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Weekly Summaries

12th of September – 19th of September

Australia to get nuclear-powered submarines

Last week, the U.S. and Britain made a joint announcement that they would help Australia deploy nuclear-powered submarines. If this happens, Australia would be able to conduct routine patrols in the South China Sea, which would challenge China. Nonetheless, Australia “committed never to arm the submarines with nuclear weapons,” according to the New York Times. The deal is a major blow to France because of multiple reasons. As a result of the deal, Australia will not buy French-built submarines, which is bad news for French businesses. France sees the event as yet another example of the “widening rift” in U.S.-French relations and has announced that it will withdraw the French ambassadors to the U.S. and Australia in protest.

Other News

  • Iran will allow nuclear monitoring as agreed in a last-minute deal reached last week.
  • North Korea announced that it had launched “long-range cruise missiles” that hit targets 932 miles away, according to the New York Times. This is a major violation of multiple U.N. Security Council resolutions.
  • The company Colossal is hoping to repopulate Siberia with thousands of woolly mammoths, thousands of years after they went extinct.
  • In a huge step towards deciding the fate of Catalonia, Spain’s prime minister Pedro Sánchez and Catalonia’s leader Pere Aragonès met in Barcelona.
  • French forces killed Adnan Abu Walid al-Sahraoui, a leader of the Islamic State
Categories
News

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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Weekly Summaries

19th of July – 25th of July

The Olympic Games have started

The Olympics — arguably the greatest sporting event in the world — started on Friday with the opening ceremony. Tennis player Naomi Osaka lit the Olympic cauldron. However, the current circumstances with the outbreak of COVID-19 mean that the games look very different this year. More than 120 people involved with the Olympics tested positive so far, including at least six athletes. Additionally, an Algerian judoka decided to quit the Olympics before his competition had even started as the matching of the competitors may have meant that he would have to fight against an Israeli athlete, leaving concerns about whether the Olympics really is successful in bringing athletes from around the world together peacefully.

Haiti gets a new government

A new prime minister was announced in Haiti last week: Ariel Henry. He will replace the interim prime minister Claude Joseph, a neurosurgeon who had not yet been sworn in amid the chaotic struggle for leadership taking place at the moment. However, the list of cabinet ministers hardly changed.

Other News

  • After floods in Western Europe last week left almost 200 people dead, floods in Zhengzhou, China, caused by very heavy rainfall have left more than 30 people dead this week and displaced more than 250,000
  • Officials announced that a recent bus explosion in Pakistan that killed 13 people, including 9 Chinese workers, was a terror attack
  • Extreme weather conditions in the U.S. have continued, with wildfires raging across the Western part of the country
Categories
Weekly Summaries

31st of May – 6th of June

China’s new 3 child policy

On Monday, the Chinese government announced that it would now allow all married couples to have three children. Previously, couples had only been allowed to have two children. The announcement comes as birth rates in China continued to fall for the fourth consecutive year.

Israeli Politics Update

After four elections in as many years, the coalition between Israel’s opposition parties, which was announced on Wednesday evening, may finally bring some stability to Israeli politics. The coalition is bad news for Prime Minister Netanyahu, who has become Israel’s longest-serving prime minister and is currently facing trial on charges of corruption. Including eight parties with ideologies ranging from the left to the far right, some analysts praised the breadth of the coalition, while others are saying that the range of ideologies and many differences may mean that the parties are “too incompatible for their compact to last” (the New York Times).

Other News

  • The “state of emergency” in Tokyo, Japan, has been extended until at least the 20th of June, scheduled to be lifted just right before the Tokyo Olympics
  • Taiwan has been facing its worst drought in half a century, draining reservoirs
  • Naomi Osaka, the highest-paid female athlete in 2020, withdrew from the French Open last week. Previously, she had already announced that she would not be participating in the usual postmatch news conferences but found herself being fined by tennis officials, who threatened further punishment if she continued to refuse to attend post-match news conferences. Previously, she had already announced that she would not be participating in the usual postmatch news conferences but found herself being fined by tennis officials, who threatened further punishment if she would not attend the upcoming post-match news conferences.
  • This past week, NASA announced that it will launch “two new missions to explore Venus,” according to the New York Times

Fun Fact

Consisting of 15 elephants in total, a herd of elephants has been making its way across China for the past year. They have travelled more than 300 miles, puzzling researchers.

