The World This Week

Our editors give us a breakdown of this week’s biggest news stories

United Kingdom: Ross Alexander Hutton 

When vehicles accelerate beyond the acceptable speed limit, we quickly apply the brakes to return to a safe speed. Hence, when the seven-day rolling average of UK coronavirus cases indicates a clear uptick, the brakes must be applied.  In essence, that is the approach the UK Government has taken by postponing further lockdown easings and enforcing new local lockdowns in greater Manchester and parts of Lancashire and West Yorkshire. According to the UK’s Chief Medical Officer, Britain has now “reached near the limit or the limits of what we can do in terms of opening up society”. With this constraint in mind, there are now difficult trade-offs between restrictions (such as the reopening of schools and opening of pubs) which will define the ‘new normal’ for months to come. 

A V-shaped recovery from the Coronavirus crisis? Whilst some economists stress it is still possible to return the economy to its’ pre-Covid size, revised analysis from the EY Item Club indicates a ‘stretched out recovery’ until 2024 – 18 months longer than previously forecasted. With low business investment dampening growth and consumers being more cautious than expected, the Item Club estimated unemployment will rise from 3.9% to 9%. Job fears also stem from the easing of the furlough scheme coinciding with the local areas forced back into lockdown and the sectors in dire need of a lifeline. Despite acquiring little attention this week, the Treasury’s review into business rates – specifically the proposal of a new ‘online sales tax’ – could pave the way to rebalance the ‘asymmetric’ retail recovery.

Like the rest of British Society, companies have placed Brexit ‘on the back burner’ as they attempt to deal with the immediate task of surviving the first wave of coronavirus. One-fifth of UK businesses have admitted their planning for the end of the transition period has gone backwards and more than half reported no change in their level of preparedness, due to lack of time and resources. This does not bode well for the UK’s negotiating position as the potential disruption of no-deal has become more acute. 

Europe: Peter Hourston

The Eurozone recorded the largest fall in output in its history between the first and second quarters at 12.1 per cent of GDP as coronavirus-induced lockdowns took their toll on European economies. Southern Europe, which saw some of the first transmission of the virus outside China in February and March, was hit hardest with contractions of 18.5 per cent in Spain. Germany, by contrast, fared better but still had a fall of 10.1 per cent from the previous quarter. Growth is expected to remain weak as rising cases across the continent risk fresh lockdowns and consumer confidence remains low. Inflation across the Euroarea was a mere 0.4 per cent – well below the ECB’s target and some members such as Ireland and Spain even witnessed deflation. The grim news fed into unemployment statistics with more than 15 million out of work in the EU and women and young people being the worst impacted.

Anti-government protests continued for a fourth week in Khabarovsk, 6,000 km to the East of Moscow, in Russia. The street demonstrations started following a decision by Vladimir Putin to arrest, remove and replace the local governor, Sergei Furgal, on fifteen year old murder charges. Furgal defeated a candidate from Putin’s United Russia party in his 2018 election, making him a source of opposition to the Kremlin. It is unclear whether other cities may be inspired by the protests, or whether the state can contain the movement.

The US has withdrawn 12,000 troops from Germany this week, following President Donald Trump’s criticism of low defence spending by European NATO allies. Although 6,400 of the service personnel will return home, the rest are to be redeployed in the continent. Opponents to the relocation include Norbert Röttgen, chairman of the Bundestag’s foreign affairs committee arguing that it would “weaken” the transatlantic alliance and vocal Trump critic and Senator for Utah, Mitt Romney, who suggested that it would be a “gift to Russia.” 

Asia Pacific: Lucy Wright

Following a surge in coronavirus infections, the Australian state of Victoria has declared a state of disaster, imposing new lockdown measures. Under the new rules, residents of the state capital Melbourne will be subject to a night-time curfew. Residents will not be allowed to travel further than 5 km from their home, exercise will be restricted to once a day, and one person will be able to go shopping for essentials at a time. Victorian Premier Daniel Andrews said the restrictions would come into effect on Sunday at 18:00 (09:00 BST).

