Talking Points
- Militias clashes in Beirut left 6 dead and dozens wounded
- Concerns rose over the state of the stricken Red Sea oil tanker
- Iraq's semi-boycotted election handed more power to the Sadrists
- UK police declined to further investigate Prince Andrew
- Britain's Irish Sea Brexit border debacle halted negotiations again
- Poland's PM Morawiecki hosed down suggestions of a Polexit
- Norway's bow-and-arrow attack believed to be an act of terrorism
- At least 46 died in a fierce apartment fire in Taiwan
- The WHO empanelled a new team to find the origins of Covid-19
- Texas banned companies from mandating vaccinations
Dive deeper
In lieu of the right old mess at the International Monetary Fund, this week we'll take up the mantle of crunching numbers and suggesting economic policy.
International Monetary Fun
When your pockets are empty, the IMF is there to help. Or, if not help, then at least voice noble intentions. A flick through its handbook reveals the organisation's lofty raison d'être, "promoting international financial stability and monetary cooperation. It also facilitates international trade, promotes employment and sustainable economic growth, and helps to reduce global poverty." The IMF's primary function is to act as a stabilising force for its 190 member states. And the best way to execute these duties is, in the IMF's words, to conduct surveillance of the global economy. Applying a set of rules pertaining to sustainable growth and healthy debt limits, the IMF is out there doing pinch tests, kicking tires, and peeking at the books. A precept when it comes to the IMF: good data, good advice.
But today the IMF has been shaken by a crisis in confidence. The current managing director Kristalina Georgieva arrived from the World Bank in 2019. A bombshell report from the lawfirm WilmerHale alleges she brought some serious baggage in tow. To wit, as CEO of the bank, Georgieva had stuck her thumb on the scale during the compilation of the 2018 Doing Business report. We know this sounds dry, but stay with us. The report ranks how easy it is to set up and run a business in each country – so it's far more than just a vanity metric. It has been alleged that as Georgieva was seeking more funds from Beijing, she pressured staff to make "specific changes" to China's ranking. Which is why the Fund opened an investigation into Georgieva. Could the numbers coming out of the World Bank have been bad under her watch? Was China secretly influencing the international institution?
Then, after a few weeks of frothy speculation from this usually tight-laced bunch, a curious thing happened. The Nobel-prize winning economist Joseph Stiglitz stepped into the ring – "having read the WilmerHale report, having talked directly to key people involved, and knowing the whole process, the investigation appears to me to be a hatchet job ."
As it happens, the person responsible for the report/hatchet job was one David Malpass. Malpass is a Donald Trump appointee who currently runs the World Bank. Stiglitz opined that Malpass might simply be looking to stir trouble for the sitting US president - an extraordinary allegation given the purview of the organisations involved. Conservatives in Washington pulling strings at the World Bank to take down the new head of the IMF was probably not what most people expected from a post-Trump era.
This week the IMF backed Georgieva in, having found no conclusive evidence of wrongdoing. But the affair has left a pall over the Fund. There have been suggestions that the IMF may have hurried its investigation because there was no appetite to change leaders amid the global pandemic and its attendant economic impact. But even if Georgieva had gone, there is clearly a growing rift between the IMF and the World Bank. The former is increasingly cutting the lunch of the latter, that is, investing in development projects . Could this just be a case of sour grapes?
Transmuting numbers into letters
It bears reminding oneself that the international monetary system, and indeed the globalised economy as a whole, is guided by a soft science. Economics is not like other sciences. In fact, it's not really a science at all. Yes, there is a quantitative element that conforms rigorously to the laws of mathematics. But that's just counting. Economics is the schema of theories that takes those numbers and uses them to inform policy. This is where things get gooey.
Robert Shiller – the 2013 Nobel laureate in economic science – outlined the distinction. "My belief is that economics is somewhat more vulnerable than the physical sciences to models whose validity will never be clear, because the necessity for approximation is much stronger than in the physical sciences, especially given that the models describe people rather than magnetic resonances or fundamental particles. People can just change their minds and behave completely differently."
We persist with this rubbery theorising because the alternatives are haruspicy and Magic 8-balls. Economists measure data signals and interpret them through whatever orthodoxy they subscribe to. Governments listen – or don't – and design policy. Some of the theories aren't exactly watertight. For instance, authoritative studies have shown that trickle-down economics is, judged on its own merits, bunkum. It is very good at creating a reservoir of wealth at the top and freezing or reversing wealth gains at the bottom. That was bad policy believed to be predicated on sound numbers.
What happened at the International Monetary Fund this year reminds us that it's not just the theories and policy that get messy – it's the economists too.
Worldlywise
A liveable wage, and other fairytales
Labour economics has its own bogeyman story. And it goes like this. Governments impose an increase in the minimum wage. Businesses, now bereft of cash, have no choice but to lay off workers. The economy spirals, welfare payments rise, disaster ensues. On the surface – especially if you lived last century – this assertion makes sense. That is, until you get out in the real world.
Enter David Card and Alan Krueger. The former was awarded, alongside Joshua Angrist and Guido Imbens, the 2021 Nobel Prize in Economics this week “for his empirical contributions to labour economics”. His work with Krueger, who died in 2019, analysed the impact of a minimum-wage increase on employment in the fast-food sector. They did so by doing something that many economists don't — talking to people. Unlike other sciences, controlled experiments aren’t plausible in economics. Ask any government to boost the minimum wage of half a population in the name of science — that is a tough sell. Instead, Card and Krueger took advantage of a mini-experiment. In 1992, the state of New Jersey (home to Card and Krueger’s Princeton University) increased its minimum wage to the highest in the U.S. Neighbouring Pennsylvania did not. The pair surveyed 410 fast-food restaurants on both sides of the border, before and after the New Jersey rise. They found “no indication” that a rise in the minimum wage led to reduced employment.
The finding was highly contested in 1990s academia. So much so that Card didn’t study minimum wage again. But his article and book with Krueger influenced the work of others. And the blanket assertion that minimum-wage rises cost jobs is less tenable in today’s economic circles. This is important because wages, after all, are the oil that keeps the economy's engine running. And no one feels this more than those on minimum wage, for whom decimal-point changes can have a monumental impact.
Take, for example, workers at Walt Disney World in Florida. The minimum wage there was lifted to $15 an hour on Sunday. When Diego Henry Jr. started working as an attraction host on the Fantasmic! show in 2013, he made $8.35 an hour. He and his daughter Zoe were living “paycheck to paycheck, cash advance to cash advance” even though he was working full time. In 2018, Disney struck a deal with unions to increase the minimum wage to $15 an hour by October 2021. The same weekend the resort started celebrations of its 50th anniversary, Diego got his pay rise. ‘I can do the things that I’ve always wanted to do,’ he said.
Card and Krueger’s research has been used as empirical evidence for policymakers, including the Biden administration’s push to increase the minimum wage. In April, Biden signed an executive order raising the minimum wage for federal contractors to $15 an hour. The job-stealing bogeyman story still lingers, but carries less weight. David Card can be partially credited for proving that a liveable income can exist outside of ‘The Most Magical Place On Earth’.
A mission from God
Brazil’s president Jair Bolsonaro has been accused of crimes against humanity in the International Criminal Court for presiding over the destruction of the Amazon rainforest. If the ICC proceeds with the complaint, it would be the first case where deforestation has been explicitly linked to loss of life. A report published in Nature in July confirmed that as a result of deforestation, agricultural overuse, and burning, the Amazon now emits more carbon dioxide than it sequesters. Austrian environmental group AllRise, which lodged the complaint with the ICC, estimates that Brazil’s role in the deforestation of the Amazon will cause 180,000 heat-related deaths this century. If successful, the case would be a watershed moment in allowing the ICC to charge the powerful with environmental destruction.
But this isn’t Bolsonaro’s first rodeo at the ICC. The complainants in this case have accused Bolsonaro of inciting murder against Brazil’s Indigenous people — something he has been accused of at the ICC several times before. "It is exactly what the Rome Statute defines as a crime against humanity: the intentional destruction of the environment and environmental defenders," said AllRise founder Johannes Wesemann. Indigenous leaders in the Amazon are speaking out ahead of the United Nations COP26 conference in a few weeks, where member countries will agree on emissions reduction targets and outline strategies to address the climate crisis.
Gregorio Mirabal, the head of the Coordinator of Indigenous Organizations of the Amazon River Basin, called on developed nations attending COP26 to collaborate with Indigenous people and formulate a plan to protect the Amazon. "Life on this planet will not be possible if the Amazon disappears,” said Mirabal, a member of the Wakuenai Kurripaco people. Efforts to curb the massacre of the lungs of the Earth, as the Amazon is often called, are also happening outside South America. The US, the EU, and the UK are each putting forward bills ahead of COP26 to limit their importation of commodities linked to illegal deforestation — a potentially powerful weapon given that 94 per cent of the logging in the Amazon is estimated to be illegal.
