americas

• The U.S. EXIM Bank in an Age of Great Power Competition    Daniel Runde/Center for Strategic and International Studies

  The U.S. Export-Import Bank (EXIM), the United States’ official export credit agency (ECA), is an independent, executive branch institution that supports U.S. businesses by financing the exports of goods and services.  During the last 15 years, EXIM, once the global ECA gold standard, has been underutilized as it has struggled politically.  Over this same period the global export credit landscape has evolved significantly, with governments around the globe using their ECAs more as instruments of industrial policy and to strategically boost their manufacturing competitiveness and strategic influence in critical emerging and frontier markets. Most notable in its ascendance as a global export credit player, the People’s Republic of China (PRC) has become a much bigger player in the space. At the same time, U.S. allies (and sometimes economic competitors) have also elevated their ECAs’ competitiveness and influence by offering more flexible terms and becoming more client-oriented compared to EXIM. As a result, EXIM not only has lost its global leadership position but is now at a significant competitive disadvantage compared to its competitors, including the PRC, in the ECA space. The U.S. EXIM bank will need a new slate of board members in January 2025, as three of the four current board members’ terms end January 20, 2025, and EXIM faces a reauthorization in 2026, offering an opportunity to rethink what tools and capabilities EXIM should have.

• Mid-Year Update on Latin America’s Economies   Americas Quarterly Podcast

  World Bank Chief Economist for Latin America and the Caribbean William Maloney discusses the economic outlook for Latin America, including addressing the question of how much nearshoring is really happening.
  

• The Future of U.S.–Mexico Relations    The National Interest

  Mexico voted overwhelmingly for Claudia Sheinbaum to become its next president. She won nearly 60 percent of the popular vote—6 percent more than the incumbent President Andres Manuel Lopez Obrador (AMLO) obtained in 2018. The political coalition led by the Morena Party secured commanding majorities in both houses of Congress and obtained victories in state elections across Mexico.  With this impressive victory, however, come challenges that will send clear signals about how this new super-majority intends to govern Mexico and what kind of partner the United States can expect to deal with.

Middle East

• Biden Faces a Hard Choice to Avert Israel’s Next War   Hal Brands/American Enterprise Institute

  Israel faces several grave decisions in the coming weeks — what to do in Gaza after the fighting in Rafah concludes, how to balance the campaign against Hamas with the quest to free the hostages, and whether to move decisively toward normalization with Saudi Arabia. But Israel’s most fateful choice is whether to pivot from one war against Hamas to another against Hezbollah. That simmering conflict is approaching a moment for decision. The best way for President Joe Biden to head off a devastating Israeli war with Hezbollah in Lebanon is to demonstrate that he will back Israel to the hilt.

• Israel isn’t ending the war in Gaza – just turning its attention to Hezbollah   Vox

  Israeli Prime Minister Benjamin Netanyahu indicated in a television interview recently that he intends to move some of the country’s forces to the northern border to fight the Lebanon-based military group Hezbollah. Were it not for the war in Gaza, that conflict might have already been capturing the world’s attention. Israeli Defense Minister Yoav Gallant is also visiting Washington this week in part to discuss the implications of that escalation with US officials.

• Iran’s New Nuclear Threat: How Tehran Has Weaponized Its Threshold Status   Foreign Affairs

  Tehran has long used threats of nuclear expansion to reduce international pressure.  After Iran attacked Israel in April and the world awaited Israel’s response, Iran’s military commander in charge of Iran’s nuclear sites warned that if Israel attacked the sites, Tehran could revise its nuclear doctrine.  This is a new and dangerous evolution in Iran’s strategy, which is to use the country’s enhanced ability to build a nuclear weapon as a deterrent. Iran has gradually acquired many of the key capabilities necessary to build a nuclear weapon, becoming a so-called threshold state. Iran can now, in a matter of days, produce enough highly enriched uranium to make a bomb. By highlighting its bomb-making potential and responding to specific provocations by threatening to take the final steps to build nuclear weapons, Tehran hopes it can prevent international sanctions and a strike against its nuclear program.

Geoeconomics

• Can Trump replace income taxes with tariffs?   Peterson Institute for International Economics

  In the list of untested policy ideas from former President Donald Trump, scrapping the federal income tax and replacing it with revenues from sky-high tariffs on imports is one of the most harmful.  Trump floated this fiscal swap when he met with Congressional Republicans last week, but it’s a deeply problematic idea for several reasons. For starters, it would cost jobs, ignite inflation, increase federal deficits, and cause a recession. It would also shift the tax burden away from the well-off, substantially increasing the tax burden on the poor and middle class.

• Sovereign Haircuts: 200 Years of Creditors Losses   Clemens M. Graf von Luckner, Josefin Meyer, Carmen M. Reinhart & Christoph Trebesch/National Bureau of Economic Research

  Abstract: We study sovereign external debt crises over the past 200 years, with a focus on creditor losses, or “haircuts”. Our sample covers 327 sovereign debt restructurings with external private creditors over 205 default spells since 1815. Creditor losses vary widely (from none to 100%), but the statistical distribution has remained remarkably stable over two centuries, with an average haircut of around 45 percent. The data also reveal that “serial restructurings”, meaning two or more debt exchanges in the same default spell, are on the rise. To account for this trend toward serial renegotiation, we introduce the “Bulow-Rogoff haircut” - a cumulative measure that captures the combined creditor loss across all restructurings during a single debt crisis. Using this measure, we show that longer debt crises deliver larger haircuts and that interim restructurings provide limited debt relief. We further examine past predictors of the size of haircuts and identify “rules of thumb” applicable to future defaults. Poorer countries, first-time debt issuers, and those that borrowed heavily from external creditors all record significantly higher haircuts in case of a default. Geopolitical shocks - such as wars, revolutions, or the break-up of empires – deliver the deepest haircuts. Sovereign debt investment disasters are often linked to (geo-)political disasters.

Recommended Weekend Reads

June 21 - 23, 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.   

Global

• Reuters Institute Digital News Report 2024

  The Oxford University-based Reuters Institute research center offers its annual assessment of how the news industry is doing globally, breaking it down by major national markets.  Overall, the study finds the news media increasingly challenged on many fronts and makes the point that the report is “filled with examples of layoffs, closures, and other cuts due to a combination of rising costs, falling advertising revenues, and sharp declines in traffic from social media.”  The report goes on to detail that “In many countries, especially outside Europe and the United States, we find a significant further decline in the use of Facebook for news and a growing reliance on a range of alternatives including private messaging apps and video networks. Facebook news consumption is down 4 percentage points across all countries in the last year.  News use across online platforms is fragmenting, with six networks now reaching at least 10% of our respondents, compared with just two a decade ago. YouTube is used for news by almost a third (31%) of our global sample each week, WhatsApp by around a fifth (21%), while TikTok (13%) has overtaken Twitter (10%), now rebranded X, for the first time.”

Americas

• The U.S. Counterweight in Mexico   Ryan Berg/Connor Pfeiffer Americas Quarterly

  The sweeping victory of Claudia Sheinbaum and the political coalition of her mentor, Mexican President Andrés Manuel López Obrador (AMLO), on June 2 leaves Mexico’s opposition in shambles. Sheinbaum’s political opponents will control less than a third of the nation’s Chamber of Deputies and are only a few defections away from the same fate in the Senate. Mexico would become the fifth Latin American country with a legislative supermajority.   Facing this qualified majority, the opposition would likely be powerless to stop a suite of 18 constitutional changes introduced in February, including proposals to target the Supreme Court and National Electoral Institute (INE), two of the country’s strongest independent institutions.   Domestic checks on power will likely evaporate. This would likely leave Washington as the main counterweight capable of protecting Mexico’s democratic institutions, the rule of law, and liberalized economy.  As Mexico’s largest trading partner, Mexico’s biggest investor, and the external actor most invested in stemming the country’s dual security and migration crisis, the U.S. must take this role seriously and have a credible Mexico policy that preserves its interests and seeks cooperation, where possible.

• Feeling the Stones: Chinese Development Finance To Latin America and the Caribbean 2023  The Dialogue

  The Latin American/Caribbean (LAC) region continues to receive relatively few loans from China’s development finance institutions (DFIs) despite high rates of lending in previous years.   In 2023, just two loans were recorded to Brazil total of $1.3 billion, slightly up from 2022 when the Chinese DFIs loaned $863 billion.   There are many reasons for the decline over time to the LAC, including China’s own domestic economic challenges as well as the China National Financial Regulatory Administration implemented sector-specific measures to strengthen the supervision of the financial industry. 

• Investing in Science and Technology: The United States Needs to Up Its Game   Center for Strategic and International Studies

  The United States is facing a challenge to its global leadership in science and technology that is more serious than any it has confronted since gaining that position after World War II. Within the relatively short span of two decades, China has emerged as a formidable rival. The limited appreciation of the nature of this rivalry with China was recently underscored by the failure of the U.S. Congress to appropriate the funds previously authorized for the largest part of the CHIPS and Science Act of 2022 while simultaneously cutting the budgets of key federal science and technology agencies for fiscal year 2024. This is all the more disappointing given that the same week, China announced a 10 percent increase in its already significant levels of public spending on research and development (R&D). The U.S.-China technology rivalry has strategic implications that can ultimately determine the outcome of a potential military confrontation, should one come about. Moreover, as U.S. technology leadership declines, the risks of economic and military challenges will rise.
  

China

• Leveraging Killed China’s Bid for Leadership  Derek Scissors/American Enterprise Institute

  China’s debt performance over the past 15 years, including the entirety of President Xi’s rule, has been historically awful – far worse than America’s, even while the US has been fiscally irresponsible.  Monetary indicators suggest that China’s debt situation will continue to slowly deteriorate for the next few years.   The author argues that even if America’s debt situation deteriorates as well, the size gap between the two economies indicates China cannot catch up while carrying so much debt.

