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April 2023, Volume 29, Number 2

Europe, Asia

The Russian invasion of Ukraine entered its second year February 24, 2023 amidst renewed fighting in southeastern Ukraine. The invasion strengthened NATO as it supplied weapons to counter the Russian forces, and Ukrainians demonstrated that real-time intelligence and drones allows smaller and flexible forces to counter larger entrenched armies.

European nations that assumed peace was the normal state of affairs after the end of the cold war in 1989 were shocked by the 2022 invasion adjusted by quickly weaning themselves off of Russian oil and gas and providing over $50 billion in aid to Ukraine. Finland joined NATO, but it is unlikely that Ukraine can join the EU or NATO unless it defeats Russia because a frozen Korea-style stalemate could complicate accession negotiations. One question in the post-Ukraine era is whether European-US military cooperation will intensify or whether Europe will try to develop an independent military capacity.

Germany may be one of the most changed countries as a result of the Russian invasion of Ukraine. Many Germans credited Ostpolitik or détente as the key to ending the cold war, not the US arms build up of the 1980s that bankrupted the USSR. The German government promised a Zeitenwende or turning point after the Russian invasion and successfully reduced Germany’s dependence in Russian energy, but has been slower to rebuild Germany’s military, in part because Ukraine’s successful resistance made threats to Germany less urgent.

NATO allies united to oppose Russia, but many developing countries including the BRICS remained neutral, often stepping up their purchases of Russian energy exports despite NATO-imposed sanctions. Many African leaders and political movements are sympathetic to Russia because of Soviet support for anti-colonial movements.

Over eight million Ukrainians fled to Europe in the first year of the Russian invasion, including two million who moved to Poland and a million to Germany. In their first year in Poland, most Ukrainians moved west away from the Ukrainian border, and many found jobs.

Some 330,000 foreigners were detected trying to enter the EU illegally in 2022. Half were caught in the Balkans, and half were from Syria, Afghanistan, and Tunisia; over 80 percent were men, some of whom were apprehended multiple times.

Britain. PM Rishi Sunak’s Illegal Migration Bill introduced in March 2023 would not allow foreigners who arrive in the UK illegally to apply for asylum in the UK. The goal of the “stop the boats” policy is to reduce the number of foreigners who cross the English Channel from France in small boats. Sunak had an immigrant visa and owns a home in California.

Britain left the EU January 31, 2020. Three years later, the effects of Brexit continue to reverberate, especially complaints of labor shortages since EU citizens can no longer move freely to the UK and work. The National Farmers’ Union says that Brexit has led to farm labor shortages. Boston, a city 160 miles north of London, supported Brexit even though local farmers relied on Eastern Europeans, some of whom earned the right to stay in the UK and remained.

Many British workers went on strike during the Winter of Discontent in 2022-23 as public sector workers dis-satisfied with falling real wages refused to work. The NHS, Europe’s largest employer with 1.2 million employees, has a budget of $189 billion a year, but the aging British population is increasing the demand for health care faster than the supply.

The Conservative government kept inflation-adjusted NHS spending flat in real terms between 2010 and 2020, and was slow to increase NHS funding during covid, keeping health care spending to 12 percent of UK GDP compared with 18 percent of US GDP.

France. France experienced at least nine days of national strikes and protests in winter-spring 2023 as President Macron raised the retirement age from 62 to 64 by 2030 by decree, using Article 49.3 of the constitution that allows certain bills to be passed without a vote in parliament. Macron survived no-confidence votes in March 2023 that saw some members of his Renaissance party defect; protests continued in spring 2023.

A 2019 effort by Macron to consolidate the country’s 42 state pension plans and raise the retirement age to 64 led to the longest transport strike in French history, and was abandoned during covid.

Half of the people born in industrial countries today are likely to live to be 100. Government spending on pension benefits ranges from less than seven percent in the UK and US to over 14 percent in France and Italy, and will rise as people live longer and there are fewer births. Life expectancy in France is 82, compared with 77 in the US.

Analysts say that many countries are likely to experience financial crises if people live longer, continue to retire in their 60s, and expect government benefits that are paid for by taxes on younger workers. Many analysts want societies to change the school-work-retire model by beginning work sooner, engaging in lifelong learning, and working longer.

For example, Italy’s population is aging and shrinking, a silver tsunami that holds lessons for what other countries with longer lifespans and lower birthrates can expect. The Italians First government wants to help older residents to remain in their homes by offering them cash benefits to make their homes safer, and to generate more money to care for the elderly by raising the birth rate but not accepting more immigrants.

Italy is experiencing low birthrates and low female participation in the labor force, the emigration of young professionals, and longer lifespans, creating a laboratory for the challenge of financing the care of the elderly. Under fascism, Italy’s population rose from 40 million in 1922 to 60 million in 1950, and is 59 million today, including seven million people over 75.

