From Brussels to the Rest of the World

How Europe Became a Model for the 21st Century

An Essay by Ullrich Fichtner

Despite its long list of crises in recent years - including the most recent vaccine snafu - the European Union has become a global pacesetter. Its laws and regulations have established global norms. This has made the bloc a 21st century model.

Fans of the European Union gather in front of the Opéra Garnier theater in Paris in 2020: A giant that is shaping the planet Foto: Bruno Levesque / IP3 Press / imago images


In the cosmos of political cartoons, Europe has been depicted as a snail and as a hydra, as a snake pit or a pigsty. The European Union can be a sick man, an old woman in a wheelchair, a neglected child o a sad woman. 

Europe found itself mocked as a deflating balloon, as a race car without an engine, as a derailed train, as a sinking ship or as a jumbo jet too big for any runway. 

The Continent has been portrayed as a barren mountain range of EU summits, as a garbage dump of files, as a befouled land of plenty with lakes of milk and wine. 

Europe in caricature is a house of cards, a ramshackle home, a burning hut, a crumbling temple. It is always in ruins.

The idea that, despite everything, the European Union is in fact a world power, never seems to occur to the cartoonists.

After all, the news speaks a different language. 

In the mirror of current affairs, in the Twitter thunderstorms of our time, the EU often looks as broken as its worst enemies describe it. 

Cyprus single-handedly blocking European sanctions against the Belarusian dictatorship. 

The governments of Hungary and Poland ruthlessly undermining the rule of law. Agonizing negotiations on a common refugee policy for the Continent repeatedly concluding in shabby nothingness. 

A common agricultural policy - one that has been wrong for decades - cemented once again. 

The procurement of coronavirus vaccines descending into acrimonious, backbiting chaos, fueled by the national interests of 27 member states. In our imaginations, that is truly not what a global power looks like.


There have been several times in the past 10 or 12 years that the EU has been so close to the abyss that the fall seemed inevitable. 

The great financial crisis of 2007 and 2008 became the Greek crisis and a European sovereign debt crisis. 

Significant doubts were raised about the basic structures of the federation of nations – and they weren’t just coming from the right-wing populists emerging across the Continent. 

Financial crises became identity crises and refugee crises spiraled into existential crises. 

In 2016, the decision by the British to leave the EU seemed like the final nail in the coffin of a historic experiment that the peoples of Europe never learned to love.

That the situation has since become less fraught is not least due to the fact that Brexit, by not destroying it, has actually saved the EU for the time being. 

The London circus and the back and forth of the Brussels negotiations also had the effect of making many Europeans realize, perhaps for the first time, how tightly entwined their countries are with the EU. 

An otherwise abstract entity became concrete, and as amusing as all the parliamentary bleating in London may have been at times, it was just as crazy that the British really believed they could get by in the world better on their own than as part of the European alliance.

The realization that backing out of the EU is not a simple undertaking will actually help defuse future disputes. 

The various debates on leaving the EU that populist parties enthusiastically launched – especially in France – have essentially fallen silent thanks to Brexit. 

Those who continue insisting on leaving the EU risk ending up on the sidelines. And that is a significant step forward for the climate in Europe.

Before Brexit, many Europeans may have lacked a sense of how the Brussels power structures worked, but there has since been a surge in political education. 

The division of roles between the EU institutions has become clearer, the roles of the European Commission, it’s executive branch, and the European Council, the powerful body representing leaders of the 27 member states, are now better understood.

It would be an exaggeration to claim that a European public now follows the political scene in Brussels more closely, but there are at least a few figures that every European now knows. The EU is no longer as faceless as it once was.

Still, there is no widespread understanding of the European Union’s weight in the world - at all. The pendulum has swung from the overconfidence following the introduction of the euro and eastern enlargement to the pronounced inferiority complex of today.

Stuck in the narrative of Europe's decline, many Europeans now worry about the future – and misperceive the real balance of power in the world today.

The EU, though, isn’t puny and insignificant. It’s quite the opposite – a giant that plays a decisive role in shaping life on this planet.

Chinese President Xi Jinping at a conference with representatives of the EU: Europe will outperform China in many respects for decades to come. Foto: Xinhua / action press


There are numerous metrics that are used to describe economic strength and they are all controversial. But given the lack of alternatives, they are still in use. 

We talk about total economic output (gross domestic product or GDP) and about GDP per capita. 

You can also calculate current account balances from imports and exports of goods and services to determine a country’s success or attractiveness. 

In terms of the EU and its 27 members, it doesn’t really matter which metric you apply: It always ranks among the top three in the world by all criteria. 

It is even ahead of the United States in many fields and will be able to outperform China in many respects for decades to come.

The EU is the most important export market for the U.S., India, South Africa and Russia. 

It is the second-largest market for China and Brazil and the third largest for Japan and South Korea. 

Three-quarters of South African exports of fruits and nuts go to the EU, 87 percent of U.S. pharmaceutical exports, 51 percent of Brazilian coffee traded on the global market, 45 percent of Indian textile exports and 40 percent of toys made in China for the world market. These figures speak of a European market and purchasing power that is mind-bogglingly big.

Europe - not China - is the largest partner of the emerging African continent. By far. A third of all African exports go to the EU, and 40 percent of the foreign investment in Africa comes from the EU. 

Investors from the 27 EU member states were active in Africa with 222 billion euros in 2017, while the Americans had only 42 billion invested and the Chinese 38 billion.

The idea - promoted by all manner of florid media features - that China is the biggest player in Africa is simply wrong. Moreover, the EU and its member states provide more than half of all development aid funding worldwide. 

EU member states are also the largest donors to the organizations of the United Nations.

If it weren’t for the European market, the American, Korean and Japanese giants in the entertainment and digital industries could also pack it in. The data shows, for example, that Apple generated fully $16.9 billion in revenues in Europe during the third quarter of last year despite COVID-19. 

With its 90 percent market share in search services, Google generates billions in advertising revenues in Europe. Facebook, meanwhile, has 277 million daily users in Europe, more than in the U.S.

Europe’s market power also stems from the comparatively high standard of living of its inhabitants. One indicator is GDP per capita, while taking purchasing power into account. 

