Posts Tagged ‘geoeconomics’
“There’s nothing more political than food”*…
Zongyuan Zoe Liu on the growing issue of food security in China, and on what it might mean for geopolitics and geoeconomics…
…every day, China’s 1.4 billion people consume a staggering 700,000 tons of grain, 98,000 tons of edible oil, 1.92 million tons of vegetables, and 230,000 tons of meat. The leaders of the Chinese Communist Party (CCP) understand that “to the emperor, the people is heaven; to the people, food is heaven,” as the traditional saying goes, and they have prioritized food security as a prerequisite to maintaining power, especially after the calamitous famines of the Maoist era. For decades, coupons were necessary to buy any food—a system not fully ended until 1995, although largely dead in the cities by the mid-1980s. Despite China’s emergence as the world’s factory, the country’s No. 1 central document, the first policy statement issued by the top authorities each year, has centered on food security and the three issues of agriculture, the countryside, and farmers since 2004.
This year is no exception, as the Central Committee of the CCP and the State Council jointly released the highly anticipated No. 1 document for 2023 on Feb. 13. The document, which carries enormous weight, sets forth two critical priorities: safeguarding national food security and protecting farmland. While previous No.1 documents touched on these issues between 2004 and 2012, it was not until 2013, when Xi Jinping assumed leadership, that the annual No. 1 document established a consistent and resolute focus on food security and farmland preservation…
Xi is correct to recognize that preserving farmland is an indispensable factor in the quest to achieve food self-sufficiency. China has experienced alarming levels of farmland loss and deterioration in recent years. The most recent land use survey showed that China’s total arable land decreased from 334 million acres in 2013 to 316 million acres in 2019, a loss of more than 5 percent in just six years. Shockingly, more than one-third of China’s remaining arable land (660 million mu, a traditional unit of land measurement in China and equal to roughly 109 million acres, slightly larger than Montana) suffers from problems of degradation, acidification, and salinization.
The land has been eroding faster in recent years. The annual net decrease of arable land has risen from about 6 million mu (about 988,421 acres) from 1957 to 1996 to more than 11 million mu (about 1.8 million acres) from 2009 to 2019. This means that between 2009 and 2019, China lost farmland equal to about the size of South Carolina. China’s diminishing farmland is also losing productivity due to over-cultivation and excess use of fertilizers. China’s fertilizer usage in 2018 was 6.4 times that of 1978, but grain yield in 2018 was only 2.2 times that of 1978.
As in many other countries, such as the United States and India, a major cause for China’s farmland deterioration has been its land-intensive industrialization and urbanization over the past three decades. Farmland has been expropriated to meet the strong demand for land to support the expansion of manufacturing, infrastructure, and urban development. Competing interests for land use have resulted in arable land being expropriated for more lucrative development projects. In the contest for land use among food growers, cash-crop planters, and property developers, profit maximization often trumps the needs of food farmers, especially when imported foods are much cheaper than locally grown options.
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Over the past two years, Chinese private property developers such as Evergrande and Vanke have pulled back from aggressive land purchasing due to stringent restrictions. [See here.] While this reduced demand from private property developers should have helped alleviate the temptation to appropriate farmland for property development, much of the demand void has been filled by state-owned enterprises and government-backed developers or companies, such as local government financing vehicles (LGFVs)… Boosting land sales through government-owned or government-controlled entities when demand from private developers is low provides a politically convenient channel for local governments to raise revenue at limited costs.
Investing limited fiscal resources in farmland protection, in contrast, does not generate immediate political and financial returns, making it a tough sell for local officials who are under pressure to deliver a rapid economic recovery. While safeguarding farmland is an important cause in the long term, and one backed from the top in Beijing in theory, it costs money from the pockets of local governments and subsidies from the central authorities. For local officials, the more pressing challenge consuming their attention and resources is to restore economic growth…
Limited domestic farmland availability combined with the pursuit of food security dictates that China would expand its overseas farmland investment and advance its strategy of farming out. The 2007 No. 1 document set farming and agriculture “going out” into the rest of the world as a national strategy for the first time, but the focus back then was exports. The 2016 No.1 document updated guidelines on international agriculture cooperation, focusing on agricultural investment and supporting Chinese companies’ overseas operations.
According to Land Matrix, a European land-monitoring organization, Chinese companies have gained control of 6.48 million hectares (16 million acres) in foreign territories, which is nearly the size of Ireland. This number dwarfs the combined 1.56 million hectares controlled by British companies, the 860,000 hectares held by U.S. companies, and the 420,000 hectares owned by Japanese companies. Chinese investment in U.S. farmland has already triggered concerns in Washington, even though China currently only holds less than 1 percent of foreign-owned U.S. farmland. Republican lawmakers have already drafted a bill to ban Chinese purchases of American farmland, while in states like Texas measures are even more advanced. China not only owns farmland in the United States but also in U.S. allies’ territory, such as the United Kingdom, France, and Australia.
