Suez and supply chains. The blockage of the Suez Canal by container ship Ever Given (freed yesterday) provoked a major disruption to global trade - 12% of which passes through the canal. It also prompted widespread reassessment on the "just-in-time", complex global supply chains that characterise today's economic architecture.
~~Industry reaction. The CEO of Maersk, which carries a fifth of the world's seaborne freight, argued that the canal blockage will accelerate the shift to "just-in-case" supply chains - e.g. holding higher levels of inventory, building in redundancies - to protect against supply chain fragility.
Political pressures. The crisis builds on existing political pressures on global supply chains. Ngaire Woods, professor of global economic governance at Oxford University, has highlighted two such pressures:
~~'Reshoring'. Governments and firms are under pressure to reverse offshoring and bring areas of production back to 'host' countries, either because of economic populism/nationalism (e.g 'bringing jobs home') or due to concerns over national resilience, i.e. ensuring countries can produce food, medical equipment, vaccines and other baseline goods or goods of strategic import to reduce reliance on other countries.
~~Demand for ethical supply chains. Institutional investors and consumers have been pressuring businesses to improve labour practices and environmental standards across their international supply chains.
~~German government action. This month, the German labour ministry has "ramped up pressure" for a groundbreaking Supply Chain Law that would make large German companies responsible for ensuring adherence to human rights in their global supply chains, and is pushing the European Commission for a corresponding Europe-wide framework. The bill has wide public and mixed industry support, but some human rights and environmental groups have criticised the bill for leaving room for exploitation and violations.
~~A climate retrofit for trade. Think tank Common Wealth's proposals for 'greening trade' examine and address the exploitation, environmental degradation and inequalities arising from global value chains.
~~A new multilateralism. Academics from SPERI have outlined the contours of a "new multilateral compact" to address sustained global inequality and the "paradoxes of inclusive growth", engaging with the issue of exploitation in global value chains.
Within-country inequalities in Global North resulting from free trade. Pushes to reshore industries or otherwise restrict trade are often framed in economic nationalist or security terms. Professor Dani Rodrik has proposed the possibility of a "legitimate case for restricting trade to promote domestic social inclusion" - when within-country inequalities resulting from international trade arise due to 'offshore' violation of domestic laws or norms - and has proposed a "social safeguards clause" to tackle this inequality and promote a "more inclusive globalisation".
~~A collective bargaining strategy for trade. The union Unite has published a report arguing for a new industrial strategy for post-Brexit trade, based on coordination between workplace representatives. They argue that collective bargaining and "supply chain solidarity" can prevent "races to the bottom" on worker pay and conditions. (Tribune article from report authors here).
Other international issues. See below for an overview of recent developments relating to immigration, vaccine nationalism, debt justice, international financial institutions and more.
Weekly Updates
Migration and international cooperation
New Plan for Immigration. Home Secretary Priti Patel۪'s announced changes to the immigration system have come under fire from ex-Home Office ministers and civil servants. Former Home Secretary David Blunkett argued the plans are unfeasible has accused the Government of "inventing [an immigration] crisis that doesn't exist".
~~Risk of destitution. The UK spokesperson for the UN High Commissioner for Refugees argued that "penalising asylum seekers [on the basis of having travelled through a 'safe' country first] risks making claimants destitute and leaving more people in limbo, without addressing the fundamental causes behind displacement and onward movements. (Financial Times)
Vaccine nationalism and Big Pharma. Earlier this month, rich countries blocked an effort by 80 poorer countries to waive vaccine patent rights in order to boost production. South Africa, a co-sponsor of the bid, argued the WTO's Trade-Related Aspects of Intellectual Property (TRIPS) agreement does not work, pointing to the 11 million African lives lost to HIV/AIDS because of a failure to secure life-saving drugs. (Euractiv)
~~Third way? WTO Director-General Ngozi Okonjo-Iweala has tried to push for a "third way"- calling for technology transfers and voluntary licensing deals within the existing framework of multilateral rules - but supporters of the waiver note have viewed this as a distraction that allows pharmaceutical companies to shift focus.
Debt, natural disasters, and special drawing rights. Avinash Persaud proposed three ways to break the 'climate-debt nexus' in an article for VoxEU's CEPR policy portal: "(1) redistribute special drawing rights using a new classification of vulnerability; (2) incorporate natural disaster clauses into multilateral development banks' lending arrangements; and (3) use the unused special drawing rights of the world's strongest countries to recapitalise regional development banks to finance resilience in the vulnerable countries without adding to their debt".
Debt justice at the G20. Progressive International published a policy briefing criticising the G20's proposed Common Framework for addressing the debt crisis in the Global South and outlined a set of demands for a just approach, comparing proposals for debt relief from the IMF, UNCTAD, CEPR EU and other international bodies in the process.
Vindication of expansionary fiscal policy? A report from UNCTAD forecasts a faster global economic recovery than expected (4.7% this year compared to 4.3%) which it attributes to the Biden administration's $1.9tn fiscal stimulus and its effect on consumer spending.
~~...But deeper structural reforms are needed beyond the 'one-shot' economic stimulus. The report warns against a "misguided return to austerity" in advanced economies, concluding that a "wholesale rewriting of the rules of the economic game" are required to tackle "the mutually reinforcing trends of rising inequality, mounting debt distress, detached financial markets and growing market power of large corporations reluctant to reinvest their profits in building productive capacities".
~~Biden to boost it again? The New York Times reported that the Biden administration is drawing up plans for a further $3tn 'giant infrastructure plan' to boost the economy, reduce carbon emissions and narrow inequality, financed through tax increases on corporations and the rich.
TUC International Conference. The TUC is hosting a discussion of global economic priorities with high-profile speakers from around the world as part of lobbying around the G7 process and the parallel 'L7' Labour Ministers gathering. The event will be broadcast on 13 April 2021, 13:00-16:00 UK time - sign up here.