Residents of and visitors to Paris made about 20 million trips on 15,000 rental scooters in 2022, making Paris one of the world’s largest e-scooter markets. The maximum speed of e-scooters was reduced to 12 mph and they were banned from side walks, reduced the number of operators to three, and recommended helmets for riders. Almost 90 percent of those who voted in an April 2023 referendum supported banning e-scooters.

Germany. Some 217,774 foreigners filed initial asylum applications in 2022, more than twice as many as in 2020. An additional one million Ukrainians are in Germany.

The coalition government wants the EU to distribute asylum seekers throughout the EU, a long-time demand of front-line states such as Greece and Italy. The EU’s Pact on Migration and Asylum aims to “distribute responsibility fairly among member states and act in solidarity to manage migrant flows.” Many EU member states want to reduce inflows of asylum seekers rather than re-distribute those who have arrived.

EU member states find it hard to deport foreigners who are found not to need asylum. Only 20 percent of the 340,000 foreigners ordered to leave the EU in 2021 actually left, the same share as in previous years. Migrants and their home countries often resist deportation, prompting EU leaders to call for withholding development aid, trade preferences, and visas for legal entrants from countries such as Morocco, Tunisia and Algeria that make it difficult to return their citizens.

Another proposal would make deportation orders issued by one EU member state valid in all EU member states. However, half of all non-Ukrainian asylum seekers are from Afghanistan and Syria, countries to which EU member states do not return people.

China displaced Germany as the world’s second largest car exporter in 2022; Japan is the auto export leader. Will China’s expertise in electric vehicles shrink German auto manufacturing and the ecosystem it supports, and will China displace Germany as a major exporter of machine tools?

Berlin’s elections in September 2021 were marred by poor organization, forcing new elections in February 2023, challenging the two-decade long hold of the SPD on the mayor’s office. The city of 3.8 million suffers from a housing shortage, disruptions to transportation due to repairs, and poor city services. One problem is governance; the 12 district mayors and councils share power with the citywide mayor and Parliament.

Italy. The number of migrants arriving by boat reached record levels of over 1,000 on some days in March 2023, threatening a repeat of 2015-16, when tens of thousands of migrants made the journey from Libya and Tunisia to southern Italian islands during the summer months when the Mediterranean Sea is calmer. Almost 30,000 migrants arrived in Italy in the first three months of 2023,

Pope Francis marked 10 years at the head of the Catholic church in March 2023. The first Latin American pope has been a voice for migrants, urging the countries where they seek asylum to be receptive to newcomers, and for the environment, urging governments to protect the planet to minimize the adverse effects of climate change on poor people.

Francis has been too liberal for some and too conservative for others. Germany’s Catholic bishops have endorsed same-sex marriage despite official teaching, and there has been little real change in roles for women in the Catholic Church and no room for married priests. Francis is also criticized for not dealing effectively with sex-abuse scandals, especially those involving friends, and not moving forward on contraception.

Norway. Norway supports its farmers generously; over half of a typical farmer’s income is from government support, including government-set prices for major commodities that are up to twice world prices and direct payments to farmers. The value of Norway’s farm output was $3.3 billion in 2020 and included $2.6 billion in producer support; about 70 percent of farm receipts are for animal products.

Norway is a net food importer that restricts the import of cheaper farm commodities in order to protect its farmers, and sets minimum prices for milk, pork, grains and some fruits and vegetables. A quota has capped milk production since 1997, and owners of quota to sell milk at the government’s minimum price can sell their quotas.

Russia. The EU sharply reduced its purchases of Russian oil and gas in 2022, but Russia was able to shift oil and gas exports to Asia, boosting its oil export revenues to $220 billion and gas revenues to $140 billion due to higher prices. Russia remains the third largest oil producer, after the US and Saudi Arabia, producing 10 million barrels a day. China imports over 16 million barrels of oil a day.

Spain. A sea of plastic protects 30,000 hectares of vegetables around Almeria, where up to 100,000 migrants from Eastern Europe and Africa are employed sometime during the year. Fewer acres planted due to irrigation restrictions combined with cold weather in February 2023 to reduce Almeria’s production of tomatoes, cucumbers and peppers, prompting British supermarkets to limit how many fresh vegetables consumers can purchase.

Sweden. House prices have fallen 15 percent from their peak in March 2022 as interest rates rise, joining many other industrial countries in experiencing falling house prices. Unlike the US with 30 year fixed-rate mortgages, home loans in other countries often feature variable interest rates that change each year, so that rising interest rates mean higher payments.

Turkey. A magnitude 7.8 earthquake and aftershocks near Gaziantep killed over 43,000 people in 10 provinces in southeastern Turkey and northern Syria in February 2023. The Turkish government forgave builders in 2018 whose structures did not satisfy building codes enacted after a 1999 earthquake that left 17,000 dead, and arrested over 200 contractors after the buildings they built collapsed in 2023.

