February 26, 2019

EIU Report Lists the Possibility of a US-China Trade Conflict Morphing Into a Full-Blown Global Trade War as Its Top Risk in 2019

"The outlook for the global economy is worsening," asserts The Economist Intelligence Unit (The EIU). "Given concerns over slowing growth in key economies, including China and the EU, and the wider impact of a trade war between the US and China, The Economist Intelligence Unit expects global growth to decelerate from 2.9% in 2018 to 2.8% in 2019 and 2.6% in 2020. However, even when taking into account this downbeat assessment, there remain a number of risks emanating from three key areas that could drive growth even lower than we currently forecast in 2019-20."

In its latest report, The EIU identifies and assesses the top ten risks to the global political and economic order. Each of the risks is outlined and rated in terms of its likelihood and its potential impact on the global economy.

Source: The Economist Intelligence Unit

1. A US-China trade conflict morphs into a full-blown global trade war (Moderate risk; Very high impact; Risk intensity = 15)

"China and the US have started negotiations to resolve the current trade dispute, and the US government has decided to suspend further increases in tariffs on US$200bn-worth of Chinese goods. Talks are likely to yield a limited trade deal—involving Chinese purchases of US agricultural and energy products, but with only broad commitments to domestic economic reform, particularly over structural issues, including technology transfer and intellectual property. While this will avoid an escalation in tensions for now, a full-blown trade war between the US and China remains a significant risk to the global economy, owing mainly to the fact such a deal will lack the necessary enforcement measures to ensure Chinese commitment to the structural reforms demanded by US negotiators. Moreover, beyond bilateral protectionism, there remains a risk that trade conflicts will escalate on additional fronts in the coming years, to the extent that global trade could actually decline, with major knock-on effects for inflation, business sentiment, consumer sentiment and, ultimately, global economic growth."

2. US corporate debt burden turns downturn into a recession (Moderate risk; High impact; Risk intensity = 12)

"Falling consumer sentiment and manufacturing activity indicators highlight the worsening outlook for the US economy as it faces the effects of a trade war with China, the impact of a lengthy government shutdown in December-January and an eventual turn in the business cycle. Nonetheless, the economy’s fundamentals remain fairly robust, with economic growth at an estimated 2.9% in 2018, and inflation slowing to 1.9% year on year in December, despite gradually rising wage growth. In addition, the Federal Reserve (the central bank) moved to a more cautious approach to monetary policy in early 2019. Therefore, although we expect economic growth to slow to 2.3% in 2019 and to just 1.5% in 2020, our central forecast is that the US will avoid a damaging recession in 2019-20."

3. Contagion spreads to create a broad-based emerging-markets crisis (Moderate risk; High impact; Risk intensity = 12)

"Many emerging markets suffered currency volatility in 2018, primarily as a result of US monetary tightening and the strengthening US dollar. In a few instances, such as Turkey and Argentina, a combination of factors, including external imbalances, political instability and poor policymaking, led to full-blown currency crises. More recently, however, the pressure on most emerging markets' capital accounts has eased, as the US Federal Reserve has adopted a more cautious monetary policy stance. Nonetheless, market sentiment remains fragile, and pressure on emerging markets as a group could re-emerge if market risk appetite deteriorates further than we currently expect."

4. China suffers a disorderly and prolonged economic downturn (Low risk; Very high impact; Risk intensity = 10)

"In China, a shift towards looser macroeconomic policy settings is under way as a result of the escalating trade conflict with the US. This will support domestic demand in the short term, but in the process previous goals of lowering unsold housing stock and corporate deleveraging are receiving less emphasis. There is a risk that, in the government’s efforts to support the economy, policy missteps will be made."

5. Supply shortages lead to a globally damaging oil-price spike (Low risk; High impact; Risk intensity = 8)

"Market fears of oil-supply shortages have eased since the US granted six-month sanction waivers to eight of the key purchasers of Iranian oil in December. Along with higher output from Saudi Arabia and Russia, and global growth concerns, this has caused the price of dated Brent Blend to fall to close to US$60/barrel, compared with highs of over US$80/b in September. However, the risk of major supply disruptions remains."

