A Significant Week - Virtual BRICS, topless G7, and NATO expansion
BRICS - Adjusted Heights On 23 June the leaders of Brazil, South Africa, China, India and Russia met (virtually) in Beijing to foster “ solidarity and cooperation based on our common interests and key priorities ”. Not only did the BRICS leaders met virtually, they issued a virtual group photo, in which the heights of the leaders had been diplomatically adjusted to avoid embarrassment and foster a sense of unity (President Xi is nearly a foot taller than Presidents Modi and Putin). In a long and platitude-filled “Beijing Declaration” invoking multilateralism and the rule of international law, the group admitted - briefly - they had discussed both Ukraine and Afghanistan, making it clear that they aren’t going to judge and aren’t going to interfere (emphasis added): Reading the Western media one would not have known about the BRICS meeting, nor of its non-judgmental approach to Russian over Ukraine: all focus was on the G7 and NATO. Immediately after the leaders of the BRICS had their virtual meeting, the G7 was meeting physically in picturesque Bavaria in southern Germany, its leaders cheerfully making jokes amongst themselves about President Putin’s fondness for posing for photographs shirtless. The only virtual attendee was President Zelensky of Ukraine, who was invited to speak. The G7 - Adjusted Morals The G7 has made Russia and President Putin pariahs, and its leaders - and majority of their electorates - obviously believe that it is politically appropriate to make personal jibes at Putin’s expense. However, just before Trudeau, Johnson and Von der Leyen laughed a their own jokes with the delighted media looking on, the Russian President himself was being greeted by the BRICS - which include the world’s largest democracy and world’s second largest economy - with all the diplomatic courtesy afforded to the leader of an independent democracy (which technically he is). On the day the G7 meeting started a Russian air-launched cruise missile - a guided not arbitrary weapon - hit a shopping center in the Ukrainian town of Kremenchuk. That feels like a very deliberate message. Beyond the G7’s childish quips, the official rhetoric against Russia and President Putin could not have been harder. In a joint statement the G7 described President Putin as a war criminal; “ Arbitrary attacks on innocent civilians are war crimes. Russian President Putin and others responsible will be held accountable,” they said in a joint statement. With profound irony - or perhaps political pragmatism over moral consistency - the G7 had no qualms about inviting two of President Putin’s BRICS friends to join them. President’s Modi and Ramaphosa attended the G7 meetings as India and South Africa are “ partner countries ” of the G7 and “ strong democracies that are aware of their global responsibilities ”, in the words of German Federal Chancellor Olaf Scholz. Strong democracies that hang out and have shared priorities with war criminals, that is. Human Freedom Metrics The BRICS nations have a decidedly patchy record on matters of personal and political freedoms. Despite 4 of the 5 BRICS countries being democracies, their collective tendencies are decidedly illiberal: based on the 2021 Human Freedom Index published by the Washington DC based Cato Institute, South Africa and Brazil rank poorly at number 77 and 78 in the world (some way below post-traumatic Bosnia and El Salvador), with India at 119th (below Sierra Leone and Cambodia), Russia at 126th (below Nicaragua and Nigeria) and China at 150th (below the Democratic Republic of Congo and Zimbabwe). The G7 all rank in the top 35: it would be higher but France lets the side down with its 34th place ranking: Canada ranks 6th, the UK 14th, the US, Japan and Germany joint 15th, and Italy 26th. NATO’s Renewed Sense of Purpose A day after the G7 summit nearly all the G7 leaders and their entourages migrated from Germany to Madrid for the NATO meeting: Japan and the EU were allowed to go home. And Finland and Sweden are joining, now that Turkey has lifted its objection to their NATO membership. The Nordic countries apparently agreed to stop supporting armed Kurdish groups in south eastern Turkey - which had enraged Ankara - in exchange for their membership of NATO. In sharp contrast to the BRICS Beijing Declaration of the week before, which hardly mentioned Ukraine, the rhetoric of the Madrid Declaration of NATO was predominantly about Russia. The original raison d’etre of NATO - fighting Bolshevik Russia (see https://the-perspective-pool.scriber.to/article/russia-is-a-bolshevik-state-once-again ) - has reignited its purpose, and expanded its membership further (emphasis added): However, in another signal that the world is now changed, NATO is also explicit about China and its disruptive influences