Turkey has eight million buildings constructed before 2000 that need to be retrofitted to withstand earthquakes. In some cases, builders can select the inspectors who ensure that their structures adhere to building codes, raising suspicions.

The 2023 earthquake damaged over 100,000 buildings and left losses of $85 billion or 10 percent of Turkish GDP. Turkey raised its minimum wage to 8,507 ($452) a month in 2023, up 55 percent from 2022 to cope with inflation approaching 100 percent. Turkey’s central bank continues to maintain low interest rates in a bid to stimulate economic growth and exports, but the effect has been to add to inflation.

President Recep Tayyip Erdogan wants to be re-elected May 14, 2023, just before the 100th anniversary of the founding of modern Turkey in 1923 by Mustafa Kemal Ataturk. Erdogan’s AKP party and its ally the MHP say that a victory in 2023 would launch a “Turkey century” that would see the country of 85 million join the ranks of the world’s industrial powers, pointing to the success of, for instance, Turkish Airlines and Turkish soap operas.

The National Alliance coalition of six opposition parties led by the CDP and IYI argue that Erdogan has weakened checks and balances and become an authoritarian leader over his two decades in power; parties must get at least seven percent of the vote to enter Parliament. However, the leading opposition candidate, Istanbul mayor Ekrem Imamoglu, was sentenced to two years in prison in December 2022 for insulting election officials. Turkey’s turn to autocracy has stalled Turkey’s efforts to join the EU.

China. China’s population shrank in 2022, as the 10.4 million deaths exceeded the 9.6 million births for the first time since famines in the 1960s. Efforts to increase births face challenges that range from employers who are reluctant to hire young women for fear they may take maternity leave to pressure on mothers to get their children into good schools while caring for aging parents.

Most couples were limited to one child until 2016, when all were permitted to have two children. The limit was raised to three children for all couples in 2021, birth limits were dropped entirely in Sichuan in 2023, and single mothers were allowed to register children for the first time.

China, Japan, and South Korea are among the world’s fastest aging countries, with almost a third of the population 65 and older due to low fertility and long lifespans. All three East Asian countries are expected to face pressure to import caregivers from lower wage countries.

Some believe that a shrinking Chinese population with a rising share of elderly residents will prompt Chinese leaders to act aggressively while China still has economic and military power, with some predicting a Chinese effort to take Taiwan by force before 2025. China spends over $250 billion a year on its military, less than a third of US defense spending of over $800 billion a year. Others dispute the notion that demography will increase Chinese aggression abroad.

China, which has 10 percent of the world’s arable land and almost 20 percent of the world’s people, is the world’s largest importer of farm commodities. China wants to increase its food production so that it is less reliant on imports.

China consumes half of the world’s pork and is building 26-story high-rise pig farms that can raise 600,000 hogs a year. African swine fever killed up to 40 percent of China’s pigs in 2018 and raised pork prices, prompting efforts to modernize pig farming. However, raising pigs in large buildings increases the risk of disease spreading rapidly.

More wealthy Chinese emigrated as China reopened in 2023, many to Australia, Singapore, and the UAE in a bid to avoid future lockdowns and arbitrary justice that could take their wealth. An advising firm expects 125,000 persons with assets of $1 million or more to emigrate in 2023, including 10 percent who are Chinese.

The covid virus that killed over seven million people, including a seventh in the US, originated in Wuhan late in 2019, but it is not clear whether covid jumped from animals to people or leaked from a virology lab. After President Trump in 2020 asserted that covid likely leaked from the Wuhan lab, many Democrats asserted that covid must have jumped from animals to people. In 2023, both parties are recognizing that covid could have come from lab leaks or animal to people transmissions.

Public health authorities recommended steps to reduce covid before they knew how it was transmitted, such as assuming that covid droplets would quickly fall to surfaces rather than remain in the air, which led to people wiping down their groceries in 2020. Once it was understood that the virus was airborne, masking and ventilation became keys to slowing the spread.

The most contentious covid responses may be the closure of businesses and schools, which led to social isolation and more domestic violence. There is now general agreement that lockdowns should be targeted and short, aimed at protecting the most vulnerable.

India. India is on track to surpass China as the world’s most populous country in 2023, and is on track to displace the UK as the world’s fourth largest economy by 2025, after the US, China and Japan. PM Narendra Modi, in power since 2014, has encouraged the construction of infrastructure to increase the mobility of people and goods.

More homes in rural villages are getting tap water and electricity, so more rural families have appliances. Many purchases are made digitally, as are many interactions with government, spreading the usefulness of cell phones.