6. Territorial or sovereignty disputes in the South or East China Sea lead to an outbreak of hostilities (Low risk; High impact; Risk intensity = 8)

"The national congress of the Chinese Communist Party in October 2017 was a milestone in terms of China’s overt declaration of its pursuit of great-power status, setting the goals for China to become a 'leading global power' and have a 'first-class' military force by 2050. The president, Xi Jinping, is keen to develop China's global influence, probably sensing opportunity during a period of US retrenchment. How China intends to deploy its expanding hard-power capabilities in support of its territorial and maritime claims is a source of growing concern for other countries in the region."

7. Cyber-attacks and data integrity concerns cripple large parts of the internet (Moderate risk; Low impact; Risk intensity = 6)

"Public, corporate and government faith in the internet as a source for global good is under strain. Revelations of major data breaches across a range of social media, and the use of that data for propaganda, are likely to see social media companies facing tighter regulation in the coming years. Meanwhile, cyber-attacks continue apace. In March 2018 the US blamed Russia for a cyber-attack on its energy grid. At a similar time there was a sustained attack on German government networks. Although these attacks have been relatively contained so far, there is a risk that their frequency and severity will increase to the extent that corporate and government networks could be brought down or manipulated for an extended period."

8. There is a major military confrontation on the Korean peninsula (Very low risk; Very high impact; Risk intensity = 5)

"There was a pick-up in diplomatic activity on the Korean peninsula in 2018, peaking with a historic summit in June between Mr Trump and the North Korean leader, Kim Jong-un, in Singapore. Decades of carefully planned approaches between the US and North Korea have failed, but there is a glimmer of hope that a more improvised and personal approach by two unorthodox leaders could make progress, with a second meeting between the two scheduled for late February. However, we maintain the view that there are irreconcilable differences between the US and North Korea on both the pace and the breadth of denuclearization."

9. Political gridlock leads to a disorderly no-deal Brexit (Low risk; Low impact; Risk intensity = 4)

"Although a withdrawal agreement between the EU and the UK was finalized at an EU summit on November 25th, it was initially rejected by UK members of parliament in a vote in mid-January, and only received parliamentary backing in a later vote on condition that the Irish border backstop be renegotiated. (The backstop stipulates that the UK would remain in a customs union with the EU indefinitely should a trade agreement preserving an open Irish border not be found.) However, the EU has so far rejected any reopening of withdrawal agreement negotiations. With so little room for maneuver before the March 29th deadline, we think that the UK prime minister, Theresa May, will be forced to delay Brexit by requesting an extension of the Article 50 window."

10. Political and financial instability lead to an Italian banking crisis (Low risk; Low impact; Risk intensity = 4)

"After positive growth in the preceding 14 quarters, the Italian economy contracted in both of the final quarters of 2018, constrained by a mixture of domestic political and economic uncertainty, tightening liquidity conditions and the worsening global trade outlook. In the light of this, we expect real GDP growth to slow from 0.8% in 2018 to just 0.2% in 2019. There is, however, a risk of a much deeper recession should investor confidence lead to another spike in bond yields."

Source: The Economist Intelligence Unit

Which risks provide the greatest concern to you or your business?

Aaron Rose is an advisor to talented entrepreneurs and co-founder of great companies. He also serves as the editor of Solutions for a Sustainable World.

February 24, 2019

Global Health Business Case Competition Focuses on Ending Malaria

In the middle of a three week trip to Uganda in 2004, a driver I hired to escort me from my hotel to various meetings said his young son had just died from malaria, an infectious disease transmitted by the bites of infected mosquitoes. While malaria has been eradicated in the developed countries, the U.S. Centers for Disease Control and Prevention says an estimated 445,000 people died of the infectious disease—most were young children in sub-Saharan Africa.

Having spent a large amount of my career working to strengthen the private sector in developing countries, I have come to appreciate the collaborative role entrepreneurship plays in combating infectious diseases such as malaria. Therefore, it was with great pleasure to participate as a volunteer judge at the fourth annual Global Health Business Case Competition on Jan. 26, 2019. The event was hosted by the Global Business Center (GBC) at the University of Washington Foster School of Business, in partnership with the Jackson School's Center for Global Studies and the UW Department of Global Health. As explained in a blog post, "This competition provides a unique opportunity for students to experience hands-on, cross-disciplinary teamwork while tackling a global health challenge."

