0. Global socio-economic, geo-political developments affecting AEC
Return to June 2021 update
Length: 4.5 min read; 935 words.
Note: The following paragraphs summarize the category of Global socio-economic, geo-political developments affecting AEC (indirectly) observed in June. More information about the specific category from June (and previous months) can be found in the downloaded report(s). The number in square brackets (e.g., [X]) refers to a reference where the reader can find more information about a specific statement. The references can be found in the References list below, on the Systematized References page or in the dowloaded report.
The discussion about this category has slightly increased in comparison to March data (19.6% vs. 17%) as economies rebound and political and social developments increase. The UK hosted the 47th summit of the G-7 nations (Canada, France, Germany, Italy, Japan, the U.K., and the US). International cooperation is back after Trump’s era. G-7 discussed climate change, coronavirus pandemic and China. [105] and promised that by 2022, they would end international funding for coal projects that don’t include technology to capture and store CO2 emissions. They also promised an “overwhelmingly decarbonized” electricity sector by the end of this decade. Finance leaders at the summit also agreed to back a new global minimum tax rate of 15%, regardless of where a company is headquartered. Biden also proposed an international loan financing project, “Build Back Better for the World” (B3W), that could rival China’s Belt and Road Initiative. Biden urged his G-7 counterparts to offer developing nations hundreds of billions in financing as an alternative to relying on Beijing for new infrastructure projects. [106][107][108] US-Russia cyber ceasefire will probably remain on words only. [109][110] The US and Russia have returned to traditional great-power diplomacy. [111][112] The threat of US-China conflict is present but not inevitable. [8] In the year since China passed a sweeping national security law for Hong Kong, the mainland government has steadily tightened its grip on the city, quashing the pro-democracy movement. [113] Iran’s hard-line judiciary chief, Ebrahim Raisi, was elected president. [24] Naftali Bennett took over as Israel’s prime minister on Sunday as a new coalition government ended Benjamin Netanyahu’s 12-year run in power. [14] The first person has been sentenced in the Capitol riot. [114] North Korea's food supply is strained and “getting tense.” [115] Collapsed Florida condo building brings focus on building inspection, maintenance and related regulations. [116]
McKinsey suggests that the global economy could be on the verge of a 40% recovery that delivers sustained and equitable growth for several years. [53] Brighter more equitable future is in front of us. [54] Millennials are the wealthiest generation. [55] The US economic recovery is unlike any in recent history, powered by consumers with trillions in extra savings, businesses eager to hire and enormous policy support. Businesses and workers are poised to emerge from the downturn with far less permanent damage than occurred after recent recessions, particularly the 2007-09 downturn. New businesses are popping up at the fastest pace on record. The rate at which workers quit their jobs—a proxy for confidence in the labor market—matches the highest going back at least to 2000. American household debt-service burdens, as a share of after-tax income, are near their lowest levels since 1980, when records began. The Dow Jones Industrial Average is up nearly 18% from its pre-pandemic peak in February 2020. Home prices nationwide are nearly 14% higher since that time. The speed of the rebound is also triggering turmoil. The shortages of goods, raw materials and labor that typically emerge toward the end of an expansion are cropping up much sooner. Many economists, along with the Federal Reserve, expect the jump in inflation to be temporary [56], but others worry it could persist even once reopening is complete. Jobless claims have declined by more than 30% since late April, slipping below 400,000 for the first time since the pandemic. [8] The extraordinary recovery of the US economy is likely to make the country the world’s top destination for overseas investment this year and next. [57]The US government’s focus is on the infrastructure plan and other Mr. Biden’s $4T economic agenda. [12]
While the US is in a post-peak-pandemic transitional period and extraordinary recovery, globally parts of the world are in the midst of the worst of the pandemic. A wave of COVID-19 outbreaks in India has impacted manufacturing and production across multiple industries and regions. [3][4] Latin America outbreaks are at alarming rates [6][31] though economic recoveries started. Lockdowns in New Zealand, Taiwan and Australia are hampering business-as-usual. Market volatility and the next moves by central banks have to be watched “very carefully” as we still live in very uncertain times. [58] Tourism is up in the air. The tourism industry lost nearly $4.5T and 62M jobs last year, but the rollout of the COVID-19 vaccines has given government officials in many countries new confidence to welcome visitors. Yet reopening plans vary by region, with many countries experiencing new virus outbreaks.[59] Supply chain issues are causing spikes of prices in all industries, and hindering economic recoveries. The global semiconductor shortage threatens economic recoveries and poses an urgent problem for IT and automotive industry, which have already announced production rollbacks, and billions of dollars in expected revenue losses, as a result. [5][60] New semiconductor factory in the US is one answer to President Joe Biden’s call for $50B in funding to encourage domestic semiconductor production as part of his proposed infrastructure plan, and the Senate recently proposed $52B to help the US compete with China. [61] White House supply chain report outlines reshoring ambitions. [62] The problem rare earth supply chain is not with a shortage of raw materials, but getting them out of the ground and out of China. [63] The US and EU are suspending tariffs on $11.5B worth of goods trapped in aircraft dispute. [64] Crypto crackdowns continue (e.g., UK bans Binance exchange [65]), while the El Salvadorian parliament is planning to be the first in the world to make Bitcoin legal tender. [19] and the Bank of Tanzania asked to prepare for crypto adoption. [66] Chinese Bitcoin miners moving to Kazakhstan. [67] Bitcoin bounces back after tumbling below $30,000 threshold. [68] S&P 500 and Nasdaq hit new records. [28] Apple fights to maintain control over iPhone apps. [69] and explores bigger iPads and reshuffles its car team. [70] Two government antitrust lawsuits against Facebook were dismissed by a federal judge. [30]