Posts Tagged ‘geoeconomics’
“The only people who can fix Africa are talented young Africans. By unlocking and nurturing their creative potential, we can create a step change in Africa’s future.”*…
And there are about to be a great many of those young people… As we exit the Holidays looking forward, our global foci tend to be the Middle East, Eastern Europe, and East Asia. In an updated re-post (the original of which was featured here), the estimable Noah Smith reminds us not to neglect Africa…
Africa has been mostly out of the news in the U.S. these days. But if you think about the rest of this century, and what that’s going to look like, it’s impossible not to think about the world’s second-largest continent. The two reasons, simply put, are 1) population, and 2) poverty. Africa’s fertility rate is shrinking, just like everywhere else, but it started doing so much later. So population momentum is going to make Africa VERY populous by the time it peaks (which some forecasters think will happen at around the end of the century). [See the chart above, taken from this IMF report.]
You’ll notice that these estimates are quite a bit lower than the ones in my first graph in the [original post]. This is because Africa’s fertility rates have been falling a lot more than people expected. But even with these lower estimates, Africa is projected to be absolutely huge by the end of the century. And its fraction of the young population will be far higher still. There will come a time, not too long from now, when countries around the world are clamoring for African migrants instead of trying to keep them out.
The other reason Africa is important is poverty; it’s now clear that Africa will be the last major world region to escape a subsistence standard of living. The question of whether and how it can escape this fate is the subject of the post below. But notice that the flip side of poverty is potential; being poor means you have a lot of room to grow, and by the end of this century, most labor-intensive tasks will probably be done in Africa.
And growth is actually doing well. Despite all the talk of decoupling and the big slowdown in China, and despite the occasional hand-wringing in the Western press, growth in Sub-Saharan Africa has been pretty robust in 2022 and 2023. And that’s projected to continue this year…
…
Just how to jump-start productivity growth in African manufacturing is a difficult question. Should countries make their exchange rates cheaper? Improve infrastructure? Spend more on education and health? Are free trade agreements important here? Do industrial policies and/or export promotion have any role to play? Or does the rise of automation simply mean that countries can’t get rich with labor-intensive manufacturing anymore?
I don’t know. But… the fact that Africa has some productive manufacturers and the fact it has managed to shift more people into factory work are both good signs. And though Asia’s growth boom is still going strong, it can’t last forever, and Africa’s day as the workshop of the world may come soon.
But economists, leaders, policymakers, businesspeople, and international organizations need to be focusing on this challenge more than they are. The fate of humanity in the 21st century and beyond hinges on whether African countries can figure out the riddle of industrialization…
Smith may be over-optimistic… in which case, economic, political, and climate migrants will stream out of Africa. Or, it may be that Africa’s development will follow a new and different social, political, and economic logic (see. e.g., here, here, and here).
In any event, Africa matters absolutely: “All futurism is Afrofuturism,” from @Noahpinion.
See also: Reynaldo Anderson‘s contribution, “In a post-American world order, Africa becomes a power player,” to Politico‘s “The Unpredictable But Entirely Possible Events That Could Throw 2024 Into Turmoil” (all of which are provocative).
If I were not African, I wonder whether it would be clear to me that Africa is a place where the people do not need limp gifts of fish but sturdy fishing rods and fair access to the pond. I wonder whether I would realize that while African nations have a failure of leadership, they also have dynamic people with agency and voices.
Chimamanda Ngozi Adichie
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As we devote ourselves to development, we might recall that it was on this date in 1912 (the anniversary of the 1806 Battle of Blaauwberg, as a result of which the British gained sovereignty over the Dutch Cape Colony, which we now know as South Africa) that the African National Congress was founded. Originally known as the South African Native National Congress, it began as a liberation movement, then became a political party. It has governed South Africa since 1994, when the first post-apartheid election resulted in Nelson Mandela‘s election as President of South Africa.
“We hear all this talk about integrating the world economically, but there is an argument to be made for not integrating the world economically”*…
… and indeed, those arguments seem to be holding increasing sway. Tyler Cowan ponders the possible economic implications of a future in which global economic interdependence recedes– a future in which globe’s economies, freer of each other, don’t rise and fall with each other (as they largely have for decades) to the same extent…
Will we see less co-movement in global economic growth?
That is the question behind my latest Bloomberg column (soft pay wall). China is now, and looking forward, less of a common growth driver around the world. Oil price shocks may not be less important for humanitarian outcomes, but they matter less for many of the largest economies. America is now an oil exporter, and the EU just made some major adjustments in response to the Russia shock. More renewable energy is coming on-line, most of all solar.
The column closes with this:
In this new world, with these major common shocks neutered, a country’s prosperity will be more dependent on national policies than on global trends. Culture and social trust will matter more too, as will openness to innovation — and, as fertility rates remain low or decline, so will a country’s ability to handle immigration. A country that cannot repopulate itself with peaceful and productive immigrants is going to see its economy shrink in relative terms, and probably experience a lot of bumps on the way down.
At the same time, excuses for a lack of prosperity will be harder to come by. The world will not be deglobalized, but it will be somewhat de-risked.
Dare we hope that these new arrangements will produce better results than the old?
Or perhaps a more general rising tide was the only way many countries were going to make progress?
Marginal Revolution
Byrne Hobart reflects further…
When economies were tightly linked, growth in the US led to more demand for manufactured goods from China, which created more demand for raw materials from other parts of the developing world. But if that link is weaker, it’s entirely possible for there to be a boom in some places and a bust elsewhere. That probably increases the personal returns from global macro investing while decreasing its social return: when the world is closely-linked, there are massive positive externalities in predicting recessions, because there are so few places to hide. It’s comparatively less essential for the world to know that German is slowing down but growth in Indonesia is picking up, but it also means that macro questions are more tractable.
The Diff
* Arundhati Roy
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As we think tectonically, we might recall that it was on this date in 1865 that the U.S. first issued Gold Certificates.
Americans began to move out west in the first half of the 19th century. Banks started printing their own money to fund land purchases, and that quickly led to two problems: loose money-printing had a volatile effect on prices, and it became increasingly hard to tell what was counterfeit from what wasn’t.
To tackle these problems, the government decreed in the 1830s that it would only accept transactions in gold and silver. But of course, lugging metals around is nobody’s idea of fun. So in 1863, Congress paved the way for the first “gold certificates” to be printed two years later, in November 1865.
A gold certificate was, in effect, a form of paper currency backed by gold – although not entirely. The Treasury was allowed to issue $120 in gold certificates for every $100-worth of gold it held in its vaults…
MoneyWeek
“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.
…
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.
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