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Weekly Summaries

26th of July – 1st of August

Chaos in Tunisia

The President of Tunisia, Kais Saeid, tried to seize power in what some call a coup. He announced that he would fire the prime minister and has already suspended Parliament. However, so far it seems that his success is very limited, although many Tunisians expressed their support. Tunisia has been a democracy since the Arab Spring revolutions.

Other News

  • A landslide in India killed 9 people, most of them tourists. Furthermore, monsoons on the western coast have also killed more than 164 people so far.
  • France has been witnessing many protests against the so-called “Covid Pass” policy
  • North Korea and South Korea have — after 14 months of silence — reopened diplomatic and military hotlines between the two countries
  • Flash floods in Afghanistan have killed at least 80 people, but the search for survivors still continues
  • President Biden announced that EU citizens will continue to be barred from entering the U.S., citing fears that the Delta variant would be spread, despite the fact that U.S. citizens are allowed to enter EU countries, as long as they are fully vaccinated
  • Forest fires in Turkey and wildfires in Greece have had devastating consequences for the people living in the surrounding areas

Are you up to date with the Olympics? Check here for the newest updates

Categories
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
Categories
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
Analysis

Discussing the Global Minimum Tax Rate

Introduction

Last month, the leaders of the Group of Seven (G7) met in Cornwall and revealed a new agreement to introduce a global minimum corporate tax rate of at least 15%. This tax would have to be paid by all corporations, regardless of where they locate their headquarters and was created in an effort to stop large multinationals from shifting their profits into tax-havens to avoid paying corporate taxes. 

Why is it necessary?

Finance leaders around the world have stated that, as of late, corporations in global commerce are trying to get the tax rate as low as possible: “We’ve had a global race to the bottom in corporate taxation and we hope to put an end to that,” Treasury Secretary Janet Yellen said in late March. Major developed economies around the world, such as Britain and the US, have wanted to raise corporate taxes and find methods to tax large tech giants at higher rates, but this is extremely difficult to do when these corporations are international but taxes are national. Essentially, no economy would be able to pass legislation to raise taxes when every other economy in the world remained at their relatively lower tax rates — not only is this controversial but it is also futile as large corporations are skilled enough to know how to move their profits into locations where the corporate tax is little to none. The global minimum rate will, ideally, ensure that all corporations around the world are taxed at the same base rate and thus create an even playing field. 

Problems that may arise

This initiative does not come without its critics. Republicans have argued that this decision will inevitably reduce the competitiveness of American corporations, which was counteracted by the fact that all countries will have the same base rate. Regardless, they are still reluctant to changes in the tax code and are in favour of minimised government intervention in the economy. The Biden administration has been pushing for a hike in the corporate tax rate, as this supports the President’s plan to raise the US rate from 21% to 28% to fund his large-scale infrastructure plan. Additionally, although Biden is clearly pushing for the change, it will be an obstacle for him and his administration to get this plan through to the thinly divided Congress in which Republicans will resist changes to the tax system. 

Some of the G7 delegations are in fact insistent on this tax rate being flexible, in order to ensure it can be pushed even higher in the future. Although several nations are highly supportive of this agreement, it only includes 7 nations. The G7 — Britain, Canada, France, Germany, Italy, Japan and the United States — plans to extend this proposal to the G20 as well later this year. 

This tax also incorporates stricter taxation for huge multinationals, notably US tech corporations, who have avoided taxes in spite of the considerable profits they gain from operating in several locations. 

Conclusion

All in all, this tax definitely levels out the playing field for global corporations, and could even help improve the budgets of some countries that will benefit from greater tax revenue. Although it disadvantages smaller economies that have thrived due to low taxes, such as Ireland, further planning and proposals to a greater variety of nations indicate a promising future for equitable taxation. 