on the Western-led world order: As I noted in my last Scriber piece https://the-perspective-pool.scriber.to/article/the-eu-aspires-to-be-the-new-rome Ukraine - for all its corruption, dysfunctional politics and long running civil war - has done enough to illustrate it has “European values and standards”, by resisting Russia. Turkey - a NATO member with an on/off relationship with Russia - still hasn’t made the cut. China vs The West The new lines are now being drawn between those who aspire to “ Western standards and values ” - led by the G7 - and those who want to make “ global governance more inclusive, representative and participatory to facilitate greater and more meaningful participation of developing and least developed countries ” (the Beijing Declaration) - led by China. The natural beneficiary of the consequences of the conflict in Ukraine is China: it remains friends with Russia, will buy more of its gas and use it to win more friends in Central Asia, Africa and Latin America, many countries of which have longstanding arms and energy deals with Russia. It also remains the second largest investor in US public debt (Japan owns a little more), and intimately connected to the economies of the West, which depend on it. The next years and decades are going to be defined by the complex wrestling match between China and the West and their friends who may have to pick sides. Further Reading:
Jul 2, 2022 · 6 min read
HM The Queen takes her Last Salute It is with genuine sadness that I write following the death of Her Majesty Queen Elizabeth II. The Queen was our “Boss” when I served in the British military: we felt that however short-term, populist or embarrassing our politicians were, The Queen was the person to whom we (and they) actually owed our allegiance, and her values and obligation to the people were our values and obligations, transcending politics. The British constitution is ancient, and has been radically altered and amended over the centuries: usually as a result of civil wars, religious conflict, secession crises, demographic changes and shifting economic realities. Having survived all that the Crown remains the source of all political power in the United Kingdom; the Prime Minister is prime minister to to the monarch, the government is the government to them, our currency bears their likeness, our armed forces swear an oath to the Crown not to politicians. The monarch represents the Crown, and the Crown represents the people: unlike so many politicians, the Crown represents all the people - whatever their beliefs, whatever their political affiliations, whatever their triumphs or mistakes, whatever their physical or psychological condition and whatever their age. Even prisoners detained “at Her (His) Majesty’s pleasure” remain citizens for whom the Crown still has regard and for whom there is always a non-judgmental opportunity for redemption. What we are currently witnessing amidst the pomp and ceremony of the funeral arrangements of the late Queen and the acclamation of the new King is a transition of political power: orderly, deliberate and with formality derived from the requirements of long experience. The Crown represents values bigger than ourselves: including integrity, selflessness, and willingness to help and defend others at one’s own risk. Her Majesty The Queen was particularly focused on and adept at living to those principles. These are old fashioned ideas, but they become very real in a crisis; the Queen saw the enormous pressure the Second World War put on her father, King George VI, and her mother Elizabeth the Queen Consort, and the stoicism and selflessness they had to display when the UK faced an existential threat. If you are skeptical of suffering for others and higher ideals just ask the combat forces of Ukraine, or examine the elevated public perceptions of President Zelensky (in January his government could only muster a 23% approval rating). As I have written before, crisis is the forge of institutions . Ukraine Counterattacks With a high degree of confidence I can say that the troops at the sharp end would tell you what they are fighting for is ideals and people other than themselves. Fortified with this morale Ukrainian forces achieved a significant break-through against Russian forces in north eastern Ukraine earlier this week. The town of Izyum, south east of Ukraine’s second largest city Kharkiv, has been retaken by the Ukrainians: this is significant for two reasons (i) Izyum is a key location on the Russian axis of attack in the northern Donbas region and (ii) it seems to have been taken without much of a fight, surprising both the Ukrainians and the Russians with the swiftness the Ukrainians’ success. Certainly this reverse will be bad for Russian morale, as well as its strategic position: Russia will soon have to decide