If China’s economic recovery and its continued growth are fueled by land sales and its property market, Xi’s prioritization of food security means Chinese entities will have to embark on more aggressive overseas land purchases. While the current theater of U.S.-China competition has been centered on the chips and semiconductors industry, a new front may emerge in the form of competition over farmland and agriculture technology. The party can survive setbacks in the chip war, but the stakes are much higher in the fight for food security. Failure on the food security front will threaten the survival of the regime…
The need to feed: “China’s Farmland Is in Serious Trouble,” from @ZongyuanZoeLiu in @ForeignPolicy.
* Anthony Bourdain
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As we contemplate comestibles, we might send tasty birthday greetings to Momofuku Ando; he was born on this date in 1910. A very successful businessman, he founded Nissin Food Products Co., Ltd., for which he invented instant noodles (ramen noodles) and created the Top Ramen and Cup Noodles brands.
Visit the Cup Noodles Museum.
“These are the times that try men’s souls”*…
Last January, (R) D looked, via Adam Tooze, at the concept of the Polycrisis: “I know it is relentless. That is also a feature of the polycrisis we are in. It comes from all sides and it just doesn’t stop.” He’s developed his thinking, summarizing in a recent Financial Times piece…
Pandemic, drought, floods, mega storms and wildfires, threats of a third world war — how rapidly we have become inured to the list of shocks. So much so that, from time to time, it is worth standing back to consider the sheer strangeness of our situation…
Of course, familiar economic mechanisms still have huge power. A bond market panic felled an incompetent British government. It was, you might say, a textbook case of market discipline. But why were the gilt markets so jumpy to begin with? The backdrop was the mammoth energy subsidy bill and the Bank of England’s determination to unwind the huge portfolio of bonds that it had piled up fighting the Covid-19 pandemic.
With economic and non-economic shocks entangled all the way down, it is little wonder that an unfamiliar term is gaining currency — the polycrisis.
A problem becomes a crisis when it challenges our ability to cope and thus threatens our identity. In the polycrisis the shocks are disparate, but they interact so that the whole is even more overwhelming than the sum of the parts. At times one feels as if one is losing one’s sense of reality. Is the mighty Mississippi really running dry and threatening to cut off the farms of the Midwest from the world economy? Did the January 6 riots really threaten the US Capitol? Are we really on the point of uncoupling the economies of the west from China? Things that would once have seemed fanciful are now facts.
This comes as a shock. But how new is it really?…
“Welcome to the world of the polycrisis” (gift link)
Then, in his newsletter, he goes more deeply into the concept and its roots…
Polycrisis is a term I first encountered when I was finishing Crashed in 2017. It was invoked by Jean-Claude Juncker to describe Europe’s perilous situation in the period after 2014. In the spirit of “Eurotrash”, I rather relished the idea of picking up a “found concept” from that particular source. On Juncker check out Nick Mulder’s wonderful portrait of “Homo Europus”. It turned out that Juncker got the idea from French theorist of complexity and resistance veteran Edgar Morin, who is a whole ‘nother story…
“Polycrisis – thinking on the tightrope“
Both pieces are fascinating and useful; both, eminently worth reading in full…
* Thomas Paine, The American Crisis
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As we ponder profusion, we might recall that it was on this date in 1898 that an American institution was born.
The University of Minnesota football team (for our non-American readers out there, I’m of course referring to the kind of football where you’ll get a penalty for using your feet) was playing their final game against Northwestern University. The U of M’s team had been having a lackluster year, and there was a general feeling on campus that this was due to lack of enthusiasm during the games. So several students, lead by Johnny Campbell on a megaphone, decided to lead the crowd of spectators in a chant: “Rah, Rah, Rah! Ski-U-Mah! Hoo-Rah! Hoo-Rah! Varsity! Varsity! Minn-e-so-tah!” The crowd went bananas, as they say, and an energized Minnesota team won the game 17-6.
That day Johnny Campbell and his (presumably drunk) friends became the first cheerleader squad.
[source]
“‘I wish it need not have happened in my time,’ said Frodo. ‘So do I,’ said Gandalf, ‘and so do all who live to see such times. But that is not for them to decide. All we have to decide is what to do with the time that is given us.'”*…
A couple of weeks ago, (Roughly) Daily took a look at the fall of neoliberalism. What’s to come? The estimable Noah Smith has a suggestion…
For years now, I’ve been thinking about what the next big organizing principle of U.S. political economy will be. By “political economy” here I mean the type of economic policies we carry out, and the ways that we expect those policies to reshape our economy. This will be the first in a series of posts laying out my predictions for what the new paradigm will look like.