Thirty-two teams (26 undergraduate and six graduate) were given The Mosquito Network: Collaborative Entrepreneurship in the Fight to Eliminate Malaria Deaths, a 2016 case written by Gaylen Williams Moore, and published by the Harvard Kennedy School. The case was supplemented with a 2018 article, "Countries must steer new response to turn the malaria tide," which highlighted how malaria reduction efforts had recently stalled in the last two years, especially in high burden countries.

The GBC blog post further explains:
The students were asked to take on the role of an Africa-based team of consultants hired by the RBM Partnership to End Malaria. The teams were tasked with recommending how to spend an extra $6 billion on malaria reduction in the context of a new "high burden to high impact" malaria program, an approach that supports countries most affected by malaria. Specifically, students addressed how much would be allocated to the ten high burden countries in Africa and explored why malaria control efforts have not been effective in curbing malaria in these countries. Next, they had to identify the right mix of malaria interventions and best practices for a country where previous efforts proved ineffective.
Students had just 48 hours to do their research and create the slide deck to accompany their presentation. On Saturday morning, January 26th, interdisciplinary UW teams presented their solutions and judges scored teams on their analysis, style, rational, and ability to handle the question and answer session.
I was grouped with three other volunteer judges who heard presentations from four teams of talented undergraduate students. Focusing initially in the Democratic Republic of Congo with future expansion to Nigeria, Niger, and Mozambique, a team presented "The Domino Country" whose mission calls for using individualized action as an adaptable model to stimulate awareness and the economy to create a domino effect throughout Africa's high burden countries. Its benchmarks were trifurcated by educate (provide knowledge of diseases and prevention, and train community leaders and civilians in diagnostics), enact (create incentives towards malaria fighting organizations and initiate national malaria programs), and evaluate (high rates of net usage of bed nets and malaria awareness and economic stability towards malaria initiatives).

The vision of team "IMPACT Consulting" is to transform health intelligence and save lives in the fight against malaria through improved data analytics and partnering with local officials. They identified Cameroon as their initial test country with a phase two expansion to Burkina Faso, Ghana, Mali, and Uganda.

"Uniting to Combat Malaria in an Era of Industrialization and Globalization" aimed to achieve four goals: (1) Develop a strategy that will appeal both to politicians and large donors while at also promoting community-based solutions in order to endure a long-term solution, (2) delegate funds to high risk countries and international organizations so that the marginal product per dollar spent is equal among productive capital to maximize total utility, (3) demonstrate a comprehensive analysis of past policies both good and bad to ensure progress for the future, and (4) establish an exhaustive Global Guidance Policy which will ensure there is cohesion in communication between global and local settings and to keep the various efforts on track for success. This team chose Nigeria as its country of focus.

Also focusing on combating malaria in Nigeria, team "Tumaini" made a presentation outlining two goals: developing an effective malaria vaccine or treatment by funding an established research program and immediately reduce malaria impact and mortality by fighting malaria through specialized clinics.

Undergraduate Track 1st Place
While neither of the teams we heard presentations from made the top three among the 26 undergraduate teams, we were quite impressed with the way each team employed essential critical thinking tools to understand the problem they were charged with solving and their creativity to formulate a possible solution.

With a rising middle class among its 1.24 billion inhabitants, government officials representing African nations often approach me about expanding my investment and business holdings on the continent. While I am keen to do so, having a workforce in good health or not otherwise impacted by sick young family members by a preventable disease such as malaria is essential to achieving long-term success. Programs like the Global Health Business Case Competition are an important piece to the process of creating sustainable solutions.

What solutions would propose if you had the opportunity to participate in this year's Global Health Business Case Competition?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of Solutions for a Sustainable World.

February 13, 2019

Mobile App Designed to Document Sick Chickens in Rural Thailand

Having dined in restaurants from Afghanistan to Uruguay, Brazil to Vietnam, and many points in between, the most common item found on the menu is Gallus gallus domesticus. In its Jan. 17, 2019 issue, The Economist published an article on how chicken became the world's most popular meat. "The chicken industry is a dirty business, but it is also a profitable one. In the OECD, a club of mostly rich countries, pork and beef consumption has remained unchanged since 1990. Chicken consumption has grown by 70% (see chart)."

