Summary: Europe’s elites warned that Britain would suffer for daring to leave the EU. Suffer severely and soon. Four months have passed since the June 23 vote and Britain has felt no ill effects. Britain might have the last laugh, since the EU has to redo its budget following the loss of its second largest contributor. The EU is already under stress. Cutting the budget and raising taxes will make it worse. Perhaps sparking more exits.
A Bitter Budget Battle Looms in the EU
Stratfor, 13 October 2016.
- Because of the Brexit, the European Union will lose a net contributor to its budget, forcing the remaining members to rethink the bloc’s spending limits and priorities.
- EU members will have three options for dealing with the loss of the United Kingdom’s income: increase national contributions, trim the budget or look for new revenue sources. Each choice carries political risks.
- Budget-related issues will create new sources of friction in the European Union as national interests shape the negotiations.
When Britain leaves the European Union, it will take with it the sizable financial contributions it makes to the bloc’s budget. That will leave remaining member states with some difficult choices to make about how big future budgets should be, what they should pay for and how much members should pony up for them. In all likelihood, key policies — from agricultural subsidies to development funds — will have to be redesigned. And as members decide how to proceed, new sources of conflict will arise that will do little to help reverse the bloc’s political fragmentation.
The EU budget is organized around the Multiannual Financial Framework, which establishes spending priorities and limits for a seven-year period. (The current one lasts through 2020.) Every year, the European Commission, the European Parliament and EU member states negotiate annual budgets based on the spending limits and priorities established by this framework.
About 75% of the EU budget comes from payments made by member states, calculated based on their gross national incomes. This means that, in absolute numbers, the largest economies make the largest contributions. But not all member states contribute the same proportion of that income, which leads to imbalances in contributions per capita. Moreover, since the budget is used to finance most EU programs, many countries give more money to the bloc than they get from it. In 2015, for example, 10 of the bloc’s 28 members were net contributors to the budget. The others received more in program spending than they paid in.
Summary: Here Stratfor provides a status report on the fight against superbugs — drug-resistant germs — one of the great threats facing us in the 21st century. The last large pandemic in the West was a century ago. Another is coming. We have time to prepare.
The Insidious Threat of Drug-Resistant Disease
Stratfor, 4 October 2016.
- Absent greater incentives, the development of new antimicrobial drugs will remain limited.
- Rising global demand for meat and poultry will make it more difficult for governments to restrict the use of antimicrobial drugs in agriculture, especially in poorer countries.
- Different national interests will make it tough to achieve the international cooperation needed to combat the growing resistance to antimicrobial drugs.
When Alexander Fleming discovered penicillin in 1928, he ushered in a new era of medicine: the age of antibiotics. Infections that had once been fatal could now be treated with relatively simple cures. In the decades that followed, penicillin became just one of many antimicrobial drugs that enabled humans and animals to live longer, more productive lives. The proliferation of those drugs seemed to have few, if any, downsides.
But over the years, we have gotten into the habit — as so often with other resources, including fish and fresh water — of overusing and misusing antimicrobial medicines. Doctors turned to them to treat illnesses, including viral infections, where antibiotics would not actually help. In time, microbes were able to build a resistance to the antibiotics deployed against them.
Now, that resistance poses a significant threat to the health of people and economies around the world. Global leaders gathered to address the growing danger at the U.N. General Assembly on Sept. 21. Though notable for the prominence of the forum hosting it, the meeting will probably yield few real solutions. An overwhelming number of economic and regulatory hurdles will make concerted international action on combating drug resistance as difficult to achieve as international action on climate change. Nations simply have more pressing priorities that will likely take precedence until an epidemic breaks out — one with economic consequences serious enough to spur the investment and cooperation needed to truly make a difference.
Summary: History shows that the new industrial revolution just beginning will bring wonders, things often seemingly more like science fiction than practical technology. Here Stratfor looks at the hyperloop, a potentially transformative new transportation technology — if it works. At the end are links are posts about even more fantastic technologies.
The Hype Surrounding Hyperloop.
Stratfor, 26 September 2016.