The higher it is, the greater a society’s level of prosperity is considered to be – and here it is clear that China still has a long way to go before it catches up with Europe or the U.S.

GDP per capita in the U.S. is around $65,000; in Germany, it is about $54,000, and an average of $47,000 across the EU. China’s GDP per capita is calculated at $16,700. In India, that figure is $7,000.

People tend to read such calculations like Olympic Games medal counts, but it would be helpful to everyone if we would stop looking at the world economy as a race of nations or as a war fought by other means. 

The logic of rise and fall, of winners and losers, leads to fear and aggression. And it fails to recognize the historical roots of great economic processes.

Around the year 1800, when industrialization was just starting to take off in Europe, half of the world’s population lived in Asia. And, consequently, half of the world's economic output was generated there. 

But by 1900, Asia’s share of the world economy had fallen to just one-fifth, precisely because of Europe’s new technological lead. Harvard researcher Joseph Nye, to whom we will return later, thus suggests that we cease talking about the rise of Asia and China, preferring the term "return" instead.

From that point of view, we're not witnessing an upheaval, but rather a protracted normalization. "Unnatural" economic and social imbalances are disappearing again - imbalances that were globally extreme and extremely unhealthy. 

China’s rise is by no means all downside, either. Given that Asia’s recovery is also promoting the growth of the global economy as a whole, the overall pie to be shared is growing - for Europeans, as well.

Europeans should also humbly recall that they themselves once had to face a difficult return from the ruins of a world war. 

As such, should China not be seeking domination in the long run and is instead striving to find its place in the world economy and the global community through fair competition, then Europe should welcome and help shape this process. 

The agreement in principle reached over the Christmas holidays on a trade deal between the EU and China points in this direction and will open up new avenues for discussing labor market protections and human rights issues.

Either way, China is already having to defer to Europe's ideas and regulations in many areas. For not only is the EU an economic superpower, it is now also the No. 1 global regulator.


Every day, miraculous things are happening around the globe of which most Europeans take no notice. 

Technology companies in California build their devices according to EU regulations. Cocoa producers in Ghana and Ecuador are transforming their operations to meet European standards. 

In Argentina, Israel and Russia, plaintiffs are suing internet companies and invoking the "right to be forgotten” that was formulated in the EU. 

Regional blocs of countries in South America are organizing themselves along the lines of the EU. Laws drafted in Europe are adopted almost verbatim into national law in countries around the world.

Fast food chains like McDonald’s, Subway and Wendy’s are taking chemical additives out of their products because the EU doesn’t allow them. 

The Brazilian company Citrosuco, the world’s largest producer of orange juice, strictly adheres to European regulations, even in countries where they do not apply. 

Adidas, Nike, and Zara are changing the composition of the plastic in sneakers around the world to make less toxic, EU-compliant goods. It’s a tremendous list, and it is very long.

When Microsoft, Google, Apple, Intel or other big companies sue each other for competition offenses, they don't just take their case to San Francisco or New York – they call on the European Commission to arbitrate and then fight it out in Europe's high courts. Mergers of large American corporations are approved or prohibited by European authorities.

Europe's view of data protection, as laid out in the General Data Protection Regulation (GDPR), has quickly become a global standard that no company and no country can ignore. Google alone claims it was forced to spend "hundreds of years of human time” to comply with the Brussels regulations, but it did so nonetheless. 

America’s 500 largest companies are continually spending billions of dollars to implement EU rules, and the situation is no different for the largest Asian, African and South American companies. 

The smartest among them are already working to reduce their carbon emissions, with an eye on the "carbon tax,” that the EU has been working on for years.

These examples lead to the equally unbelievable and correct conclusion that globalization today is actually a "Europeanization" – and this was not written in EU advertising brochures, but in Britain’s Economist, the must-read newspaper of laissez-faire capitalists.


A global player like today's Europe has never existed in this form in the history of the world. By regulating the affairs of its internal market step by step, the EU is formulating globally effective standards along the way. 

Whether it's chemicals, hazardous waste, hormone-treated meat, electronic waste, emissions standards, animal testing, antitrust, privacy, crop protection, competition or air pollution control – the EU is always somehow already there.

It sets standards and criteria worldwide based on scientific findings and equipped with recognized scientific, legal and also moral competence – even in areas where, by law, it would actually have no say. 

It’s not a stretch to say that the European Union makes the world a little bit better every day, a little bit cleaner, a little bit healthier, safer and more sustainable.

"EU laws determine how timber is harvested in Indonesia, how honey is produced in Brazil, what pesticides cocoa farmers use in Cameroon, what equipment is installed in dairy factories in China,” writes Anu Bradford, a law professor from Finland at New York’s Columbia University. 

She and her staff did a great deal of work bringing together many of the facts and figures cited in this essay. The book she wrote following that research, "The Brussels Effect,” published in early 2020, is subtitled: "How the European Union Rules the World.” 

When asked by DER SPIEGEL if that thesis was perhaps a tad overwrought, she replied: "I don't think so! It's just that, contrary to traditional ideas, Europe is a quiet world power, and this is precisely the basis of its success."

Her book paints a picture of an EU that sometimes has a direct and, at times, indirect effect around the globe. 

It’s an effect based on the simple fact that Europe - as an economic power, as a market and as a trading trading partner - is so important that non-European countries and companies do not want to be cut off from it under any circumstances. 

In addition, contrary to widespread perception, companies are actually very much interested in regulated markets, especially those operating internationally. 

Clear criteria for everyone provides planning security and fair competition – and because the EU usually sets the strictest rules, many companies adopt them for the sake of simplicity.

In the course of modern history, there have always been leading powers whose competence and guiding principles were followed by others. 

The British and French shaped the 18th and 19th centuries, while the United States, after the world wars, shaped the 20th. The Americans set the "gold standards" for the world until the 1980s. 

After that, though, they became so enamored of deregulation that they virtually abandoned the role of regulating those gold standards, eventually losing it almost entirely. 

The EU has stepped into that void. In terms of the rules of production, economic activity, consumption and living together, it will be the formative power of the 21st century – a rational hegemon.

It also profits from the fact that many issues currently making their way to the forefront are ones the EU has been working on for many years, and this strengthens the "Brussels Effect” immensely. Data protection, in particular, was already old hat in Europe long before the internet scandals and hacker attacks of our time. 