Categories
Weekly Summaries

17th of May – 23rd of May

Israel and Gaza reach a cease-fire

At the beginning of last week, Israel continued to conduct airstrikes on the Gaza Strip while Hamas fired rockets at Israel from the Gaza Strip. Some say that such levels of violence were last seen in 2014. During a phone call with President Netanyahu of Israel, President Biden reportedly expressed “support for a cease-fire between Israel and Hamas,” according to the New York Times. Furthermore, Egypt has been continuously working with the United Nations, in the hopes of reaching a cease-fire. Foreign ministers of the European Union have also called for an “immediate cease-fire.” A cease-fire appears to now have finally been reached after 11 days of fighting, coming into effect at 2 am local time on Friday. Both sides claimed victory and there were celebrations both in Gaza and in the West Bank.

Other News

  • In “Nowhere Land” on Mars China has successfully been able to land a rover, even releasing the first photos that were shot of Mars this week
  • Around 8,000 people crossed the border from Morocco to Spain, with Spain reacting by troops, military trucks, and helicopters into Ceuta
  • In Indonesia, a lawsuit pursued by citizens aims to force the government to address the pollution in the metropolitan area of Jakarta
Categories
Analysis

What is soft power?

Hard power vs. soft power

In international relations, there are two main types of power: hard power and soft power. Hard power is related to the traditional image people have when they hear the word “power.” The definition of hard power is “power deployed in the form of coercion;” this can be using force, threatening the use of force, and putting in place economic sanctions or inducements of payment. Soft power, meanwhile, refers to the “use of positive attraction and persuasion to achieve foreign policy objectives.” This means that the main aim of a “soft power” foreign policy is to become influential rather than using any form of “real” (or hard) power.

The origin of soft power

The concept of soft power was first proposed by Joseph Nye in the late 1980s. Joseph Nye originally described three sources of soft power, namely political values, culture, and foreign policy. After World War II ended, the basis of U.S. soft power was the spread of ideas and values like democracy, a free-market economy, and human rights. People and countries looked up to the United States of America as a role model and wanted to be like them. Therefore, these people and countries were more willing to put these ideas like a democratic government and a free-market economy into place in their own countries as they had seen how well these worked for the USA. In the period immediately after the end of the Cold War, the concept of “soft power” caught fire among politicians, with some even claiming that soft power “defined” the period immediately after the Cold War.

Soft power today

Although hard power has been used more frequently again by countries again nowadays — an example is North Korea building nuclear weapons — China has increasingly been using soft power. In Joseph Nye’s original article on soft power, China was hardly mentioned. Nowadays, China is the world’ biggest trading country. Examples such as China’s Belt and Road Initiative — through which the Chinese government aims to encourage economic growth in other countries by providing the necessary infrastructure — serve as evidence of China’s new approach to international relations.

Sources

  1. https://softpower30.com/what-is-soft-power/
  2. https://foreignpolicy.com/2018/08/20/the-rise-and-fall-of-soft-power/
Categories
Weekly Summaries

19th of April – 25th of April

President Déby of Chad killed

President Idriss Déby was considered crucial “to battling Islamist extremism in the central Sahel region,” according to the New York Times. Thus, he was backed by both France and the United States. This past week, however “he was killed in clashes between insurgents and government soldiers” (the New York Times). He had just secured his sixth term in office.

Other News

  • Aleksei Navalny is on his third week of hunger strike to protest against his lack of access to medical treatment and has now been moved to a hospital
  • Last weekend, a passenger train north of Cairo derailed, killing at least 11 people
  • The U.S. and China made an agreement to work together to fight climate change
  • Argentina’s inflation rate is now above 40 percent
Categories
Analysis

The Flaws of the Chinese Model

Historical Context

In the 1970s, Beijing liberalized the economy, opening it up to foreigners, and adopting policies that promoted free trade. These were similar to glasnost and perestroika, which were implemented in the USSR. The hope was that millions of Chinese could be lifted out of poverty and into prosperity. While Deng’s reforms started in agriculture, he slowly branched out to include industry as well. A perfect example is Shenzhen, now a bustling metropolis, back then it was a shanty-town. He decided that the Pearl River delta should spearhead the liberalization. The PRC created special economic zones with little oversight, where foreign firms could trade freely with minimal interference from Beijing. This was adopted throughout China as the try-outs were successful, accelerating China’s economic growth.

