Wednesday, February 5, 2020

A WORLD IN CRISIS - "a wind of madness is sweeping the globe"


"Escalation is back," U.N. Secretary-General Antonio Guterres warned Tuesday. Laying out his goals for 2020, Guterres said he wants to break vicious dynamics and create a "virtuous circle" that leads to progress.
Angela Weiss/AFP via Getty Images
U.N. Secretary-General Antonio Guterres laid out a sobering view of the current state of the world Tuesday, saying that "a wind of madness is sweeping the globe" as instability erupts into unpredictable and violent conflicts. The problems are made even worse, he said, by faltering economic situations and countries that disrespect U.N. Security Council resolutions "before the ink is dry."
"Escalation is back," Guterres said, referring to violence that has flared in Yemen, Libya and elsewhere. And in the midst of problems between rival groups, the U.N. chief said, the world is also facing the effects of a worsening climate crisis, citing the historic wildfires that brought disaster to Australia and record high temperatures in the world's oceans.
Guterres made the remarks Tuesday morning in a speech laying out his priorities for the new year. His chief goal, he said, will be to "break the vicious circles of suffering and conflict and to push for a strong surge of diplomacy for peace."
Noting that 2020 will bring the U.N.'s 75th anniversary, he called on its member nations to listen to "conversations in every corner of the world about the future we want."



"There is no doubt that people have much to say," Guterres said, adding, "The disquiet in streets and squares across the world is proof that people want to be heard. They want world leaders to answer their anxieties with effective action."
YouTube
The current state of the world is defined by "cascading challenges" and "vicious circles" that threaten peace and security, the U.N. head said. And the conflicts that emerge, he added, are "longer, more lethal and more likely to erupt in the first place."
The precarious circumstances have slammed the door on recent progress toward comity and peace, Guterres said. He detailed that sentiment in a striking portion of his speech that was transcribed by the office of his spokesperson:
"Tensions were of course high as the last year ended, but we were moving in the right direction in a number of hotspots. We were seeing signs of de-escalation and some measure of progress.
"That's all changed.
"I have spoken recently about winds of hope. But today a wind of madness is sweeping the globe.
"From Libya to Yemen to Syria and beyond – escalation is back. Arms are flowing and offensives are increasing.
"All situations are different but there is a feeling of growing instability and hair-trigger tensions, which makes everything far more unpredictable and uncontrollable, with a heightened risk of miscalculation.
"Meanwhile, Security Council resolutions are being disrespected even before the ink is dry.
"As we can see, problems feed each other.
"As economies falter, poverty remains entrenched.
"As future prospects look bleak, populist and ethnic nationalist narratives gain appeal.
"As instability rises, investment dries up, and development cycles down.
"When armed conflicts persist, societies reach perilous tipping points.
"And as governance grows weak, terrorists get stronger, seizing on the [vacuum]."
Devoting a large share of his speech to worsening climate conditions, Guterres noted that the world's ocean temperatures and the mean sea level had both reached new record highs.
"Scientists tell us that ocean temperatures are now rising at the equivalent of five Hiroshima bombs a second," he said.
Humanity faces other challenges on land, the U.N. head said, listing shrinking permafrost and thawing tundra as two factors that will send "vast amounts" of methane — a greenhouse gas — into the atmosphere.
Applying his central metaphor of a vicious circle to the climate, Guterres said the smoke from the massive fires in Australia "is now itself a literal vicious circle – circling the globe, releasing the equivalent of as much as six months of the country's total carbon emissions in 2018."
Referring to the interconnectedness of the world's climate, he added, "What happens in Australia doesn't stay in Australia — and the same can be said about any part of the world."
After delivering that dire summary of the world's state of affairs, Guterres held out a ray of hope.
"There is some good news," he said, adding that more people are now aware of the risks posed by climate change and noting that governments and the private sector are changing their policies and investing money to protect the environment.
Guterres also called on the U.N.'s member nations to "break the vicious circle of poverty and inequality and to shape a fair globalization leaving no one behind." And he stressed the importance of sustainable development to prevent big problems from growing even larger.
Listing priorities such as improved education, gender equality and health care, Guterres said that making progress on even one goal can have a ripple effect. It could create, he said, "the virtuous circle we know is possible and that can point the way toward growth and prosperity for all."