• How China’s Overcapacity Holds Back Emerging Economies   the Rhodium Group

  Since 2019, weak domestic demand and expanding industrial capacity have combined to balloon China’s manufacturing trade surplus. While growing Chinese exports benefit developing countries to some extent by providing inputs for their local industries, they also contribute to China’s rising market power, creating new vulnerabilities for the developing world. It has long been assumed that China’s rise up the value chain would create a growing market for labor-intensive manufactured goods from other emerging markets. These hopes will be dashed if Beijing cannot restart the engines of its own domestic growth and absorb more of what it currently exports. Unless Beijing implements serious demand reforms, developing nations will be crowded out of manufacturing by Chinese overcapacity, leaving them dependent and without export opportunities.

BRICS & the U.S. Dollar

• Xi, Putin Score Wins as More Asia Leaders Aim to Join BRICS   Bloomberg

  As Russian President Vladimir Putin and Chinese Premier Li Qiang wrapped up separate meetings in Southeast Asia this week, the two partners in the BRICS economic bloc encountered a region keen to join a group seen as a hedge against Western-led institutions.

• Top Dollar: Why the Dominance of America’s Currency is Harder Than Ever to Overturn    Foreign Affairs

  The U.S. economy is no longer the colossus it once was. Its public debt is gargantuan and rising, and policymaking in Washington is erratic and unpredictable. Persistent threats of debt defaults undercut the perception that U.S. government bonds are safe.  Therefore, it would be no surprise, then, if the dollar were rapidly losing its power. But in fact the opposite is happening: the trends that would be expected to weaken the dollar, many of them driven by U.S. policy, are only strengthening its global dominance. The dollar remains on top in part because of the U.S. economy’s size and dynamism relative to other major economies. But more than that, although American institutions are fraying, those in other parts of the world are in no better shape, with populism and authoritarianism on the rise. Moreover, economic and geopolitical turmoil serves only to intensify the quest for safe investments, usually leading investors back to the dollar, which remains the most trusted currency. The United States financial markets are much larger than those of other countries, making dollar assets easier and cheaper to buy and sell.
  

• The World After the West: Zarokol on Turkey   Re-Order Podcast/European Council on Foreign Relations

  The growth in membership to organizations such as BRICS+, the New Development Bank, and the Shanghai Cooperation Organization demonstrates the continued rise of ‘middle powers’ – countries that belong to neither the West nor the global south but play a significant role in the developing world order. This week, ECFR director Mark Leonard talks with Ayşe Zarakol, professor of international relations at the University of Cambridge and author of “Before the West: the Rise and Fall of Eastern World Order” (2022), to discuss the framework of global order beyond its Western conceptions. How do middle-power institutions leverage their membership to develop an identity separate from the historically dominant blocs? What can non-Western institutions such as BRICS+ offer dissatisfied ‘middle’ countries? And how is Turkey using these in the context of a new global order?

Africa

• Africa and the Economic Struggle of Great Power Politics   Arsenal of Democracy Podcast/The Hudson Institute

  Hudson Nonresident Fellow James Barnett joins the show from Nigeria to paint a picture of Africa’s economic and political landscape. France, the United States, Russia, China, and Saudi Arabia are all involved with the continent through either foreign direct investment, humanitarian aid, military support, and/or peacekeeping operations. Barnett gives his outlook on how the West is perceived regionally and whether Chinese and Russian initiatives in Africa will have a long-lasting impact.  

Geoeconomics & Finance

• Trademarks in Banking   Federal Reserve Board Finance and Economics Discussion Series

  Abstract: One in five banks in the United States share a similar name. This can increase the likelihood of confusion among customers in the event of an idiosyncratic shock to a similarly named bank. We find that banks that share their name with a failed bank experience a half percent drop in transaction deposits relative to banks with similar characteristics but different names. This effect doubles for failures that are covered in media. We rationalize our findings via a model of financial contagion without fundamental linkages. Our model explains that when distinguishing banks is more costly due to similar trademarks, depositors are more likely to confuse their banks’ condition resulting in financial contagion.

Chart of the Week

Who Is Turning to TikTok for News?

We noted in our lead Weekend Read above how the Reuters Institute has released its annual report on how the media industry is doing globally.  Coupled with the banning of TikTok in the U.S., India, and other nations, Statista breaks it down in a great chart showing the power of TikTok as a news provider.  In Thailand, 39 percent use TikTok as their source of news, Kenya comes in at 36 percent, Malaysia comes in at 31 percent, and Indonesia comes in at 39.  Only 9 percent of Americans use TikTok as their primary news source.

Recommended Weekend Reads

June 14 - 16, 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.   

Post-Election Mexico

• The Long Shadow of Violence in Mexico’s Elections   35 West Podcast/Center for Strategic and International Studies

  On June 2, nearly 60 million people cast their votes for the next president of Mexico, making it the largest election in Mexico’s history. However, the race was also marred by electoral violence, with more than three dozen candidates or prospective candidates murdered over the electoral season. Intimidation, coercion, and threats to family members further compelled many prospective candidates to withdraw from the race, illustrating the corrosive impact of violence and impunity for democratic institutions.  In this episode, Ryan C. Berg sits down with Chris Dalby, Director of World of Crime and author of the new book CJNG – A Quick Guide to Mexico’s Deadliest Cartel. Together, they discuss Mexico's evolving criminal landscape, the causes and consequences of electoral violence in Mexico, and what to expect from the new Sheinbaum administration's security policy. They also delve into the ways the United States and Mexico can reset security cooperation which has deteriorated in recent years.
  

• Populism’s Grip on Mexico: A Conversation with Denise Dresser   Foreign Affairs Podcast

  Earlier this month, Claudia Sheinbaum won a sweeping victory in Mexico’s presidential election. Although a lot of the coverage framed the results as a win for women and progressive politics, the story is far more complicated.  Mexico’s democracy is in trouble, warns Denise Dresser, a political analyst in Mexico. For years, Dresser has watched Sheinbaum’s party—and its previous leader, Andrés Manuel López Obrador—govern through polarization and the erosion of democratic institutions, even as the country struggles with violence, corruption, and persistent inequality. Dresser is a professor of political science at the Autonomous Technological Institute of Mexico. There is a chance that Sheinbaum will chart a different course. But if not, Dresser worries that Mexico could face an autocratic future.
  

• Inside Mexico’s anti-avocado militias   The Guardian

  The spread of the avocado is a story of greed, ambition, corruption, water shortages, cartel battles and, in a number of towns and villages, a fierce fightback.
  

• Latin America’s Big Opportunity   Shannon O’Neil/Council on Foreign Relations

  Over the last three decades, economic growth in Central Europe, East and Central Asia, Southeast Asia, and Sub-Saharan Africa has outpaced growth in Latin America, where most economies have actually become less sophisticated and diversified.  But now, current global trends are creating an opportunity for a long-delayed takeoff across Latin America.

The UK Elections

• Who’s Ahead in the British Polls?  A Day by Day UK Election Tracker   The Economist

  With the UK general election being held on July 4, here is a link to The Economist’s special election website showing where the UK political parties stand in the polls. As of June 13th, Labour is leading the ruling Conservatives by more than 20 percentage points. The other parties include the Liberal Democrats, Scottish National Party, Reform Party, and several smaller fringe parties) stand in the polls. 

• How Nigel Farage Blew up the UK Election  Politico EU

  Two weeks ago, Nigel Farage, the leader of the Brexit movement, was looking at his latest vanity project looked as a likely busted flush. Now it has the potential to upend the U.K. election — and reshape the future of British politics for good. For the first time on Thursday evening, an opinion poll from one of Britain’s most respected pollsters put Farage’s startup venture, Reform UK, ahead of its long-standing mainstream rival, the Conservative Party.

NATO Policy

• Developing An Economic Security Agenda for NATO   War on the Rocks

  As the NATO Summit in Washington DC approaches in July, the authors argue he assembled leaders should therefore initiate a NATO Economic Deterrence Initiative aimed at fortifying economic resilience and deterrence capabilities across the alliance. This initiative should include proposals to revitalize consultations, intelligence sharing, and policy coordination on economic security, adapting the alliance to a changing global landscape and sustaining the cohesion and unity that underpin collective defense. By reintegrating economic security into its strategic considerations, NATO can ensure a more comprehensive and resilient deterrent posture for the future.

U.S. Elections

• 2024 Election Outlook (June 2024)  The Tiber Creek Group

  Leading Washington lobbying firm Tiber Creek offers a superb overview of the state of the 2024U.S. elections, analyzing the Presidential, House, Senate, and Gubernatorial races and all the many nuances that is making this election season like no other in recent U.S. history.
  

• RFK Jr. on Polluters, Falconry, and Assassinations   The MeatEater Podcast

  If you not familiar with the MeatEater Show or MeatEater Podcast, they are the wildly popular outdoors hunting television show and podcast hosted by Steven Rinella.  Rinella is an American outdoorsman, conservationist, writer, and chef.  In this podcast, he talks with independent presidential candidate Robert F. Kennedy Jr.  Among the topics discussed: Brain worms (which Kennedy has suffered from) and bonding over parasites; getting mercury poisoning from eating all the fish you harvest; How Kennedy raised homing pigeons at age 7 and going on to become a master falconer; fighting polluters to keep water clean; making a list of every bad thing you ever did; focusing on what matters to people; government-subsidized vs. free market energy sources; Secret Service security; and more. 