Now, many are looking to Europe to learn from its experiences with data and privacy protection. 

But Europe has also built up expertise on issues of social and environmental sustainability, which have long been out of vogue in other regions of the world and cannot be quickly replicated elsewhere. Instead, entire countries are adopting the European model as they head down the path toward becoming prosperous societies.

The EU, says Anu Bradford, does the difficult work of lawmaking with great expertise in many fields and is recognized as an authority on many issues. 

It doesn’t hurt that the texts of its legislation are almost always immediately available in several of the major world languages. As such, the EU sets an example globally, as a role model, a pacesetter, a problem-solver and a mediator.

The accusation, most recently formulated by Donald Trump, that all this is done only out of Europe's interest in protecting itself from competition may seem plausible, but it is hardly substantiated. 

Bradford devotes an entire chapter of her book to the subject and concludes that the EU is not pursuing protectionist goals. After all, it doesn’t set rules for others, it only does so for its own market. One could be forgiven for thinking that Europe has become the smartest world power there has ever been.

A replica of the Eiffel Tower in Macau: Europe has had a "roller coaster" of a recent history. Foto: action press


The distinction between a "soft” and "hard” power originates from Joseph Nye, the Harvard professor mentioned earlier in this piece. 

Nye was born in 1937 and has been a professor emeritus for quite some time now, but he still continues to research and publish. Just a few weeks ago, another article of his appeared in a trade journal, outlining his thinking. 

Nye is convinced that hard power is an absolute necessity, but adds that military power is a blunt instrument. For today’s powers, he wrote, the point is to combine soft and hard power to create "smart” power.

Nye argues that missiles and warships don’t help fight global warming, protect privacy or regulate banking. But they remain, Nye wrote in an email response to questions sent by DER SPIEGEL, "necessary though not sufficient for national defense of liberal democracies.” 

The EU has shortcomings in this area, not so much in terms of capacity as in terms of coordination among its members and their willingness to decouple security policy from the nation-state.

If 2019 military spending is used as a basis and the UK, which has since left the bloc, is ignored in the analysis, the countries of the EU together account for around 12 percent of global defense spending. 

This puts them far behind the U.S., whose share is around 39 percent, but ahead of China, with 10 percent, and well ahead of Russia’s 3.5 percent. 

China's share may well grow, but these figures show that Europe, often accused of impotence in foreign and security policy, would actually be on par with the major powers in military terms if it succeeded in uniting its nationally fragmented "hard" power into a European one.

Why this is necessary is easy enough to explain. If you want to have a say in questions of war and peace or human rights, you need more than just values and arguments. Military heft is also necessary. 

The same applies to your own security. Munich-based historian Andreas Wirsching argues that Europe potentially has a tangible security problem. "The question,” Wirsching says, "is what would happen if something were to go wrong?” 

The EU, he argues, is certainly "a power of global importance and attraction,” but it often fails to fulfill the hopes placed in it. "In Ukraine, for example, there’s not much more you can achieve with soft power,” Wirsching says.

Or, in the drastic words of Joseph Nyes: Anyone who believes that hard power is illegitimate or irrelevant today "should tell that to Ukrainians or Georgians fighting Putin, or to the Yazidis who suffered the genocidal attacks of the Islamic State.”

Danger is lurking everywhere. 

The German government is currently particularly concerned about China's attempts to shake the edifice of European norms and standards and to weaken the union. 

There have already been several occasions in which individual EU countries have deviated from the common line when it came to criticizing China or attacking it for human rights violations. 

Hungary, Greece, Croatia, Slovenia and the Czech Republic maintain what is at times alarming closeness to the power in Beijing. 

Dangerous new fault lines could open up here. And such fractures weaken the European Union.

But it remains an open question how hard a power the EU has to become or can ever become. And that simple fact is alarming. At the moment, no one wants to imagine what might happen, as Wirsching points out, if a war were to break out at one of the EU’s external borders – on the Black Sea, the Baltic or in the Mediterranean. 

And that lack of clarity is, for a world power, unacceptable in the long run.


The current EU high representative for foreign affairs, Josep Borrell of Spain, has compared today’s EU foreign policy with the introduction of the euro, when - for a time - the old national currencies existed side-by-side with the new European currency. 

For the moment, Borrell told the Frankfurter Allgemeine Zeitung newspaper shortly before taking office a little over a year ago, EU foreign policy must coexist with national foreign policies. The point, though, is that the intersections will grow over time.

Time plays a vital role in complex alliances like the EU. Those who complain about the inability of the 27 member states to formulate a coherent foreign and security policy often forget that the EU is a very young entity historically. 

Sixteen of today’s 27 member states have only joined since 1995, with 13 first becoming members in 2004. 

The upshot is that the interests of the island of Malta must now be reconciled with those of the nuclear power France, the concerns of the Baltic states with those of Cyprus, and Sweden has to take an interest in Bulgaria's security concerns and vice versa.

After at least two centuries of deeply rooted nationalist thinking, that isn’t an easy exercise.

But can it succeed anyway? 

This is where the greatest work is needed in the further development of the EU. At the Foreign Ministry in Berlin, officials are cautiously optimistic. 

They say the deal among EU member states last summer for a corona aid program that entailed issuing shared debt and provided money as grants rather than loans was a breakthrough, an "historic leap forward.”

But as happens in the circles of power in Europe, that beautiful leap quickly became an ugly stranglehold. When Hungary and Poland moved to block the corona bailout package and the next EU budget over a rule of law provision it contained shortly before Christmas, they sparked a major crisis. 

Once again, the fractures became visible in an EU establishment that always seems particularly helpless when individual member-state governments seek to emulate Trumpism. Yet it is in precisely those instances that the EU’s resilience shines through. 

It frequently fluctuates, but it doesn’t sink.

The bloc’s path in recent history has been a "roller coaster,” which also happens to be the title of historian Ian Kershaw’s book on the subject. And that’s how it will continue – as a major construction site where muddling through is sometimes the best path rather than a weakness.