India’s richest person, Gautam Adani, was worth almost $150 billion in Fall 2022. However, allegations that Adani Enterprises and its subsidiaries fraudulently inflated their stock prices cut Adani’s wealth in half by February 2023. Adani and Indian PM Modi are from Gujarat, a west coast state where Modi was chief minister during Hindu-Muslim riots in 2002, leading to a private-market driven economy in which Adani firms play key roles.

India’s GDP rose from $1.8 trillion to $3.2 trillion between 2011 and 2021, a time during which the government encouraged Indian firms controlled by Adani to build infrastructure, including the Mundra Port in Gujarat. Adani took on debt to expand into many other businesses, some of which have opaque accounting. After the prices of stock in Adani enterprises rose by five times or more, short sellers argued Adani stock was over-valued.

Some Adani deals have come under scrutiny. Adani Power signed an agreement in 2015 with Bangladesh that allows Adani to set the price of goal to generate electricity that it buys from mines it controls, which could lead to high prices charged to consumers.

ANZ. New Zealand exported ag, forestry and fishery commodities worth NZ$53 billion in 2022, including NZ$7 billion worth of horticultural exports led by kiwifruit and wine. Dairy products are the largest New Zealand export, and coop Fonterra is New Zealand’s largest firm. New Zealand’s minimum wage rose to NZ$22.70 an hour in 2023, and is up 44 percent since 2017/18.

The New Zealand government has proposed a tax on the methane emitted by cows as they digest grass and feed, angering dairy farmers who may have to reduce the herd of five million cows (the US has nine million cows).

New Zealand’s North Island had the wettest January 2023 on record, over 16 inches of rain in Auckland, and was lashed by Cyclone Gabrielle’s 90 mph winds in February 2023. The government declared a national emergency to assist the clean-up in Hawke’s Bay, New Zealand’s fruit bowl known for the production of apples. Replanting apple trees using dwarf rootstocks and trellises can cost NZ$200,000 per hectare.

Australians are voting on whether to guarantee indigenous peoples a Voice to Parliament via elected representatives. Eight of the 44 referendums held in Australia were approved, including a 1967 vote to recognize Aboriginal and Torres Strait Islander peoples in the constitution. The First Nations Voice vote will be held in late 2023.

Prescribed areas are those where alcohol is banned in an effort to reduce alcohol-related problems in areas with Aboriginal peoples. In the Northern Territory, alcohol bans were in effect from 2007 until 2022; when lifted, the result was a crime wave in the town of Alice Springs with only 25,000 residents, leading to a renewal of the alcohol ban in “town camps” surrounding Alice Springs in February 2023.

Australia’s superannuation or pension fund has since the 1990s required employers to make pension contributions on behalf of their employees; the rate is 12 percent of employee earnings in 2025. Super contributions grow tax free, and workers do not pay tax on withdrawals after 65. Super contributions totaled A$3.3 trillion in 2023, and about 20 percent are not spent and instead inherited by heirs.

The average super balance is A$150,000, but is over A$300,000 for persons over 60. Average Australian earnings are A$94,000 a year, which should generate over A$700,000 with 12 percent contributions for each year of work between 21 and 67. Australians who have multiple jobs may have multiple supers, which means they may pay management fees on several accounts.

The AUKUS agreement will buy and develop nuclear-powered submarines in Australia to challenge China in the Pacific for up to A$368 billion over three decades. The submarines will not initially have nuclear weapons and are likely to include American and British sailors.

Egypt. The current government, in power since 2013, expanded the role of state- and military-owned firms in the economy and used debt to develop megaprojects that include a new capital city. The Egyptian pound fell from 16 to $1 in 2022 to 30 to $1 in 2023, and the government was forced to seek a bailout from the IMF, which imposed conditions including more privatization, although some state- and military-owned firms could be sold to friendly retired officers.

Kenya. The Dadaab refugee camp, built in the early 1990s about 45 miles south of Somalia to accommodate Somalis escaping famine and civil war, now has 325,000 Somali residents fed by the UN and NGOs with about $50 million a year in donations are not likely to return to their countries of origin. A drought-induced famine affecting over eight million Somalis means that Dadaab is growing again.

Tunisia. President Kais Saied in February 2023 asserted that an influx of sub-Saharan migrants was changing Tunisia’s demography and increasing crime, prompting attacks on migrants. Saied, elected in 2019, has become authoritarian, dismantling democratic institutions to repress protests against economic stagnation. The IOM, which estimates that there are over 20,000 unauthorized SSA migrants in Tunisia, says that the Tunisian government finds unauthorized migrants $6 for each week they were in the country.

South Africa. Corruption and mismanagement under successive ANC-led governments since 1994 have made South Africa the world’s most unequal society. State-owned electricity provider Eskom and train network Transet have been unable to provide electricity or move coal to power plants, leading to blackouts that last hours. High labor costs, corruption, and vandalism mean that Eskom and Transet are more likely to slow than to spur employment and economic growth.

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