Geoeconomics

• The Big Threat to Dollar Dominance is American Dysfunction   Steven Kamin &Mark Sobel/Financial Times

  In the 1960s, French finance minister Valéry Giscard d’Estaing lamented the dollar’s “exorbitant privilege”, longing for an international monetary system less reliant on the dollar and the shackles of US economic policy. In 2009, Governor Zhou Xiaochuan of the People’s Bank of China called for de-dollarization and a multipolar regime with an internationalized renminbi. Emerging markets joined the chorus, criticizing the spillovers from Fed monetary policy. But the wistful yearnings from seemingly every quarter of the world for the emergence of a non-dollar alternative system miss the point. Instead of reimagining the international monetary system, the focus should be on strengthening the underlying drivers and dynamics of the global economy.
  

• Food Policy in a Warming World   Allan Hsiao, Jacob Moscono & Karthik Sastry/NBER

  Do governments systematically intervene in agricultural markets in response to climate shocks? If so, what are the aggregate and distributional consequences? We construct a global dataset of agricultural policies and extreme heat exposure by country and crop since 1980. We find that extreme heat shocks to domestic production led to increased consumer assistance. This effect is persistent, primarily implemented via border policies, and stronger in election years when politicians are particularly responsive to constituent demands. Shocks to foreign production led to increased producer assistance, consistent with policymakers' targeting redistribution rather than price stabilization. Interpreted via a model, the estimates imply that policy responses almost fully stabilize prices in shocked markets, reducing losses to domestic consumers by 97% while increasing those to domestic producers and foreign consumers by 55% and 105%, respectively. Responsive policy exacerbates overall welfare losses from projected end-of-century climate shocks by 14%.

• Sleep: Educational Impact and Habit Formation National Bureau of Economic Research

  Abstract: There is growing evidence on the importance of sleep for productivity, but little is known about the impact of interventions targeting sleep.  In a field experiment among U.S. university students, we show that incentives for sleep increase both sleep and academic performance.  Motivated by theories of cue-based habit formation, our primary intervention couples personalized bedtime reminders with morning feedback and immediate rewards for sleeping at least seven hours on weeknights. Our results demonstrate that incentives to sleep can be a cost-effective tool for improving educational outcomes.

Technology

• The Big-Tech Clean Energy Crunch Is Here Wired

  As the world’s biggest companies race to build the infrastructure necessary to enable artificial intelligence, even remote Scottish wind farms are becoming indispensable. In Europe last year, $79.4 million was spent on new data center projects, according to research firm Global Data. Already in 2024, there are signs that demand is accelerating. Today Microsoft announced a $3.2 billion bet on Sweden data centers. Earlier this year, the company also said it would double its data center footprint in Germany, while also pledging a $4.3 billion data center investment for AI infrastructure in France. Amazon announced a network of data centers in the state of Brandenburg as part of a $8.5 billion investment in Germany, later dedicating another $17.1 billion to Spain. Google said it would spend $1.1 billion on its data center in Finland to drive AI growth.
  

• Catalyzing Crisis: A Primer on Artificial Intelligence, Catastrophes, and National Security  Center for a New American Security

  The arrival of ChatGPT in November 2022 initiated both great excitement and fear around the world about the potential and risks of artificial intelligence (AI). In response, several AI labs, national governments, and international bodies have launched new research and policy efforts to mitigate large-scale AI risks. However, growing efforts to mitigate these risks have also produced a divisive and often confusing debate about how to define, distinguish, and prioritize severe AI hazards. This categorical confusion could complicate policymakers’ efforts to discern the unique features and national security implications of the threats AI poses—and hinder efforts to address them. This report aims to: Demonstrate the growing importance of mitigating AI’s catastrophic risks for national security practitioners, clarify what AI’s catastrophic risks are (and are not), and introduce the dimensions of AI safety that will most shape catastrophic risks.
  

Leadership and Psychology

• CIA Clinical Psychologist Ursula Wilder on Profiling World Leaders   Intelligence Matters Podcast

  In this episode of Intelligence Matters, host and former CIA Director Michael Morell speaks with Ursula Wilder, a clinical psychologist at the Central Intelligence Agency, about why intelligence agencies conduct psychological profiles of world leaders, and how past policymakers have used what they have learned to make strategic decisions. Wilder, who also worked in CIA's counterterrorism center and Medical and Psychological Assessments unit, explains the "dark tetrad" of personality -- narcissism, paranoia, Machiavellianism and sadism -- and how those traits can influence how leaders make decisions and engage in negotiations. She and Morell also discuss how policymakers respond to psychological profiles compiled by government agencies. 

Recommended Weekend Reads

May 31 - June 2, 2024

Here are our recommended reads from reports and articles we read in the last week.  In this issue, we have a new suggestion: Twitter accounts we follow and find interesting, informative, and fun.   We hope you find all of this 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

• Why is the U.S. GDP recovering faster than other advanced economies?  FEDS Notes/May 17, 2024

  In this note, we investigate possible drivers explaining the stark difference in economic performance between the U.S. and AFEs over the past few years, considering both cyclical factors, such as fiscal and monetary policies, as well more structural factors, such as labor market flexibility and business dynamism. We also recognize the role of large shocks that particularly affected certain regions such as the economic shocks resulting from Russia's invasion of Ukraine that had an outsized effect in Europe. Although a precise quantification of each channel is left for future research, we argue that structural factors play a role in the way different economies responded to cyclical policies.3 In addition, we caution against interpreting recent productivity developments as only reflecting permanent shifts across economies.

• The Rise of Mesoeconomics   William Janeway/Project Syndicate

  The digitalization of economic life and real-world data has opened up new possibilities for the study of the economic networks, regions, and sectors that ultimately determine how economic policies play out in the real world. Such modes of thinking will be crucial for economic policymaking in a new age of geopolitical risk.

• Instruments of economic security  Bruegel

  Geopolitical and economic developments, including Russia’s invasion of Ukraine and trade disruptions during the COVID-19 pandemic, have raised concerns about the European Union’s exposure to hostile countries. The challenge of improving European economic security (which we narrowly treat here as exposure to foreign trade or production shocks) has grown in importance, with various relevant policy measures introduced at the EU level.  Focusing in particular on the threat posed by economic coercion, this paper begins by assessing the nature of this threat before outlining two lessons that can be drawn from two recent instances of this coercion in action: China’s actions against Lithuania and Australia, respectively.

•  Commercial Real Estate in Focus   Federal Reserve Bank of St. Louis

  Commercial real estate (CRE) is navigating several challenges, ranging from a looming maturity wall requiring much of the sector to refinance at higher interest rates (commonly referred to as “repricing risk”) to a deterioration in overall market fundamentals, including moderating net operating income (NOI), rising vacancies and declining valuations. This is particularly true for office properties, which face additional headwinds from an increase in hybrid and remote work and troubled downtowns. This blog post provides an overview of the size and structure of the U.S. CRE market, the cyclical headwinds resulting from higher interest rates, and the softening of market fundamentals.  As U.S. banks hold roughly half of all CRE debt, risks related to this sector remain a challenge for the banking system. Particularly among banks with high CRE concentrations, there is the potential for liquidity concerns and capital deterioration if and when losses materialize.

Ukraine War/Russia

• Russia is using the Soviet playbook in the Global South to challenge the West – and it is working  Chatham House

  Russia has been courting the states of the Global South to circumvent Western sanctions and avoid international isolation – with notable success. In February 2024, Moscow hosted the first ‘For the Freedom of Nations’ forum with 400 delegates from 60 countries, aiming to rally the countries of the Global South against ‘Western neo-colonialism’.  In its war on Ukraine, Moscow has turned the Global South into both an instrument and a theatre of geopolitical competition, capitalizing on long-held grievances of colonialism and power imbalance. Much like its Soviet predecessor, Russia uses ‘anti-imperialism’ as its main propaganda theme and as an ideological basis for its global engagement. It has effectively leveraged legacies such as memories of Soviet support for decolonization and traditions of non-alignment, bringing deep-seated resentment against the West to the fore. 

• The End of the Near Abroad   Carnegie Endowment for International Peace

  Putin’s war on Ukraine marks the end of the near abroad—the idea that Russia enjoys a special status in much of the post-Soviet space. But while Russia’s neighbors are seeking greater independence, they are not necessarily turning West.  Are these states a new buffer between NATO and Russia?  Or a threat to Russia in and of themselves?

• The Memo-Affair: Plan, Bluff, or Accident? Russia’s “Project” on Altering Maritime Borders in the Baltic Sea   Wilson Center

  On the evening of Tuesday, May 21, 2024, Russian media reported on a short technical document posted online by the Russian Defence Ministry (MOD) regarding a maritime border project in the Baltic Sea. In the memo, the Ministry was seeking approval for its proposal on a “draft list of geographical coordinates” that would help recalculate “baselines measuring the width of Russia’s territorial sea, mainland coastline and Baltic Sea islands.”  By establishing “a missing straight baseline system,” the “maritime border” of the Russian Federation would, according to the document, ultimately be altered. This redrawing of the boundary, pertaining specifically to the Kaliningrad region (near Baltiysk and Zelenograd) and the eastern Gulf of Finland (around several islands that the Finnish government ceded to the USSR in 1940), would allow Russia to “use these waters as internal.”  To the governments of Finland and Lithuania, this news came as a complete surprise.

• Action Plan 3.0: Strengthening Sanctions Against the Russian Federation Working Group Paper #19 of the International Working Group on Russian Sanctions

  Significant sanctions have already been imposed on Russia, for which the sanctions coalition should be applauded. Sanctions have had a major impact on the Russian economy and have constrained Russia’s military and financial capabilities. In particular, the international sanctions coalition –around 50 countries – has substantially reduced Russian export markets and revenues. In addition, the Kremlin’s inability to access roughly $300 billion in central bank reserves has dramatically limited its policy maneuvers. But more efforts are needed.  The Working Group, made up of independent experts from many countries, proposes the following in their latest report: Confiscate frozen Russian assets abroad, impose new sanctions on Russian exports (gas, nitrogen fertilizers, metals), impose import tariffs on all remaining Russian exports, strengthen technology bans, tighten financial sanctions, impose more sanctions on Russian companies, impose more personal sanctions, prevent lawyers from enabling sanctions evasion, designate Russia as a sponsor of terrorism, stop Western companies from doing business with Russia, strengthen enforcement of existing sanctions, and expand secondary sanctions on other countries that do business with Russia.

