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The fate of Afghanistan’s economy after the Taliban takeover

Introduction

Afghanistan is one of the poorest countries in the world due to the destruction of its limited infrastructure through wars, predominantly after the Soviet Invasion (1979- 1989). Along with political instability and high dependency on foreign aid, this state of depravity is perpetuated.

The biggest news in the world from the past few weeks stems from the Taliban takeover of Kabul, the capital of Afghanistan, and effectively replacing the Afghanistan government. With most government officials and Former President Ashraf Ghani fleeing the country, the Taliban has now taken complete control of the presidential palace and declared that the war is over. How will this impact the economic conditions of Afghanistan?

Foreign Investments

As mentioned earlier, Afghanistan is greatly dependent on foreign aid. However, international aid flows are under a cloud of profound uncertainty. German Foreign Minister Heike Maas told the ZDF broadcasting program, “We will not give another cent if the Taliban takes over the country and introduces Sharia law.”(Sharia Law is the Islamic legal system, which governs religious rituals and aspects of day-to-day life, including finance and banking).

Moreover, following recent unrest and the toppling of the government, investor confidence in Afghanistan could drop to an all-time low.

 So, now that the Taliban has taken complete control of Kabul, international trade and business will soon come to a halt as the militant group has stopped all exports and imports, particularly with India. India imports about 85% of its dry fruits from Afghanistan. The Federation of India Export Organisation expressed concern that dry fruit prices may go up in the coming days due to the turmoil in Afghanistan.

 Hence, the Afghanistan economy has the potential to experience a significant downfall, since international aid accounted for ~43% of their GDP (Gross Domestic Product) in 2020, per the World Bank. Thus, considering the following in terms of foreign investment, the nation has a bleak future.

Mineral Resources

According to WION, while Afghanistan may be one of the poorest nations in the world, it is a region of vast mineral resources. In 2010, American geologists said the resources in this region are worth about – $1 trillion.

Valuable minerals such as iron ore, copper, gold, lithium, sulphur, and various gemstones, to name a few. A 2010 report of Afghanistan’s Ministry of Mines recorded the country’s copper resource at almost 30 million tonnes. Further, another report in the same year said that 28.5 million tonnes of copper lay hidden in undiscovered deposits, bringing the total to roughly 60 million tonnes. Given current rates at the London Metal Exchange, the mineral resources would amount to ~$500 million. Moreover, Afghanistan has a gold resource of at least 2700 kilograms, making gold the most favourable hedge ever since inflation. (Inflation is the rate at which the general level for the price of goods & services rise, resulting in a sustained drop in the purchasing power).

However, one mineral has particularly a striking potential. Lithium is a metal used in the batteries of mobile devices and electric cars. The latter application will be crucial in the future, as the automobile sector is quickly transitioning towards zero-carbon forms of transport.

Today, lithium is also facing unprecedented demand, with an annual market growth of 20% compared to just 5-6% a few years ago. According to the International Energy Agency, global demand for lithium is expected to grow by over 40 times by 2040. Additionally, The Pentagon memo designated Afghanistan as “The Saudi Arabia of Lithium”.

China Takes Interest?

Back in 1996, when the Taliban first took control of Afghanistan, China refused to recognize their rule and left their embassy shut for years. This time around, Beijing has been one the first to embrace the Islamist militants next door.

But, what prompted such a change of heart?

Director of the China Program at the Washington-based Stimson Center Yun Sun said: “Twenty years ago, China was not a global power and what was happening in Afghanistan did not bother China.”

Today, China commands an economy worth $14.7 trillion—more than 17 times its size in 1996—in addition to a massive trade-and-infrastructure initiative that stretches across the Eurasian landmass. Although China has not officially sought ties with the militant group, there are hints that it will provide financial assistance to Afghanistan.

 China is currently eyeing the mineral resources of Afghanistan, which are worth $1 trillion. Moreover, the large reserves of copper and lithium specifically will be highly beneficial for the Chinese electronics industry.

The Taliban will need significant assistance to rebuild Afghanistan. Because Western countries and financial institutions are unlikely to assist, China, with its massive reserves of capital and proximity to Afghanistan, can play a supporting role in the survival of a future Taliban government.

Conclusion

In conclusion, Afghanistan may have a chance to grow its economy under such grave circumstances with Chinese assistance.