Analysis

China progressed and grew — to the shock of many economists as no country on earth had ever grown at the rates China did. This raised the net output of firms in the economy, therefore increasing the GDP. As the Chinese adopted friendlier policies, the GDP rose further as China became a lucrative investment destination ceteris paribus. Mathematically speaking, as GDP is Consumer Spending, Investment, Government Expenditure, and Net Exports (Total Exports – Total Imports) added together, as China grew its reputation on the world stage and investments from abroad grew raised the GDP, imports remained stagnant due to an uncompetitive Yuan. Meanwhile, exports also increased, raising Net Exports (Total Exports – Total Imports), having a ripple effect on the GDP too.

GDP of China [PPP] from the World Bank Database (CC BY-4.0)

 As China started to industrialize, the wages grew at rates never seen before. It looked like China had the perfect deck of cards to become an industrialized nation, which it did — as China is a newly industrialized country. However, this came with many downsides: externalities and inequality.

Externalities are a cost or benefit placed on a third party. They can be positive or — as in China’s case —  negative. The costs to produce outweigh the cost to society from the production in markets. Therefore, there is a welfare loss. As there is a welfare loss, society is worse off — this can be in the forms of pollution, increased health risks, lower life expectancies, or otherwise. The welfare loss exposes the public to harmful particles and extreme air pollution. Now, this leads us to question how well-off are the Chinese?
Even though rapid economic growth has increased wages and lifted many out of poverty, and the effect of increased GDP has had direct consequences on the Chinese, nonetheless, one result of rapid unchecked growth is inequality. As The Economist reported in 2015 and 2019, education is highly unequal. Access to education helps individuals earn more due to the development of skilled labor and allows firms larger access to a larger pool of individuals with specialized skills. However, as stated in both the articles, most Chinese schools are now jam-packed with elite, wealthy kids; and uneven wealth distribution, like in the United States, has led to the degradation of the quality of education received by rural Chinese. This can cause them to struggle in the gaokao, an all-important university exam, viewed by many rural Chinese as their only way out. However, the government has been attempting to fix this. Beijing has suggested that educational reforms are needed. There is also the big North-South divide. Farmers in the north cannot earn enough to live, so they migrate to the south to become laborers or factory workers. As they live in poor neighborhoods, this increases the chances of their children scoring poorly on the gaokao.

Conclusion

Nonetheless, China has had tremendous success in eliminating poverty. Its people — once some of the world’s poorest — are now living in a modern country. However, many challenges are facing the Chinese. The ones discussed here are scratching the surface; some others include depopulation, firms’ inefficiency, unemployment, and an overheating economy.

Sources

Categories
Weekly Summaries

15th of March – 21st of March

Shooting in Atlanta

Eight people were killed on Tuesday during a mass shooting in Atlanta at massage parlors. The victims include six Asian women, alerting Asian communities around the US. Law enforcement officials have responded by increasing police patrol, responding to an increase in hate incidents against Asians since the outbreak of COVID-19 over a year ago. The gunman has now been captured and has been charged with several counts of murder.

Other News

  • The European Union is taking legal action against Great Britain, claiming that Britain violated a legal agreement over Brexit and Northern Ireland.
  • Northern China experienced its strongest and largest dust storm in a decade
  • A court in Japan ruled that it was unconstitutional to not recognize same-sex marriages
Categories
Weekly Summaries

1st of March – 7th of March

Protests in Spain

The young Spanish generation has been going to the streets in major cities like Madrid and  Barcelona for more than a week now. At first, the protests were a reaction to the arrest of the rapper Pablo Hasel, but now the protests have developed into a much bigger movement. The pandemic has hit Spain’s youth very hard; over 40% of young Spaniards now find themselves unemployed, the highest number in the EU. The current situation is a far-cry from the Barcelona that once was one of the “best places in Europe” for young people.

The Former French President Found Guilty of Corruption

It is the second time in modern French history that a former president was convicted of a crime. The former French President Nicolas Sarkozy was sentenced to at least one year in prison this past week on charges of corruption. Sarkozy supposedly gained confidential information from a judge after offering to help the judge get a job.

Other News

  • Britain and the EU have had some major disagreement this past week. The path to a “normal” relationship between the two parties remains a rocky one.
  • Last Sunday, the Hong Kong authorities charged 47 pro-democracy activists of violating the new Chinese Security Law.
  • New charges have been raised after the civil leader Daw Aung San Suu Kyi by Myanmar’s military which staged a coup a few weeks ago. She now faces a prison sentence of up to 9 years.
  • The U.S. announced sanctions against Russia on Tuesday on the accusation of poisoning Aleksei Navalny
  • Three female journalists were shot in Afghanistan last week on their way home from work
  • After hundreds of Nigerian girls were abducted from their boarding school last week, their kidnappers have now released them