Wall Street rises as coronavirus weighs heavily on global economy
The growing divergence between financial 
markets, boosted by continual injections of 
cheap money, and the underlying real economy, 
has been further underscored by the impact of 
the coronavirus outbreak.
While the Chinese economy has been at a virtual standstill this week and the effects of production cutbacks are starting to flow to the rest of the world, Wall Street has nevertheless undergone a rapid rise, after significant falls, and returned to positive territory for the year.
Yesterday the Dow finished 408 points higher, or 1.4 percent up, after being up more than 500 points during the course of the day. The S&P 500 was up by 1.5 percent and the tech-heavy Nasdaq index rose by 2.1 percent to finish at a record high.
Stock trader works at the New York Stock Exchange [Credit: AP Photo/Mark Lennihan]
The rise in the market was the result of major central bank interventions both in China and the US. Share prices in China rose yesterday—after falling by more than 8 percent when markets re-opened on Monday after the extended lunar New Year break—due to a $174 billion intervention by the People’s Bank in China and indications that state-run institutional investors were buying up stocks to support the market.
In the US, the market was boosted by a $94 billion injection of cash by the New York Federal Reserve in the short-term repo market in order to keep down overnight interest rates.
The Wall Street Journal reported that the upward movement in the market was the “growing belief that fiscal and monetary policy will blunt the impact of the virus outbreak” and pointed to “investor psychology” that central banks “will do whatever they need to.”
A comment reported by CNN from Michal Every, senior Asia-Pacific investment strategist at Rabobank put the issue more directly.
“The underlying market hope is clear: central banks will save us, not just from the business cycle, and not just from climate change, but not from global pandemic too,” he wrote.
This week, 21 provinces in China told businesses not to resume work at least until February 10 and that the shutdown could be extended if the virus continues to spread. According to calculations by the US business channel CNBC, the shutdown covers areas that account for more than 80 percent of China’s gross domestic product and 90 percent of its exports.
In the Hubei province, where the disease outbreak began in the city of Wuhan, businesses have been told not to re-open before February 14, with provincial authorities stating they could extend the shutdown to an “appropriate extent.”
China is the world’s largest exporter of intermediate manufactured products that form part of the global supply chains of major corporations. It is the source of 20 percent of the global total of such products and 40 percent for production carried out in South Korea, Japan, Vietnam and Cambodia.
The effects have already begun to be felt. Yesterday Hyundai, the world’s fifth largest carmaker by sales, announced that it was shutting down all its car factories in South Korea because it had run out of components from China.
European car production could soon be affected. The Financial Times has reported that parts manufacturers Continental and Thysssenkrupp both held crisis meetings this week. Travel restrictions in China are preventing the normal resumption of work and while companies have said they expect to resume production next week it is by no means guaranteed.
Analysts at the Japanese financial firm Nomura pointed to the effect of the shutdown of the car industry.
“Restrictions on movement and other measures have raised the risk of disruption to supply chains, and we see potential for a stalling in automobile production within China. We also see a risk that supply chain issues could have knock-on effects in Japan and elsewhere in Asia,” they said.
Seventeen years ago, the outbreak of the SARS virus delivered a hit both to China and the rest of the world. The new coronavirus has a much greater potential for damage because of the growth of the Chinese economy. In 2002–2003 China accounted for about 4 percent of global GDP. Now, that figure is over 16 percent and China accounts for about one-third of all global growth annually—more than the US, Japan and Europe combined.
The increased weight of China in the global economy is reflected in the sharp fall in the prices of industrial commodities, of which it is a major consumer.
The price of oil has fallen by around 20 percent over the past three weeks and has officially entered bear market territory. Earlier this week the Kremlin issued a statement that President Vladimir Putin had taken a call from Saudi Arabia’s King Salman and the two sides were ready to coordinate their actions to “ensure stability on the global oil market.”
Olivier Jakob at the consultancy firm Petromatrix told the Financial Times that, while initially the estimates of reduced consumption were focused on air transport, “the true risk is lower economic activity. That’s much bigger in scale.”
Estimates for the growth of the Chinese economy, at least for the first quarter, have already been revised sharply down from just below 6 percent to as low as 4.5 percent or even 4 percent.
With China accounting for around half the consumption of the world’s metal and mining resources—a level double what it was when the 2003 SARS outbreak took place—the price of metals has fallen sharply. Copper, often regarded as a bellwether for global industrial production, is down 13 percent and the price of iron ore has dropped by more than 8 percent. The price of liquefied natural gas has also fallen sharply, with a key price index used in Japan and Korea dropping to a record low on Monday.
In contrast to the surge on the markets, the Wall Street Journal warned in an editorial this week of the effects on the US economy. It noted that Apple, McDonald’s, Levi Strauss and Starbucks have announced temporary closures of their stores, and manufacturers such as Ford, Apple and Tesla have temporarily halted production.
It pointed out that one sixth of Apple’s sales and nearly half of the chip-maker Qualcomm’s revenues come from China and that 80 percent of the active ingredients used by drug-makers used to produce finished medical products in the US are sourced from China.
“Because China is the world’s largest manufacturer and an enormous consumer market, the economic freeze will disrupt supply chains and reduce corporate earnings,” the Journal commented.
Goldman Sachs said last week it expected the impact of the virus to cut US output by between 0.4 and 0.5 percentage points in the first quarter of this year, with a rebound to follow in the second quarter. But with the full effects as yet unknown there is no way of determining the accuracy of such an assessment.
With industrial production falling in China and the knock-on effects in Japan, Asia, Europe and the US, an ongoing rise in US markets—fuelled by the belief that cheap money will continue to be pumped out by the Fed—could create the conditions for a financial crisis whose economic contagion would exceed those of the coronavirus.