The exploitation of the rare earth minerals would bring foreign currency to Afghanistan, whose weak economy relies on subsistence agriculture, services, and international aid. However, some observers are calling not to overestimate China’s interests in Afghanistan.

Their statements imply that the idea of a China which would get its hands on the mineral wealth of Afghanistan is a fantasy. Researchers say that the recent investments that China will specifically be for the exploitation of pine nuts (Pine nuts are one of the more expensive nuts on the market). It can be said that Chinese interest and collaboration with Afghanistan under Taliban control may be short-lived.

Sources


1.What next for Afghanistan’s economy? – BBC News
2. Financial News – Forex News, Stocks Market News (fxempire.com)
3. The fate of Afghanistan economy under Taliban rule | Business News (timesnownews.com
4. Minerals worth trillion dollars: So really how big is Afghanistan’s economy under Taliban control? (msn.com)
5. What next for Afghanistan’s economy? – BRIGHT NEWSROOM
6. Why China is interested in Afghanistan (linkedin.com)
7.Taliban to reap $1 trillion worth of Afghanistan’s mineral wealth – Frontline (thehindu.com)

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News

Taliban Rises to Power Again

Introduction

What are the Taliban? The Taliban is a militant terror group that ruled Afghanistan under the command of Mullah Omar (founder and the first leader of the Taliban) from 1996 – 2001 until they were toppled by the U.S. forces. In response to the 9/11 attack, the US launched “Operation Enduring Freedom,” which was aimed at all the suspects of the attack — mainly Al Qaeda and Taliban. Due to this, the Taliban was overthrown easily. The ideology followed by the Taliban is extremist. They aim to install Islamist rule all across Afghanistan. They have almost 85,000 fighters according to recent NATO estimates.

Timeline

Early1990s 

● Taliban emerged in Pashtun areas straddling Pakistan and Afghanistan 

1995 

● Captured the province of ‘Herat’ 

27 SEP 1996 

● Taliban captured the Afghan capital, Kabul, and the regime of President Burhanuddin Rabbani was overthrown 

● Islamic Emirate of Afghanistan was established by Mullah Omar 

1998 

● 90 percent of Afghanistan was captured 

● They enforced their own Islamic or Sharia Law once they were in power 

2001 

● Al-Qaeda, led by Osama Bin Laden in Afghanistan, carries out the largest terror attack ever conducted on US soil (9/11) 

● A US-led coalition bombs Taliban and al-Qaeda facilities in Afghanistan. Targets include Kabul, Kandahar and Jalalabad. 

(7th of October) 

● Fall of Kabul; the Northern Alliance, a group of anti-Taliban rebels backed by coalition forces, enters Kabul as the Taliban fled the city. (13th of November) 

2004 

● New constitution, 26th of January; the constitution paves the way for presidential elections in October 2004.

● Hamid Karzai, the leader of the Popalzai Durrani tribe, becomes the first president under the new constitution. He serves two five-year terms as president. 

2006 

● UK troops deployed to Helmand, May 2006 

2009 

● 17th of February 2009, U.S. President Barack Obama approves a major increase in the number of troops sent to Afghanistan. 

2011 

● Osama bin Laden killed, 2nd of May 2011 

2013 

● Death of Mullah Omar, 23rd of April 2013 

2014 

● NATO ends combat operations, 28th of December 2014 

2015 

● Taliban resurgence 

2020 

● The US and the Taliban sign an “agreement for bringing peace” to Afghanistan, in Doha, Qatar on the 29th of February. The US and Nato allies agree to withdraw all troops within 14 months if the militants uphold the deal.

2021 ● On the 16th of August, the Taliban returned to power, In just over a month, the Taliban swept across Afghanistan, taking control of towns and cities all over the country, including Kabul. Afghan security forces collapsed in the face of the Taliban advance.

What is happening in Afghanistan now?

On April 14, US President Joe Biden announced that the US forces would withdraw by September 11th, 2021. In May 2021, foreign forces started to withdraw from the country and the Taliban stepped up to defeat the Western-backed government. The Taliban captured 26 provincial capitals in just 10 days, while Kabul fell in 1 day and the Taliban were thus able to take control over Afghanistan again. On August 15th, Afghanistan’s President Ashraf Ghani, who was backed by the U.S., resigned and fled to Oman.

