The World This Week

Our editors give us a breakdown of this week’s biggest news stories

United Kingdom: Ross Alexander Hutton 

Warning lights are flashing in the U.K. as the R-number – an indication of the rate of reproduction – rose to between 0.9-1.1. Even though this was to be expected, given all the lockdown easings, it suggests the risk of a nationwide resurgence of the virus is mounting as the winter nears. 

A surprise jump in the U.K. inflation rate from 0.6% in June to 1% in July was caused at least in part by the emerging recovery of oil prices and clothing prices driving inflation higher than expected. But is this a trend to be concerned about given the sheer amount of money the Bank of England has pumped into the economy? Probably not at this stage. Speculation of a deflationary cycle is fuelled by legitimate fears of unemployment surging in the months ahead as the reverberations of the coronavirus recession are likely to be realised in the long-term. Thus, the Treasury should – for the time being – seek comfort in knowing they can continue to borrow at historically cheap rates and foster more fiscal stimulus, despite U.K. government debt rising above £2 trillion for the first time.

“Too often this week it felt as if we were going backwards more than forwards,” the E.U.’s Brexit Negotiator revealed at the end of the seventh round of talks. ‘Slim progress’, ‘frustration on both sides’ and ‘robust discussions’ are becoming familiar go-to mantras by the interlocutors to express the often demoralising negotiations as David Frost and Michel Barnier fail to approach the talks ‘on the same page’.

Europe: Peter Hourston

Mass protests against President Alexander Lukashenko are continuing in Belarus following the disputed election of two weeks ago. The deepening crisis in what is often called ‘Europe’s last remaining dictatorship’ comes amid a backdrop of already tense EU-Russia relations. European Council President Charles Michel confirmed this week that the EU would impose sanctions on individuals responsible for violence and voter fraud, but German Chancellor Angela Merkel emphasised the need for “dialogue within the country: there can be no interference from outside.” This came with opposition leader Svetlana Tikhanovskaya appealing to EU leaders to “support the awakening” of her country’s democracy, but Russian President Vladimir Putin warned that the situation would deteriorate if “external actors tried to meddle in…internal affairs”. Western leaders hope that Putin can use his influence to peacefully transfer power from Lukashenko after the 26-year long ruler ordered the military to step up border controls.

The latest round of talks on the post-Brexit UK-EU trade deal took place in Brussels this week amid the increasing likelihood of a no-deal. EU Chief Negotiator Michel Barnier said, “I simply do not understand why we are wasting valuable time” and Boris Johnson’s EU Sherpa David Frost confirmed that there are “significant areas which remain to be resolved” including on fishing and state aid. Although both sides emphasise that they wish to reach an agreement before the end of the transition period on December 31, Frost tweeted that, the “UK’s sovereignty, over our laws, our courts, or our fishing waters, is of course not up for discussion and we will not accept anything which compromises it”. London has already confirmed that it will not ask for an extension, leaving EU capitals to accept that trade with the UK would be on WTO terms from January 1.

Mass post-Covid-19 unemployment looms over Europe. Governments across the continent worry about how to preserve jobs while simultaneously wind down expensive state support measures. The ECB’s Chief Economist said at last month’s monetary policy committee meeting that “surveys suggested that employment was lagging output” with GDP growing as lockdowns were eased but firms reluctant to take on extra workers. Meanwhile, the IHS Markit flash composite purchasing managers’ index, a widely cited survey of business activity, this week warned that the Eurozone recovery was slowing down due to weak underlying demand and business confidence.

Asia Pacific: Satyajit Mohanan 

Escalating diplomatic tensions have resulted in a China-US deadlock on the phase one trade deal review. The Chinese commerce ministry on Thursday said that the US has agreed to hold trade talks “in the coming days” to evaluate the progress of their phase one trade deal six months after it took effect in February. Ministry spokesman Gao Feng made these claims at a weekly briefing held online. However, the Trump administration has declined to acknowledge any plans to meet with the Chinese on this issue. President Trump has earlier postponed the trade deal review that had been scheduled for August 15 following the rising tensions between the two countries. Meanwhile, official data suggests that China’s imports are well behind the pace needed to meet the first-year target increase of $77bn specified in the deal. Hence, no consensus on the trade deal review further jeopardizes the future trade between the two superpowers.