Coronavirus outbreak disrupts global auto industry as carmakers shut down production in China


The outbreak of the 2019-nCoV coronavirus in China, declared a global health emergency by the World Health Organization, is rattling the global auto industry. International auto manufacturers have shut down production in facilities across China in response to the spread of the deadly coronavirus outbreak, which originated in Wuhan, the capital city of China’s Hubei province at the end of December 2019.
Many manufacturers are further extending the annual Lunar New Year holiday shutdown at least through February 10. So far, 11 of China’s 31 provinces have announced extended holiday shutdowns of all non-essential industries for at least an additional week in attempt to contain the spread of the virus. These provinces are Hubei, Shanghai, Guangdong, Chongqing, Zhejiang, Jiangsu, Anhui, Yunnan, Fujian, Jiangxi and Shandong. According to IHS Markit, a global industrial analytics and research group, the 11 provinces are responsible for two-thirds of China’s automotive production.
Wuhan [Credit: ZhengZhou]
Wuhan, the epicenter of the coronavirus outbreak, is an important production hub for the global auto industry. Known as China’s “Motor City,” major global auto manufacturers rely on production in Wuhan for large portions of their Chinese output: 54 percent for French automaker PSA, 47 percent for Japanese automaker Honda, 19 percent for American automaker General Motors (GM) and 15 percent for Chinese automaker Donfeng.
GM, Toyota and Volkswagen have closed their plants in the region at least through February 9 in light of advice from local authorities. Honda and Nissan, which have also suspended operations in the region, are expected to have operating profits decline by 11 percent and 6.1 percent, respectively, for each month of production stoppage, according to JP Morgan Chase.
IHS Markit further predicts that the continued idling of the plants in these areas will lead to a first-quarter production loss of 350,000 units, or 7 percent, if the shutdown is extended to February 10. However, if the shutdown extends through mid-March, first-quarter output is expected to take a 32.3 percent hit, a loss of more than 1.7 million units, according to the report.
The coronavirus outbreak will have a much more serious impact on the Chinese and global markets than the 2003 Severe Acute Respiratory Syndrome (SARS) outbreak, which had little impact on the global auto sector. Today, China’s auto industry is six times the size it was in 2003 and is the world’s leading automaker, producing 25 million vehicles or a quarter of cars and trucks manufactured each year. Approximately 1.6 million of the more than 9 million workers directly employed by the global auto industry work in China.
The country is also the world’s largest car market with 23 million new vehicles registered in 2018, compared to 17 million in the US. The country’s domestic auto market has recently declined, however, largely due to the trade war measures of the United States and the slowing global economy. Even before the outbreak of the coronavirus, Bloomberg reported that China was heading toward its lowest sales forecast in five years.
The impact of the shutdowns will reach throughout the world. Due to China’s central position in the world automotive industry and world economy as a whole, production delays will impact the international supply chain for transnational corporations producing vehicles around the world. Sig Huber, senior managing director at the consultancy Conway Mackenzie and former global director of purchasing at Fiat Chrysler Automobiles NV, told Bloomberg that “If work stoppages are extended, we could start to see production disruptions in other parts of the world.”
Electric vehicle producer Tesla is among the companies monitoring the situation for supply chain impact outside of China. It expects a 10-day delay in operations at its new Shanghai plant, the first Tesla plant built outside of the US.
