Author : The BlackSummit Team
Date : September 5, 2024
To begin this week’s newsletter, we examine the crisis of poor governance around the world, highlighting the cases of Venezuela, Egypt, and sub-Saharan Africa, highlighting the global ramifications. Then, we touch on new technologies, from energy storage to new batteries, that are transforming the clean energy transition. We then move on to look at China’s doubling down on industrial policy in light of its tremendous local government debt burden. We end this week’s newsletter by looking at the dangers that forever chemicals in fertilizer used in American farmland poses for consumers.
What Happens When Half a Million People Abandon Their City
Francis Robles, New York Times
Even Summer Nights Can’t Escape Egypt’s Economic Crisis
Vivian Yee, New York Times
Africa’s Debt Crisis Has ‘Catastrophic Implications’ for the World
Patricia Cohen, New York Times
Poor governance has had devastating impacts across various regions, hollowing out once-thriving communities and exacerbating economic and social crises. In Maracaibo, Venezuela’s second-largest city, years of corruption, mismanagement, and political repression by the Maduro regime have led to the collapse of the state oil company, PDVSA, the backbone of the local economy. This has resulted in widespread scarcity of essential services like electricity and water, driving nearly half a million residents to flee in search of stability elsewhere. The city, now a desolate urban landscape of abandoned homes and overgrown yards, stands as a tragic symbol of how authoritarian governance and the failure to meet basic needs can dismantle entire communities. Similarly, in Egypt, decades of poor governance have left the country grappling with an economic crisis that has dimmed the once-vibrant streets of Cairo. The government’s inability to address fundamental issues, such as currency devaluations and underinvestment in healthcare and education, has deepened the despair of its citizens, who now navigate a life of growing poverty— roughly 30% of Egyptians live in poverty per the most recent government statistics that were gathered before the pandemic.
The situation in Africa further illustrates the consequences of bad governance. Across the continent, mismanagement and corruption have led to a crippling debt crisis, with over $1.1 trillion owed to foreign creditors. This immense financial burden has stifled economic growth, forcing governments to cut critical public services and stoking social unrest. Countries like Kenya and Nigeria have been particularly hard-hit, with protests erupting as citizens bear the brunt of austerity measures imposed to service the debt. The crisis is further complicated by the influence of opaque foreign creditors, particularly China, whose loans often come with hidden risks. As a result, African nations are trapped in a cycle of borrowing and repayment, leaving them vulnerable to economic shocks, rising poverty, and social unrest. The consequences extend beyond the continent, threatening global progress on critical issues like climate change and the green transition.
Clean energy’s next trillion-dollar business
The Economist
A variety of new batteries are coming to power EVs
The Economist
The rapid advancement of grid-scale battery storage is set to revolutionize clean energy by addressing one of the most significant challenges in decarbonizing the world’s electricity supply: the intermittency of solar and wind power. As the global installed capacity of battery storage is expected to soar from less than 200 gigawatts (GW) last year to over 5 terawatts (TW) by 2050, the market is on the brink of becoming a trillion-dollar industry. Falling prices and innovative new chemistries, such as sodium-ion batteries, are driving this transformation, making battery storage not only more affordable but also more efficient and safer. Major players, particularly in China, are leading the charge with massive investments in research and development. Although intense competition has led to overcapacity and consolidation within the industry, the surge in battery storage is poised to make clean energy more reliable and widespread, with grid-scale batteries rapidly becoming a cornerstone of the global energy transition.