India’s Opposition led Parliamentary Standing Committee on Information Technology has summoned Facebook on September 2nd over the political hate speech controversy. The Wall Street Journal’s recent piece exposed that Facebook’s hate-speech rules collided with Indian politics which highly benefits the ruling party. Some employees allege favoritism to India’s ruling Bharatiya Janata Party (BJP) and a possible nexus between the tech giant and Prime Minister Modi’s party. Opposition leaders including Rahul Gandhi, the de facto leader of the Congress Party condemned this preferential treatment and led a backlash against Facebook. While the BJP has denied the allegations, Facebook said it had no comments on the summons.

India’s Tata may sell stake in Jaguar Land Rover (JLR) and their UK Steel Plant as talks with British Government fail. This development comes as India’ business giant and the British government failed to reach a consensus on a financial package. Reports allege that the Tata group is looking for a strategic partner for Jaguar Land Rover (JLR) and a complete sale of its UK steel operations. The European operations of both the companies are bleeding the finances of their parent companies. The condition of JLR is alarming as the company has lost one billion pounds in the first six months of calendar 2020 owing to the economic fallout caused by the coronavirus pandemic.

Africa & Middle East: Camille Capelle 

On the 18th August, the military took control of the government in Mali. After arresting several high-rank officials, the government leaders were forced to resign. After weeks of discontent and growing protests, the turmoil enabled a successful military coup. Mali has already experienced a similar event in 2012 which led to violent extremists took advantage of the instability in the form of Islamist insurgency. The world watches nervously for the potentially damaging effects that this could have on the region, especially the US and France who have been heavily involved in the country’s affairs. Nevertheless, a day after the coup a public announcement was made that the military group intended to uphold democratic values and that a new President will be elected. 

The $10 billion oil refinery deal which was agreed upon between the Saudi Crown Prince and Beijing has been put on hold. The venture would have allowed Aramco to invest in oil refineries in northern China but fluctuating oil prices and Saudi Arabia’s own drop in revenue from the energy sector have made the deal problematic for the kingdom. Nevertheless, China remains an important economic partner for the Kingdom and there is potential for the deal to be reviewed at a later date. 

In a promising change of tone, rival leaders in the Libyan civil war have announced an immediate ceasefire on Friday. After years of chaos and violence, the announcement comes as a promising step towards de-escalation. While the ceasefire has been welcomed by the U.N and other countries which have publicly voiced their support, there is some skepticism as to the real-life progress that it will bring, expecting a new stalemate instead.

North America: Amelia Brown 

The conclusion of a 10-year-long lawsuit by protesters against Toronto police arrived this week—a $12.5 million payout for over 1,000 protesters who were wrongfully arrested at a G20 summit in 2010. The mass arrest of peaceful protesters, onlookers, and journalists came after tear gas, rubber bullets, and pepper spray was used to box them in, and was followed by strip-searches. Court judges said police violated the protesters’ civil rights; the police will have to make a public statement saying how they will better handle protests in the future. 

Californians are stuck between a rock and a hard place right now. Hundreds of wildfires raze the state, forcing residents to choose between evacuating and risking coronavirus exposure in state shelters, or staying in a dangerous home, both with the added loom of losing their homes to flames. Lightning strikes continue to start up fires faster than firefighters can contain them, especially given the shortage of prison volunteer firefighters due to early release caused by the pandemic. Blackouts, smokey air, and astonishingly hot weather also plague areas not directly on fire, including other surrounding states. Many scientists point out that all the conditions that have led to the worst seen fire season have been exacerbated by continuing human caused climate change

The Trump administration continued its fight with Chinese technology company Huawei, imposing harsher sanctions that are meant to bottleneck supplies and materials for the company. This latest jab comes after months of the president working to ban two other Chinese tech companies, ByteDance and Tencent. The (arguably) biggest consequence if the government succeeds being the banning of popular social media app TikTok, and messaging app WeChat. 

South America: Annie Smith 

A sailing ship off Haiti killed at least 17 people, including two children, when it sank on Thursday 20 August. The ship was believed to be carrying about 30 people and at least nine have been rescued, with the search still ongoing for more survivors. The head of Haitian Maritime and Navigation Service said that the ship sank because of high winds, though it was also overloaded and had not been given permission to sail. President Jovenel Moïse tweeted his condolences to the victims and those affected.