 Taiwan 

• Beware forecasts of doom for Taiwan under Lai   Ryan Hass/Brookings Institution

  Newly inaugurated Taiwanese President Ching Te (“William”) Lai. Lai famously once referred to himself as a “pragmatic worker for Taiwan independence.” Considering Beijing has threatened to go to war to prevent Taiwan's independence, the thinking goes that Lai’s recent inauguration could spell impending trouble. Such analysis is easy to write and almost certainly wrong. Lai is not a wild-eyed zealot with a one-track-minded focus on Taiwan's independence. He is a professional politician who has organized his career around becoming Taiwan’s president. Now that he has ascended to Taiwan’s top elected position, he will want to win reelection. To do so, he almost certainly will need to tack to the center of Taiwan’s political spectrum rather than cater to the wishes of a small minority of Taiwan voters who favor throwing caution to the wind in service of Taiwan's independence or unification. Indeed, less than 6 percent of Taiwan’s voters support “the immediate pursuit of independence from, or unification with, the People’s Republic of China.”

 Recommendations from the Twitterverse 

We are starting something new with this issue: We will periodically offer recommended Twitter accounts we find particularly informative and useful.  We hope you find them useful, too.

• Robin Brooks/Brookings Institution (@robin-j-brooks)

  Brooks is the former Chief FX Strategist at Goldman Sachs and the Chief Economist at the Institute for International Finance. He is now a Senior Fellow at the Brookings Institution. His voluminous stream of great charts and graphs revealing the massive back-door trade avenues employed by Russia to evade sanctions is jaw-dropping.  But he covers a host of other well-researched global economic issues, as well.

•  Ryan Berg/Center for Strategic and International Studies (@ryanbergPhD)

  I will say it right up front: Ryan is a good friend.  But he’s also hands-down the best observer/academic I know of all things Latin America, and his Twitter site is the “one-stop shopping” place to go to stay up to date on the region.  As the Director of the Americas Program at CSIS, he somehow devours the many diverse political, economic, social, and business streams running through the region and is able to synthesize is quickly and right on target. He’s also the leading expert on China’s growing investment entanglements in the region. 

• Milei Explains (@Milei_Explains)

  I’m not sure who produces this twitter page, but I find it quite fun and informative as Argentine President Javier Milei fights to transform the economic mess that Argentina is in today.  The site explains: “Milei in English. translates [Argentine President Javier] Milei for friends. No politics. 100% Economics.  Not affiliated with Javier Milei.”  

Recommended Weekend Reads

May 17 - 19, 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. 

Critical Minerals

• Mineral Demands for Resilient Semiconductor Supply Chains CSIS

  The People’s Republic of China (PRC) is the principal strategic competitor of the United States. In addition to antagonism in other domains, this rivalry entails escalating technological competition. No country is technologically self-sufficient, but the United States’ reliance on China’s considerable market share in the critical minerals industry for semiconductor supply chains creates a dependency that turns a trade imbalance into a potential national security threat. Chips are ubiquitous in all modern technology, and their relevance and worth will only expand in the coming years. The countries that are able to secure their own supply chains for critical technologies will be in a position to write the rules of global economic governance for years to come.

  Americas

• The Woman Inheriting AMLO’s Revolution Foreign Policy

  Most Mexicans began to seriously entertain the idea that Claudia Sheinbaum could be Mexico’s first female president in December 2022, when her trademark slicked-back ponytail began to appear on billboards across the country. Paid for by legislators in Sheinbaum’s party, Morena, the signage was intended to make the former climate scientist and then-Mexico City mayor known nationwide.
  

• Mexico’s Post-Election Fiscal Reality Check   Americas Quarterly

  Mexico is three weeks away from one of its most consequential elections in recent history. Much is at play on June 2, as the outcome of this vote is likely to have economic and political implications that will shape the nation’s future for decades. Why is there so much at stake? From an optimistic perspective, the opportunity nearshoring brings to the country is likely to become more evident in the next six years, but only if the new administration manages to tackle the significant bottlenecks Mexico still faces in broad areas such as energy, infrastructure, security, water, human capital, and its regulatory environment. From a less upbeat vantage point, Mexico’s democracy could be at risk if the election results end up in a landslide.  Notwithstanding the result, no matter who wins the presidential race, the post-June 2 party will likely be short, as the current list of challenges—and inherent risks—the next president will face is probably the most fearsome in 25 years.
  

• War Has Changed. We Didn’t.  That Reality Will Cost Us  Hudson Institute’s Arsenal of Democracy Podcast

  War is rapidly changing. Countries like China are already moving force structure and planning toward a new type of conflict. Meanwhile, the United States overspends and delays the production of systems like aircraft carriers that could soon fall into the category of “a weapon that you can’t afford to lose.” The Sagamore Institute’s Dr. Jerry Hendrix joins the show to explain how the US and its industrial base can change course to prepare for future conflicts before a dangerous “comeuppance” shocks us into action.  This episode features Dr. Jerry Hendrix, a Senior Fellow at the Sagamore Institute.

Russia’s War on Ukraine

• “Russia’s Murky Future”  The Foreign Affairs Interview Podcast

  The noted Russian scholar and biographer of Josef Stalin, Steven Kotkin,  gives a fascinating interview on what is going on inside Russia.  When Russia botched its invasion of Ukraine and the West quickly came together in support of Kyiv, Russian President Vladimir Putin’s grip on power appeared shakier than ever. Last summer, an attempted coup even seemed to threaten his rule. But today, Putin looks confident. With battlefield progress in Ukraine and political turmoil ahead of the U.S. election in November, there’s reason to think things are turning in his favor.

Australia

• Australia’s New Gas Strategy Makes for Flawed Foreign Policy The Interpreter

  The latest Australian federal budget, handed down on Tuesday night, pledges unprecedented support to making Australia a “renewable superpower”. Yet a new gas strategy that preceded it promises to keep Australia and its Asian energy partners tethered to this fossil fuel for decades. While fiscal commitments now favor Australia’s greener energy engagement, Canberra should wind back broader regulatory support to gas. This would quicken the timeframe in which Australia might provide for both the energy security needs of Asia and the climate security needs of the Pacific.

China

• China Has Gotten the Trade War it Deserves   The Atlantic

  A global trade war is starting, and China is at the center of it. A reckoning for Beijing’s economic model, which is designed to promote Chinese industry at the expense of the rest of the world, has long been coming. China’s trading partners have had enough. The result will be a wave of protectionism, with potentially dire consequences for both China and the global economy.

Global Financial Markets and Economics

• Emerging Threats to Financial Markets  RAND

  In early 2021, a freewheeling, freethinking group of investors on Reddit decided to flex some collective muscle. They plowed their money into GameStop, a video game retailer that several big hedge funds had bet against. The stock price shot up, some people made millions—and, to the delight of those on Reddit, the hedge funds had some very bad days.

Asymmetric Threats

• Contested Connectivity: Cyber Threats in the Asia-Pacific   International Institute for Strategic Studies

  Asia-Pacific countries are facing increasing numbers of state-backed hacking operations serving geopolitical and economic purposes. They are also getting better at conducting them. Domestic and foreign-policy ambitions are manifesting in the information space, where state-linked actors are contesting state adversaries, political opponents, and world views both overtly through activities such as defacement (hacking a target website and replacing its content with the hackers’ own message), and covertly, via disinformation operations. While basic cyber best practice is still out of reach for the least cyber-capable states, a couple of regional states could be considered amongst the most cyber capable globally. Forging a greater range of international partnerships between governments and industry is likely to boost the region’s resilience in cyberspace. Political will and geopolitical alignments will likely shape how that unfolds.

Demographics

• Birth Dearth or Baby Boom?   American Enterprise Institute

  Writing in the Wall Street Journal earlier this week, Greg Ip and Janet Adamy explored the possibility that the world’s population may peak and begin to fall far sooner than demographers have previously projected: “The world is at a startling demographic milestone. Sometime soon, the global fertility rate will drop below the point needed to keep the population constant. It may have already happened. Fertility is falling almost everywhere for women across all levels of income, education, and labor-force participation. The falling birthrates come with huge implications for the way people live, how economies grow and the standings of the world’s superpowers.”

• Addressing Demographic Headwinds in Japan: A Long-term Perspective OECD

  Japan faces serious demographic headwinds. Under current fertility, employment, and immigration rates, the population would fall by 45% by 2100 and employment by 52%. Given the challenges of a shrinking and ageing population, the government has pledged to “create a children-first economic society and reverse the birth rate decline”. One priority is to strengthen the weak financial position of youth, which leads many to delay or forgo marriage and children. Making it easier to combine paid work and family is also critical so that women are not forced to choose between a career and children.

Recommended Weekend Reads

May 3 - 5, 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. 

European Union

• Enrico Letta’s Report: More Than a Market, But Less Than An Agenda  Centre For European Reform

  On April 18th, former Italian prime minister Enrico Letta published his long-awaited report on the future of the EU’s single market, entitled ‘Much more than a market’. Letta describes the EU single market as unsuited for a world where the EU’s share of the world economy is shrinking and where it faces competitors less willing to play by global norms. His report correctly identifies many of the EU’s most urgent problems. It has proposals on everything from the need for high-speed rail, investments in outer space, and a more unified health sector, to more quotidian efforts to improve EU law-making processes. But many of Letta’s recommendations echo ideas which have been raised repeatedly in recent years, offering something for everyone while glossing over trade-offs. This is illustrated by his somewhat quixotic call for the EU to strike “a balance between competitiveness, strategic independence and equitable global conditions, avoiding the imposition of detrimental regulations and instead fostering strategic partnerships based on well-founded policies”.