This revolution in battery technology is also transforming the electric vehicle (EV) industry, where a variety of new battery technologies are emerging to meet the diverse needs of consumers and manufacturers. In Nysa, Poland, a cutting-edge plant owned by Umicore is at the forefront of this evolution, producing critical cathode materials for a range of battery chemistries. These batteries, which account for a significant portion of an EV’s cost and performance, are increasingly being tailored to suit different market segments. Lithium-iron phosphate (LFP) batteries, which are cobalt-free and lower in cost, are gaining popularity in urban vehicles, while high-performance lithium-ion (Li-ion) batteries are being optimized for luxury models. Additionally, alternatives like sodium-based batteries and innovative solid-state versions are on the horizon, promising to further diversify the battery landscape. As the industry grapples with fluctuating material prices and the need for sustainable practices, flexibility in production and innovation in battery design are crucial. This multi-battery future underscores the dynamic nature of both the clean energy and EV markets, where the race to develop the best energy storage solutions is intensifying and driving global progress toward a more sustainable future.
China’s Real Economic Crisis: Why Beijing Won’t Give Up on a Failing Model
Zongyuan Zoe Liu, Foreign Affairs
China’s debt divide is hurting its economy
Robin Harding, Financial Times
In late 2022, Beijing’s sudden end to its strict “zero COVID” policy was expected to revive China’s economy after a prolonged period of pandemic-induced stasis. However, rather than a robust recovery, the economy has faltered, with sluggish GDP growth, eroded consumer confidence, and a severe decline in property values. These issues reveal deeper structural problems, notably chronic overcapacity driven by decades of industrial policies that favored production over consumption. This approach has led to unsustainable output levels in various sectors, such as solar panels and electric vehicles, resulting in a global glut that depresses prices and strains international trade. The persistent focus on industrial dominance, often fueled by excessive local government debt and uncoordinated investments, has created a vicious cycle of falling prices and rising insolvency, with domestic demand remaining low and global markets struggling with excess supply.
China’s economic difficulties are further compounded by severe fiscal challenges stemming from a deep divide between central and local government responsibilities and revenues. While the central government’s debt remains relatively low at around 24% of GDP, local government debt has surged to an estimated 93% of GDP. Local authorities, tasked with significant expenditures on public services, generate only a fraction of the necessary funds and rely heavily on central transfers and off-the-books borrowing. The recent crackdown on these practices, combined with a slowdown in property sales—a crucial revenue source for localities—has led to severe fiscal strains, including unpaid salaries and desperate measures such as fines and retrospective tax investigations. Despite Beijing’s efforts to reform the fiscal system, such as granting more autonomy to local governments and enhancing financial transfers, these initiatives face the challenge of balancing increased local spending power with a likely rise in central government debt. The centralization ethos from Zhou Enlai’s era continues to constrain comprehensive reform, exacerbating China’s economic troubles and highlighting the limitations of its production-centric model.
Something’s Poisoning America’s Land. Farmers Fear ‘Forever’ Chemicals.
Hiroko Tabuchi, New York Times
5 Takeaways From Our Reporting on Toxic Sludge Fertilizer
Hiroko Tabuchi, New York Times
For decades, federal encouragement led American farmers to use municipal sewage sludge as fertilizer, aiming to recycle nutrients and reduce landfill waste. However, this practice has introduced severe environmental and health risks due to the presence of toxic “forever chemicals,” or PFAS, found in the sludge. These chemicals, known for their persistence and potential health hazards, have been detected at alarming levels on farms across the country. Farmers have obtained permits to use sewage sludge on a fifth of America’s farmland (roughly 70 million acres), while the sludge was used on 4.6 million acres in 2018. Recent investigations have revealed that PFAS contamination from this sludge is contributing to severe issues, such as livestock deaths and contaminated produce, raising alarm among farmers and consumers alike. The problem is exacerbated by a lack of comprehensive regulation and testing, with some states like Maine leading efforts to ban sludge use and investigate contamination, while others, like Michigan, are taking a more cautious approach in order to minimize negative economic impacts that could come with banning the substance outright without more research. The crisis highlights the need for better oversight and alternatives to prevent further damage to agriculture and the environment. The EPA, which has encouraged the use of sewage as a fertilizer, is now studying the risks in order to support farmers and ensure a clean food supply for Americans and the world.