Former U.S. Ambassador Richard Morningstar, who was America’s chief diplomat in Brussels around the turn of the century, has a rather amusing description for it: "The European Union likes to take two steps forward and then one and a half steps back,” Morningstar says, "but that’s progress, too.”


Around 20 years ago, professors from Germany and elsewhere issued incessant of the euro and the appalling consequences it would have for the prosperity of everyone in Europe. 

Now that the euro has established itself as the world's second-most reliable hard currency, it is a position that has been essentially abandoned today.

Nor has the eternal fear of a Brussels kraken sucking all the democracy out of the member states borne out. And despite myriad predictions of the EU's demise, that hasn't happened either. 

This only shows how wrong it is to use a momentary snapshot to develop an overall impression. And, yes, the media shares some of the blame. But it is also rooted in deeper structures of human thought.

Hans Rosling, a committed European from Sweden, worked during his lifetime to help people in his role as a physician. As a researcher, he sought to cure the general blindness we have to that which grows slowly and progresses unobtrusively. 

The subtitle of his remarkable book "Factfulness” is: "Ten Reasons We’re Wrong About the World – and Why Things Are Better Than You Think.” It is, according to Rosling, much healthier, much wealthier, much more advanced and much better than most people think.

Rosling wasn’t trying to whitewash the real challenges facing us. Having worked in poverty stricken areas of Asia and Africa, after all, he knew better. 

He wanted to send the positive message that although progress may take place at a snail's pace, it is still taking place - and that striving for progress is not a useless endeavor. 

You could sum up his stance in one line: If you're always wringing your hands, you don't have a hand free to roll up your sleeves. Rosling seeks to encourage people.

His way of thinking would also benefit the EU. As Europeans, we might then realize from time to time that this federation of European nations was and still is a vehicle for peace and prosperity, a vehicle for opportunity for hundreds of millions of people. 

One could be proud for a moment of what has been achieved, of an amazing success story. Of the fact that, thanks to European initiatives, many things have truly improved for many people over the decades.

But the European Union – and in this sense it is a lot like the United Nations – is often only scrutinized for its shortcomings. The EU is frequently judged solely on its ability to act quickly and too rarely on its ability to pursue a goal step by step, with calm and perseverance. 

And people also often forget that the EU is a federation of 27 countries. When they are united, Europe is strong. When they disagree, even the best EU is of little help.

In the long term – meaning years and decades – the EU will be judged by whether it achieves its objectives, and it only ever sets grand goals for itself. Preserving peace, saving the world’s climate, ending the destruction of nature, protecting people, increasing prosperity, improving lives, seeking happiness.

Most Europeans believe these goals are so self-evident that they barely even hear them any longer and dismiss them as florid rhetoric. 

As such, they are in danger of failing to see what the rest of the world has already realized: that we have been successful in transforming an entire Continent - a place where people tore each other apart for centuries - into a model for the 21st century.

It’s not possible to be much more of a world power than that. 

Silver surge could signal coming commodities boom

Digital economy will still need metals and minerals

Merryn Somerset Webb

                                                                                                                               © Reuters

Last weekend everyone slightly wished they owned silver.   

The social media-driven investors who so upset the market with their short squeeze on GameStop spent Saturday and Sunday chatting about doing the same to the metal — which obligingly rose 7.7 per cent on Monday alone.

The excitement has died down since the r/WallStreetBets Reddit chatroom has dropped out of the headlines. 

But while you need never think of GameStop again, you should definitely keep thinking about silver.

Why? Because it is likely to play a core role in the next commodity super cycle. 

You don’t get proper long bull markets in industrial commodities very often: over the past 227 years, says Saxo Bank, there have only been six. 

But when you do they are all driven by the same easy-to-see-in-hindsight dynamics. A glut of supply drives down prices. 

Producers go on strike — they stop exploring and innovating. Supply falls behind demand. 

Stockpiles run down and prices rise.

It’s as simple as that. 

The key thing for investors to note is that once events are under way the price rises tend to go on for some time due to the fact that it takes well over five years to get a new mine up and running.

So where are we in the cycle now? 

At the beginning of the good bit (from an investor point of view at least.). 

The big metal miners effectively went on investment strike in 2014 — stopping almost all expansionary spending with the result that a large number of industrial metals were already in short supply even as we went into the pandemic last year.

That shortage of supply is soon to hit a new wave of demand. 

In the short term there is the pent-up demand that will be released as we leap out of lockdown and on to the road. 

Note that the US has effectively been providing a highish minimum income for everyone for a year (there is likely another $2,000 per person on the way) — and that money will find its way into the real economy pretty quickly.

But there is more to the new demand dynamic than that. In the post-Covid-19 era, it appears that no one will worry much about fiscal prudence. 

Instead, there is every chance that the fashion for the government to fill individuals’ pockets will continue; that the endless promises of green transformation and infrastructure revolution will come good; and, crucially, that governments will prioritise high levels of employment over low levels of inflation. 

Think of the volume of cash that will spray around economies, and perhaps we are moving into something of a “Keynesian golden age” says Gavekal Research.

All this is wonderful for industrial metals and particularly wonderful for any materials that are at the core of green transformation. 

There is, for example, no replacement for copper in electrification. 

The more you think green, the more you need brown metal.

Meanwhile, just because most of the discussion around infrastructure is about clean energy doesn’t mean oil won’t be dancing at the super cycle party. 

Sure, prices briefly went negative last year and even now the coast of Shetland is littered with unwanted tankers. 

But we will be reliant on fossil fuels for decades to come — there is no getting out of it — and so could be curtailing supply too early in the game. 

To those that argue that after so long of lockdown our behavioural changes will have become so ingrained we will travel to our offices less and take fewer holidays than we have in the past, all I can say is check out cruise bookings. 

Carnival says bookings for 2022 are already outpacing those for 2019.

Add it all up, says Saxo, and this is to be the year in which “the narrative of a greener government supported transformation of the social paradigm meets the reality of too little supply, inadequate infrastructure and a business world that has been so busy getting digital it forgot the physical world”. 

Great products don’t just need to be hailed on social media, they need to be produced, shipped and delivered. 

That needs real-world commodities. 

The new bull started last year — the Bloomberg Commodity Index rose by 10 per cent in the last quarter of 2020 — but 2021 could be the year it really gets going.