Meanwhile in India, at least 86 people have died in recent days as a result of drinking illegally-made alcohol, say officials in the northern state of Punjab. Hundreds of people die in India each year after drinking bootleg alcohol, which is much cheaper than branded spirits, from backstreet distilleries.

Invoking emergency powers, Hong Kong’s chief executive, Carrie Lam, has postponed elections for the city’s legislature, in a move that drew swift condemnation from Washington. Citing the coronavirus pandemic, the chief executive, has stated that the poll had to be postponed because of social-distancing requirements. White House press secretary, Kayleigh McEnany, reports that “this action undermines the democratic processes and freedoms that have underpinned Hong Kong’s prosperity”.

Africa & Middle East: Camille Capelle 

After the announcement of anti-government protests in the capital of Zimbabwe, the capital went into a complete police-controlled lockdown. Despite hopes for a new era of freedom and democracy in the country since the regime change, these actions echo the approach of the previous “strongman” Robert Mugabe. “The number of opposition activists charged with a form of treason during Mr. Mnangagwa’s three years in office is already higher than during Mr. Mugabe’s entire tenure, according to research by a coalition of 22 Zimbabwean rights groups.”

Protests in Israel have shown resilience as they continue on a bi-weekly basis. Calls for Netanyahu’s resignation have reached new levels as crowds have started gathering outside of his official residence in Jerusalem and near another private residence in Tel Aviv. While the protests have been dismissed by the Prime minister as left extremists, it is undeniable that these are the largest popular protests in Israel since 2011. 

As part of further efforts at economic diversification, the UAE has opened the first Arab nuclear power plant, becoming the third country in the Middle East with nuclear technologies alongside Israel and Iran. The UAE is steadily expanding its capabilities and influence in the international economy. Although the UAE has clearly announced the entirely energy-based purpose of their program, concerns rise that it is the first of many nuclear programs to appear in the Arab world. 

North America: Amelia Brown 

The second quarter  GDP decreased by an estimated 32.9%.  The estimate is based on preliminary data—another estimate will be released by the Bureau of Economic Analysis later in the month from more complete data. The sharp decrease is likely due to the pandemic causing decreased personal spending, business investment, and exports, among other economic collapses. 

The US government has pledged $2.1 billion in funding to Sanofi and GlaxoSmithKline for 100 million doses of a coronavirus vaccine, which they hope to be ready by early 2021. The funding is based on reaching certain milestones with the development, and is part of Operation Warp Speed’s $10 billion congressional-budget. 

After just a week of the delayed season starting, six MLB teams had to postpone games this weekend due to outbreaks of coronavirus within the clubhouse. The NBA is trying their luck at restarting the season, as the final eight games of the regular season began again. Unlike the MLB, all NBA teams have been isolating at the ESPN compound at Disneyworld in Orlando, Florida, something they hope will help them avoid the spread baseball is seeing. 

South America: Annie Smith 

The Chilean government has passed a new law which allows its citizens to withdraw money from their retirement savings in order to fight economic hardship stemming from the COVID-19 pandemic. As the new law goes into effect, over 3 million Chilean citizens have already gone into their pension funds. The emergency measure allows Chileans to withdraw up to 10 per cent of their contributions for the next year.

From April to June 2020, Mexico’s economy shrunk by the most on record, with its GDP falling 17.3 per cent compared to the previous quarter and marking Mexico’s biggest quarterly decrease since 1993. While Mexico’s economy, the second largest in Latin America, is expected to shrink nearly 10 per cent more this year, its deepest recession since the 1932 Great Depression, President López Obrador insisted on Thursday that the worst had passed and their strategy for fighting COVID-19 and supporting the economy was working.

The Mexico Supreme Court has rejected one state’s bid to decriminalise abortion. If the case from Veracruz would have been upheld, the state would have seen abortion decriminalised for the first 12 weeks of pregnancy, allowed terminations for health reasons, and removed the time limit on abortions in cases of rape. While the decision only affects Veracruz, campaigners worry that it could have repercussions for the rest of Mexico, as abortion is only legal in two Mexican states – Oaxaca and Mexico City.

