Our editors give us a breakdown of this week’s biggest news stories
United Kingdom: Ross Alexander Hutton
“Serious recovery momentum” is how U.K. economists have characterised the recent uptick in several economic measures. After a year of restrictions, the economy appears to be ‘going up the gears’ as retail sales surged past expectations by 3.6% in March and the hiring of workers accelerated at the fastest rate since August 2017. These are encouraging signs for an economic engine in dire need of unleashing pent-up demand. Backing this reassuring comeback is a sustained rise in consumer confidence as consumers translate confidence derived from the successful vaccination rollout into their economic decision making. Yet, the rebound has come at a staggering cost the public purse: government borrowing hit the highest level since the end of the second world war. It seems the body politic has become ‘numb’ to news like this, such is the unprecedented nature of the times we find ourselves in. However, substantial spending – and tax cuts – in past months effectively created the glidepath for the longer-term recovery which already appears to be materialising. So, there’s palpable hope for the road ahead. As for the public finances, well, that’s a somewhat diminished worry for another day.
You’ve probably heard of Bitcoin and wondered its potential to shake-up the way economic agents interact with ‘money’ and in what form payments are made. Well, the Bank of England and HM Treasury have announced the creation of a taskforce to explore the potential for establishing a central bank digital currency (CBDC) – essentially a digital version of pound sterling, backed by the U.K.’s central bank. While no decision has been made on whether such an adaptation of currency will happen, the bank emphasised that “any CBDC would be introduced alongside – rather than replacing – cash and bank deposits”. The significance of this development is not in the proposal itself but in its implications for the role of central banking in the years ahead. A British CBDC would dramatically change the informational relationship between the central bank and consumers in order to “ensure the U.K. remains at the forefront of global innovation”.
Africa & Middle East: Camille Capelle
This morning, over two dozen people were killed and many more injured by a substantial fire which erupted in a hospital in Baghdad. The fire hit the ICU unit which housed mainly coronavirus patients. The deadly fire has caused a massive outrage amongst the people who expect accountability from officials, calling the incident a case of negligence. Afterall the fire was caused by a ruptured oxygen tank and was able to spread due to the lack of fire-safety infrastructure in the hospital itself. An investigation has already been launched into the fire and hospital chiefs have already been detained by the police. It is another serious hit to Iraq’s already fragile health infrastructure as it continues to battle coronavirus in the country.
Negotiations over the Iran deal continue as parties express their expectations for the lifting of sanctions. The US has provided a list of sanctions which it considers reasonable to lift upon a return to the Nuclear Deal. However, some other countries as well as the EU are able to place sanctions on the country for reasons unrelated to the nuclear deal, to which Iran has expressed its deepest discontent. In mid-April, the EU had moved to further denounce several Iranian security officials and prisons for human rights violations. Iran has criticized the decision and threatened to cancel all talks with the EU in retaliation. The involvement of all these parties and their diverse interests severely complicates negotiations and any progress towards a new deal with Iran.
North America: Amelia Brown
This week has been marked by anticipation and speculation about President Biden’s upcoming spending and tax plan to be released by Wednesday. Tentatively called the American Families Plan, it focuses on domestic infrastructure like childcare, education, and health reforms. The plan has caused tension between the new administration and Wall Street, as funding for these new projects would be raised through increased taxes on the wealthiest citizens and business. The plan will add almost 2 trillion more dollars to Bidens ‘Build Back Better’ campaign, complementing another recent proposal to address more traditional infrastructure and capital like broadband and greener energy.
Optimistic economic recovery has led the Bank of Canada to cut back on it’s monetary policy aimed at increasing money supply during the pandemic. The bank will decrease its monthly bond buying by a quarter. The announcement came also as the bank increased their projection for output growth for the country to 6.5%, a 2.5% increase from the previous projection. Despite a recent increase in infection rates and restrictions in some provinces, the Bank of Canada is the first of G7 members to decelerate monetary policy during the covid recovery.