Tax
"Tax Day was a bit of a flop". Tax Justice UK summarised the 30 consultations on tax reform released by the Government last week, with the headline summary: "The Treasury has announced some worthy tinkering around the edges. But the big issues in the tax system... have been largely punted to another day." Some highlights:
~~Tax avoidance. The Treasury is consulting on giving HMRC extra powers - such as the ability to freeze the assets of professionals who enable tax avoidance.
~~Climate. The government is planning to slash Air Passenger Duty on domestic flights, while raising APD on long-haul to compensate, and effectively ruled out the progressive Frequent Flier Levy proposal. TJUK contrasts this with France's climate-friendlier approach of bailing out Air France conditional on them scrapping domestic flights.
~~Wealth. There was little to nothing on taxing wealth and income from wealth - it remains to be seen whether this will be picked up in the autumn.
Corporate Tax Haven Index. Tax Justice Network released its Corporate Tax Haven Index 2021, ranking the world's worst offenders for helping multinational corporations pay less tax. Three British Overseas Territories are ranked as the top 3 worst offenders, whilst the UK itself is 13th.
Local economies
Community ownership of pubs. Drawing from research from the British Beer and Pub Association finding that 1/4 of UK pubs may never reopen, an article for Vice explored the potential for community ownership of local pubs as a solution to land being sold to property developers or larger chains like Wetherspoons.
Northern independence. Freddie Hayward asked "Can the Northern Independence Party succeed?" in an article for the New Statesman, describing the new political party as a reaction to Starmer's leadership of Labour. The party is drawing up a manifesto soon focused on a 'green industrial rebirth' and increased funding for public services.
Housing crisis debate. Commenting on Martin Wolf's argument that supply shortages are to blame for high UK house prices, IIPP's Josh Ryan-Collins and Ian Mulheirn from the Tony Blair Institute wrote a letter to FT arguing against, highlighting that the surplus of dwellings over households has doubled since the 90s and stating: "The housing crisis is real, but the problem is on the demand side. Better financial regulation, property taxation and more social housing would all be more effective solutions than efforts to address the supply shortage mirage."
South Wales Valleys Climate and Fairness Panel. IPPR released another report on the Environmental Justice Commission's Citizens' Juries, with recommendations to assess the practical steps available "in the South Wales Valleys to address the climate crisis and restore nature in a way that is fair for everyone".
Green Homes Grant post-mortem. Following widespread criticism of the Green Homes Grant, the government has scrapped the scheme and gave a £300m boost in funding for the Green Homes Grant Local Authority Delivery Scheme and Social Housing Decarbonisation Fund Demonstrator instead. (Non-paywalled coverage)
~~A central plank of green recovery? Analysis from the TUC found that the scheme's peak job creation has been just 14,500 jobs, compared to the 100,000 promised by the government. The TUC argued that withdrawal of £1bn funding will take "a wrecking ball" to green jobs in the North West and pointed to their own retrofitting proposal to create 212,000 new jobs delivered by local authorities.
Adapting central bank operations to a hotter world. The Network for Greening the Financial System, a network of 89 central banks and financial supervisors, published a report outlining proposals to ensure central banks factor in climate-related risks into their asset purchases and monetary policy frameworks.
"Greening the Giants". Think tank Onward published a report exploring twelve 'carbon giant' industries (representing 62% of UK emissions, 23% of output and 21% of jobs) that must be decarbonised and offering a 25 point plan to help the transition whilst creating jobs, arguing that up to 1.7 million jobs could be created if the government fulfils the balanced pathway under the 6th Carbon Budget. (Twitter thread summary / Business Green coverage)
Podcast on economics and environmental breakdown. Ayeisha Thomas-Smith spoke to Laurie Laybourn-Langton about recent climate-related controversies - such as the Cumbrian coal mine plans - and explored the question "Why can't the economic status quo deal with the climate emergency?"
Digital platforms, work and poverty
Rashford sets sights on Deliveroo's low pay. Marcus Rashford planned to hold 'emergency talks' with Deliveroo following findings by the Mirror's investigation that thousands of Deliveroo riders earn less than the minimum wage.
~~Monopsony. The authors highlight that the power of large companies such as Amazon can exert an anti-competitive effect on local labour markets through effective 'monopsony' - i.e. companies that 'buy' a large part of a town's labour can use this power to suppress wage competition, so that wages are lower than they would be in a 'perfectly competitive market'.
10+ years of deprivation and ill health. A review by the British Academy, bringing together 200 academics and headed by the Government's chief scientific adviser Sir Patrick Vallance, argued "failure to understand the scale of the challenge ahead and deliver changes would result in a rapid slide towards poorer societal health, more extreme patterns of inequality and fragmenting national unity". The report advocates major investment in public services, particularly community services, local government, social care and local charities, especially in deprived areas.
Socio-economic determinants of health. England's Chief Medical Officer Chris Whitty warned the government about the effect of poverty on public health, pointing to the economic effect of lockdown on communities "on the borderlines of deprivation".
The power of mission-oriented interventions. Shortly before the Prime Minister claimed the Covid-19 vaccine programme's success was due to 'greed' and 'capitalism', the Industrial Strategy Council published a paper that concluded "government played a key role in expediting every stage of the OX/AZ vaccine development process" and gave six lessons for future industrial policy in the UK.
~~Haldane: Government not set to tackle 'Grand Challenges'. The Industrial Strategy Council headed by BoE's Andy Haldane criticised the Government's plans to 'level up' the country and deliver net zero, as current plans appear "over-reliant on infrastructure spending and the continued use of centrally controlled funding pots thinly spread across a range of initiatives".