• EU’s red tape Is helping Russia Australian Strategic Policy Institute

  The European Union’s spending rules and public-procurement processes are plainly inadequate to the threat posed by Russia’s full-scale invasion of Ukraine. If the World War II Allies had been subject to such strictures, they would have been unable to buy landing craft for the invasion of Normandy in 1944, equip General Charles de Gaulle’s Free French Army, or issue war bonds in time. The EU’s regulations undermine its capacity to mitigate the war’s effects on Europe itself, weaken its ability to protect itself from a broad range of hybrid attacks, and prolong Russia’s military aggression against Ukraine.

• Security of Supply in Times of Geopolitical Fragmentation  German Institute for International and Security Affairs

  The recent political consensus on the European Critical Raw Materials Act (CRMA) marks a significant step towards a common raw materials policy within the European Union (EU). Against the backdrop of increasing geopolitical tensions, the EU aims to bolster its “strategic autonomy” within its raw material supply chains. To achieve this goal, it is essential for the EU and its member states to enhance collaboration with mineral-rich third countries. The current geopolitical environment will require a concerted effort on the part of the EU with respect to its raw material diplomacy, as only through such effective engagement will the EU be able to diplomatically and programmatically implement raw material partnerships that appeal to third countries. 

• Europe can’t afford to decouple from China  UnHerd

  Last week, US Secretary of State Antony Blinken travelled to Beijing to meet senior Chinese government representatives.  His reception was somewhat frosty, as officials told him that the United States must choose between a policy of “confrontation or cooperation” with the Chinese. Beijing’s diplomatic well is now pretty dry, and its representatives are signaling clearly that the Americans need to make a decision on their Chinese strategy.

China

• “Keeping Up with the Pacing Threat: Unveiling the True Size of Beijing’s Military Spending”  American Enterprise Institute

  Beijing’s publicly released military budget is inaccurate and does not adequately capture the colossal scope and scale of China’s ongoing military buildup and wide-ranging armed forces modernization.  After accounting for economic adjustments and estimating reasonable but uncounted expenditures, the buying power of China’s 2022 military budget balloons to an estimated $711 billion—triple Beijing’s claimed topline and nearly equal with the United States’ military budget that same year.  Equal defense spending between the United States and China plays to Beijing’s benefit. As a global power, the United States must balance competing priorities in the Indo-Pacific and elsewhere, which spreads Washington’s budget thinly across multiple theaters. Meanwhile, each yuan China invests in its military directly builds its regional combat power in Asia.

• The Potential Chinese Responses to a U.S. Ban on TikTok  Carnegie Endowment for International Peace

  In March, the U.S. House of Representatives overwhelmingly passed a bill that would require TikTok to divest from its Chinese parent company, ByteDance, or face a ban within the United States. The Senate is expected to vote on this matter soon, with President Joe Biden expressing his intention to sign the bill into law. However, factors such as the timing of the Senate vote, the November U.S. presidential election, and legal action by TikTok make the app’s U.S. future anything but certain. 

Russia and Ukraine

• Russia’s Shadow Fleet Goes Rogue  Center for European Policy Analysis

  The frequent presence of the Kremlin’s sanctions-dodging vessels off the coast of Gotland, where they perform dangerous ship-to-ship transfers of oil, is a clear provocation, not to mention a looming threat to marine life. Now the Swedish Navy reports that shadow vessels in the waters of Sweden’s exclusive economic zone don’t just conduct their regular business: they’re also equipped with communications gear that is in no way needed by standard merchant vessels. The Russian shadow fleet appears to simultaneously be a spy fleet.

•  These four Ukrainian families hoped to return home one day. Now all they have left of their homes is their keys.  Meduza

  In the aftermath of Russia’s full-scale invasion of Ukraine, over 14 million people — nearly one-third of Ukraine’s pre-war population — were forced to flee their homes.  For many of those hoping to someday return, however, Moscow’s war of aggression has left them without a home to go back to. In addition to homes now under Russian occupation, approximately 250,000 buildings in Ukraine (the majority of which were residential) have been completely destroyed.  Meduza spoke to four Ukrainian families who once dreamed of the day they could finally return home. Today, all that remains of their homes can fit in the palm of their hands: their keys.

• Stick, Carrot and More Stick: The Kremlin and Russian Youth Center for European Policy Analysis

  The Russian authorities are increasing the indoctrination of children and young people in an attempt to secure their support. In mid-April, the Ministry of Education ordered teachers to tell pupils about heroes of the “Special Military Operation,” “wartime heroic deeds” and “spiritual-moral values, including service to the Fatherland.”

• Does It Matter If Ukraine Loses?  Centre for European Reform

  In war, the ‘right’ side does not always win. Franco’s Nationalists won the Spanish Civil War; the Taliban drove the West out of Afghanistan. Ukraine’s president, Volodymyr Zelenskyy, said recently that without more US help, Ukraine would lose the war.  The commander of Ukrainian forces, Oleksandr Syrskyy, warned on April 13th that the situation in the east of the country had deteriorated significantly.  Even if the aid belatedly approved by the US House of Representatives on April 20th arrives in the next few weeks, democratic Ukraine could still be defeated by authoritarian Russia. Western countries – especially European countries – need to decide how much this matters to them.  At present, some, such as the Baltic states, are doing all they can to ensure that Russia does not win. A few, such as Hungary, seem to be actively working against Ukraine. But for most countries, there is a sizeable gap between leaders’ rhetoric, proclaiming support for Ukraine, and their revealed priorities, in terms of defense spending, weapons delivery and willingness to talk honestly to their domestic audience about the war.

United States

• Immigration Has Helped Boost US Economic Growth  Peterson Institute for International Economics

  Immigration into the United States has surged in recent years, and it has boosted economic growth. Based on an analysis of records from the Department of Homeland Security and other sources, the Congressional Budget Office (CBO) has substantially revised up its estimates of net immigration into the United States. CBO now estimates net annual immigration averaged 3 million in both 2022 and 2023 and projects that this year’s pace will be high as well. Many new immigrants have likely joined the US labor force, increasing the productive capacity of the macroeconomy. The implied increase in “potential output growth” helps explain how the US economy could have grown at a robust 3.1 percent pace over the four quarters of 2023 without generating more inflation pressures. 

The Hidden Monetary State  Arizona State Law Journal

Money is a motley.  While the state typically enjoys a monopoly on issuing new physical currency, a variety of instruments serve money-like roles in the financial system. The United States relies heavily on its commercial banking system to augment the money supply through issuing deposits. Alongside, and on top of the commercial banking system, a shadow banking system has also developed, offering a range of deposit substitutes. This article seeks to cast new light on the U.S. financial system by exploring how, over the course of the twentieth century, federal policymakers engaged in a series of distinct and largely uncoordinated monetary experiments. As we show through historical case studies, federal authorities designed, promoted, and repurposed financial instruments, endowing them with money-like characteristics by providing them with liquidity support, credit support, or both. In essence, policymakers created special purpose moneys to further national policy ambitions. 

Africa

• The Mirage of African Independence  Compact Magazine

  50 years ago, Portugal’s colonial project in Africa unraveled, bringing to a close the age of overt European imperialism on the continent. In the decades after World War II, dozens of newly independent nations arose in the African territories previously colonized by Britain, France, and Belgium. By the end of the 1960s, among Europe’s imperial powers, just one holdout had remained: Portugal, which had also been the first European nation to acquire African territory with the 1415 conquest of Ceuta, on the North African coast.

Chart of the Week

The Rainy Season Hits Panama and the Canal May Be Getting Back to Normal 

The long drought in Panama appears to be over.  Per Bloomberg: “The rainy season is arriving at the Panama Canal as predicted, fueling hopes that a prominent trade chokepoint will clear up just in time for shipping’s busy time of year. The seven-day moving average of daily vessel crossings reached 25 last week, up from a low of about 21 set in late-January but still well below the long-term average before the drought of about 35 a day, according to data compiled by IMF PortWatch. The canal authority announced recently that it will lift booking slots to 31 daily transits in the second half of May and then to 32 starting in June. Maximum draft rules — which limit the total weight of a ship’s cargo — will rise starting in June, too.”

Recommended Weekend Reading

April 26 - 28, 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. 

U.S. National Economic Security Policy

• Onshoring Semiconductor Production: National Security Versus Economic Efficiency Council on Foreign Relations

  Semiconductors—commonly known as microchips, chips, or integrated circuits—enable modern life. Those small devices make everything from computers, smartphones, microwaves, and cars to advanced weaponry work. A car, for instance, needs as many as 3,000 semiconductors, while one Javelin anti-tank missile requires more than 250 chips. As artificial intelligence (AI) and quantum computing continue to advance, the global demand for semiconductors will only increase, while power will accrue to those countries that can develop, produce, and harness the most advanced chips.

• What can be done about the high and rising national debt?  Brookings Institution

  U.S. policymakers and the American public have expressed significant concerns about the rising national debt, but there have been few meaningful actions in recent decades to address it. On April 16, at an event co-hosted by the Brookings Institution and Miami Dade College, fiscal policy experts and local officials came together to discuss the prospects for policies that can address concerns over rising public debt. You can watch the full video of the event here.