So how do you invest? 

The first thing to note is that if you are an index investor in the UK you are fairly exposed to miners and oil companies already: this is one reason why the UK market has been underperforming.

There are a variety of good low-cost exchange traded funds. 

For gold, there is iShares Physical Gold, for example, and for silver iShares Silver Trust ETF — the one the Reddit group focused on! 

Otherwise, for a gold and silver fund look at Merian Gold and Silver Fund.

I pushed its manager Ned Naylor-Leyland, head of gold and silver at the Jupiter funds group, to name his favourite silver stock last week. 

He was very clear that you absolutely must not own only one silver stock: this is a high-risk sector in which diversification is absolutely vital. 

But for his biggest silver holding he’d choose Pan American Silver, the Canadian miner, because of its scale, good management and growth pipeline.

On copper, a nice UK-listed smaller miner is Atalaya, which owns an ex-Rio Tinto mine in Andalucía. 

It is, says Amati’s Dr Paul Jourdan, well run and has lots of room to explore around its active workings.

If you prefer a larger single mining stock, perhaps consider Rio Tinto — which Charles Plowden, manager of the Monks Investment Trust (usually known for its tech bias) has been adding to his portfolio. 

He expects profits and cash flows to be very strong during a 7-10-year long tight supply situation.

Rio, he says, will “make out like a bandit”. Investment trust investors might also look to BlackRock World Mining or to one of two smaller trusts. 

The BlackRock Energy and Resource Income investment trust and CQS Natural Resources Growth and Income Plc are both small and reasonably expensive (ongoing charges of 1.4 per cent and 1.8 per cent respectively) but trade on discounts to their net asset value of 8 per cent and 14 per cent, and pay 4 per cent plus dividends. 

Better still, the WallStreetBets crowd hasn’t heard of them yet.

Merryn Somerset Webb is editor-in-chief of MoneyWeek. 

Peru’s political elite ensnared in ‘Vacuna-gate’ scandal

Two ministers have resigned after revelations that hundreds received jabs ahead of schedule

Gideon Long in Bogotá

Local media have dubbed the scandal ‘Vacuna-gate’ © AFP via Getty Images

Peru has been rocked by revelations that nearly 500 people, including former president Martín Vizcarra and other senior politicians, were vaccinated against coronavirus on the quiet, weeks before the vaccines were made available to health professionals and the public.

The scandal has shaken a country which has been among the worst hit in the region by coronavirus, and which at one point had the highest per capita death rate anywhere in the world. The nation of 32m people has recorded more than 1.2m cases and nearly 44,000 deaths.

The country’s health and foreign ministers have resigned over what local media have dubbed “Vacuna-gate” (Vaccinegate). 

Both ministers acknowledged that they were vaccinated in January, before Peru started its vaccine rollout.

Neither went public with the news at the time, nor did they tell the president, Francisco Sagasti, who was inoculated on February 9, apparently under the belief that he was the first person in his cabinet to get the jab from Chinese company Sinopharm.

Vizcarra, meanwhile, was vaccinated in October along with his wife and older brother. 

Public prosecutors have opened an investigation into how he and his relatives gained access to the vaccine months before doctors and nurses, who have been fighting one of the worst Covid-19 outbreaks in Latin America.

Sagasti said he was furious about the revelations, which come less than two months before Peru goes to the polls to choose a new president. 

He said that any government official who used his or her position to gain preferential access to the vaccines would be sacked.

The Medical College of Peru expressed its “indignation” over the issue “especially in circumstances in which doctors, nurses, technicians and other healthcare professionals were getting ill and dying in the fight against the pandemic”.

Sinopharm has been conducting clinical trials of Covid-19 vaccines in Peru alongside Cayetano Heredia university in Lima. 

According to the university, Sinopharm not only imported doses of vaccine for the trial but also brought 3,200 extra doses “to be administered voluntarily to the investigation team and people related to the study”.

On Monday, the university published a list of 487 people who had received some of those doses. 

Vizcarra, his wife and his brother were on it, as were Pilar Mazzetti, former health minister, and Elizabeth Astete, former foreign minister. 

None of them was directly involved in the study.

Some people received three doses. 

One official at the health ministry was vaccinated along with this wife, his sister and his two children. 

The official has since quit.

Mazzetti resigned on Friday last week, later describing her decision to accept the jab and keep it secret as “the worst mistake of my life”. 

She said she had “given in to my insecurities and fears” after seeing health workers get ill and, in some cases, die.

Astete resigned on Sunday and issued a statement regretting her actions. Both have been replaced by new ministers.

Vizcarra, who was Peru’s president from 2018 until November last year, said he believed he was receiving the vaccine as part of the Sinopharm trial. 

When the university clarified last weekend that neither he nor his wife had ever been part of the trial, Vizcarra said this caused him “great surprise”.

He said he had kept the vaccination secret at the time so as not to “put at risk” the normal rollout of the trial. 

He has since issued a video statement regretting that decision.

Political analysts say the scandal is likely to have an impact on attitudes towards candidates in the presidential election, due to be held on April 11.

Polls show that even before Vacuna-gate, Peruvians had an abysmally low opinion of their ruling class, having watched a string of presidents and former presidents brought down by corruption scandals or forced out of office after clashing with a hostile congress.

Vizcarra was impeached in November on unproven corruption charges and replaced by the head of congress who lasted just a week before quitting in the wake of street protests over his seizure of power.

Sagasti was named as interim president until the election, on the agreement that he will not stand in it.

The vaccine scandal “will raise public frustration levels with the political class, which could foster greater apathy or encourage a vote for systemic change,” UK-based consultancy Teneo noted.

Light a candle for the kids

The freeze in Texas exposes America’s infrastructural failings

You ain’t foolin’ nobody with the lights out

WHEN IT RAINS, it pours, and when it snows, the lights turn off. Or so it goes in Texas. After a winter storm pummelled the Lone Star State with record snowfall and the lowest temperatures in more than 30 years, millions were left without electricity and heat. 

On February 16th 4.5m Texan households were cut off from power, as providers were overloaded with demand and tried to shuffle access to electricity so the whole grid did not go down.

Whole skylines, including Dallas’s, went dark to conserve power. 