On August 14th, Joe Biden made a statement about the Afghanistan crisis and what role the U.S. will play : 

“Over the past days, I have been in close contact with my national security team to give them directions on how to protect our interests and values as we end our military mission in Afghanistan. 

First, based on the recommendations, I have authorized the deployment of approximately 5,000 U.S. troops and an orderly and safe evacuation of Afghans who helped our troops during our mission and those at special risk from the Taliban advance. 

Second, I have ordered our Armed Forces and our Intelligence Community to ensure that we will maintain the capability and the vigilance to address future terrorist threats from Afghanistan. 

Third, I have directed the Secretary of State to support President Ghani and other Afghan leaders as they seek to prevent further bloodshed and pursue a political settlement.

Fourth, we have conveyed to the Taliban representatives in Doha that any action on their part on the ground in Afghanistan, that puts U.S. personnel or our mission at risk there, will be met with a swift and strong U.S. military response. Fifth, I have placed Ambassador Tracey Jacobson in charge of a whole-of-government effort to process, transport, and relocate Afghan Special Immigrant Visa applicants and other Afghan allies. Our hearts go out to the brave Afghan men and women who are now at risk. We are working to evacuate thousands of those who helped our cause and their families.”

What does the Taliban’s return mean for the citizens of Afghanistan?

Questions are being asked about how the group will govern the country, and what their rule means for women, human rights, and political freedom in Afghanistan. Its leadership says it wants peace and an inclusive government that is compatible with Islamic law or the Sharia Law, but many Afghans are skeptical about this and thousands have already fled the country, fearing a return to a brutal and repressive regime.

A brief about the Sharia law: 

Sharia is Islam’s legal system. It is the set of laws that govern the daily lives of Muslim people and it is based on a combination of the Quran and the teachings from the prophet Muhammad. 

Taliban officials have repeatedly tried to assure Afghan citizens, particularly women, that this time the rule will be different. Earlier this week, the Taliban urged women to join its government. Some representatives have also said that women will be allowed to work and study. When they were last in power, the Taliban had made full burqa compulsory but this time they said that women will not be required to wear a full Burqa, and can opt for just the hijab (headscarf). Well, what is the actual situation on the ground? Despite their assurances, parts of the country are seeing a return to the repressive old order, women in some provinces are not allowed to leave their home without a male relative escorting them and were also denied access to universities in some places, girls have been banned from returning to schools and there have been reports of several forced marriages. Smartphones and television have been banned, young men are being forced to join their ranks. Reporters and peace activists who raised their voices against the Taliban face risk to their lives. In the current situation in Afghanistan, chaos has been created everywhere, Airports and ATMs were mobbed with thousands of people trying to escape the country. According to reports, 5 civilians have been shot at the terminal, 3 people were also seen holding on to the wheel of a US plane flying out of Kabul.

How are other countries and the UN reacting?

United Nations: UN Secretary-General Antonio Guterres urged the Taliban to exercise utmost restraint to protect lives 

China: Released a statement that it is looking to deepen “ friendly and cooperative” relations with Afghanistan.

Pakistan: Imran Khan, made a statement which was “ The Afghans broke shackles of slavery” 

Germany: Released a statement that U.S, troops withdrawal was the “biggest NATO Debacle”.

India: Union minister of state for External Affairs, Meenakshi Lekhi, said that India wants peace all over the world as India continues evacuation exercises to rescue Indians currently in Afghanistan.

Why was the Taliban’s renewed rule over Afghanistan inevitable?

Over the past 20 years, the U.S. has poured trillions of dollars into Afghanistan to oust the Taliban, an effort that was clearly unsuccessful. But a look at the country’s strategic geographic location and the politics of the region tells us that this outcome was inevitable. Afghanistan is strategically located between central and south Asia – a region rich in oil and natural gas. It has long faced constant meddling from the Soviet Union/Russia, the UK, the U.S., Iran, Saudi Arabia, India, and Pakistan.