if “victory” can be declared with the annexation of most of the Donbas, or whether - less plausibly - it has the ability to take all of Ukraine. Unfortunately, self-deceit seems to be a feature of the Russian military, and yesterday Kremlin spokesman Dimitry Peskov said that Russia’s “special military operation” would continue “until all the goals that were originally set are achieved”. We will see. Sweden shifts to the Right Sweden’s coalition government, led by the Social Democrat Megdalena Anderssen, applied to join NATO in May - alongside Finland - and at the time of writing appears to have lost the general election to the right wing Sweden Democrats, led by Jimmie Akesson. The demographics of Sweden make it one of the most diverse countries in Europe, a significant number of the 30% or so diverse “non-white” ethnicities that make up the population result from immigration in the last 15 years; notably from Syria, Iraq, Iran, Afghanistan and Somalia. This rapid shift in population seems to have placed strains on politics and social perceptions with a surprising number of young people - 22% of 18 to 21 year-olds - supporting a political party that seeks to curb immigration and has its origins in the national front. 21 Years since the 9/11 attacks In some ways the terrible events of 9 September 2001 seem very recent, so vivid are the memories. That day is etched in the minds of many, including mine: it led to wars of revenge in Afghanistan and then Iraq, and changed my life and that of many. I cannot believe it was 21 years ago; it seems both recent and distant. New Offices Finally, and a more optimistic note, the Tellimer team in London moved our HQ to new offices near Liverpool Street this week. Much fancier than our previous very “start-up” digs! Yours Duncan
Sep 13, 2022 · 5 min read
August Things of Interest
What Mattered this Week Over the summer I and the team at Tellimer have been busy: we launched Scriber , the creator stack for financial writers - that I am using to write this - and are just about to launch Parsel Enterprise , which very accurately extracts and digitizes data from pdfs (I have been using it to manage invoices, but it is really designed to digitize whole industrial processes; it is the equivalent of me using a Lamborghini to pick up some milk). Anyway, it means I have not written my usual geopolitics or business essay, but have collected some thoughts on significant events of the last fortnight. Please let me know if you like this format; I may well use it from time to time; firstname.lastname@example.org . The Fed in a (Jackson) Hole I can’t help recalling the repeated claims of Fed Chair Powell and his predecessor, Janet Yellen, that inflation was “transitory” following the Covid-19 lockdowns and would soon abate as the US and global economy recovered. They may claim they didn’t know Russia would invade Ukraine (the CIA really should have told them - they most likely did in fact), but the get together of global central banks at the weekend has once again spooked markets as the Fed now admits that inflation is the main enemy and anything must be done to defeat it. It seems that Powell will raise rates until the US - and therefore global - economy is on the ragged edge of a full blown recession, mortgages are defaulted and unemployment goes up. Not happy metrics to hope for. The Death of Gorbachev Mikhail Gorbachev, former General Secretary of the Soviet Communist Party has died aged 91 . Those of us who lived through any of the Cold War era will remember the transformative impact of the last Soviet leader: before his premiership the USSR was a feared dark power, full armed with nuclear weapons that could destroy the World, lurking the other side of the Iron Curtain and engaged in dangerous espionage and war via proxies. By the end of his time the Soviet Union and its communist experiment was ended, the Cold War was over and such was the sense of the significance that American thinker Francis Fukuyama predicted that liberal, enlightened capitalism was now accepted as the only really fair way to run society - what he described as the “end of history”. We all felt that Armageddon had been averted. Although much of what Gorbachev achieved has now been undone by the chaos of the USSR’s collapse in the 1990’s and the actions of President Putin, he still ranks as a great man to me, and I would guess many of my generation. Pakistan Floods Pakistan once again suffers from huge and destructive flooding . Many will remember the terrible floods and landslides of 2011, following a record breaking heatwave in Central Asia, Russia and Ukraine in 2010, that led to riots and the Arab Spring . It has happened again, with melting snow and monsoon-like rain. Unfortunately Pakistan’s government seems as unprepared as it was last time, despite making more progress in