Some Texans braved the snowy roads to check into the few hotels with remaining rooms, only for the hotels’ power to go off as they arrived. 

Others donned skiwear and remained inside, hoping the lights and heat would come back on. 

Across the state, what were supposed to be “rolling” blackouts lasted for days. It is still too soon to quantify the devastation. More than 20 people have died in motor accidents, from fires lit for warmth and from carbon-monoxide poisoning from using cars for heat. 

The storm has also halted deliveries of covid-19 vaccines and may prevent around 1m vaccinations from happening this week. Several retail electricity providers are likely to go bankrupt, after being hit with surging wholesale power price.

Other states, including Tennessee, were also covered in snow, but Texas got the lion’s share and ground to a halt. Texans are rightly furious that residents of America’s energy capital cannot count on reliable power. 

Everyone is asking why.

The short answer is that the Electric Reliability Council of Texas (ERCOT), which operates the grid, did not properly forecast the demand for energy as a result of the storm. 

Some say that this was nearly impossible to predict, but there were warnings of the severity of the coming weather in the preceding week, and ERCOT’s projections were notably short. 

Brownouts last summer had already demonstrated the grid’s lack of excess capacity, says George O’Leary of Tudor, Pickering, Holt & CO (TPH), an energy investment bank.

Many Republican politicians were quick to blame renewable energy sources, such as wind power, for the blackouts, but that is not fair. 

Some wind turbines did indeed freeze, but natural gas, which accounts for around half of the state’s electricity generation, was the primary source of the shortfall. 

Plants broke down, as did the gas supply chain and pipelines. 

The cold also caused a reactor at one of the state’s two nuclear plants to go offline. Transmission lines may have also iced up, says Wade Schauer of Wood Mackenzie, an energy-research firm. In short, Texas experienced a perfect storm.

Some of the blame falls on the unique design of the electricity market in Texas. Of America’s 48 contiguous states, it is the only one with its own stand-alone electricity grid—the Texas Interconnection. This means that when power generators fail, the state cannot import electricity from outside its borders.

The state’s deregulated power market is also fiercely competitive. ERCOT oversees the grid, while power generators produce electricity for the wholesale market. Some 300 retail electricity providers buy that power and then compete for consumers. 

Because such cold weather is rare, energy companies do not invest in “winterising” their equipment, as this would raise their prices for consumers. Perhaps most important, the state does not have a “capacity market”, which would ensure that there was extra power available for surging demand. 

This acts as a sort of insurance policy so the lights will not go out, but it also means customers pay higher bills.

For years the benefits of Texas’s deregulated market structure were clear. At 8.6 cents per kilowatt hour, the state’s average retail price for electricity is around one-fifth lower than the national average and about half the cost of California’s. 

In 1999 the state set targets for renewables, and today it accounts for around 30% of America’s wind energy.

This disaster is prompting people to question whether Texas’s system is as resilient and well-designed as people previously believed. Greg Abbott, the governor, has called for an investigation into ERCOT. 

This storm “has exposed some serious weaknesses in our free-market approach in Texas”, says Luke Metzger of Environment Texas, a non-profit, who had been without power for 54 hours when The Economist went to press.

Wholly redesigning the power grid in Texas seems unlikely. After the snow melts, the state will need to tackle two more straightforward questions. The first is whether it needs to increase reserve capacity. 

“If we impose a capacity market here and a bunch of new cap-ex is required to winterise equipment, who bears that cost? 

Ultimately it’s the customer,” says Bobby Tudor, chairman of TPH. The second is how Texas can ensure the reliability of equipment in extreme weather conditions. After a polar vortex in 2014 hit the east coast, PJM, a regional transmission organisation, started making higher payments based on reliability of service, says Michael Weinstein of Credit Suisse, a bank. 

In Texas there is no penalty for systems going down, except for public complaints and politicians’ finger-pointing.

Texas is hardly the only state to struggle with blackouts. California, which has a more tightly regulated power market, is regularly plunged into darkness during periods of high heat, winds and wildfires. 

Unlike Texas, much of northern California is dependent on a single utility, PG&E. The company has been repeatedly sued for dismal, dangerous management. But, as in Texas, critics have blamed intermittent renewable power for blackouts. 

In truth, California’s blackouts share many of the same causes as those in Texas: extreme weather, power generators that failed unexpectedly, poor planning by state regulators and an inability (in California, temporary) to import power from elsewhere. 

In California’s blackouts last year, solar output naturally declined in the evening. But gas plants also went offline and weak rainfall lowered the output of hydroelectric dams.

In California, as in Texas, it would help to have additional power generation, energy storage to meet peak demand and more resilient infrastructure, such as buried power lines and more long-distance, high-voltage transmission. 

Weather events that once might have been dismissed as unusual are becoming more common. 

Without more investment in electricity grids, blackouts will be, too.

viernes, febrero 19, 2021



The Enigma of Dubai

In Dubai's path to modernization, appearances can be deceiving.

By: Hilal Khashan

First-time visitors to Dubai get the impression that they about to enter to an austere Islamic city with strict codes of conduct. 

They are warned against things like public displays of affection, using profane language and eating in public during Ramadan. 

It doesn’t take long to realize, however, that these taboos are merely a veneer – in reality, people can do whatever they like so long as they don’t get caught. 

Like in most traditional Arab societies, in Dubai, shame is the primary tool for enforcing compliance with social norms.

Thus, in more ways than one, Dubai is a paradox. 

It presents itself as a unique, modern and rapidly developing economy. 

Sheikh Rashid bin Saeed Al Maktoum, who ruled the emirate from 1958 until his death in 1990, introduced liberal economic policies. 

But he also laid the groundwork for a maximum state security policy to maintain law and order and prevent the emergence of opposition groups, namely Islamist movements.

The paradox of Dubai is also apparent in the city’s long-standing problem with prostitution. 

Sheikh Rashid was an innovator, but he was also a realist. 

He knew he could not eliminate prostitution and instead grew to tolerate it. 

Over time, the problem has become more complex and widespread, especially as the emirate began a comprehensive development process after the oil boom of the mid-1970s. 

The sheikh’s vision fell short; he failed to foresee the untoward aspects of modernization that the emirate is all too familiar with today. 