China eclipsed Japan as the world’s second-largest economy in 2010. With a current gross domestic product of nearly $14.55 trillion, it accounts for over 16 percent of the global GDP and is expected to reach as high as 21 percent of the world’s output by 2024.
The impact of the coronavirus on the world economy has been reflected in the sharp drops of the global stock markets as the deadly virus has continued to spread.
The livelihoods of autoworkers in China and their families hang in the balance as plants are shut down for indefinite periods across the country. The virtual lockdown of Wuhan has entered its second week. One of the reasons for the extended shutdown cited by global auto manufacturers is the uncertainty that workers would be able to travel to work in factories, as public transportation systems such as buses and subways have been suspended throughout Wuhan, in addition to workers in other areas taking their own precautions and choosing not to travel out of fear of contracting the virus.
Chinese autoworkers and their families will no doubt struggle financially during the extended shutdown period and its aftermath. Over the last year and half, GM, Ford, Volkswagen (VW) and other carmakers have already embarked on a global rampage against jobs, announcing layoffs and plant closures in response to the shift towards electric vehicles and falling demand in China and around the world. GM and VW expect production in the region to be reduced by 11 percent year-over-year as a result of the crisis.
While the vast majority of workers in the US and other countries feel nothing but sympathy for their counterparts in China, the Trump administration has sought to use the virus to whip up anti-Chinese nationalism. During a TV interview last week, Trump’s commerce secretary, Wilbur Ross, said the outbreak of the virus “will help to accelerate the return of jobs to North America.” He told Fox Business News, “I don’t want to talk about a victory lap over a very unfortunate, very malignant disease. The fact is, it does give business yet another thing to consider when they go through their review of their supply chain.”
While seeking to stoke up economic nationalism, Ross could care less about the jobs of US workers. The billionaire made his fortune buying up distressed steel, coal mining and auto parts companies, stripping them of their assets and flipping the companies for huge profits, leaving thousands of workers without jobs and pensions. In conducting these corporate raids, the asset stripper enjoyed the backing of the United Steelworkers, the United Auto Workers and other unions, which blamed the job losses on Japan and other US competitors.
Vast resources exist in the US and China, the world’s two leading economies, to combat the spread of the virus, which now has confirmed cases reported across Asia, Europe, North America and Australia. However, the division of the world into rival nation states is the biggest obstacle to the collaboration of scientists, health care professionals and workers around the world, and the marshalling of the necessary global resources to combat the spread of this and future epidemics.

That the spread of the virus has also underscored the vast economic inequality in China and rapacious character of the capitalist ruling class, which has made huge fortunes from exploiting the working class and providing a cheap labor platform for the transnational corporations. The financial losses incurred by the profit-hungry corporations as a result of the spread of the coronavirus outbreak will be shifted onto the backs of the working class in China and worldwide, through job cuts, cuts to safety and health benefits, shortened hours and wage losses, and forced overtime to make up for lost production.

No comments: