Category Archives: EARTH WATCH

China, America, and the International Order after the Pandemic

By Mira Rapp-Hooper – As people around the world fall ill, global markets convulse, and supply chains collapse, COVID-19 may also reorder international politics as we know it. No analyst can know when this crisis will end, much less divine the world we will meet at its conclusion. But as scholars have begun to note, it is plausible that China will emerge from the wreckage as more of a global leader than it began.

Following World War II, the United States was a chief architect of the so-called liberal international order and became its uncontested leader with the Cold War’s end. China, with its breathtaking economic growth and vast increases in military spending, has been on the ascent for decades, but long remained focused on domestic stability and the security of the Chinese Communist Party. It clambered to center stage after 2008, when the global financial crisis appeared to signal a weakening of American primacy.

China and others took the American financial stumble as a blunder of democratic capitalism, and a moment of opportunity to advance their own agendas. Under Xi Jinping, Beijing has seen the last decade as a period of “strategic opportunity” — one it did not necessarily expect to last, as it faces its own expected economic and demographic slowdowns. It built military bases in the South China Sea in contravention of international law, launched the vast and opaque Belt and Road Initiative to spread economic and political influence, doubled down on the state’s role in the economy and prejudicial policies, and coopted international human rights bodies. Along the way, it began to develop its own global governance aspirations and visions.

With the election of Donald Trump, the United States widened Beijing’s window of opportunity with its self-inflicted political convulsion. To China’s great fortune, American foreign policy was now expressly hostile to multilateral institutions, bellicose on trade, and defined national security in terms of narrow, homeland defense. To experts in the United States and abroad this looked like a willing abdication of the system the United States had constructed and led. But alongside these fears, and in another significant shift, foreign policy thinkers from both major parties increasingly agreed that the United States and China had entered a period of a great-power competition, in part, over the future of the international order and which power would set its terms.

Alone, the United States could not hope to match China’s economic and military heft in Asia. With allies by its side, America could remain peerless and manage peaceful change. Narrow unilateralism stoked renewed perceptions of further American decline and attenuated an otherwise favorable balance of power.

Enter the novel coronavirus.

It should be stunning that a virus that originated in China and spread in part due to Chinese government mismanagement may reorder the world to Beijing’s advantage, as Kurt Campbell and Rush Doshi have argued. more>

Updates from McKinsey

We’re not going back to the ‘normal’ we had before coronavirus
Our global managing partner Kevin Sneader joined Andrew Ross Sorkin on CNBC’s “Squawk Box” Wednesday, March 25, to talk live about the business implications of the coronavirus pandemic. The full interview is available now at CNBC.com. You can read all of our material on the crisis at our coronavirus insights page.
By Kevin Sneader – One thing is clear from all the conversations I’ve had: nothing is going to be the same. This is a new normal, a different way of operating.

I think for our clients, they’re worried about their employees, their customers, and cash—in that order. And they are worried about cash. Even in the health care sector, there are providers who are not getting paid right now, and they’re worried about cash flow just as players in several other sectors are.

Another reality they’re all dealing with is that people keep sending them scenarios as to how this could play out. The message we’re hearing is that the scenarios are helpful, but leaders are wondering what’s going to be true across all these scenarios. Because if it’s not going back to the way it was before, what’s the next normal? What’s the way in which we’re going to have to operate?

The reality is that consumer behavior is changing fundamentally, and so much else is changing, and the question is, “will it go back?” I think the answer in many cases is “no.”

If you think about a lot of what’s happened in the last few years, some of it’s going to be reinforced. The shift [to working] online has now been given a boost, and it’s hard to see that being taken back to where it was before.

At the same time, I think one of the biggest shifts will be the way that products reach us. For many years, we and others have been focused on efficiency: how efficiently can I run my supply chain? I think now there’s going to be a lot of conversation about, how resilient is my supply chain? more>

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Updates from ITU

Let’s work together to improve road safety. Technology will be key.
By Yushi Torigoe – There is great concern that road traffic accidents kill more than 1.35 million people every year and are the leading cause of death for children and young adults aged 5-29 years.

Road traffic accidents cost most countries 3 per cent of their gross domestic product.

The numbers are indeed, alarming!

The 3rd Global Ministerial Conference on Road Safety was an opportunity for a dialogue on how we can provide access to safe, affordable, accessible and sustainable transport systems for all.

It is clear that while some countries have made progress on road safety in the past decade through better road safety legislation on speeding, drink driving, seatbelt use, wearing helmets, for example, much more can be done, and we need a set of innovative solutions to save lives on the world’s roads.

Participants at the Conference agreed that intensifying international cooperation and multilateralism through engagement with all relevant actors, including the private sector, is necessary to achieve global road safety targets – including the Sustainable Development Goal target 3.6 – to reduce road traffic fatalities and injuries by half.