its rehabilitation with the IMF . Combined with droughts in Europe and China, this is a hellish vision of the future of global warming. Un-Finnish Business Sanna Marin, the youthful modernising Prime Minister of Finland has been in hot water for parting with celebrity friends . It would be easy to dismiss a young woman letting her hair down with friends as understandable decompression from a stressful job, but there are a couple of genuine political issues for PM Marin to worry about: (i) The Finns remain socially conservative; Marin wasn’t with a group of old mates, she was with celebs and posing an dancing for the camera: the Finns like a drinker but don’t appreciate a show off, and (ii) Finland has a 1,340 km land border with Russia; earlier in the year Marin made the decision to end Finland’s post-War neutrality and join NATO, which is a big - and bold - call. Underneath Marin’s charm, good looks and fondness for a party, she is must be tough. Nigerian Japa Wave Nigeria is a huge and diverse country with a massive amount of potential and many very smart and well educated people within its near 200 million population. Somewhat worryingly for the government, significant numbers of the most ambitious, clever and young people are starting to leave Nigeria for opportunities in foreign countries, in what is being called the “Japa Wave” . Japa is Nigerian slag for “run away swiftly”, as the young escape nearly 20% inflation and more than 30% unemployment. Nigerians have always had a broad diaspora, and there have been migration waves before. The UK is still a favorite for education and Canada is growing as a destination for work. It might feel bad for many of us sitting in the G7 right now, but everyone else thinks we are in a stronger spot. The Conservative Party selects the next UK Prime Minister On the subject of Great Men, I had the privilege of meeting former Prime Minister Harold Macmillan (he subsequently became the Earl of Stockton), when I was a child: he was dining with my grandparents and I was allowed to stay up to meet him. Macmillan apologized for the weakness of his handshake when he was introduced and explained that it was because of being shot through the wrist while assaulting German trenches in the Great War. Looking at the choice the Conservative Party is making for its next leader - and therefore the UK’s next Prime Minister - between “unimaginative” Rishi Sunak and “unguided missile” Liz Truss (not my quotes - rather alarmingly descriptions from people who know them), I cannot help reflect that British politicians used to to be made of rather sterner stuff. Yours aye Duncan
Aug 31, 2022 · 6 min read
It is All Going to Get Better from Here...
After the year that was 2022, and the lost years of the pandemic before that, it is easy to be gloomy: the grinding conflict in Ukraine, volatile politics, climate and pollution challenges, extreme weather events, strikes, riots, cost-of-living pressures, economic uncertainty and the persistence of Covid. Oh, and the hugely over-publicized mental breakdown of some rich guy called Harry Sussex. It is all fueled by a constant negative stream of woe and selective complaining through the mainstream and social media. However, if one looks closer at the reality of what is happening, I would argue we should all be feeling a bit more positive about 2023. Inflation is Coming Down In December the US Consumer Price Index (CPI) inflation fell for a sixth consecutive month to 6.5% - that is the CPI basket is 6.5% higher than it was 12 months ago. So yes, the price of a lot of the things we all use and need are more expensive than they were, but that is down from an annualized rate of 9.1% in June 2022. The Fed is likely to need more data (unfortunately higher unemployment) before it takes its foot off the policy breaks, but markets have been cautiously cheered by the direction, regaining some of the ground lost in recent months. To have the World’s largest economy showing signs of getting inflation under control has to be good news for everyone, everywhere. Investment Assets are Undervalued And the practical side-effect of this haze of gloom that seems to have taken hold of the markets is that a lot of them look undervalued when compared with their historic multiples. The chart below, complied by my colleague Hasnain Malik , shows that some of the largest emerging economies, which were hardest hit by a strong US Dollar, supply shocks and inflation, look to be discounted compared with the multiples of previous years. Even the US, with its falling inflation and overpriced currency is negative on some metrics: Another great observation from my friend and former colleague Ashwani Mathur , is the striking similarity of current policy and market events to those of 1994 and 1995. In 1994 the Fed also felt it necessary to raise rates to stem