Sources

  1. https://scroll.in/article/1002900/talibans-victory-in-afghanistan-was-inevitable-even-after-two-decades-of-american-intervention
  2. https://www.aljazeera.com/program/inside-story/2021/8/17/what-does-the-talibans-return-to-power-mean-for-afghanistan
  3. https://www.bbc.com/news/world-south-asia-11451718
  4. https://www.bbc.com/news/world-27307249
  5. https://www.whitehouse.gov/briefing-room/statements-releases/2021/08/14/statement-by-president-joe-biden-on-afghanistan/

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News

A Noisy Return to a Post-Pandemic Normal

Introduction

As COVID-19 infections throughout the world rise, especially with the Delta variant — a mutated version of the virus — it brings into question, when will we get back to a new ‘normal’. While parts of the world are already returning to a pre-pandemic norm, countries in Africa still lag behind in securing vaccines for their healthcare workers. Until the world can ensure a safe and equitable distribution of vaccines, there will be no normal — for a while. 

The United Kingdom

Dubbed “Freedom Day,” the United Kingdom is returning to pre-pandemic normalcy. All restrictions have been lifted, and with 68.8% of the population having received a 2nd dose, all is going well, until you start to take into account the steady rise in infections — especially with the transmissible Delta variant, which killed thousands in India a few months ago. Like Shakespeare’s play on words, this is another gamble with the economy. For the past few months, the British economy has been stagnating, recent consumer trends show that household expenditures decreased by 11% when compared to Q3 2020-2021, and a loss in consumer spending hurts aggregate demand in the UK. This has a negative effect on the GDP and led to a loss in income, rise in unemployment, and consistent failures to meet monetary policies set forth by the Bank of England. 

Downing Street is now trying to get people back out: partying, eating, drinking, and working; and throughout the western world, governments have taken similar approaches. Across the pond, the United States is, for the most part, open, while Canada is coming out of lockdown. Lockdowns have hurt local business, people are frustrated and government debts and deficits have taken a toll on the state. However, in most of the Western world, we see that vaccines are readily available, but most countries still do not have enough vaccines to return to a ‘new’ normal. 

Georgia

Countries such as Georgia, Ukraine, or Belarus for example are not relatively poor states — in comparison to the rest of the world — but lag behind in vaccination rates. Vaccine hesitancy is rampant among the public and even with government encouragement, few people volunteer to take it, and in order to save their economies, prematurely opened up. This leaves them vulnerable to COVID-19, which delays the world’s return to normal, and raises a philosophical question: do the ends justify the means for some countries that are opening up prematurely due to vaccine shortages? For example, the IMF predicts Georgia will grow at 7.7% this year due to opening up prematurely, but amid rising delta infections, hospital beds filling up, and exhausted medical and financial resources, it is very possible many will die in the next wave. 

However, Georgia isn’t alone. There are a hundred other countries facing the same question. Do the ends justify the means? What to prioritize? Nonetheless, getting the jab is important — no matter where you live — as it means you are one less person to vaccinate and more vials can be donated to other, lesser developed countries. The faster vaccines can be secured for poorer, lesser developed nations, the faster we will return to a ‘new’ normal because a dozen nations don’t represent the world. The longer it takes to vaccinate any human, the longer this pandemic drags on, and the longer you’ll wear a mask. So, if you have the opportunity to do so, take your dose as it’ll help strengthen the world from a virus which churned the world to a halt.

Sources

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Analysis News

The Space Race — Is it worth it?

Introduction

On July 29th, 63 years ago, the US Congress passed the legislation, which established NASA, otherwise known as the National Aeronautics and Space Administration. NASA is a government established agency that is responsible for the technology and science related to space and air. As you may know, NASA’s purpose is not only to analyse and explore space, in case of Earth’s demise, providing alternative approaches to human survival beyond our atmosphere but also to protect the human race from the harms of space. An example of this would be detecting asteroids that could pose a threat to human existence if the trajectory proves to be heading towards Earth. However, it is questionable as to the necessity of space exploration. Annually, the US government provides NASA with a budget of $22.629 billion, and this number is ever-increasing. Although this only represents around 0.48% of the total of the US government spending, it is highly debated as to whether spending this amount of money is necessary, and could instead be directed to other means, e.g. building renewable energy sources to help reduce climate change. 