We need to put an end to a silo mentality, when it comes to dealing with a global problem. more>

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Simple steps to reduce the odds of a global catastrophe

By Warwick J. McKibbin and David Levine – The novel coronavirus COVID-19 may become a footnote in history – a disaster narrowly averted. It could also become a global pandemic similar to some of the worst pandemics of the twentieth century.

For example, assume the COVID-19 is as easy to spread and as dangerous as the 1957 Asian flu. Based on the epidemiological estimates of mortality and morbidity rates from that experience, our best estimate from a 2006 study on pandemics was that such a virus might kill more than 14 million people and shrink global GDP by more than $500 billion  (McKibbin and Alexandro Sidorenko. Global macroeconomic consequences of pandemic influenza. Australian National University, 2006). These estimates are far higher than the costs were in 1957 because our world is increasingly connected and urban. Preliminary results currently being updated  in 2020 suggest even higher numbers for worse case COVID-19.

We hope that scientists can rapidly develop a vaccine. Unfortunately, there is much we do not yet know about this new virus.

At the same time, we do know the virus mostly spreads when people sneeze or cough. The germs then spread when people inhale infected droplets. The germs also land on surfaces. People who touch their own mucus or an infected surface then spread the virus on their hands. For most respiratory infections, perhaps half the cases spread from people’s hands.

Fortunately, even without a vaccine, we already know how to slow an epidemic of respiratory infections.

If everyone coughed or sneezed into their elbow or a tissue (not into the air or on their hands), the germs would not travel very far. And if everyone washed hands with soap before preparing food or eating, that route of transmission would end. more>

The IMF: The World’s Controversial Financial Firefighter

The International Monetary Fund, both criticized and lauded for its efforts to promote financial stability, continues to find itself at the forefront of global economic crisis management.
By Jonathan Masters and Andrew Chatzky – Since its inception in July 1944, the International Monetary Fund (IMF) has undergone considerable change as chief steward of the world’s monetary system. Officially charged with managing the global regime of exchange rates and international payments that allows nations to do business with one another, the fund recast itself in a broader, more active role following the 1973 collapse of fixed exchange rates, intervening in developing countries from Asia to Latin America. In 2010, it gained renewed relevance as the European sovereign debt crisis unfolded.

The fund has received both criticism and credit for its efforts to promote financial stability.

Forty-four allied nations convened at the Bretton Woods Conference in 1944 to establish a postwar financial order that would facilitate economic cooperation and prevent a rehash of the currency warfare that helped usher in the Great Depression. The new regime was intended to foster sustainable economic growth, promote higher standards of living, and reduce poverty. The historic accord founded the twin institutions of the World Bank and the IMF and required signatory countries to peg their currencies to the U.S. dollar. However, the system of fixed exchange rates broke down in the late 1960s and early 1970s due to an overvaluation of the U.S. dollar and President Richard Nixon’s decision to suspend the greenback’s convertibility into gold.

The IMF is akin to a credit union that permits its membership access to a common pool of resources—funds that represent the financial commitment or quota contributed by each nation, relative to its size. In theory, members with balance-of-payments trouble seek recourse with the IMF to buy time to rectify their economic policies and restore economic growth. The fund pursues its mission in three fundamental ways:

Surveillance. A formal system of review monitors the financial and economic policies of member countries and offers macroeconomic and financial policy advice.

Technical assistance. Practical support and training directed mainly at low- and middle-income countries help manage their economies.

Lending. The fund gives loans to member countries that are struggling to meet their international obligations. Loans, or bailouts, are provided in return for implementing specific IMF conditions designed to put government finances on a sustainable footing and restore growth. more>

Updates from McKinsey

Climate risk and decarbonization: What every mining CEO needs to know
Building a climate strategy won’t be quick or easy—but waiting is not an option.
By Lindsay Delevingne, Will Glazener, Liesbet Grégoir, and Kimberly Henderson – In the mining industry, the impact of climate change and how the industry can respond to it has increasingly been a topic of discussion over the past decade.

Mining is no stranger to harsh climates; much of the industry already operates in inhospitable conditions. But forecasts of hazards such as heavy precipitation, drought, and heat indicate these effects will get more frequent and intense, increasing the physical challenges to mining operations.

Under the 2015 Paris Agreement, 195 countries pledged to limit global warming to well below 2.0°C, and ideally not more than 1.5°C above preindustrial levels. That target, if pursued, would manifest in decarbonization across industries, creating major shifts in commodity demand for the mining industry and likely resulting in declining global mining revenue pools. Mining-portfolio evaluation must now account for potential decarbonization of other sectors.