The article further notes that "[h]umans gobble so many chickens that the birds now count for 23bn of the 30bn land animals living on farms." Importantly, "Chicken is cheap... . A pound of poultry in America now costs $1.92, a fall of $1.71 since 1960 (after adjusting for inflation). Meanwhile the price of beef has fallen by $1.17 a pound to $5.80."

A hen and her chicks I saw in
Jinja, Uganda
Moreover, "It is not just fussy Western eaters who increasingly favor chicken. Rising incomes mean that demand for the meat is growing even faster in poorer countries. As a result, chickens are now the world's most widely traded meat. In economic terms they are, in effect, the opposite of cars. They are produced whole. But their value is maximized once they are broken up.

"Though westerners prefer lean, white meat; many in Asia and Africa prefer dark meat, which includes legs and thighs. These preferences are reflected in local prices: in America breasts are 88% more expensive than legs; in Indonesia they are 12% cheaper. Differences in the price of chicken feet are even starker. The thought of eating talons is abhorrent to many Westerners, but they often feature in Cantonese recipes. China now imports 300,000 tonnes of 'phoenix claws' every year."

Poor food security in industrial and developing countries alike, however, have been well documented over the past several years. Fred de Sam Lazaro, director of the Under-Told Stories Project at the University of St. Thomas in Minnesota, and a special correspondent for the PBS NewsHour, produced a report explaining that "viruses like Avian flu, Ebola and Marburg often fester in animals before moving into human populations. Animals in regions that are geographically remote present particular challenges for disease containment. But in Thailand, local residents are using technology, including digital scanning, to track animals and stop outbreaks before they start."

As Mr. de Sam Lazaro notes: "There are more chickens than people in remote Thai villages like Huay Ton Chok, and people do worry when their chickens stop crossing the road. That's because, five years ago, this village suffered an outbreak of flu-like disease that killed hundreds of birds. So when farmer Udom Putipatharakal thought one of his chickens wasn't doing well and another looked really ill, he reported it."

"For four years," according to Mr. de Sam Lazaro, "Pariwat Roomak has been dispatched from the local health department, responding to calls about sick animals in the area."

Mr. de Sam Lazaro further explains:
Pariwat enters all of this information into an app on his smartphone and transmits it directly to the local government health office, the veterinary department and to a major university to be analyzed. It's part of a participatory One Health disease detection program, more simply called PODD. And it has become a model for programs like this all over the world. It's villages like this one that scientists fear could be the cradle of the next superbug, one that can jump from animal to human, and then mutate so it can leap from human to human. So the objective of this exercise is to track every diseased animal, particularly chickens, so as to contain an outbreak before it becomes a pandemic.
According to Jarwan Chaicom, who heads the local health department for this region in Thailand, "Before we adopted the system, the villagers didn't have a way to connect with each other or with us. The local government is quite far away from them. Language is another barrier, because we have seven ethnic groups and seven languages in this area."

A smartphone app developed for the program translates those languages, so all the responders can track where the diseases are occurring. Patipat Susumpow leads the firm that designed the app. It had to be simple. "The penetration rate of smartphone is not really high in those communities," says Mr. Susumpow. "So most of our volunteers either never used a phone before or used like a very simple phone."

In the case of documenting the ill chicken in Huay Ton Chok, Mr. de Sam Lazaro reports the next stop for the diseased bird was a two-hour bus ride to Chiang Mai University where "scientists determine the type of disease, the likely cause, and, accordingly, recommend action to prevent its spread, whether it's administering antibiotics to animals or disinfectant spraying."

By utilizing mobile technology, Mr. Susumpow adds: "We hope the app can be the placeholder for democratizing the power of response and disease management back to the community."

Click here to watch the video or read the transcript of the PBS NewsHour segment.

What mobile applications are you seeing that are helping to document occurrences of infectious diseases?

Aaron Rose is an advisor to talented entrepreneurs and co-founder of great companies. He also serves as the editor of Solutions for a Sustainable World.