Science & Technology: Paula Plechschmidt 

Recapping last week’s update on intel; the company has not been doing well with Apple dropping them in favor of an in-house chip based on Arm technology and their competitor Nvidia overtaking them as the US’ most valuable chipmaker. Now the Financial Times has reported that Nvidia are trying to acquire the UK chip designer Arm from Softbank. This deal would be worth more than $32bn and would leave Nvidia with the UK’s most valuable tech company. This would allow Nvidia to take advantage of the incredible stock growth it has seen in the past year, consolidate its position in the semiconductor industry and would further increase its lead on Intel, a tech giant that had been at the epicenter of this industry long before Nvidia.

Europe has always been behind in tech in comparison to its counterparts in the US and Asia. Especially in light of the scandal surrounding and eventual collapse of Wirecard, a company of which many had hoped that it could establish Europe on the tech scene, it becomes clear that there is a severe lack of focus on this vital sector. The boss of Europe’s largest software company SAP has said the Europe “has to do better” if it wants to become any sort of competent competition for tech in Asia and the US.

On Wednesday the chief executives of Amazon, Apple, Google and Facebook had their first appearance in the landmark antitrust trial. The big tech firms were criticized on many points including buying start-ups to stifle them, for using their data to clone and kill off competitors and simply for wielding an unlawful amount of power over the lives of individuals due to their size. David Cicilline, Democrat of Rhode Island summarized this nicely: “As gatekeepers to the digital economy, these platforms enjoy the power to pick winners and losers, shake down small businesses and enrich themselves while choking off competitors” However, the amount of positive value these companies create must also be kept in mind, which is only possible due to their size as this allows them to exploit the network effect. As the debate continues in the US, these two sides will further be evaluated.

Business: Tom Woods 

ByteDance, the Chinese owner of video sharing app TikTok is scrambling to find a solution to heightening pressure from the Whitehouse threatening to ban the app. Earlier this week, Trump pledged to ban TikTok from the USA via executive order and even ruled out a sale of its American arm to a US-based firm. Although he may seem to be taking a hard-line approach, many have analysed Trump’s manoeuvres as an attempt to force a lower selling price from ByteDance. The company has been in talks over a deal with Microsoft for the past week.

Big tech firms came under intense scrutiny this week in US Congressional hearings over antitrust and competition regulation. Some of the world’s most powerful CEOs were present, including Facebook’s Mark Zuckerberg, Amazon’s Jeff Bezos, Apple’s Tim Cook, and Google’s Sundar Pichai. Lawmakers are largely concerned over the tremendous power big tech now wields and its ability to easily thrust competition out of the marketplace. In a particularly telling exchange, the congressional subcommittee presented Bezos with internal Amazon emails from 2009 showing that the firm sold diapers at a loss (which eventually totalled around $200 million) in order to price out of the market and facilitate a takeover before hiking prices back up. Temporarily selling at a loss to push competition out of the market is an illegal action. Spectators gave generally positive accounts of the effectiveness of the scrutiny the subcommittee members exerted onto the firms, and more enquiries of this sort are likely to be held in the future.

Theory: Cassi Ainsworth-Grace 

Publications like The Economist have been paying increasing attention to the need to be cautious about ‘real-time’ economic data. Tech giants like Apple and Google have played an important role in the release of this real-time data through its mobility statistics publications.

Google in particular publishes its Covid-19 Community Mobility Reports, with its stated aim as providing “insights into what has changed in response to policies aimed at combating Covid-19”, on a country-by-country basis. Websites like Our World in Data have provided interactive versions of the data published by sites like Google.

However, the methodologies used to compile this data lack the transparency of official statistics, and the numbers are not entirely representative of overall economic activity, but provide a snapshot of human mobility. Yet this real-time economic data offers a more specialised analysis compared to traditional statistics, and provides companies a deeper insight into more specific areas of the economy.

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