The mining sector itself will also face pressure from governments, investors, and society to reduce emissions. Mining is currently responsible for 4 to 7 percent of greenhouse-gas (GHG) emissions globally. Scope 1 and Scope 2 CO2 emissions from the sector (those incurred through mining operations and power consumption, respectively) amount to 1 percent, and fugitive-methane emissions from coal mining are estimated at 3 to 6 percent. 1 A significant share of global emissions—28 percent—would be considered Scope 3 (indirect) emissions, including the combustion of coal.

The mining industry has only just begun to set emission-reduction goals. Current targets published by mining companies range from 0 to 30 percent by 2030, far below the Paris Agreement goals. Mines theoretically can fully decarbonize (excluding fugitive methane) through operational efficiency, electrification, and renewable-energy use. Capital investments are required to achieve most of the decarbonization potential, but certain measures, such as the adoption of renewables, electrification, and operational efficiency, are economical today for many mines. more>

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Updates from McKinsey

Ten principles for successful oil and gas operator transitions
Incoming operators face several challenges when taking over an asset, including managing the transition, improving performance, and capturing value. Ten principles can guide the way.
By Pat Graham, Maximilian Mahringer, and Andy Thain – In the past five years, many oil and gas assets experienced an operator change after concessions expired and new operators or national oil companies acquired the rights, or after international oil companies divested or acquired assets. Regardless of the circumstances, a transition between operators represents a critical inflection point for an asset. On one hand, it gains a fresh lease on life through better access to capital, the adoption of new operating methods, or the application of new technologies that enhance its value. On the other hand, an operator change can trigger instability and increase risk before and after the transition. Indeed, many new operators fail to capture the value they expected.

From our analysis of production profiles following upstream operator transitions, we found that only about 20 percent were executed successfully, meaning they maintained or improved production levels throughout the transfer phase. Between 15 and 20 percent stagnated, while 60 to 70 percent declined.

Why were failure rates so high? We identified several reasons why incoming operators struggled to maintain production output:

Lack of collaboration between acquirer and incumbent. Failing to establish an effective working relationship can lead to multiple issues, such as reluctance among incumbents to invest in areas that fail to yield an economic payback before exit, decline in employee engagement, and challenges in the transfer of data and operating procedures.

Excessive level of change from day one. Transferring operatorship always involves changes to governance, operating processes, and IT systems—some of which will need to be implemented from day one. However, tackling too much change too soon can be disruptive, destroying good incumbent practices and cultural features that the acquirer should seek to retain.

Loss of essential capabilities. When exiting an operatorship, incumbents often relocate critical talent to more attractive prospects in their portfolios. This is particularly true of asset-leadership teams, specialists, and those with scarce skills. Replacing such capabilities can be costly and time consuming for the incoming operator.

Lack of attention to cultural differences. Every operator has their own way of aligning the organization’s vision, translating that vision into reality, and finding ways to create business value. No matter how similar ways of working may appear on the surface, different companies often interpret key terms such as “respect” or “risk-taking” in different ways, with different expectations of the behaviors needed to support them. Bringing these differences into the open and deciding which ones need to be addressed, and how, is a vital step in any transition. more>

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A Foreign Policy for All

Strengthening Democracy—at Home and Abroad
By Elizabeth Warren – Around the world, democracy is under assault. Authoritarian governments are gaining power, and right-wing demagogues are gaining strength. Movements toward openness and pluralism have stalled. Inequality is growing, transforming rule by the people into rule by wealthy elites. And here in the United States, many Americans seem to accept—even embrace—the politics of division and resentment.

How did we get here?

There’s a story Americans like to tell ourselves about how we built a liberal international order—one based on democratic principles, committed to civil and human rights, accountable to citizens, bound by the rule of law, and focused on economic prosperity for all. It’s a good story, with deep roots. But in recent decades, Washington’s focus has shifted from policies that benefit everyone to policies that benefit a handful of elites. After the Cold War, U.S. policymakers started to believe that because democracy had outlasted communism, it would be simple to build democracy anywhere and everywhere. They began to export a particular brand of capitalism, one that involved weak regulations, low taxes on the wealthy, and policies favoring multinational corporations. And the United States took on a series of seemingly endless wars, engaging in conflicts with mistaken or uncertain objectives and no obvious path to completion.

The impact of these policy changes has been devastating. While international economic policies and trade deals have worked gloriously well for elites around the world, they have left working people discouraged and disaffected. Efforts to promote the United States’ own security have soaked up huge resources and destabilized entire regions, and meanwhile, U.S. technological dominance has quietly eroded. Inequality has grown worldwide, contributing to an unfolding nationalist backlash that seeks to upend democracy itself. It is little wonder that the American people have less faith in their government today than at any other time in modern U.S. history. The country is in a moment of crisis decades in the making.

