EsadeGeo Daily Digest, 06/11/2019

Financial Times – Martin Wolf / There is one way forward on climate change

  • Climate policy is dangling between the cynicism of Donald Trump and the radicalism of Greta Thunberg. The US president has just pulled the world’s second-largest emitter of greenhouse gases out of the Paris climate pact. Contrarily, Ms Thunberg demands significantly more than a 50 per cent cut in global net emissions by 2030. The former is certainly irresponsible. However, the latter seems inconceivable.
  • If the trend does not alter soon, the chances of avoiding an increase in global average temperatures of more than 1.5C above pre-industrial levels will be zero and those of avoiding a 2C increase will be small. As the IMF notes in its latest Fiscal Monitor, meeting the latter goal requires reducing emissions of greenhouse gases by a third below the baseline, by 2030. To keep below a 1.5C increase, emissions need to be half of the baseline. The longer the delay in acting, the larger the required action becomes.  
  • Unfortunately, the outright opposition of people such as Mr Trump, and the indifference of much of the population, are not the sole obstacles to success. In any case, climate change will not be solved by one country. To succeed, policy must be effective, legitimate and global. To be effective, policy must combine planning, regulation, research and incentives.
  • What, then, is to be done? The answers include a programme of action over three decades; pragmatic resort to all policy tools, including market-based incentives; use of the revenue raised from carbon pricing to compensate losers and make the tax system and climate mitigation more efficient; a stress on the local environment benefits of eliminating the use of fossil fuels; and, above all, a commitment to climate as a shared global challenge. In an era of populism and nationalism, is there any chance? Not obviously. If so, we will indeed have failed. But the young are surely right to expect better.
  • Project Syndicate – Daron Acemoglu / Are the climate kids right?

The New York Times – Keith Bradsher / China’s Xi praises free trade. Striking deals is another matter

  • Xi Jinping broadly endorsed free-trade principles and promised to welcome foreign investment in a speech on Tuesday, but a setback with India and a lack of details toward ending the punishing trade war with the United States are testing Beijing’s ability to prove it can make a deal. Mr Xi stated that: “Economic globalization is a historical trend,” comparing the momentum to the world’s important rivers. “Although there are sometimes some waves going backward, and even though there are many shoals, the rivers are rushing forward and no one can stop them.”
  • The question is, however, whether China will open up fast and far enough for the Trump administration, which has made Beijing’s management of the world’s second-largest economy a major sticking point toward resolving the trade war. In what could be a good-will gesture by Beijing in connection with efforts to settle the trade war, China’s central bank allowed the country’s currency, the renminbi, to strengthen slightly in trading on Tuesday.
  • Nonetheless, China is still imposing different rules that deeply frustrate foreign investors. According to Carlo Diego D’Andrea, the chairman of the European Union Chamber of Commerce in Shanghai: “You have hundreds of regulations and indirect barriers that make your life miserable doing business here.”
  • South China Morning Post – Keegan Elmer / ‘No one wins a trade war’: French President Emmanuel Macron points to common ground with China on tariffs and climate action

Foreign Policy – Michael Albertus & Mark Deming / Pinochet still looms large in Chilean politics

  • Over the last several weeks, Chile’s image as the political and economic darling of Latin America has been shattered. Sparked by a meager hike in subway fares, protests and marches have now metastasized into the worst unrest the country has seen since its transition to democracy in 1990. The president, Sebastián Piñera, has declared war on protesters, invoked a state of emergency, and unleashed a repressive crackdown that, indeed, invokes memories of dictator Augusto Pinochet.
  • The prosperous economy and the political stability have always masked a darker problem: the last vestiges of Chile’s dictatorship were never entirely rooted out, and the persistent influence of former authoritarian elites and those who directly inherited their legacy over democratic politics is part of what is bringing protesters out on the streets today.
  • After the democratic transition in 1990, elites from the outgoing Pinochet dictatorship retained prominent positions in the military, National Congress, and local government well into the early 2010s. Pinochet himself remained head of the Chilean military until 1998 and a designated senator until 2002. When former authoritarian elites capture important posts across a new democratic government, they can use their leverage to push policy decisions toward protecting their own interests over citizens’.
  • Of course, the persistence of elites from an authoritarian past is rarely sufficient to trigger widespread unrest. But stalling economic growth can cast that influence in a new light, especially in countries where judiciaries, political parties, and independent regulators have allowed corruption to thrive and waste to proliferate. However, as Chile shows, even financially responsible and successful economies cannot entirely placate citizens when there is a yawning gap between the haves and have-nots, especially when many of the haves got there because of their ties to a brutal past.

Euractiv – Grégoire Normand / Amid Brexit and trade wars, European industry faces economic gloom

  • The eurozone’s manufacturing sector contracted for the ninth consecutive month in October, based on the latest Purchasing Managers’ Index (PMI) calculated by the Markit firm. The indicator, which takes into account several factors related to the industrial sector’s health, recovered very slightly in October to 45.9 from 45.7 in September but remained well below 50. With the postponement of Brexit, trade tensions and digital wars, it is easy to see why the clouds of uncertainty are piling up in Europe’s skies.
  • Moreover, in the third quarter, the eurozone’s gross domestic product (GDP) grew only 0.2%, a level well below those recorded in 2017 and 2018, according to the latest Eurostat figures published on 31 October. Chris Williamson, Markit’s chief economist, explained that: “Amid its sharpest contraction in seven years, the eurozone’s manufacturing sector is likely to put a severe brake on the region’s economic growth in the fourth quarter. Indeed, the latest data from the survey point to a quarterly decline in industrial production of more than 1% by the end of the year.”
  • Germany, the eurozone’s leading economy remains entangled in serious difficulties at the end of the year; the Italian industrial sector continues to suffer and Spain, for its part, recorded a fifth consecutive month of decline in the PMI index. On the other hand, French industry is showing signs of a slight recovery. The PMI surveyed by Markit recovered slightly between September and October, from 50.1 to 50.7.

The selected pieces do not necessarily reflect the views of Javier Solana and EsadeGeo. The summaries above may include word-for-word excerpts from their respective pieces.

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