Monthly Archives: April 2014

It is in everyone’s economic interest, both short and long-term, to solve the Ukrainian crisis; and therefore they will – or, at least, that is what rational thinking would suggest. But the reality is very different. And it is not necessarily because the parties involved in this crisis are irrational. Rather, it is because they are stuck in what game theorists call a “prisoners’ dilemma”. In the process, the risks of adverse global economic spillovers are on the rise.

The recent escalation of events in Ukraine has narrowed the set of options available to the four major parties involved – the country itself, Russia, central and western Europe and the US. As this occurs, the probability of each party attaining its desired outcome is rapidly declining, let alone them retaining sufficient control over developments on the ground. Indeed, the current course is one that leads to growing internal Ukrainian fragmentation, biting western sanctions on Russia, counter-sanctions by Moscow on western energy supplies, and a mounting financial bill for all. 

The future of two of the most famous names in British industrial history is in the balance this week. They are the subject of intense political discussions, in which industrial logic seems relegated to a subsidiary position. Yet no British government representative has yet said a word about it. This state of affairs can surely not be allowed to continue. Surely Vince Cable, the business secretary, must demand a seat at the table? 

Despite reassuring statistics about the safety of global flight and the generally responsible record of Malaysia Airlines as a carrier, it was unsettling to take a night flight to Jakarta on one of its jets that flew over the general area in which US, Australian and Chinese ships are frantically searching for signs of aircraft wreckage. However, this is precisely what I did this month while visiting a country struggling to deal with the complex aftermath of the disappearance of flight MH370

As the situation in Ukraine escalates the immediate focus is on the Geneva talks among Russia, Ukraine, the US and EU to find a political solution. Chances of a diplomatic breakthrough are slim, if only because Moscow seems determined to get its way in Ukraine. Its overriding aim is to prevent Kiev from aligning with Europe and the west. It may well succeed in the short term. But in the longer term, Vladimir Putin is bound to fail. 

The enormous influence that Cuba has gained in Venezuela is one of the most underreported geopolitical developments of recent times. It is also one of the most improbable. Venezuela is nine times bigger than Cuba, three times more populous, and its economy four times larger. The country boasts the world’s largest oil reserves. Yet critical functions of the Venezuelan state are either overseen or directly controlled by Cuban officials.

The relationship goes beyond subsidies and advantageous business opportunities for Cuban agencies. Cuban officers control Venezuelaメs public notaries and civil registries. Cubans oversee the computer systems of the presidency, ministries, social programmes, police and security services as well as the national oil company, according to Cristina Marcano, a journalist who has reported extensively on Cubaメs influence in Venezuela.
 

It always seemed likely the UK’s elevated inflation rate in recent years would prove to be a temporary phenomenon. With miserably low domestic wage growth and low rates elsewhere, it was only a matter of time before UK inflation began to drop. Wedneday’s fall in consumer price inflation to 1.6 per cent leaves the Bank of England with an unfamiliar problem: what should it do when inflation is too low?

Optimists will argue that the drop in inflation is consistent with the beginnings of a productivity boom, whereby the UK finally rediscovers its supply potential. 

The 20th anniversary of the Rwandan genocide is a time for grief, humility and reflection. The scale, speed and viciousness of the brutality – one million dead and two million driven from their homes between April 7 and mid-July – scarred not just Rwanda and its neighbours, but the conscience of a generation of western politicians and aid workers. Bill Clinton described the failure of the west to act as one of the greatest regrets of his presidency.

In Rwanda every year there is a week-long programme of events to remember the genocide and learn lessons. This year four themes seem especially important. 

The world’s finance ministers and central bank governors gather in Washington this week for the biannual International Monetary Fund meetings. While there will not be the sense of alarm that dominated the convocations in the years after the financial crisis, the unfortunate reality is that the medium-term prospects for the global economy have not been so problematic for a long time.

The IMF in its current World Economic Outlook essentially endorses the “secular stagnation” hypothesis, noting that the real interest rate necessary to bring about enough demand for full employment is likely to remain depressed for a substantial period. This is made manifest by the fact that inflation is well below target throughout the developed world and is likely to decline further this year. Without robust growth in, and greater demand from, these markets, growth in emerging economies is likely to subside. That is even without considering the political challenges facing countries as diverse as Brazil, China, South Africa, Russia and Turkey. 

Twenty years on, the debate about the Rwandan genocide in which up to a million people lost their lives still reverberates. The question of why Rwandans did this to each other and why the world stood by remains bitterly contested.

What is not in doubt is that over a period of 100 days the most widespread horrific massacre of modern times took place as the victims perished, mostly killed by hand with machetes. And even as that history is still fought over, an even angrier, more contemporary dispute rages about the nature of today’s government that first took power in the genocide’s aftermath. 

The numbers are in for first quarter performance for global stocks and bonds. Taken at face value, the price signals emitted by public markets contrast quite a bit with what they were predicting last year for the global economy. Yet the economic and policy realignments implied by markets may well fall on deaf ears when it comes to immediate and durable changes in the behaviour of key economic actors.

Judging from their absolute and relative performance, last year’s markets correctly signalled a better growth trajectory for advanced countries, overall and compared to their counterparts in the emerging world – the most notable contrast pitting enthusiasm for a Japanese rebound against Chinese growth pessimism.