Sources:

Categories
Weekly Summaries

28th of June – 4th of July

Civil War in Tigray, Ethiopia

Civil war has been raging in Tigray, a northern region in Ethiopia, for eight months. On Monday night, Tigrayan fighters entered Mekelle, the regional capital shortly after the Ethiopian government troops had withdrawn from Mekelle. Shortly after entering the city, the Tigrayan forces also gained control over the airport and the telecommunications network as residents celebrated. The attack on Mekelle by the Tigrayan forces, known formally as the Tigray Defense Forces, is part of a greater counterattack against the Ethiopian government troops. Ethiopian government troops then formally retreated from the Tigray region on Wednesday after it had occupied the Tigray region since November. More than two million people have been displaced and impending crises, including famine and a lack of water, bear grave prospects for the future of the Tigray region.

Other News

  • The Trump Organization was charged with “running a 15-year-tax fraud scheme” on Thursday, according to the New York Times
  • Western Canada and the northwestern US have experienced a huge heat wave, which has been deadly
  • The highest court in South Africa has ordered the imprisonment of South Africa’s former president, Jacob Zuma, for 15 months. Jacob Zuma previously failed to appear before court for a corruption inquiry
Categories
Analysis

How the pandemic affected the crude oil industry

Introduction

One of the most important and significant commodities in the history of the modern world has been oil. Crude oil was so essential at one point that it was the basis of one of the largest monopolies in history: the Standard Oil Company. After the Second Industrial Revolution, which led to the popularization and availability of machinery and electricity in general, oil became an almost priceless product that seemed to keep the world spinning. Despite its importance decreasing since then, oil still remains an incredibly valuable resource. Nonetheless, the outbreak of COVID-19 and subsequent lockdown policies gave the oil industry an incredible blow.

The pandemic and crude oil

The pandemic took its toll on many industries, but oil was among those that suffered the most. In the United States, oil mainly hovered around the price of $60 and $70 per barrel in the first quarter of 2020 and seemed to be steadily increasing. However, in March, when the stricter pandemic guidelines were first put in place in the United States, the prices of oil began to fall dramatically. In fact, the prices fell so suddenly that towards the end of April, oil prices were actually negative. While there were many factors that contributed to this drop, the largest and most obvious was the lack of demand. Although there may be a limited amount of oil in the world, there is still an incredible amount of it being produced on a daily basis. During the pandemic, the production of crude oil (i.e. the supply) did not decrease by much, but the demand fell remarkably. Fear of being infected with the virus discouraged many people from leaving their homes unless they absolutely needed to. This meant that vehicles, most of which rely heavily on oil, were being used significantly less. In turn, this relative abandonment of vehicles led to the price of crude oil falling dramatically, not just in the United States but on a global scale as well. 

Outlook towards the future

There is now a hope that the pandemic will be over soon. Many restrictions have been lifted in countries around the world, and the price of oil has changed as a direct result of this. As restrictions were slowly lifted throughout the second half of 2020 and the first half of 2021, the prices of oil have made an incredible recovery. So far, this recovery shows no immediate signs of ending any time soon. While an increase in the production of electric cars will certainly hurt the oil industry in the future, increases in oil prices seem to be unstoppable as oil prices now approach $75 per barrel in the United States. This is significantly higher than the price of oil just before the pandemic hit. Many analysts expect prices to reach $80 per barrel before the Summer ends, and some even believe that prices will reach $100 per barrel within the next two years. This just goes to show that volatility in the economy often follows volatility in the rest of the world. In this individual case, in response to a global pandemic, oil prices dropped to improbable lows and then increased to unbelievable highs all within the span of a single year.

Sources

  1. https://www.cnbc.com/2021/06/02/it-could-be-a-hot-summer-ahead-for-oil-prices.html
  2. https://www.wsj.com/articles/investors-bet-green-energy-focus-will-push-up-oil-prices-11623656321

Categories
Weekly Summaries

14th of June – 21st of June

Elections in Israel

The former Prime Minister, Benjamin Netanyahu was “formally ousted” by Israel’s parliament last Sunday. The new coalition government was then approved by a single vote (60 to 59) and one abstention. Israel’s new Prime Minister Naftali Bennett, who is said to be further right than Netanyahu, will be replaced by the centrist leader Yair Lapid in two years. In total, the new coalition government is made up of eight parties — including an independent Arab party for the first time in Israeli history — who have little in common due to their wide distribution among the political spectrum. This could mean trouble for the new government in the future, although they have announced that as the new coalition government, they will focus more on domestic issues instead of issues that divide them to provide some stability. The first step that the new Israeli coalition took on Tuesday was to announce their plans to “repair Israeli ties with the US,” the New York Times reported. However, at the same time, the Israeli military bombed parts of the Gaza Strip in the early morning hours last Wednesday after incendiary balloons were sent by the Hamas into southern Israel. So far, there have been no reports of casualties.