His successors did not encourage prostitution, human trafficking and shady business dealings, though neither did they stamp them out. 

These illicit trades have become major facilitators of Dubai’s modernization and enigmatic rise.


The Emirate of Dubai – one of seven emirates that comprise the United Arab Emirates – has a population of 3.3 million residents, only 12 percent (nearly 400,000) of whom are citizens, according to government figures. 

Though there are no official statistics on the ethnicity of its citizens, there is a sizable ethnic Iranian minority. 

Of the entire population, South Asians constitute around 60 percent, Iranian expatriates about 15 percent, and highly paid Westerners about five percent. 

The rest are mostly Palestinians, Egyptians and Lebanese.
United Arab Emirates

The nominal per capita income in Dubai is roughly $31,000, though this figure is a poor reflection of the economic position of most who live there. 

Hundreds of thousands of Asian laborers receive an average monthly salary of about $150, while per capita income for locals is much higher than the nominal average.

The large presence of workers, mostly laborers, from the Indian subcontinent is a result of Dubai’s declaration as a British protectorate in 1892. 

The British administered Dubai from the Persian Gulf Residency (headquartered in the Iranian city of Bushehr), which was subordinate to British India. 

They allowed Indians to run Dubai’s civil service, commerce and banking. 

Years later, Indian laborers flocked to Dubai after the discovery of oil in 1960. 

Dubai was also a center of trade with Iran since the early 19th century, and many wealthy Iranians established permanent residence there. 

Iranian investments in Dubai currently top $200 billion.

Economic Pillars

Dubai’s economy has three main pillars: Port Jebel Ali, tourism and air transport. 

Opened in 1979, Port Jebel Ali is the ninth-largest port in the world and incorporates a vast manufacturing complex producing goods ranging from aluminum to a wide array of food and other consumer products. 

It is Dubai’s top revenue generator, providing $53 billion annually, or about 60 percent of gross domestic product.

The port is also a key part of the UAE’s efforts to become a maritime power. 

The UAE wants to protect the primacy of its main port from potential competitors in the Middle East and the Horn of Africa – which requires guaranteeing access to sea lanes leading to Port Jebel Ali, including the Strait of Hormuz, Bab el-Mandeb and the Suez Canal. 

Thus, the UAE built military bases in Eritrea’s Assab port and Somaliland’s Berbera port. It also joined the Saudi-led coalition in Yemen’s civil war in 2015 to help secure its Arabian Sea coast, Socotra Island and the strategically located Aden port. 

The UAE also supported Abdel-Fattah el-Sissi’s coup against Mohammed Morsi after Qatar promised to establish an industrial zone in the Suez Canal area – which Abu Dhabi viewed as a direct threat to Port Jebel Ali.

Another major source of revenue is tourism. 

More than 16 million people visited Dubai in 2018. Most of Dubai’s tourism-related revenue, however, comes from prostitution, money laundering, smuggling and human trafficking. 

Economic dividends from these activities are invested in real estate, construction and tourist infrastructure. Although Dubai has little tolerance for freedom of expression, relentlessly persecuting political activists and human rights advocates, it allows prostitution to go on unabated. 

With more than 30,000 foreign prostitutes, Dubai has been dubbed the “Sodom-sur-Mer” – or Sodom by the sea. 

A few years ago, a Saudi cleric also referred to Dubai as “sin city” before the government pressured him to rescind his statement.

Dubai has a well-developed infrastructure that sustains the prostitution industry, which is supported by tourists, expats and locals alike. 

Unlike elsewhere in the Gulf, Dubai is known to quickly issue tourist visas, which are used by human trafficking businesses to recruit young women. 

Upon arrival, they are given work permits in fake occupations and coerced into becoming sex workers.

Dubai is an international center for money laundering, which has contributed to its construction boom and infrastructure expansion. 

There is no evidence that the government actually solicits money launderers; what is certain, however, is that it does not have a strict anti-money laundering policy comparable to most other countries, especially in the West – an omission that invites corruption and shady business activities. 

Transparency International has accused the UAE of turning a blind eye to illegal business transactions, saying that it is “incredibly vulnerable to money laundering.”

Dubai is also a regional center for the illicit antiquities trade. International smugglers in Dubai have purchased artifacts stolen by the Islamic State in Iraq and Syria, which have ended up on display in Western museums. 

Dubai’s economy is also dependent on the international narcotics trade. Close to $4 billion worth of heroin from Afghanistan is smuggled into Dubai annually. 

According to the International Consortium of Investigative Journalists, the eldest daughter of former Angolan President Jose Eduardo dos Santos recently smuggled millions of dollars belonging to the diamond- and oil-rich country into Dubai, where she now claims residence.

The Human Toll 

In 2016, the government in Dubai created a "ministry of happiness," a move that raised eyebrows given the extent of the human rights abuses there. 

Indeed, the government has not made a sincere effort to deal with the prostitution issue. Indentured servitude is widespread. 

And laborers, many of whom must give their entire first year’s salary to their employment agent, work under dismal conditions seven days a week and live in filthy accommodations. (At least two Indian laborers commit suicide each week, and there are likely many more suicide attempts that go unreported.)

Prostitution has been particularly resilient in Dubai and has had a significant human toll. 

In 1936, Sheikh Saeed bin Maktoum tried to tackle it by coercing prostitutes to either get married or leave the emirate. 

His successor, Sheikh Rashid, ordered that all prostitutes be deported, but this created a liquidity problem as they withdrew their savings from banks, forcing him to rethink his decision.

In 2019, the National Committee to Combat Human Trafficking dealt with just 23 cases of human trafficking, provided humanitarian support for 41 victims, and prosecuted 67 traffickers, all of them foreign. 

The former head of Dubai’s police department acknowledged that prostitution and alcohol were a national affliction. 

In 2006 and 2015, the UAE introduced laws aimed at conveying to Western countries that the UAE was keen on combatting human trafficking. 

But its efforts rang hollow. 

In reality, Dubai lacks the will to genuinely address the problem.

An Uncertain Future

Despite its glamour and appeal to foreigners, Dubai is a superficial city constituted by empty high-rise buildings with no distinct national, religious or cultural character. 

