International Economics: IB Economics

It seems as though global commitments to reduce fossil fuel consumption are weakening with the news that coal power capacity rose over the last year, largely driven by China. However, there's been a slowdown in the decommissioning of European coal-fired power stations, presumably as a result of the Ukraine war. 

A quick explainer of the extent to which Europe is dependent upon Russian gas. It does what it says on the tin. 

Larry Elliott reflects upon the history seeming to repeat itself. The first meeting of the G7 was in response to the OPEC oil price shock, so it seems appropriate that this weekend's meeting is focused on another energy crisis, in this case the impact of Russia cutting its supply of gas to Europe. 

Germany has already had to adopt an emergency gas plan, but the signals from other economies are mixed, with the US and the UK tightening monetary policy. It has to be said - again - that we live in interesting times. 

Larry Elliott looks at the impact of sanctions on the Russian economy and asks the question 'Who will blink first'?

It's clear that the Russian economy has been crippled by sanctions, but Europe's dependence upon Russian natural gas and oil, and the rising price of both means that Europe is going feel some of the pain too. 

This BBC article is a fantastic article about the effect of protectionism on trade patterns, with Australian wine exporters reacting to Chinese tariffs by shifting their focus from the Chinese market to Europe, with the UK the major destination.

This is an example of trade diversion - it is far from an optimal outcome, and reflects a reduction in economic welfare for all concerned. Far from an optimal solution, it reflects a compromise, but one that involves a welfare loss.  

Trouble in the Eurozone, with German growth slowing and the region as a whole stalling...

Watch this space.

Is Europe the new Japan? Certainly, Mohamed El-Erian argues that it's displaying many features of 'Japanification': weak growth, disinflation and perpetually low interest rates.

He goes onto suggest that the solutions to these problems are tough - requiring prompt action and political consensus, and that the latter is, unfortunately, difficult to secure. 

Abenomics all round, I say!

The OECD forecast recession ahead for much of Europe, in the wake of the invasion of Ukraine...

Larry Elliott looks at the prospects for the global economy and argues that we are wishful if we think that the next few years are going to see a repeat of the 1920s, with a Fourth Industrial Revolution and rapid growth. 

Instead, he suggests that there are four problems that need tackling -the re-establishment of a relatively calm macroeconomic environment, the need for higher levels of investment, an attempt to tackle inequality and greater global co-operation. 

Without it, we're likely to see continuing economic problems - and countries from Sri Lanka to developed European economies suffering. 

Larry Elliot comments on the difference between the US ban on Russian oil - which will come at relatively little cost, given the small quantity of Russian oil that the US imports, and Europe's far greater dependence on Russian energy. He wonders whether it might split the Western alliance on the issue. 

He might  have a point - however, I would argue that with Spring just around the corner, and then Summer approaching, the real pinch point is likely to be more than 6 months away, and by then, I suspect, the West is banking on the war being over. 

Given the ongoing uncertainty in Ukraine, the Guardian has a quick look at where else Europe might be able to get gas from if Russia cuts exports. The suggestions are the Qatar and Libya could step in, although the LPG would need transporting. Purely by coincidence, I started Tim Marshall's "Prisoners of Geography" - not a book about Sixth Form pupils and their choice of A-Level - and parts of the first chapter deal with exactly this issue in the wake of Russia's annexation of the Crimea.

And it's not only us that's suffering - the European economy has stalled and Brexit is only likely to make this worse. The French and Italian economies are shrinking, and so the latest European growth figures are going to be exceptionally weak.

I wonder if any Brexiteers will make some crass reference to this in the week ahead.

An interesting insight into the global economy, with worrying implications for European economies, in that it implies that European companies are struggling to compete against US and Chinese rivals. 

Furthermore, it looks like the policy response is going to be to fostering more collaborative projects in Europe in the hope of offsetting the perceived technological advantages of global superpowers.

Whither the global economy?

Or is it wither the global economy?