Applications of space research

However, it is important to recognise the necessity of space exploration for proving/disproving scientific theories that have previously been developed on Earth. These theories have brought us insights into gravity, the atmosphere, fluid dynamics, the geological evolution of other planets and most importantly it has shown us the connection between the sea, sun and moon. Thanks to Sir Isaac Newton’s discovery in 1687, we now know that tides are very long-period waves that move throughout the ocean in response to forces exerted by the moon and sun. Fishing, recreational boating, and surfing all rely on tidal data. Commercial and recreational fishermen alike rely on their understanding of tides and tidal currents to boost and improve their catch rates. According to the report published by Allied Market Research, the global fish farming market generated $271.61billion in 2018, and is projected to reach $376.48 billion by 2025, witnessing a CAGR of 4.7% from 2018 to 2025, and is therefore a staple part of our global economy. 

The Space Race and Jeff Bezos

Nevertheless, It could be argued that the race to space has become glorified, being used as an anchor for the economically elite to exhibit their wealth. The last century’s space race was a competition between the world’s great powers and a test of their ideologies. It would prove to be a synecdoche of the entire Cold War between the capitalist United States and the socialist Soviet Union. Has this desire to be deemed most rich and powerful continued into the 21st Century? On the 20th of July, Jeff Bezos, the richest man in the world, alongside three other passengers (his brother, Mark Bezos; Wally Funk, a storied aviator; and Oliver Daemen, an 18-year-old fresh out of high school), made the trip to space and back. Bezos stated that by going first, he wanted to prove that his technological advanced vehicle was safe, and that Blue Origin is finally ready to make its 11-minute suborbital trips, an experience people can buy. The $5.5bn journey raised the question as to whether this accessible technological advancement was a step in the right direction, or whether its consequence will lead to an even greater division between the top 1% and the remainder of the population.

Sources

  1. https://www.history.com/this-day-in-history
  2. https://oceanservice.noaa.gov/facts/moon-tide.html
  3. https://www.globenewswire.com/news-release/2021/01/13/2158043/0/en/Global-Fish-Farming-Market-to-Reach-376-48-billion-by-2025-AMR.html 
  4. https://news.sky.com/story/bezos-branson-musk-the-new-space-race-explained-as-virgin-galactic-prepares-to-launch-12347249
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Analysis News

Should the Tokyo 2020 Olympics take place?

Introduction

The Japanese government and the International Olympic Committee (IOC) have officially declared that the 2020 Olympics will take place from July 23rd, 2021 onward. The decision is very controversial around the world, especially in the host country, Japan, because of the COVID-19 situation. Should the Olympics really take place? Or should they be canceled? In this article, I will cover two different perspectives: the individual perspective and a business/economics perspective.

Individual Perspective: First of all, what do people in Japan think about the Olympics? 

The above graph is the survey that asked more than 9000 Japanese citizens what they thought about the Olympics. The graph shows that Japanese citizens’ opinions about the opening of the Olympics are very spread. In August 2020, about 50% of the interviewees said that the Olympics could take place without any postponement. However, in June of 2021, only 36% of interviewees said so, and about 35% of the people interviewed thought that the Olympics should be canceled. As time goes by, it seems that more people are against the Olympics going ahead.

 In the background of such a result of the survey, from an individual perspective, there is almost no merit in the Olympics taking place this summer because simply, allowing all Olympics players from abroad means we have to expect more covid cases will occur in Tokyo. In addition, the IOC and JOC (Japanese Olympic Committee) have made rules that all players do not need to be quarantined for 2 weeks even though other foreigners who do not relate to the Olympics do. And, they also set a rule that players are allowed to bring, buy alcohol whenever they want to even though the Japanese Government prohibits stores from serving alcohol after 9 pm in Tokyo. Such “special treatments” increase the dissatisfaction of Japanese citizens. In Japan, just like other countries in the world, people try to spend time in their home as much as they can even though most of them want to travel or hang out with friends. In such circumstances, making special rules just for Olympics players make people think that this is unfair and feel disrespected.