The G7 Summit in Cornwall

The first-in-person summit since the pandemic first began concluded last week. The countries that attended were the US, Canada, France, Germany, Japan, Italy, and the UK. Although the G7 countries were not able to reach agreements on all topics they wanted to address, they have planned a range of new policy approaches. You can read more about the G7 summit on Cornwall here: https://econir-web.com/2021/06/20/the-g7-summit-in-cornwall/

Other News

  • Ebrahim Raisi has won the election in Iran, becoming the new President. However, voter turnout, especially among the younger generation, was very low.
  • During the NATO summit, President Biden “reaffirmed his commitment to the alliance,” according to the New York Times. The union has also taken a harder stance towards China and Russia, saying that China’s growing military power and influence around the world may “present challenges.”
  • President Biden met with President Putin in Geneva. The meeting was described as “positive” by President Biden and as “constructive” by President Putin, with outcomes such as an agreement to “open U.S.-Russia talks on cybersecurity and arms control” (the New York Times) being made.
  • Britain and Australia have made a free-trade agreement, which is Britain’s first major trading deal since it left the European Union last year.
Categories
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

Categories
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
Categories
Analysis News

The US Department of Defence’s Plans to Win the War on Global Warming

Who is the Department of Defence?

The Department of Defence is an executive branch of the department of the federal government, charged with coordinating and supervising all agencies and functions of the government directly related to national security and all the United States Armed Forces.

Global Warming and how the US is affected by it

Currently, the US contributes around 15% of the world’s greenhouse gas emissions through a variety of activities including industrial activities, the burning of fossil fuels, and many more. The question remains, will the USA’s future plans allow this figure of 15% to be reduced significantly? The United States is a region of the world that is highly susceptible to natural hazards, which have only been intensified by the developing issue of climate change. Therefore, the US has a strong need and desire to reduce the impacts of climate change. In 2019, over 90 natural disasters were reported in America alone. Although the US is a developed, High Income Country (HIC), these natural disasters cost the US government billions each year, money that authorities can’t afford to lose, but more importantly the hazards can destroy whole communities and livelihoods. For example, in 2017, the government spent a record $306 billion following three hurricanes, extreme wildfires, flooding, tornadoes, and droughts – each of the 16 disasters exceeded a billion dollars in reparation costs.

The Plan of Action

The US Department of Defence has developed a ‘huge appetite’ for renewable energy sources, as described by POLITICO.com. President Biden, working alongside the Department of Defence, has assured the media that over $2 trillion of the governments’ budget will be directed into the expansion of clean energy, aiming to reduce carbon emissions and build resilient facilities over the next four years. However, the ambitious plan will need the approval of Congress, an audience that is likely to show resistance to the plan, due to the strong views of the Republicans, who aim to block any ‘green’ plans. The Department of Defence is one of the United States’ biggest contributors to carbon emissions and that is why this plan of action is imperative. Many people believe that the way to reducing climate change is by individually reducing our own carbon footprint. While this may be true, there is a limit as to how much individuals produce as companies and organizations such as the Department of Defence produce the vast majority of the world’s greenhouse gas emissions. Although the Department of Defence’s plans are not yet complete, their aims and intentions are in favor of helping reduce climate change, a plan that may take many years, but a small step today is still a step in the right direction.

Sources

  1. https://en.wikipedia.org/wiki/United_States_Department_of_Defense#:~:text=The%20United%20States%20Department%20of,the%20United%20States%20Armed%20Forces
  2. https://www.activesustainability.com/environment/top-5-most-polluting-countries/
  3. https://oceanleadership.org/natural-disasters-cost-u-s-record-306-billion-last-year/
  4. https://www.politico.com/news/2021/01/04/biden-pentagon-climate-change-454404