Bolsonaro is not expected to take any action — the rate of clearing has doubled since he took office in 2019. Nearly 65 per cent of voters disapprove of him , but there are growing fears he will abandon or undermine elections scheduled for next year. Bolsonaro told supporters in September that he only has three fates: arrest, death, or victory. “Only God can take me from the presidency,” he said.
The best of times
A few minutes in heaven
William Shatner landed back on Planet Earth this week having touched the edge of space. The beloved Star Trek actor who played Captain James T. Kirk of the USS Enterprise became the first nonagenarian to cross the Kármán line separating our atmosphere from the rest of the universe. Like nearly everyone who has seen our planet from on high, he was overcome with a desire to protect it. He marvelled at, "this sheet, this blanket, this comforter of blue that we have around us". Here's an idea to save it: no more space tourism.
The answers are around us
One of the most humorous types of news stories we come across is the pharmaceutical giant that discovers a medicinal treatment that has been practiced for time immemorial. In this week's example, a team from Oxford University partnered with NuCana to develop a chemotherapy drug derived from Himalayan fungus Cordyceps sinensis. It is 40 times more effective at killing cancerous cells than what is currently in market. A wonderful surprise for everyone except the practitioners of natural Chinese medicine who have used the fungus to treat cancers for several hundred years .
The worst of times
Washed up on a floating island
The relocation of Rohingya by Bangladeshi authorities is underway. 100,000 people are being shipped from the crowded refugee camp of Cox's Bazaar to Bhasan Char – 'the floating island' in Bengali. It's name refers to the geography; it is so low-lying that until flood-barriers were erected recently it would disappear beneath high tides. There are no jobs to speak of on the island which is kept under guard like a prison. Housing the Rohingya on Bhasan Char is beginning to look less an act of high charity and more a problem swept under the carpet.
A renewed offensive
The Ethiopian army, backed by irregulars drawn from ethnic militias, launched a new assault on the restive region of Tigray this week. The government broke months of ceasefire that held after the swift recapture of the region by Tigrayan insurgents in June. The disproportionate use of heavy artillery and airstrikes is one thing, but the government wielding starvation as a weapon against its own people is a horror.
Weekend Reading
The image
The quote
"WA Police have charged a 48-year-old man with stealing in relation to the alleged stealing of an "acoustic monitoring tag" used in the tracking of great white sharks by the Department of Primary Industries and Regional Development (DPIRD). The man is due to appear before the Albany magistrates court on 4 November 2021."
– The gentleman in question is believed to have used the tag to set off shark alarms along Western Australian beaches. The police statement gives us the 'what'. We'll leave it up to your boundless imagination to think of the 'how', 'why', and 'are you kidding me, dude'.
The numbers
2,000 feverish, coughing Americans
- The Centre for Disease Control recorded 2,000 flu cases during the 2020-21 flu season. That is 17,000 times fewer than the 35m cases in the previous year.
23% jump in consumption
- US coal plants are on track to burn nearly a quarter more coal than they did last year. That is just over 100m extra tonnes of the dirtiest fossil fuel – incinerated and pumped into our skies.
The headlines
"Pro-Trump candidate suggests taking all boats out of the water to lower sea levels" – The Independent
"Japan's island-shaped curry inflames tensions with Korean neighbours"
The special mention
This week the North Korean Army won the vaunted inkl special mention with a display of unbridled machismo. In a video that simply needs to be seen to be believed , topless soldiers engage in feats of bravery and strength before an adoring Kim Jong-un. Such feats included: breaking cinderblocks over one another's heads, comrades smacking comrades with big sticks, and general tumbling about in choreographed fight scenes. It's all good theatre. And, you'd be hard-pressed to come up with a better analogy for Juche Thought than being repeatedly hit in the head.
A few choice long-reads
- The cryptocurrency Tether markets itself as a stablecoin – that it is backed by cold hard cash in US currency. The only problem is no one can find that cash. A thrilling read from Businessweek.
- No-one said the transition would be easy. But few said it would be this bumpy. The Economist on the first major energy shock of the green revolution.
- This is an absolute must-read. 7,000 words of plain-speaking from The Atlantic on the biggest threat to journalism. Meet the secretive hedge fund that is gutting America's newsrooms.
Tom Wharton @trwinwriting