U.S. Election Outlook

• Census Bureau Releases 2022 Congressional Election Voting Report United States Census Bureau

  The voter registration rate (69.1%) for the 2022 congressional election was the highest registration rate of a midterm election in 30 years. However, the voter turnout rate (52.2%) was lower than in the 2018 (53.4%) midterm elections, according to the new Voting and Registration in the Election of November 2022 report released today by the U.S. Census Bureau. The report, based on data from the 2022 Current Population Survey (CPS) Voting and Registration Supplement, builds on detailed tables released earlier this year.

Russia

• Russian US election interference targets support for Ukraine after slow start Microsoft Threat Analysis Center

  Russian influence operations (IO) have picked up steam in the past two months. The Microsoft Threat Analysis Center (MTAC) has tracked at least 70 Russian actors engaged in Ukraine-focused disinformation, using traditional and social media and a mix of covert and overt campaigns.

• The Black Sea Region Endures Beyond the Theater of War Panorama

  Many strategic surprises have come from the combat operations on the Black Sea theatre in the last 25 months, and they keep coming as the long Russo-Ukrainian war continues to evolve while the prospect of peace is barely visible through its fog. In the domain of politics, one surprise is that the Black Sea region has not been completely transfigured into the theater of war but endured, even if its key institution – the Black Sea Economic Cooperation (BSEC) – barely functions in a few working groups and the Parliamentary Assembly.

• US vs. Russia: Why the Biden strategy in Africa may be failing Politico

  U.S. officials are starting to accept that their strategy of pressing Niger and other war-battered African countries to break off ties with Moscow and embrace democratic norms is no longer working. The recent breakdown in relations with Niger, where American troops are set to withdraw as Russian fighters arrive, has forced a reckoning inside the Biden administration over its approach to maintaining its allies in volatile parts of Africa.

• Back in Stock? The State of Russia's Defense Industry after Two Years of the War CSIS

  This report examines Russia’s evolving defense industrial capabilities and limitations during the second year of the Russia-Ukraine war and analyzes how these changes have affected and will continue to affect battlefield outcomes in Ukraine. The report starts with an overview of Russia’s domestic arms production efforts throughout 2023, followed by a detailed examination of key Russian weapons systems (such as tanks, artillery, drones, missiles, and electronic warfare systems) and their changing roles on the battlefield. The report then analyzes Russia’s general procurement dynamics and identifies the imported components and weapons categories that Russia’s defense industry has particularly relied on in the second year of the war.

India

• How India’s democracy shapes its global role and relations with the West  Chatham House

  Two narratives dominate global discussions about India today: one is on the country’s rise as an increasingly prominent geopolitical and economic actor; the other centers on concerns – particularly among India’s Western partners – about democratic backsliding. As India goes to the polls in 2024, this paper examines the interplay between these two narratives, or more specifically, what India’s status as the world’s largest democracy means for its global role and relations with the West. It does so by analyzing how the changing nature of India’s national identity impacts the country’s foreign policy.

China

•   Why the U.S. and China Suddenly Care About a Port in Southern Chile Americas Quarterly

  Perched on the pylons of a century-old coal pier, sleek black cormorants gaze out at cruise ships, propane tankers, and research vessels dotting the white-capped Strait of Magellan. Farther into the horizon, a humpback whale blows a misty plume toward the sky.

• China is Battening Down for the Gathering Storm Over Taiwan War On The Rocks

  Chinese war drums beat on as pundits hotly debate if or when Beijing will try to seize Taiwan by force. There is no apparent countdown to D-day for initiating a blockade or invasion, but major strategic indicators clearly show that General Secretary Xi Jinping is still preparing his country for a showdown. Developments underway suggest Taiwan will face an existential crisis in single-digit years, most likely in the back half of the 2020s or the front half of the 2030s.

• Middle East

• Six Options for Israel in Gaza The Washington Quarterly

  In response to its devastating October 7, 2023 attack, Israeli leaders have stated that they seek to “destroy” Hamas–a goal easier in rhetoric than in reality.1 Israel’s actions—bombing Gaza, sending in troops to kill Hamas fighters and destroy Hamas’ infrastructure, and targeting Hamas leaders in Gaza and around the region—have killed over 30,000 Palestinians in Gaza, including many children. In solidarity with Hamas, Iranian-backed groups have conducted attacks against Israeli and US targets around the region.2 If, understandably, Israel is loath to allow Hamas a victory and seeks to ensure its security, what options does it have?

• Iran and the de-escalation myth Atlantic Council

  Forgive the Israelis if they aren’t in the mood to take the victory lap the White House has suggested to them, following the remarkable defense of their territory from an unprecedented Iranian barrage of more than three hundred explosive-laden drones, ballistic missiles, and cruise missiles. “You got a win,” US President Joe Biden told Israeli Prime Minister Benjamin Netanyahu over the weekend, as reported by Axios from a White House source. “Take the win.” Translate that into a strong US suggestion, straight from the Oval Office, that Israel demonstrate restraint in its response and refrain from attacking Iranian territory to avoid further escalation. To drive his point home, Biden also told the Israeli prime minister that US forces wouldn’t participate in any reprisal attack.

International Economics 

• 24-9 Economic Multilateralism 80 Years after Bretton Woods Peterson Institute for International Economics

  The global economic institutions that grew from the Bretton Woods conference of 1944 aimed to create a cooperative policy environment conducive to recovery, development, continuing prosperity, social stability, and democracy. Prominent in the minds of the architects were the macroeconomic and trade policy coordination failures of the 1930s, which accompanied a world depression and the march toward the Second World War. The assumption of “embedded” liberalism’ underlying Bretton Woods gave way to a much more market-oriented system by the early 1990s, fueling strong growth in several large emerging markets and a period of hyper-globalization—but also social tensions in advanced economies. The result has been a changed geopolitical balance in the world as well as a backlash against aspects of globalization in many richer countries, notably the main sponsor of postwar international cooperation, the United States. At the same time, global cooperation is threatened despite the emergence of a broader range of shared global threats requiring joint action. The rich industrial countries that dominate the existing multilateral institutions should recognize them as being instrumental for channeling superpower competition into positive-sum outcomes that can also attract broad-based international support. However, leveraging those institutions will require buy-in from middle- and low-income countries, as well as from domestic political constituencies in advanced economies. The future of multilateralism depends on reconciling these potentially conflicting imperatives.

• Newcomers Bring New Rules  CSIS

  The world’s challenges are increasingly complex. Borders could not stop the spread of the COVID-19 pandemic, but Russia’s 2022 invasion of Ukraine demonstrated that the kinds of national wars that characterized the 20th century were still relevant. Ideology has faded, and the states of the Global South have grown larger and wealthier. They now expect a larger share of the global pie. While cooperation has become more necessary, the world has entered an era of increased national contestation.

• Jobs, Trade, and Investment: Cyclical Weakness, Structural Strength The Transatlantic Economy

  Lenin once quipped, “There are decades where nothing happens, and there are weeks where decades happen.” So, it is with the 2020s. While barely at the half mark of this decade, the world economy has been buffeted by a global pandemic, Russia’s stunning war of aggression in the heart of Europe, an Israel-Hamas conflict that could engulf the broader Middle East, ongoing violence across large swathes of Africa, massive movements of displaced peoples, major disruptions to flows of goods, services, and commodities, and a spike in inflationary pressures reminiscent of the 1970s. Rarely have the challenges seemed so acute.

• Are We Fragmented Yet? Measuring Geopolitical Fragmentation and its Causal Effects UPenn

  After decades of rising global economic integration, the world economy is fragmenting. To measure this phenomenon, we introduce an index of geopolitical fragmentation distilled from diverse empirical indicators. To do so, we rely on the use of a flexible, dynamic factor model with time-varying parameters and stochastic volatility. Then, we employ structural vector autoregressions and local projections to gauge the causal effects of changes in fragmentation. We show that more fragmentation impacts the global economy detrimentally but harms emerging economies more than advanced ones. We also document a key asymmetry: fragmentation immediately harms the global economy, while reduced fragmentation only unfolds gradually. A sectoral analysis within OECD economies highlights the adverse effects on those industries intricately linked to global markets, including manufacturing, construction, finance, wholesale, and retail trade.

Recommended Weekend Reads

April 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. 

India

• A Short History of India in Eight Maps  The Economist

  In his decade in power Narendra Modi, India’s prime minister, has centralized the state to an unprecedented extent. Yet his ruling Bharatiya Janata Party(BJP) has failed to attract many voters in the more prosperous south. The regional divergence is not unique to the BJP. Throughout India’s long history, rulers have tried and failed to unite the subcontinent under central authority. The chief reason is India’s diversity, summed up in clichés about dozens of cuisines, hundreds of languages and thousands of gods. The clichés may be trite, but they are also useful. A whirlwind tour through 2,500 years of Indian history helps explain why.
  

• “Meet India’s Generation Z”  Foreign Policy

  India changes more in five years than many countries would in a quarter century. This is partly because it is still relatively young: The country gained independence just 76 years ago, and nearly half of its population is under the age of 25. As one would expect, then, much has happened in the five years since 2019, when Indian voters issued an overwhelming mandate to keep the Bharatiya Janata Party (BJP) and Prime Minister Narendra Modi in power.  But what do those aged 18 to 25 think about India’s future?
  

• “The Hindu Nationalist Foreign Policy – Under Modi, India is Becoming More Assertive”  Foreign Affairs

  As India enters into historic elections, and unlike in previous elections, foreign policy is a major issue. Today, more Indians care about their country’s place in the world than did so a decade ago, and the aspirations of average citizens are mirrored in their nation’s fortunes like never before. The BJP has used this new attention to craft a self-reinforcing message: if the party can catapult an “ordinary citizen” such as Modi to global prominence, it can do the same for a country that has languished in poverty and weakness. Similarly, if Modi can make India secure, prosperous, and widely respected, he can do the same for the Indian voter.