Luis Rodolfo Abinader has been sworn in as the new president of the Dominican Republic following his election win last month. A 53-year-old businessman, Abinader has never held elected office, and he defeated a 16-year run by a centre-left party. Two days before his swearing-in, Dominican Republic was the only country among the 15-member United Nations security council to support the US resolution to indefinitely extend an arms embargo against Iran, further exacerbating tensions between the United States and Iran.

An international team of marine scientists has discovered 30 new species of invertebrates in the Galapagos, findings mainly consisting of fragile coral and sponges as well as four new species of crustacean. The area, within the Galapagos Marine Reserve, is protected from destructive human practices such as fishing with bottom trawls and deep-sea mining, which are known to have catastrophic effects for fragile communities. The Galapagos archipelago, off the coast of Ecuador, harbours the largest number of different animal species on the planet.

Science & Technology: Paula Plechschmidt 

On Thursday Airbnb announced that groups of more than 16 people would be banned from renting properties through their website. This follows previous restrictions on under-25s using Airbnb homes in the UK, US and Canada. Both of these stem from the fear that parties and social gatherings have moved to these types of homes in light of corona regulations restricting the places in which people can congregate. The company, based in Silicon Valley, wants to show that it is socially aware unlike other big tech companies, many of which have come under persistent fire due to the ongoing antitrust hearings.

By a California law that came into effect earlier this year, companies such as Uber and Lyft have to classify their drivers not as contractors but rather as employees. This is meant to give the drivers more rights, such as healthcare and sick pay. A Superior Court judge had given these companies until the end of Thursday to make this switch, with Uber responding that they cannot simply change their business models at the “flick of a switch”. This meant that both companies were planning to stop their services at 23:59 local time on Thursday. However, just hours before Lyft and Uber were due to halt rides, the court decision to grant a reprieve came through, allowing them to continue operating while the court considers to appeal the case.

Business: Tom Woods 

Virgin Atlantic is scrambling for survival ahead of a key High Court vote on a rescue package it secured last month. The package plans to funnel £1.2 billion into Virgin over the next 18 months and is funded by Branson’s own Virgin Group, US-based hedge fund Davidson Kempner Capital Management, and fee deferrals from numerous shareholders. The vote to approve it is scheduled for Tuesday. In a further attempt to improve their fortunes, the firm has asked its top supplier to take a 20% cut on the money the firm owes them and receive the rest of it in staggered payments. CEO Shai Weiss expressed the view that should everything go to plan for Virgin Atlantic, the firm could return to profitability by 2022.

Travel firm STA has ceased trading as the latest casualty of the COVID-19 pandemic. The company, which specialises in organising often-lengthy trips for students and young people, said that its industry had been brought “to a standstill”. Simon Calder, travel editor for the Independent, said that heavy High Street rents, minimal income, and an inundating demand for refunds left the firm with little chance of survival or recovery. STA Travel currently owns over 50 shops in the UK and its failure could result in around 500 job losses.

Theory: Cassi Ainsworth-Grace 

The spread of Covid-19 has spurred a new wave of investor activism. This is by no means a new concept, as decisions by shareholders to avoid investing in ‘sin stocks,’ or firms considered unethical is a practice that dates back centuries. Although this has often taken the form of ‘ethical divestment’, there has been increased investment into healthcare start-ups. Global health funding to private companies reached US $18.1 billion in the second quarter of 2020, up 28% year-on-year.

There has been a particular focus on mental health, as the number of deals for mental health companies rocketed to a high of 57. Companies like TruGenomix, a firm focused on advancing the treatment of PTSD, has received $800,000 from Sanford Health, with the aim of offering genetic testing to a quarter of a million US veterans.  It’s not alone, as Telehealth has also seen a particularly strong quarter, as the number of deals has increased by 23% since quarter one.

This investor activism has also spread to environmental funds, as green bond issuances have risen 50% since last year. Others have demanded we ‘build back better’ once we move into post-pandemic recovery. There has been a push for shareholder activism amid the pandemic, as shareholder engagement plays an increasingly important role in influencing the behaviour of the firm, as well as improving the quality of board monitoring.

Image Source: The Atlantic

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