To fight back, we need to pursue international economic policies that benefit all Americans, not merely an elite few. We need strong yet pragmatic security policies, amplified by diplomacy. And the United States can no longer maintain the comfortable assumption that its domestic and foreign policies are separate. Every decision the government makes should be grounded in the recognition that actions that undermine working families in this country ultimately erode American strength in the world. In other words, we need a foreign policy that works for all Americans.

The urgency of the moment cannot be overstated. At home and abroad, democracy is on the defense. The details of the problem vary from place to place, but one cause stands out everywhere: the systematic failure to understand and invest in the social, political, and economic foundations on which democracies rest. If we do not stand up to those who seek to undermine our democracy and our economy, we will end up as bystanders to the destruction of both. more>

Why the recent debt buildup is a concern

By Peter Nagle – Since 2010, debt in emerging market and developing economies has grown to record highs.  Current low interest rates —which markets expect to be sustained in the medium term—appear to mitigate some of the risks associated with high debt. However, emerging market and developing economies (EMDEs) also face weak growth prospects, mounting vulnerabilities, and elevated global risks. A menu of policy options is available to reduce the likelihood of the current debt wave ending in crises and, if crises were to take place, to alleviate their impact.

Global debt reached a record-high of about 230 percent of global GDP in 2018.  Total EMDE debt also reached an all-time high of about 170 percent of GDP in 2018, an increase of 54 percentage points of GDP since 2010.

Over the past fifty years, there have been four historical waves of debt accumulation:  1970-89, 1990-2001, 2002-09, and since 2010. The latest wave, which started in 2010, has been the largest, fastest and most broad-based increase of the four.

Rapid increases in debt are common among EMDEs. Between 1970 and 2009, the sector accumulating debt shifted from the public to the private sector. However, since 2010, both governments and private sectors have rapidly accumulated debt. more>

What if Competition Isn’t As “Natural” As We Think?

By John Favini – “The struggle for life,” Darwin deduced, would naturally select those beings whose hereditary mutations made them most fit to a specific environment. Over successive generations, scientists came to see the driving force behind evolution as perpetual competition between discrete individuals, a biological arms race to eat and reproduce in a world of scarcity.

Fast forward a century and a half, and “survival of the fittest”—the expression social theorist Herbert Spencer coined to sum up Darwin’s thinking—is as much a cultural cliché as it is a scientific theory. Hell, your worst colleague at the office might even offer it as a justification for his one-upmanship. More than just a cliché, though, the supposed naturalness of competition has played a central role in substantiating the laissez-faire variety of capitalism the majority of the American political spectrum has championed for the past four or so decades.

Indeed, any non-market-based solution to social issues usually falls prey to claims of utopianism, of ignoring the fundamental selfishness of the human species. Advocates for welfare programs, for instance, often run up against criticism that their policy proposals fail to understand to importance of “losing,” that they lessen the stakes of the competition innate to human social life.

Similarly, collectively owned spaces or institutions (like communal land trusts or co-ops) are often presumed short-lived or inefficient, doomed to suffer the “tragedy of the commons” as the innate self-interest of each member leads to an overuse of collective resources—a thesis that has been debunked again and again since its first articulation by Garrett Hardin in 1968.

To put it simply, we have let Darwinism set the horizon of possibility for human behavior. Competition has become a supposed basic feature of all life, something immutable, universal, natural.

Yet new research from across various fields of study is throwing the putative scientific basis of this consensus into doubt. Mind you, there have always been people, scientists and otherwise, who conceived of life outside a Darwinian paradigm—the idea of evolutionary biology is and has been a conversation among a mostly white and male global elite. Yet, even within centers of institutional power, like universities in North America, competition’s position as the central force driving evolution has been seriously challenged recently. In fact, criticisms have been mounting at least since biologist Lynn Margulis began publishing in the late ’60s

Put simply, life is beginning to look ever more complex and ever more collaborative. All this has fractured Western biology’s consensus on Darwin. In response to all these new insights, some biologists instinctively defend Darwin, an ingrained impulse from years of championing his work against creationists. Others, like Margulis herself, feel Darwin had something to offer, at least in understanding the animal world, but argue his theories were simplified and elevated to a doctrine in the generations after his passing.

Others are chartering research projects that depart from established Darwinian thinking in fundamental ways—like ornithologist Richard Prum, who recently authored a book on the ways beauty, rather than any utilitarian measure of fitness, shapes evolution. Indeed, alongside the research I have explored here, works by scientists like Carl Woese on horizontal gene transfer and new insights from epigenetics have pushed some to advocate for an as-yet-unseen “Third Way,” a theory for life that is neither creationism nor Neo-Darwinian evolution. more>