Geoeconomics 

• Quantitative Tightening Around the Globe: What Have We Learned? National Bureau of Economic Research

  This paper uses the recent cross-country experience with quantitative tightening (QT) to assess the impact of shrinking central bank balance sheets. We analyze the experience in seven advanced economies (Australia, Canada, the Euro area, New Zealand, Sweden, the UK, and the US)—documenting different strategies and the substantive reduction in central bank balance sheets that have already occurred. Then we assess the macroeconomic and financial impact of QT announcements on yields and a range of other market prices. QT announcements increase government bond yields, steepening the yield curve and potentially signaling a greater commitment to raising policy interest rates, but have more limited effects on most other financial market indicators. Active QT has a larger impact than passive QT, particularly on longer maturities. The implementation of QT has been associated with a modest rise in overnight funding spreads and a decline in the “convenience yield” of government bonds, but QT transactions did not significantly affect the pricing and market liquidity of government debt securities. Finally, we evaluate who buys assets when central banks unwind balance sheets, an issue that will become increasingly important if central banks continue to reduce their security holdings while government debt issuance remains elevated. We find that increased demand by domestic nonbanks has largely compensated for reduced bond holdings by central banks. This series of cross-country results suggest that QT has had more of an impact than “paint drying” but far less than simply reversing the effects of the quantitative easing programs launched during periods of market stress. Looking ahead, although QT has been smooth to date, frictions could increase in the future so that QT quickly evolves into more like watching “water boil.”

Europe

• EP Spring 2024 Survey: Use Your Vote - Countdown to the European Elections EU

  The Parliament’s Spring 2024 Eurobarometer reveals strong interest among citizens in the upcoming European elections (6-9 June) and awareness of their significance in the current geopolitical context. The survey sheds light on Europeans’ voting behavior, their attitudes toward campaign topics, and their preferences for the priority values for the next term of the European Parliament. It focuses also on citizens’ perception of the EP and EU, their perspective on life in the EU, as well as on their opinions about the EU within the current global context.

Russia

• The Impact of Semiconductor Sanctions on Russia American Enterprise Institute

  After Russia again invaded Ukraine in February 2022, the US and its allies restricted Russia’s access to semiconductors, aiming to disrupt the Kremlin’s defense industrial supply chains. Have these semiconductor controls worked? The secrecy of the Russian defense industrial base makes it difficult to answer this question fully, but this report examines the evidence to provide some tentative conclusions on the impact of tech export controls.

• The Five Futures of Russia: And How America Can Prepare for Whatever Comes Next Foreign Affairs

  Vladimir Putin happened to turn 71 last October 7, the day Hamas assaulted Israel. The Russian president took the rampage as a birthday present; it shifted the context around his aggression in Ukraine. Perhaps to show his appreciation, he had his Foreign Ministry invite high-ranking Hamas representatives to Moscow in late October, highlighting an alignment of interests. Several weeks later, Putin announced his intention to stand for a fifth term in a choiceless election in March 2024 and later held his annual press conference, offering a phalanx of pliant journalists the privilege of hearing him smugly crow about Western fatigue over the war in Ukraine. “Almost along the entire frontline, our armed forces, let’s put it modestly, are improving their position,” Putin boasted in the live broadcast.

China

• A Chinese Perspective on the Russia-Ukraine War: A Conversation with Dr. Zhao Hai CSIS ChinaPower Podcast

  In this episode of the ChinaPower Podcast, Dr. Zhao Hai joins us to discuss China’s views on the Russia-Ukraine war and its broader implications for China. Dr. Zhao provides an assessment of how he thinks China perceives the evolving situation on the ground, emphasizing China’s concerns about the risk of further escalation between Russia and the West, potentially involving the use of nuclear weapons. He argues that the Ukraine crisis has heightened U.S.-Russia competition and speaks to how China views the conflict as a sign of the world order shifting towards one of multi-polarity. He also shared his assessment of the United States engaging in enhanced proxy warfare in Ukraine that could be used in the Indo-Pacific in the future. 

• The CCP’s Role in The Fentanyl Crisis The Select Committee on The Strategic Competition Between the United States and The Chinese Communist Party

  The House Committee this week released an in-depth report on the Chinese Government’s role in the Fentanyl trade and its impact on the U.S.  The fentanyl crisis is one of the most horrific disasters that America has ever faced. On average, fentanyl kills over 200 Americans daily, the equivalent of a packed Boeing 737 crashing every single day. Fentanyl is the leading cause of death for Americans aged 18-45 and a leading cause in the historic drop in American life expectancy. It has led to millions more suffering from addiction and the destruction of countless families and communities. The report charges that beyond the United States, fentanyl and other mass-produced synthetic narcotics from the People’s Republic of China (PRC) are devastating nations around the world. It is truly a global crisis. The PRC, under the leadership of the Chinese Communist Party (CCP), is the ultimate geographic source of the fentanyl crisis. Companies in China produce nearly all of the illicit fentanyl precursors, the key ingredients that drive the global illicit fentanyl trade.

• Why China Remains Unlikely to Invade Taiwan The Interpreter

  The United States, and Washington DC in particular, is awash with expectations of war against China in the near future, most likely caused by a Chinese decision to forcibly annex Taiwan. Plenty of Americans — including senior military officers, academics, and politicians — think Chinese leader Xi Jinping sees war as the best option. Those making this argument typically say Xi is tired of waiting for unification to happen peacefully, sees a military window of opportunity, or has set a deadline for finishing the job. Some think China’s recent economic problems create an incentive for Beijing to launch a diversionary Taiwan war.
  

• China, Russia, and Iran Are Reviving the Age of Empires  Hal Brands/Bloomberg Opinion

  The ghosts of empire are haunting Eurasia. President Xi Jinping’s China is seeking to reclaim the power and privileges of the great dynasties that once bestrode Asia. President Vladimir Putin is channeling the memory and the methods of famous conquerors from Russia’s imperial past. Iran is using proxies, missiles, and other means to build a sphere of influence encompassing parts of the old Persian Empire. Not so long ago, much of the world was ruled by empires. If today’s revisionist states have their way, the future could resemble the past. 

The Economics of a Good Sleep

• Sleeping Our Way to Being Productive VoxEU

  Sleep is key to our physical and mental health. It also affects people’s employment and productivity. This column explores how the amount of weekly sleep influences employment, productivity, and the income of individuals in Germany. Each additional hour of sleep per week increases the probability of employment by 1.6 percentage points and weekly earnings by 3.4%. Sleep is partly the product of both public and private decisions and can be incentivized so that the negative economic effects of not sleeping enough are more salient to individuals.

• Americans Sleeping Less, More Stressed Gallup

  For the first time in Gallup polling since 2001, a majority of U.S. adults, 57%, say they would feel better if they got more sleep, while 42% say they get as much sleep as they need. This is nearly a reversal of the figures last measured in 2013, when 56% of Americans got the sleep they needed, and 43% did not. Americans’ perception that they aren’t getting enough sleep is borne out by the diminished number of hours of sleep they report getting per night.

Recommended Weekend Reads

April 12 - 15, 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

• "As China’s Economy Falters, So Does Middle-Class Confidence"  NBC News

  At a restaurant in the Chinese capital that serves up low-cost meals to seniors, much of the crowd these days is decidedly less than senior. For Wang Ran, a 27-year-old designer, lunch at the restaurant in Beijing costs about half what she would normally pay — which makes a big difference as she downgrades her spending amid an economic slump in China that could have global ramifications.

• "No Substitute for Victory: America’s Competition with China Must Be Won, Not Managed"  Foreign Affairs

  Chairman of the U.S. House Select Committee on the Chinese Communist Party, Representative Mike Gallagher (R-WI), and former U.S. Deputy National Security Advisor Matt Pottinger write that amid a presidency beset by failures of deterrence—in Afghanistan, Ukraine, and the Middle East—the Biden administration’s China policy has stood out as a relative bright spot. The administration has strengthened U.S. alliances in Asia, restricted Chinese access to critical U.S. technologies, and endorsed the bipartisan mood for competition. Yet the administration is squandering these early gains by falling into a familiar trap: prioritizing a short-term thaw with China’s leaders at the expense of a long-term victory over their malevolent strategy. The Biden team’s policy of “managing competition” with Beijing risks emphasizing processes over outcomes, bilateral stability at the expense of global security, and diplomatic initiatives that aim for cooperation but generate only complacency. 

Americas 

• “Should Investors Take a Sheinbaum Victory for Granted in Mexico?”  Americas Quarterly

  In a year in which about half of the adult population in the world will vote and several national elections are set to be dramatic, Mexico is a puzzle. On June 2, the country will vote for president, 128 federal senators and 500 congresspeople, governors in nine states (including Mexico City), and local congresses and municipalities—all in all, a whopping 20,000 public offices will be up for grabs.  Yet, markets would suggest Mexico is an oasis of tranquility, a “boring long,” so to speak. After rallying by 15% against the U.S. dollar in 2023, the Mexican peso has posted an additional 2.1% gain this year, the only major currency still outperforming the mighty greenback. Credit default swaps (CDS), which measure the cost of insuring against a government defaulting on its debts, tell a similar story: at 92 points, they are significantly lower than Brazil’s (144) and Colombia’s (149) and have been hovering below the 100 mark for the last 12 months.

•   “Canada Stuck In NATO Penalty Box Through 2030”   Politico

  Canada is not about to meet its NATO defense spending commitments anytime soon, as new spending plans fail to meet the 2 percent target all NATO members are required to spend (and which Prime Minister Justin Trudeau again committed to meeting in 2023). The latest budget suggests Canada will only hit the defense spend-to-GDP ratio requirement of 1.76 through 2030. 