From the late 1970s through the middle of the 2000s, our organizing principle was what some people call “neoliberalism” — deregulation, tax cuts, free trade, and the shift of the welfare state towards in-kind benefits and work requirements. The reasons we went down this road were complex, and the results were mixed. This replaced an earlier paradigm that people called “the New Deal”, which started to emerge during the Great Depression but really solidified during and just after WW2. That paradigm involved large-scale government investment, heavy regulation, high taxes, social insurance, and the encouragement of a corporate welfare state.
Ever since the financial crisis and the Great Recession of 2008-12, we’ve been looking for a new organizing principle. Obama didn’t really try to give us one; with the exception of Obamacare, he was mostly focused on crisis recovery and damage control (stimulus, financial regulation, boosting the welfare state incrementally along largely neoliberal lines).
But everyone knew a new paradigm was needed. The question was what it would be…
[After carefully considering, then sadly rejecting climate change as a candidate…]
So if it’s not climate change, what will be the thing that forces us to come up with a new policy paradigm? If it’s not the moral equivalent of war, perhaps it’ll be the threat of actual war…
“The War Economy,” Part 1
In a second post, he elaborates on how the U.S. and its allies might stack up against a “New Axis.” He dives into relative demographicc, economic, and social strengths, concluding…
I can’t say whether or not the New Axis is the most formidable military competitor that the U.S. and its allies have ever faced. The original Axis was certainly fearsome, and the USSR had tens of thousands of nuclear weapons ready to roast the world at the touch of a button. But I think that the comparisons above show that the New Axis certainly represents an economic competitor like none the U.S. and its allies have ever faced. And the reason is simply China. Russia is mainly a gas station with nukes. But China has three things going for it:
- China has far, far more workers than the original Axis or the Soviet bloc.
- China has advanced manufacturing technology that probably rivals the original Axis in relative terms, and far exceeds the Soviet bloc.
- China has the world’s largest manufacturing cluster, making it the “make everything country”, which neither the Axis nor the USSR managed to be.
He continues…
This is simply a unique situation in modern history. The Industrial Revolution began in Europe and spread to the U.S. and the East Asian rim. The aftermath of WW2 saw central Europe and the East Asian rim incorporated into a U.S.-led alliance that dominated global manufacturing in a way that the communist powers could never threaten. Now, with the rise of China, world manufacturing is divided roughly in two.
Much of the War Economy in the U.S. (and its allies) will therefore be about rediscovering the manufacturing capabilities they neglected during China’s meteoric rise…
“The War Economy, Part 2: Sizing up the New Axis“
The Brookings Institute recently published its own (and very resonant) assessment of U.S. readiness, “The Sources of Societal Competitiveness.” And Nathan Gardels followed with a trenchant reminder that consensus on national security is a double-edged sword…
In the end, the enduring vitality of any country must be built primarily on the wherewithal within, not on the shaky foundation of menacing adversaries without. George Kennan, architect of the containment strategy against the Soviet Union, understood that lasting vigor comes from the inner confidence of a nation that thrives on its own terms and doesn’t rely on enemies to hold it together. External threats may spur a welcome renewal, but it will remain fragile if that becomes its purpose.
Kennan believed correctly that the West would ultimately be victorious in the Cold War not on some battlefield but through the organic strength of a robust society that no adversary could match.
The same perspective applies today with respect to the challenge of assertive autocracies, especially China. The most important contribution democracies can make to fostering more freedom in the world is to demonstrate through their own institutional integrity and innovations how a governing consensus can be reached by non-authoritarian means.
“When Domestic Unity Is Built On Foreign Enemies“
We live in interesting times. Eminently worth reading all of the links in full.
* J.R.R. Tolkien, The Fellowship of The Ring
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As we return to first principles, we might recall that it was on this date in 1945 that the Japanese Foreign Ministry sent telegrams to the Allies (by way of Max Grässli at the Swiss Department of Foreign Affairs ) announcing that Japan would accept the Potsdam Declaration. The surrender of the Empire of Japan was announced by Japanese Emperor Hirohito on 15 August and formally signed on 2 September 1945, bringing the hostilities of World War II to a close.
“How Africa’s population evolves, and how the continent’s economies develop, will affect everything people near and far assume about their lives today”*…
In these tumultuous times, there’s a lot of competition for one’s attention: Russia and its aggression? China and it’s ever-more-assertive rise? The tensions within Europe? The divisions within the U.S.? Indeed, as Adam Tooze argues, there’s so much going on that there’s a risk we’ll miss the most fundamentally important long-term dynamic of all…
Once you realize it’s scale, there is no global trend as dramatic today as the revolution in Africa’s demography.