inflation, which had started again in the wake of the recession of 1992/93 and was melting the bond markets. For a year stock markets bounced along on a mainly negative pattern, until they tilted back up as inflation fell. This is Ashwani’s analysis of the market correction of 1994 and the recovery of 1995, noting the negative coverage in the media, even in the midst of the upturn: Now compare it with the current pattern of Fed tightening and stock prices in 2022: So it would be hard to say that a recovery is definitely around the corner, but it is an interesting comparison isn’t it? For all of us it is worth discounting high level media nonsense - theirs is an entertainment business - and trying to find some credible sources of perspective to inform our thinking instead: it is out there if you look. Ukraine could be the 21st Century’s Korean War Despite the ongoing destruction, horror, and lack of a clear end-game in Ukraine, it may not actually lead to a third world war. There are striking similarities between the situation in Ukraine and the Soviet-sponsored invasion of South Korea by the communist North in 1950. At the start of Russia’s invasion of Ukraine NATO was divided and purposeless, the EU at odds with itself and US international leadership seemed frail; nearly a year on, NATO has regained its raison d’etre and will imminently be bolstered by two new members (Sweden and Finland), relationships in the EU are better than they have been for some time, the relationship between the EU and UK has improved because of the British support to Ukraine, and Japan has embraced rearmament and is working with her Western allies in the face of an increasingly assertive China. If anything the potential is for the conflict in Ukraine to create a period of international stability in its wake; very much as the Korean War did in the 1950’s. That era of stability led to a period of unrivaled economic growth, albeit also a period of global re-armament. Renewable Energy has Wind in its Sails One of the ironies of the the conflict in Ukraine is that it has accelerated the adoption of, and investment in, renewable energy in a way that 27 meetings of COP couldn’t. It is said that necessity is the mother of all invention, and certainly that is the case for much of Europe, which is scrambling to reduce its dependency on Russian natural gas. The UK was actually ahead of the game, having built some of the world’s largest offshore windfarms in the shallow and perennially windswept waters of the North Sea (the shallowest and youngest sea on Earth, only formed by flooding after the last ice age). As of the time of writing (Saturday 14th January 2023), this is the energy mix in the UK: But…. The UK has some post-Brexit challenges The fuller impacts of Brexit are now starting to be felt. As the rest of the major economies start to show at least tentative signs of recovery, the UK lags in growth and productivity and has exchanged “freedom of movement” immigration from the EU - mainly of people coming to the UK to work - for uncontrolled immigration of refugees from Africa, the Middle East and Emerging Europe (nearly 46,000 people crossed the Channel from France to the UK in small boats in 2022, the largest single component being young men from Albania) and Ukrainian refugees (of which approximately 200,000 have been given asylum in the UK). In 2022 net migration to the UK exceeded 500,000 for the first time. To put that in context, in 2015, the year before the Brexit vote, the high point of net migration was 370,000, mainly driven by an increase in immigration from the EU. Such are the shortages of qualified workers and professionals in the UK, the British Medical Association has called on the UK Government to loosen immigration rules to allow foreign doctors to work in the UK more easily: at present 48% of all trainee GP doctors in the UK require an immigration visa. Such is the mess the National Health Service is in, there have even been examples of Ukrainian refugees going back to Ukraine to avoid a wait for a doctor in the UK . With strikes across the public sector, inflation, lower growth than any other country in the G7, creaking infrastructure, higher taxes, badly run and expensive public services (in the UK we aren’t allowed to say how dreadful the NHS is, because it is immediately regarded as a criticism of our medical professionals, which it isn’t - they deserve our support - but the NHS is hugely expensive, not one thing, and has many serious organisational defects), an aging population with a disinclination or inability to work beyond 50 , and uninspiring politicians on all sides….. any recovery may feel a little slower in arriving to the UK. Be good, Everyone. Duncan We hope you find the thoughts in the Perspective Pool interesting and entertaining but please don't treat them as advice.