Business perspective

On the other hand, from a business perspective, the Olympics can benefit not only a country but also some companies. The organizing committee announced that the economic effect of the Olympics can be estimated as 16,365,000,000 dollars. It means that if the Olympics are canceled, the amount of money will be lost in some ways. For the Japanese government, they spent large amounts of money to maintain places such as Japan National Stadium and Olympic Village because they thought all budgets they spent could be taken back by taking place the Olympics so that they certainly want to take place the Olympics no matter what. The Olympics also affect domestic companies a lot. The below graph shows what 4,092 companies will think if the Olympics is canceled. It shows that about 41% of them think that it is better to cancel the Olympics in terms of companies’ profits prediction. However, about 59% of them think that they will get more profit if the Olympics takes place. It means that about 60% of companies in Japan think that the Olympics will somehow benefit them even though foreigners will not visit Japan. Companies think this way because even though people from foreign countries are not able to come to Japan, the Olympics itself has a large impact on companies, especially hotels, restaurants, and airline companies because people take planes to come to Tokyo, eat meals at the restaurants, and then stay at the hotels. 

Conclusion

The Olympics should be a sports festival that everyone in the world enjoys. However, because of the spread of the pandemic, people argue who is responsible if the Olympics do not succeed, not how to make the Olympics better. In the background, many Japanese people disagree with the opening of the Olympics mainly for two reasons.

  1. They are concerned that the number of COVID cases will skyrocket once players around the world enter Japan.
  2. They feel they are treated unfairly by the government based on the special treatment that the government has made for Olympics players.

On the other hand, many companies in Japan think that they are able to take advantage of the Olympics as a chance to gain their profits while some of them don’t consider the Olympics as a big opportunity due to the prohibition of foreigners to enter Japan. It is interesting to see the different reactions toward the Olympics between citizens, and companies due to their consideration from different perspectives. Anyhow, the Olympics will begin in about 3 weeks from now. I hope the Olympics will succeed without any problems related to coronavirus and give hope to those who have suffered from the virus…

Sources

  1. https://www.tsr-net.co.jp/news/analysis/20210615_03.html
  2. https://www.nri.com/jp/knowledge/blog/lst/2021/fis/kiuchi/0525

What do you think? Let us know in the comments!

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News

The G7 Summit in Cornwall

What is the G7?

The G7 is a political establishment, founded in 1975, that addresses current and potential future challenges that can affect the growth of the global economy, including the impacts of fluctuating oil prices and of emerging markets. The G7 is made up of some of the wealthiest economies across the world — the US, the UK, Canada, France, Germany, Italy, and Japan (China is not a member of the G7). The organisation is not an official, formal entity and therefore has no legislative or authoritative power to enforce policies or laws around the world. However, due to the powerful nature of the countries involved, policies can be introduced within said countries, helping to resolve global issues.

What is the purpose of the G7? 

The intergovernmental organisation meets periodically to assess economic and monetary issues that have developed throughout the world between each summit. They discuss and sometimes act in order to assist in resolving global issues, particularly those that concern the global economy.  Their efforts have allowed the organisation to launch initiatives, which fund issues and relieve crises, including several aimed at relieving debt within developing nations. For example, the establishment provided $300 million in 1997 to help construct the containment of the reactor meltdown at Chernobyl, following the nuclear disaster. 

What did they discuss in Cornwall last week? 

As expected, the main topic of conversation was resolving the current global crisis, COVID-19. The leaders within the establishment debated the importance of a stronger global health system and reviewed a potential plan of action which could reduce the global health inequality that could protect us from future pandemics.  Their agenda further included discussion on actions taken towards climate change, e.g. the unsuccessful Paris Agreement of 2015, and trade agreements. This was a big topic for Britain in particular, since talks regarding Brexit began in 2016 when Britain decided to leave the European Union.

What were the outcomes of the meeting? 

The meeting had three major outcomes: “A Billion doses of COVID-19 vaccine (1)”, “no more coal (2) ”, and “tech giants and tax havens targeted (3)”.