Latin America: Leo Le Borgne
Brazil’s Environment Ministry budget was slashed under the Bolsonaro administration, despite his assurance that the Brazilian government would increase spending to counter chronic deforestation in the Amazon. This budget cut comes as Brazil is negotiating with the US Biden administration on an environmental protection deal, which has drawn heavy criticism from indigenous activists and high-profile celebrities alike. With Bolsonaro demanding billions of dollars in assistance to end deforestation, the president’s previous political attitudes towards the environmental protection looms over the prospects of reaching a deal with the US. Deforestation in the Amazon has reached all-time highs in the past few years.
Science & Technology: Paula Plechschmidt
The EU is aiming for an artificial intelligence (AI) regulatory policy that finds a middle way between China and US policy. This week Brussels has started to lay out its plans to create rules for how AI will be allowed to be used. At it’s heart the goal is to integrate European values into the market for this innovative technology. China and the USA have gone two very different way in the development of AI. China on the one hand has focused on a state-led plan, with applications focused on the way in which the government can be supported. On the other, the US has allowed the private sector to completely lead the innovation in that sector, naturally developing more commercial uses of the technology. The EU is trying to find a middle ground where they wish to rein in the extent to which governments can control AI, but also want to encourage start-ups to experiment and innovate, as well as push investment into this area.
Snap Inc. is forecasting a 80% revenue rise in the second quarter. With restrictions easing, Evan Spiegel, the chief executive of Snap is suggesting that engagement on Snapchat will be boosted, due to the need to increasingly coordinate social activities. YOY gains had beat analyst expectations, indicating positive trends for the company’s growth. This turnaround has been extremely positive, especially after a less profitable 2019.
Business: Tom Woods
J.P. Morgan has become just the latest actor to apologise for its role in the “European Super League” (ESL) proposed the last week. In a whirlwind week for European football, proposals for the “European Super League” were announced by the continent’s biggest clubs late on Sunday before clubs began withdrawing on Tuesday evening, bringing the project to an end for now. The league would have seen 20 of Europe’s top clubs clash it out every season in an American-style league format which would then lead to a cup for the best performing eight teams. However, 15 of the teams in the league every season, referred to by the ESL as the “founders”, would always be guaranteed a position in the tournament, regardless of performance in previous seasons. Concerns were also raised that the amount provided to smaller clubs by the biggest organisations in football would decline if the ESL were introduced. As a result, the plans were met with huge protest by fans, pundits and even governments and on Tuesday evening, beginning with Chelsea FC, clubs began withdrawing. Shortly after their plans were ruined, all the clubs behind the proposals issued apologies for their roles, but fans appear slow to forgive, and ways to meaningfully reform European club football are being urgently sought out.
Despite the many ways that the COVID-19 pandemic has indirectly helped the environment recover from man-made damage, in China, the number of total flights has almost doubled compared to pre-pandemic levels as a result of a boom in private air travel. Domestic use of private jets has risen 87% compared to this time last year, according to WingX Advance GmbH, a data company. The rise appears to be a direct response to the pandemic, which has left certain areas of China very difficult to access as commercial airlines entirely remove themselves from them. However, the flights are still primarily domestic in China, as getting permits for international travel on a private jet can be more difficult.
Theory: Cassi Ainsworth-Grace
On April 20th, Isaiah Andrews of Harvard University was awarded the John Bates Clark Medal by the American Economic Association. The John Bates Clark Medal is a prestigious award presented annually to an American economist under the age of forty, who has been deemed to have made the most significant contribution to economic thought and knowledge. Andrews, who is an econometrician, has been recognised for developing statistical tools and models to help economists reduce inaccuracies. To the Harvard Gazette, Andrews stated that his current work is centred “less on answering any specific policy question than on thinking about tools that we’re using to answer those policy questions.” In 2018, The Economist named Andrews one of the eight best young economists of the decade.