International Finance and Technology

• "Chapter 2: Expanding Frontiers: Fiscal Policies for Innovation and Technology Diffusion" International Monetary Fund

  How can fiscal policies promote innovation and technology diffusion in a fiscally constrained world? Countries are implementing industrial policies to promote innovation in specific sectors amid security concerns. However, the IMF argues industrial policy is only advisable when targeted sectors generate measurable social benefits (such as lower carbon emissions or knowledge spillovers), implementation capacity is strong, and policies do not discriminate against foreign firms. A well-designed fiscal policy mix that supports innovation more broadly across sectors and emphasizes fundamental research can boost long-term growth for advanced economies. For less advanced economies, facilitating technology adoption with strategic investments and tax reforms should be the priority.

• "The New Quantum Technology Race"  Internationale Politik Quarterly

  Throughout history, technological advancements have bestowed states that are innovation leaders with a decisive edge over other states. The development of today’s internet, pioneered by the US Advanced Research Projects Agency, significantly enriched the United States, for example. It currently boasts seven of the world’s top 10 companies, which make their profits from the hardware and software for internet-connected devices.

U.S. 2024 Elections

• "The 2024 U.S. Election, Trust, and Technology: Preparing for a Perfect Storm of Threats to Democracy"  RAND Corporation

  Foreign governments interfered in the 2020 U.S. presidential election, while some domestic leaders alleged election fraud before voting even began. Assertions that the election was “stolen” gained so much traction that, as certification began, a crowd rallied and attacked the U.S. Capitol, causing damage, injury, and death. Messages discrediting the election results and the agencies and officials investigating the riot and election-related offenses have continued unabated, particularly on social media.

Economics 

• "How the Big Mac Index Relates to Overall Consumer Inflation"  Federal Reserve Bank of St. Louis Blog

  The Big Mac index was created by The Economist magazine as an informal way of measuring the purchasing power parity between different countries and currencies. The idea is that in every country, the Big Mac sold at McDonald’s is the same. The price of the Big Mac should reflect the local price of ingredients, wages, and other expenses like advertising. Therefore, even though the Big Mac sandwich is the same in every country, its price differs.

Podcast Recommendation of the Week 

The “In Good Company” Podcast

Last week, the Wall Street Journal ran a fantastic profile of Nicolai Tangen, the CEO of Norges Bank Investment Management (which has $1.6 trillion under management).  Tangen somehow finds time to run a podcast called “In Good Company,” where he interviews the biggest CEOs in the world – and gets them to share fascinating insights about themselves, their companies, and what they think about all sorts of things on their minds.  Tangen has interviewed Darren Woods, CEO of Exxon (who loves to grill all kinds of meats), former Morgan Stanley CEO James Gorman (who revealed he would regularly get physically sick from all the stress of work), Elon Musk, Alibaba Founder Jack Ma, and many others.   Give it a listen – you won’t be disappointed.  It’s available on Apple Podcasts, YouTube, and Spotify.

Recommended Weekend Reads

March 8 - 10, 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. 

United States

• “Joe Biden’s Last Campaign”  Evan Osnos/New Yorker Magazine

  In a wide-ranging interview with President Biden, the author helps shed light in what drives the President to want to run for another term in office, what motivates him to face former President Donald Trump again in November despite poor polling, and how he views the first three years of his presidency.

• “Implications of Cannabis Legalization for the US Federal Budget”  American Enterprise Institute

  Abstract: Federal legislation to legalize, regulate, and tax cannabis could have significant impacts on the federal budget.  While the specific details of any potential cannabis legalization are unknown at present, such reforms are likely to affect both tax receipts and federal outlays through a wide range of mechanisms, including excise tax collections, changes in the size and composition of the labor force, and the major federal health care programs.  We identify the main federal budgetary implications of legalizing cannabis and estimates their likely magnitude where possible.

• “How Americans View Weight-Loss Drugs and Their Potential Impact on Obesity in the U.S.”  Pew Research Center

  About three-quarters of Americans say they have heard a lot or a little about Ozempic, Wegovy, and other similar drugs that are being used for weight loss. Among those familiar with these drugs, 53% think they are good options to lose weight for people with obesity or a weight-related health condition, while just 19% think they are not good options, and 28% say they’re not sure. By contrast, just 12% of those familiar with these drugs say they are good options for people who want to lose weight but do not have a weight-related health condition. A far larger share (62%) say these drugs are not good options for people without a weight-related health condition, while 26% aren’t sure.

Latin America

• “Poll Tracker” Mexico’s 2024 Presidential Vote” Americas Society/Council of the Americas

  This real-time tracker updates on the Mexican presidential race between Claudia Sheinbaum, representing an alliance of the Workers Party (PT), the Let’s Keep Making History Party (Seguimos Haciendo Historia//SHH), and the Green Party (PVEM) versus  Xóchitl Gálvez of the National Action Party (Pan).  The reader can check regularly for changes to the polling in advance of the June 2, 2024 election.

• “Brazil’s Polarization Is Here to Stay Even As Politicians Have (Mostly) Dialed Down the Rhetoric”   Americas Quarterly

  Little suggests polarization has gone away since the highly contentious election cycle in October 2022. Polarization in Brazil seems to have “calcified“: A poll in December indicated that more than 90% of people who had voted for either Lula or Bolsonaro did not regret their choice, even though Bolsonaro had been convicted for abuse of power and barred from holding office until 2030 by then.  And yet, while both President Lula and former President Bolsonaro possess an unrivaled capacity to mobilize their respective supporters and single-handedly produce confrontations on social media, a broader analysis reveals that the intensity of polarization in Brazil, in many ways, seems to have declined considerably over the past year.

• “What Happened to Lulu?  How He Dashed High Hopes for Brazil’s Foreign Policy – and How He Can Get Back on Track”  Foreign Affairs

  Few leaders could claim on taking office, to have induced sighs of relief from both Chinese President Xi Jinping and U.S. President Joe Biden. Yet, in January 2023, that is exactly what Luiz Inácio Lula da Silva did. His narrow victory over Brazilian President Jair Bolsonaro, a right-wing extremist and an admirer of Donald Trump, sparked optimism across borders. But during his first year in office, Lula, who is chairing the G20 in 2024, has struggled to translate his vision for a more progressive global order into action. His foreign policy thus far has been beset by diplomatic missteps that have strained relations with partners in both the West and the developing world. His statements and actions have cast doubts on his role as peacemaker, coalition builder, and champion of the marginalized. His commitment to environmental leadership has been marred by his decision to turn Brazil into the latest petrostate. And his grand design overlooks his country’s most pressing threat: the explosive expansion of criminal networks that are working hard to turn Brazil into a failed state and that are undermining the ecological integrity of the Amazon rainforest.

China 

• “Can Electric Cars Power China’s Growth?”   Federal Reserve Bank of New York Liberty Street Economics Blog

  China’s aggressive policies to develop its battery-powered electric vehicle (BEV) industry have been successful in making the country the dominant producer of these vehicles worldwide. Going forward, BEVs will likely claim a growing share of global motor vehicle sales, helped along by subsidies and mandates implemented in the United States, Europe, and elsewhere. Nevertheless, China’s success in selling BEVs may not contribute much to its GDP growth, owing both to the maturity of its motor vehicle sector and the strong tendency for countries to protect this high-profile industry.  

• “China’s long-term struggle to become integral in semiconductor supply chains”  Merics

  In semiconductors, China is much less able to exploit its dominant supply chain position than the US. However, Beijing is building up the legal framework and market power to use dependencies in the semiconductor industry as a bargaining chip if necessary. What can Europe do? This article is part of our series on China’s strategies to reduce vulnerabilities.

• “U.S. Military Theories of Victory for a War with the People’s Republic of China”  Rand Corporation

  Abstract:  military conflict between the United States and the People's Republic of China (PRC) would entail escalation risks that the United States has not seriously considered since the Cold War. The authors of this paper consider how the United States can prevail in a limited war with the PRC while avoiding catastrophic escalation. 

  The authors do so by considering theories of victory for the United States in a war with China. A theory of victory is a causal story about how to defeat an adversary: It identifies the conditions under which the enemy will admit defeat and outlines how to shape the conflict in a way that creates those conditions. The authors consider five theories of victory and identify two as the most viable: denial (persuading the enemy that it is unlikely to achieve its objectives and that further fighting will not reverse this failure) and military cost-imposition (using military force to persuade the enemy that the costs of continuing the war outweigh the benefits). The authors maintain that denial offers the best chance for delivering victory while avoiding catastrophic escalation, whereas military cost-imposition has lower prospects of success and higher chances for catastrophic escalation.

Russia

• “Legal options for confiscation of Russian state assets to support the reconstruction of Ukraine”   European Parliamentary Research Service

  This report analyses the options under international law for the confiscation of Russian state assets to support Ukraine’s reconstruction.  It focuses on Russian Central Bank assets, US$300 billion, which are frozen in various jurisdictions. The report considers four avenues for overcoming Russia’s immunity for enforcement: avoidance of immunity through purely executive or legislative action; justification for the breach of international law on the grounds that it is a countermeasure; evolution of international law to lift immunity from enforcement upon, for example, a finding of aggression by a United Nations principal organ; and an exception in international law for the enforcement of an international judgment.

Map of the Week (and Photo Essay) 

How Ukraine Overcame Russia’s Grain Blockade

Russia’s sealing off of Ukraine’s vital Black Sea ports and its attacks on Ukrainian grain storage centers at one point raised worldwide alarm about possible food shortages. But by early this year, grain exports were nearly back to prewar levels.    The map below shows how Ukraine modified its traditional export routes to avoid destruction by Russian forces (notably by hugging the coasts of NATO members Romania, Bulgaria, and Turkey).  The map below – created by the Council on Foreign Relations (CFR) – shows the route.  And you can see the CFR’s excellent Photo Essay on Ukrainian grain growth and shipping HERE.