Jan 14, 2023 · 7 min read
The Global Food War
Let them eat avocados The last 25 years has seen a transformation in the way the world produces and consumes food. Population growth has driven some of the revolution but so has a benign economic backdrop - the shocks of the Dot.com bubble and Global Financial Crisis notwithstanding: even in those moments of economic uncertainty bread and milk prices did not soar and the range of food expanded further. Globalization and JIT (just-in-time) supply chains meant that groceries and supermarkets made exotic products and out of season flowers, vegetables and fruits available at any time of year - and with the advent of food delivery apps like Instacart, Amazon Prime Now, Grab, Uber Eats, and Gorillas, at any time of day. As the range of food available expanded as it became cheaper, so more people, and greater percentage of the population were able to eat formerly exotic delicacies such as avocado, sushi, or mozzarella. Between 2013 and 2021 fresh avocado imports in to the US rose from 1.2bn pounds weight to 2.6bn pounds (1.2 million metric tons) - in addition to domestically grown fruit. In the same period the annual consumption of avocados per capita in the US rose from 5 pounds to nearly 9 pounds (4kgs of avocado per man, woman and child). That is a lot of avocados: in the 1970’s they were the preserve of high end restaurants and Upper East Side dinner parties, now they are available at 2am to anyone in a city with a smartphone. Climate, Bread Riots and The Arab Spring The Western world may have addicted itself to ultimate choice and free availability, but in the developing economies it is grains that provide the staple food to many. In 2010 a series of extreme weather events hit many of the largest grain and food exporting countries, including Russia, Ukraine, Canada, Argentina and Australia and led to a 30%+ increase in global food prices. A “Rossby” heat wave ignited wildfires that swept through South Western Russia, destroying crops, thousands of homes and claiming dozens of lives (the same heatwave caused destructive flash flooding and landslides killing hundreds in Pakistan), Argentina and Australia had severe droughts and crops in Canada were destroyed by exceptionally heavy rains. The Middle East absorbs one third of all grain imports: particularly in economies like Egypt, bread is the staple food of the poor, and consequently accounts for a proportionately larger component of people’s disposable income. The series of riots and public demonstrations seen across much of the Arab World in the early summer of 2011 - the “Arab Spring” as it became known - was driven by a number of factors, but frustration over bread prices and food inflation was one of them. Riots and political upheavals rocked Tunisia, Morocco and Bahrain, caused the collapse of the Mubarak government in Egypt and led to the chaotic civil wars in Libya and Syria. The disruption cause by the global pandemic, exacerbated by the conflict in Ukraine, has led to record food commodity prices: in relative and absolute terms exceeding the dark days of the early 1970’s where an energy shock was followed by rampant food inflation. In current events one can discern the climate-food-politics-geopolitics cycle, and how interrelated global issues now are: how a Rossby wave can put the G7 and G20 on a collision path and contribute to Russia invading Ukraine. See my previous essay on the related geopolitics at: https://the-perspective-pool.scriber.to/article/ukraine-democracy-and-the-most-dangerous-moment-in-human-history Growing Food Protectionism Added to the already volatile inflationary mix is the invasion of Ukraine (the world’s 5th largest wheat exporter) by Russia (the world’s largest wheat exporter). Notably, most of Ukraine and Russia’s wheat is destined for emerging markets and much of that to the Middle East. With growing concerns about food affordability and availability China and India have already imposed protectionist measures, reducing exports to improve their own food security. Last week China publicly rejected the G7’s criticism of India’s recent wheat export ban via its state controlled English language news site Global Times; making the point that it is not helpful for the West to blame developing economies for the situation. The Chinese have a point, in as much as the USA and Canada are amongst the planet’s largest grain exporters, while China, Brazil and India (three of the big-boys of the G20 not in the G7) are net importers. There is political power in food. The Food Security Index The Economist Impact Food Security Index, which ranks countries on the basis of food affordability, availability, quality, safety, natural resources and resilience, places Russia at 23rd, China 34th, Brazil 63rd, and India at 71st. The USA is 9th, Canada is 7th and the UK sits near the top in 3rd (the Republic of Ireland is top, with relatively low population density, lots of agricultural land, and as those who have been there will know, plenty of rain). Amongst the most vulnerable countries are those in Sub-Saharan Africa, South Asia and the Middle East (the “contested areas” of the Tri-Polar world, that sit between the great power blocks of the USA, Europe and China: see https://the-perspective-pool.scriber.to/article/the-tri-polar-world-and-why-the-west-rules-for-now ). As the price of food soars on rising energy price rises and the risk of recession it is hard not to think that it will drive the climate-food-politics-geopolitics cycle once again. Even for well-off urbanites Avocados will become more expensive and less available. Countries with weak food supply chains and low per capita incomes are vulnerable to genuine human and political catastrophe: for the hard core investors and policy-makers out there wanting to understand more see my erudite friend and colleague Hasnain Malik’s recent research on Tellimer.com . This will be an uncomfortable ride for everyone, but for those based in economies with good Food Security Index rankings - much as the cost of living is going up rapidly and will undoubtedly cause hardship for many - we should all count ourselves lucky. Further Reading:
May 24, 2022 · 6 min read