Asia’s return to the center of the world economy dominates the headlines. But in the grand sweep of history that is a rebalancing or restoration not a revolution. Until the 18th century, the Pacific and Indian Oceans were the heart of sophisticated economic activity. That balance was grossly distorted in the “centuries of humiliation” by the rise of the West. Now, thanks to Asian economic growth, the centers of economic activity and population are realigning.
The same cannot be said for Africa. Despite optimism in recent years, the relative lack of economic growth in Africa is well-known. Less well-appreciated is the extraordinary historical novelty of its demographic development.
In 1914 according to the best estimates, Africa’s entire population was 124 million and that includes North Africa. Today it is 1.34 billion. Compared to Africa’s roughly elevenfold increase in population, Asia’s population increased by “only” between 3 and 4 times – China’s merely tripled and India’s increased by 4.5 times. Furthermore, whereas Asia’s population is beginning to stabilize – led by that of India and China – Africa’s population will, barring disasters, reach 2.4 billion by 2050 and will go on growing.
Longer term projections are hazardous, but a world with somewhere between 9 and 11 billion total population and close to 4 billion people living in Africa is what current trends would lead one to expect. That means that by 2100 the African share of global population will likely be between 35 and 40 percent. And in 2100 the population of several African countries – Chad, Mali, Niger, Nigeria, and South Sudan – is likely still to be growing.
That is something new under the sun. It means that in sheer quantitative terms Africa’s story increasingly drives world history…
Read on for a thoughtful unpacking: “Youth Quake. Why African demography should matter to the world,” from @adam_tooze in his newsletter Chartbook— in part a consideration of Youth Quake, by @EdPaiceARI.
See also: “We need to take a closer look at entrepreneurship in Africa,” from @sham_jaff in @whlwnews.
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As we pay attention, we might send dedicated birthday greetings to Joe Slovo; he was born on this date in 1926. A South African citizen from a Jewish-Lithuanian family, Slovo was a delegate to the multiracial Congress of the People of June 1955 which drew up the Freedom Charter. He was imprisoned for six months in 1960, and emerged as a leader of Umkhonto we Sizwe the following year. He lived in exile from 1963 to 1990, conducting operations against the apartheid régime from the United Kingdom, Angola, Mozambique, and Zambia. In 1990 he returned to South Africa, and took part in the negotiations that ended apartheid. He is probably best known for proposing the “sunset clauses” covering the 5 years following a democratic election, including guarantees and concessions to all sides, and for his fierce non-racialist stance. After the elections of 1994, he became Minister for Housing in Nelson Mandela’s government, a post he held until his death from cancer in 1995.
“The whole of the global economy is based on supplying the cravings of two percent of the world’s population”*…
Perhaps that’s an oversimplification; but as a new McKinsey Global Institute study suggests, perhaps not by much…
We have borrowed a page from the corporate world—namely, the balance sheet—to take stock of the underlying health and resilience of the global economy as it begins to rebound from the COVID-19 pandemic. This view from the balance sheet complements more typical approaches based on GDP, capital investment levels, and other measures of economic flows that reflect changes in economic value… [and] provides an in-depth look at the global economy after two decades of financial turbulence and more than ten years of heavy central bank intervention, punctuated by the pandemic.
Across ten countries that account for about 60 percent of global GDP—Australia, Canada, China, France, Germany, Japan, Mexico, Sweden, the United Kingdom, and the United States—the historic link between the growth of net worth and the growth of GDP no longer holds. While economic growth has been tepid over the past two decades in advanced economies, balance sheets and net worth that have long tracked it have tripled in size. This divergence emerged as asset prices rose—but not as a result of 21st-century trends like the growing digitization of the economy.
Rather, in an economy increasingly propelled by intangible assets like software and other intellectual property, a glut of savings has struggled to find investments offering sufficient economic returns and lasting value to investors. These savings have found their way instead into real estate, which in 2020 accounted for two-thirds of net worth. Other fixed assets that can drive economic growth made up only about 20 percent the total. Moreover, asset values are now nearly 50 percent higher than the long-run average relative to income. And for every $1 in net new investment over the past 20 years, overall liabilities have grown by almost $4, of which about $2 is debt…
“The rise and rise of the global balance sheet: How productively are we using our wealth?,” from @McKinsey_MGI
(Image above: source)
* Bill Bryson
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As we recalculate: we might spare a thought for composer, musician, director, and producer Frank “anything played wrong twice in a row is the beginning of an arrangement” Zappa; he died (of pancreatic cancer) on this date in 1993 at age 52.
“Politics is the entertainment branch of industry”
“The bottom line is always money”
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