  1.  The leaders at the conference pledged to deliver over 870 million vaccine doses to the developing world, on top of the 250 million already promised by the US and the 100 million from the UK. This action will not only allow the HIC’s to recover from the pandemic but allow LIC’s to recover, also. This will have a rather large impact as the lower-income countries are more at risk of an unrecoverable economic depression than higher-income countries. 
  2. There was a unanimous agreement in which the G7 leaders pledged to phase out coal-fired power generation at home and reduce/end funding for new coal-burning power plants in the developing world. Furthermore, the leaders committed to offering developing nations $2.8bn to help them switch to cleaner fuels. These plans will not only help reduce carbon emissions but will consequently reduce climate change. A large issue within climate change is that developing countries do not have funding to provide renewable sources of energy. Therefore, this initiative is of great importance as it will allow countries to take a global stance against global warming.
  3. The summit agreed to take steps towards dissuading MNC’s (multinational co-operations) from shifting profits to low tax-havens. The leaders signed up to levy a minimum 15% corporate tax rate. This will help boost economies especially following the pandemic, which has caused severe economic instability globally. Furthermore, the leaders have also moved to help protect the global financial system from the impact of climate change by agreeing on rules which require companies and financial institutions to disclose the extent to which their business is exposed to climate change risks.

Sources

  1. https://www.weforum.org/agenda/2021/06/g7-summit-covid19-tax-environment/
  2. https://www.investopedia.com/terms/g/g7.asp

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News

The upcoming market that is destroying livelihoods

Introduction

Sand is the second most used natural commodity, whose relative importance in the global market has increased drastically in the past half a century, due to the substantial increase in demand for materials in which sand is a major contributor. The number of people living in urban areas has more than quadrupled since 1950, to over 4.5 billion today. The UN predicts that another 2.5 billion people will join the 4.5 billion people already living in cities within the next 3 decades.

The increasing demand for sand

Therefore, the demand for sand has increased. An example of this is within the construction industry, where sand is used to provide strength to materials such as asphalt, mortar, and concrete. However, due to the world’s ever-increasing population, there is forever an increase in the demand for sand-based materials used to increase supply for buildings and infrastructure. To meet these demands, many billions of tonnes of sand are used worldwide annually, so much so that a UN report estimated that the global sand use in 2012 alone could have created a concrete wall 27m high by 27m wide around the equator.

Effects of increasing demand for sand

Although sand is associated with its trivial use of constructing sandcastles on holiday as a child, or in the play area at your local park, it is a necessity to keep global river systems intact, a resource that we certainly take for granted. As innocent as sand may seem, the incredible demand for it is causing loss of livelihoods, loss of ecosystems, and is even a cause of death around the world.

As described by an article written by the BBC, in Kenya, the over-dredging of the local riverbeds in poor, rural counties such as Makueni, is leaving some communities without access to drinking water, subsequently leading to the eventual deaths of many locals. Kenya, alongside many other African countries, is known for its seasonal, sand-filled rivers due to its desert biome. When heavy rainfall occurs, the sand allows water to percolate, and therefore acts as a natural store for water flow, providing a water source for the surrounding villages. However, once these rivers are dredged by companies and governments who wish to sell this commodity, only the bedrock — a relatively impermeable surface — remains, causing no water to be stored and surrounding land to be flooded.  It is important to understand that many thousands of people rely on such natural resources of water to live. While companies continue to exploit indigent areas, many are left without the means to survive. 

Furthermore, the increased demand for sand has led to it becoming a highly desired commodity, which subsequently has encouraged unofficial markets to emerge. An example is India’s black market for sand harvesting, which is operated by violent sand mafias. There have been many reports of killings, in a growing wave of violence sparked by the global desire to own one of the worlds’ most under-appreciated commodities. Many hope to purloin sand, through methods of violence in order to export this product in unofficial markets. Based on the law of demand and supply, when there is increased demand, there is an increase in the price. As the price elasticity of demand for sand is relatively elastic this provides mafias and other rogue organizations the power to gain significant funds from the export of such product. 

For some, sand is just a means to an end; a way to exploit yet another non-renewable resource (a skill our population has, sadly, acquired profoundly), but for many, sand protects their village, their livelihood.

Sources

BBC, September 2017. How the demand for sand is killing rivers. Available at https://www.bbc.com/news/magazine-41123284. (Accessed May 2021)

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News

Biden’s Proposed Tax Increase Angers Investors

Introduction

With just days left until his 100th day in office, President Joseph Biden is presenting a third economic package worth over $1 trillion entitled the American Families Plan. This $1.8 trillion package intends to increase funding for childcare and education. However, to help pay for this package, the president is looking to America’s wealthiest.