Following a recent visit to Elon Musk’s Tesla electric car factory in California, Indian Prime Minister Narendra Modi expressed interest in a less mature but potentially more groundbreaking idea: Hyperloop. Musk, the founder of companies such as SpaceX and Tesla, released an open-source proposal for the new mode of transportation in 2013. Essentially a levitating train car traveling through a tube in near vacuum conditions, Hyperloop technology could make in minutes trips that normally take hours.
Over the past three years, a handful of companies have taken the idea and run with it. But despite interest and investment, enough physical and technical hurdles remain that implementation of such a system is years, possibly even decades, away. Should Hyperloop come to fruition, it has the potential to shape geopolitical relationships and behaviors of nations like other transportation methods that came before it. India’s prime minister is evidently optimistic about the technology, as are leaders from a number of other nations. But should they be?
Summary: Here’s an essay about the European Union from one of Stratfor’s more perceptive analysts. It provides a unusual and insightful perspective on Europe’s long quest for unification, and the bumps along the way.
Europe, Unhappily Ever After
By Reva Goujon.
Stratfor, 20 September 2016.
The scene at Bratislava Castle last week was a familiar one: European leaders gathered for another summit in a typically idyllic setting, where the natural beauty of their surroundings belied the deep imperfections of the union they were struggling to salvage. But now, in the wake of Britain’s vote to leave the Continental bloc, delusion steeped in the ideals of an “ever-closer” union is wearing thin, and the realists in the room seem to be gradually gaining ground.
The shift in the summit’s tone was to be expected; closet Euroskeptics can no longer hide behind the United Kingdom as they assert national rights and tamp down Brussels’ principles. They realize that the longer Europe’s leaders avoid the hard questions, opting instead to continue extolling the “spirit” of the European Union as a way to survive, the more the bloc’s guardians will have to react to — rather than shape — the enormous changes bubbling up from their disillusioned electorates.
As Italian Prime Minister Matteo Renzi (who has tied his own political fate to a referendum in October) testily noted, the Bratislava gathering amounted to little more than a “boat trip on the Danube” and an “afternoon writing documents without any soul or any horizon” on the real problems afflicting Europe.
Tempering Ideals With Realities
The same frustration was palpable in several conversations I had during a recent trip to Slovenia, a country that tends to stay below the radar in Europe but is nevertheless highly perceptive of ground tremors. Slovenia lies, often precariously, at the edge of empires. Under the weight of the Alps, the former Yugoslav republic has one foot lodged in the tumultuous cauldron of the Balkans while its other foot toes the merchant riches of the Adriatic Sea. All the while, its arms are outstretched across the Pannonian Plain toward Vienna, the seat of the Austro-Hungarian Empire.
Summary: As we watch the candidates babble in the Campaign2016 circus, we can look across the Pacific to see a rational geopolitical strategy, something America has not had for decades. Here’s a note about China rebuilding its fabled Silk Road — revised for the 21st century.
The Grand Design of China’s New Trade Routes
Stratfor, 24 June 2015.
- Over the next several years, China will devote significant resources to the construction of Eurasian trade routes under its Belt and Road Initiative.
- As transit routes come online, the proportion of Chinese maritime trade passing through South China Sea chokepoints will shrink.
- The new infrastructure built as part of the Belt and Road Initiative will support China’s economic rebalancing by opening new markets, generating demand for higher value-added Chinese goods and helping China build globally competitive industries.
- Improving transit routes will lead to new security and political risks, and China’s efforts to mitigate these threats could create frictions in the very areas where Beijing is trying to diversify its trade routes.
In 2013, China’s President Xi Jinping proposed a plan to stimulate development in Eurasia by constructing what he called the Silk Road Economic Belt and the 21st Century Maritime Silk Road — revivals of the overland and maritime trade routes that once connected China and Europe. Since then, the “Belt and Road Initiative” has become a fixture in official Chinese discussions on both foreign and domestic policy. Nonetheless, the initiative is still loosely defined. Beijing claims there are about 60 Belt and Road countries, but there is no public listing of these countries.