It’s facing stiff competition from Gulf Cooperation Council countries that want to diversify their economies as oil prices fall. (Saudi Arabia’s Neom project is a prime case in point.)

COVID-19 has taken a heavy toll on Dubai’s economy and led to, among other things, the postponement of Expo 2020. 

Its tourism and air travel industries have also been hit hard. 

In 2019, they contributed some $35 billion to the emirate’s economy, or 40 percent of its GDP. 

Dubai’s foreign debt exceeds $160 billion, or more than 150 percent of its GDP, and it’s unclear whether oil-rich Abu Dhabi will bail it out as it did in 2008 with a $20 billion loan. 

Indeed, its soaring skyscrapers may no longer be able to obscure its unsustainable economic path.

What’s in a War?

Channeling the spirit of America's entry into World War II, President Joe Biden has promised a mass mobilization of people and resources to tackle the COVID-19 pandemic. But if defeating a virus is like waging a war, several important historical lessons and caveats should be kept in mind.

Harold James

PRINCETON – US President Joe Biden started his term with a beautifully crafted speech that caught the spirit of a country exhausted by Trumpism and COVID-19. 

Biden has promised a “full-scale, wartime effort” against the pandemic. But hasn’t our tired world already been in the trenches for a year now?

On March 19, 2020, when Donald Trump belatedly started to act as though the coronavirus might be serious, he referred to “our big war” and promised to “continue our relentless effort to defeat the Chinese virus.” Similarly, Chinese President Xi Jinping on February 6, 2020, declared a “people’s war” against the virus.

Of course, Trump’s war quickly went off the rails, as have previous US attempts to deploy the war analogy outside of a military or diplomatic context. 

In June 1971, President Richard Nixon, calling drug abuse “public enemy number one,” launched the “war on drugs,” which President Ronald Reagan expanded. Fifty years later, this mobilization is almost universally recognized as having failed.

Likewise, the “war on terror,” declared by President George W. Bush following the attacks of September 11, 2001, succeeded merely in preventing a precise repetition of that event. 

Not only were there plenty of other attacks elsewhere, but terror proliferated, becoming a tool for groups like US white nationalists and Trump supporters. The warriors against terror were fighting a tactic, not a target.

So, what does it take to win a war? 

For starters, victory requires a complete mobilization of people and resources. 

We cannot even hope to succeed against COVID-19 unless we marshal the contributions of many different individuals – most of them low-paid, disadvantaged workers in health, transportation, logistics, and other critical sectors.

Historically, wars have been waged with the promise that those who fought them would be rewarded. World War II was transformative in the sense that not only was the enemy defeated, but a better world was built in its aftermath. Health care, education, and infrastructure were extended to the benefit of society at large.

Victory also depends on “great logistics,” as a spokeswoman for the courier and freight service UPS pointed out during a White House event early in the crisis. 

But great logistics hasn’t happened. 

Instead, COVID-19 test results are still routinely held up for the oddest reasons, and the United States has scarcely even bothered with virus monitoring or contact tracing.

Without sound logistics management, everything else can fall apart. 

In World War I, Czarist Russia produced more than enough grain to feed its population, but the big cities endured terrible starvation. 

Officials blamed the inadequate rail system. 

In fact, there were plenty of railcars to transport grain, but they were in the wrong place. 

Rail workers had no shoes, and thus could not turn up for work.

Pandemics, like wars, produce shortages of critical resources, whereupon decentralized procurement can trigger bidding wars, with local and state agencies pushing up the prices of protective equipment, medical supplies, or vaccines. 

Disputes about prioritizing vaccination are likely to create tension between organized groups, from pensioners and medical providers to teachers and other essential workers. 

In wars that are waged successfully, the management of supplies is centralized to prevent their diversion to inefficient or undesirable uses.

Wars also give rise to international competition, which can fuel anger of the kind expressed by European Union citizens who see vaccinations proceeding faster in the United Kingdom and Israel than in their own countries. 

The companies that produce vaccines – Pfizer, AstraZeneca, Johnson & Johnson, GlaxoSmithKline, Merck, Moderna, Novavax, and Sanofi – have facilities in many countries. 

But they need to be able to operate worldwide without worrying about how production will affect pricing strategies in segmented markets.

Another issue for suppliers is transient demand. 

Vaccine manufacturers face a problem analogous to that of armament manufacturers before and during wars: if they invest in gigantic production plants, they will end up with massive unused facilities when the war is over. 

Hence, there needs to be more clarity (and creativity) about how the infrastructure used against COVID-19 can be repurposed. 

At least the novel techniques used in the mRNA vaccines will be useful to combat a wide range of diseases and disorders in the future.1

Wars also need to be paid for. 

In the past, countries facing the prospect of a massive war bill assumed that in victory they could impose the costs on the defeated power. 

The Trump administration tried this approach when it insisted that China should pay a “big price” for its role in the pandemic, especially considering that it had already returned to economic growth before the end of 2020. 

In any case, even friends and allies will squabble over the settling of war debts. In the case of COVID-19, the only realistic scenario is that no one else is going to pay; demands for reparations will merely poison international diplomacy.

Finally, the war on COVID-19 has involved massive fiscal and monetary stimulus, far beyond the levels in response to the 2008 global financial crisis. 

As such, it is important that governments start preparing long-term stabilization programs to prevent bottlenecks, shortages, and price increases when the emergency is over.

This may sound like attempting to square a circle. 

The key is to focus precisely on the need of the moment, while accepting that many other needs cannot be easily determined. 

We need instruments for today that can also be used in different ways tomorrow. 

And while we look ahead to a better future, we also should prepare for higher taxes.

There is a model for managing such temporal dilemmas. 

The post-WWII vision relied on a surge of economic dynamism that provided a bridge from war to peace. 

Without strong, shared growth, the burden of the war would have been unbearable. 

Only a transformative vision of a generally healthier society can help us overcome today’s dismal reality.

Harold James is Professor of History and International Affairs at Princeton University and a senior fellow at the Center for International Governance Innovation. A specialist on German economic history and on globalization, he is a co-author of The Euro and The Battle of Ideas, and the author of The Creation and Destruction of Value: The Globalization Cycle, Krupp: A History of the Legendary German Firm, and Making the European Monetary Union.