Why investors are angry

The proposal includes a dramatic increase in the capital gains tax rate for those making $1 million per year or more. Simply put, the capital gains tax is a tax on profit made by the sale of non-inventory assets such as stocks or bonds. Currently, the capital gains tax rate is 20% for those who make the aforementioned income. However, this plan would increase that number to 39.6%, which will become the new top income tax rate if this plan comes to pass. That is not all, since the surtax on investment income introduced by former President Barack Obama would actually make the total tax rate 43.4 %.

In just one bill, the capital gains tax rate would more than double for the wealthiest of the United States. This doesn’t even account for the capital gains taxes issued by individual states. For example, in California, the combined state and federal rate would be 56.7%.

Possible long-term effects of the bill

Needless to say, many investors and venture capitalists are infuriated by this plan, since it would reduce the value and drive to allocate money towards long-term investments. Furthermore, if fewer people commit to investments because of this much larger tax, the tax revenue will be reduced over time. This would essentially defeat the purpose of the tax increase in the first place. Also, as if building a business from the ground up wasn’t difficult enough, it will become much more difficult for entrepreneurs to acquire investments to help get their business started. The announcement of this plan resulted in stocks sliding more than they had in a month, which reflected the impact that this plan would likely have on the stock market as a whole.

Sources

  1. https://www.bloomberg.com/news/articles/2021-04-22/biden-to-propose-capital-gains-tax-as-high-as-43-4-for-wealthy
  2. “Biden tax rise fans investor fury,” published in the Financial Times, reporting by Eric Platt, Aziza Kasumov, Michael Mackenzie, Mark Vandevelde in New York, Miles Kruppa in San Francisco, and James Politi in Washington
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News

Outbreak of Coronavirus in India

For more than a year already, the recent outbreak of the coronavirus has continuously disturbed our plans. Whereas some nations managed to normalize the situation, others have turned into a “death valley.” One of these countries is India. 

On the 26th of April alone, 316 thousand Indians tested positive for the coronavirus. However, this data cannot be fully trusted because the government is not able to supply the doctors with the required number of tests. There is also a lack of doctors to help the sick; the prices for essential medicine have sky-rocketed. Indian doctors have announced that soon there will not be enough space in hospitals anymore, and that therefore hospitals would soon no longer be able to accept new patients. The government has taken some steps to help hospitals by, for example, banning the use of liquid oxygen in non-medical purposes.

The number of daily cases for the past few days in India. The graph is taken from https://www.worldometers.info/coronavirus/country/india/.

Sources

  1. http://www.xinhuanet.com/english/2021-04/26/c_139907439.htm
  2. https://www.dw.com/en/india-coronavirus-death-toll/a-57338733
  3. Picture from https://www.cnbc.com/2021/04/26/photos-show-the-deadly-toll-of-covid-in-india-as-coronavirus-cases-top-17-million.html
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News

The 24th of April throughout the years

Background

On this day in 1915 Talaat Pasha, one of the leaders of the leading figures in the Ottoman Empire, ordered to arrest 800 members of the Armenian elite in Stambul. This was the starting point of the Armenian Genocide, one of the worst crimes against humanity in history. The aim of the Armenian Genocide was to end the “Armenian question” in the Ottoman Empire once and for all. More than 1,5 million people were killed. Men were murdered on the spot, villages were burnt down, and women and children were forced to move to the desert where they died of starvation. 

On this day last year, millions of Armenians around the globe spent the day in a grave atmosphere. With shaking hands they looked at the photographs of their relatives who did not survive that nightmare. Some of them were elderly and some were not even three years old; some of them were talented artists and some were successful merchants. It did not matter who the person was, it mattered that they had Armenian blood. 

The 24th of April 2021

On this day, the 24th of April 2021, millions of Armenians will once again reminisce these horrible events. They will do it in 2022, 2023, 2024… We shall not forget our great-grandparents, who were massacred for no reason by the blood-thirsty politicians. 

In the end, I would like to ask everyone to do something. If you have an Armenian friend, an Armenian neighbor or an Armenian colleague take a look at him; just look at him for a second. If this shameful act wasn’t stopped by the Ottoman Empire’s defeat in World War I, who knows if he would be standing near you. 

Sources

  1. A Shameful Act by Taner Akcam
  2. Talaat Pasha: Father of Modern Turkey, Architect of Genocide by Hans-Lucas Kieser
  3. Great Catastrophe by Thomas de Waal