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Sensemaker: Opportunity cost

Sensemaker: Opportunity cost

What just happened

Long stories short

  • Kazakhstan’s government resigned and an interim prime minister was appointed after thousands rioted in Almaty over energy prices. 
  • Australia’s prime minister said Novak Djokovic could be on the next plane home from Melbourne if he couldn’t prove he merited a Covid vaccination exemption for the Australian Open. 
  • Judge Lewis Kaplan could have dismissed the sexual assault case brought against Prince Andrew by Virginia Giuffre, and didn’t. 

Opportunity cost

Full post-Brexit customs controls came into force in the UK on New Year’s Day. Some business owners are struggling to understand them. There are new declaration forms, rules-of-origin checks, duties and taxes. Others say they have no time or money to deal with them and will likely close shop. The controls are a reminder that Brexit’s economic effects are still being determined because the rules are still changing.

The confusion, on top of the economic damage caused by Covid, has allowed Brexit supporters to sidestep questions on whether leaving the EU has a negative impact on the British economy. Norman Lamont, the former Conservative chancellor, told the BBC it was impossible to distinguish between the economic effects of Brexit and the pandemic, but researchers have tried anyway: 

  • British goods trade in October 2021 was 15.7 per cent, or £12.6 billion, lower than it would have been had the UK remained in the EU’s single market and customs union, according to a study by the Centre for European Reform.
  • The government’s Office for Budget Responsibility estimated Brexit’s medium-term impact on British GDP to be a reduction of four per cent, with only two-fifths of this impact having already occurred.
  • A separate study by the UK in a Changing Europe and the London School of Economics’ Centre for Economic Performance, put that figure at between 5.8 and seven per cent.

Brexit, in fact, doesn’t just make other economic shocks like the pandemic harder to measure. It also makes them worse by damaging trade, exacerbating supply bottlenecks, and creating political uncertainty that deters investment.

This is not just a Remoaner view:

  • In a survey of almost 100 economists by the Financial Times, most respondents said the UK will trail other developed countries in its economic recovery from the pandemic because of “political uncertainty and the lingering after-effects of Brexit”.
  • Sushil Wadhwani, a hedge fund manager and former Bank of England rate setter, said the trade frictions and inflationary pressures caused by Brexit would force the BoE to tighten monetary policy earlier than other central banks, slowing the UK’s recovery relative to its peers.
  • “Recoveries are driven by optimism about the future ”, says Paul de Grauwe, professor at the London School of Economics. “Brexit will impose chronic pessimism about the future of the UK economy”.

Plenty of voters still disagree. On the whole people don’t notice hypothetical lost GDP and there is no majority in opinion polls for reversing or relitigating Brexit. In private, Boris Johnson has floated the idea of “Keep Brexit Done” as a slogan for his re-election. But it’s still not done. Some of it’s still being implemented, like the new customs controls. Other parts, like the Northern Ireland protocol, may yet have to be torn up and rewritten. One thing remains clear: the costs will be substantial.

covid by numbers

89: per cent reduced risk of hospitalisation and death within 28 days for those taking the Covid antiviral medication Paxlovid. Authorised by the UK regulator on 31 December, the NHS has secured an initial 2.75 million courses already.

Wealth investment, fairness, prosperity

Bain of South Africa
The first of three reports from South Africa’s State Capture Inquiry shows how the US consultancy Bain & Company conspired with the country’s tax commissioner, Tom Moyane, and president, Jacob Zuma, to take control of the South Africa Revenue Service. In particular, the report found that Zuma and Moyane had met Bain to plan how they’d bring SARS to heel before Bain ultimately won a contract to restructure the institution and before Moyane was appointed its head. Moyane was fired four years later, in 2018, but not before SARS lost more than 2,000 specialised managers and investigators. The report recommended that all Bain’s contracts with state entities be re-examined by the police and National Prosecuting Authority. And that Moyane be charged with perjury for giving false evidence to parliament. 

belonging identity, society, beliefs, countries

Emma Watson anti-semitism
Emma Watson, who played Gryffindor’s Hermione Granger in the Harry Potter films, posted an image on Instagram of a pro-Palestinian protest with “Solidarity is a Verb” written across it. In response, Israel’s former ambassador to the UN, Danny Danon, said: “10 points from Gryffindor for being an antisemite.” Israel’s current UN ambassador wrote that “fiction may work in Harry Potter but it does not work in reality”, noting that if it did exist it could eliminate “the evils” of Hamas and the Palestinian Authority. Watson’s Instagram post has meanwhile been liked by more than a million users.

New things technology, science, engineering

Xinjiang Tesla
Tesla opened a showroom in Xinjiang, where the Chinese government is accused of conducting genocide against Uyghur Muslims and other ethnic minorities. “In 2022, let us together launch Xinjiang on its electric journey!” the Californian company announced in a post on Weibo. The announcement followed passage of a new US law banning imports from Xinjiang unless there’s clear evidence that they weren’t made with forced labour. The US commerce department has also banned exports to a number of companies that develop technologies China can use to repress minorities. Human rights groups called on Tesla to close the showroom and described the company as “despicable”. Competition in the EV sector is heating up. Mercedes said it has advanced its battery life technology to a point where its Vision EQXX prototype car, set to go on sale in 2024, could travel 620 miles without needing a recharge. That’s 200 miles more than Tesla’s Model S.

The 100-year life health, education, living, public poliCY

Losing vax race
Britain’s vaccine minister, Maggie Throup, said new Covid variants will keep emerging “unless we help to vaccinate people in the poorest parts of the world”. Her argument isn’t new. In fact, Tortoise’s Arms Race campaign has been making since launching in July. Around that time, the UK pledged to donate 100 million doses to countries in need. Throup said it’s donated 30 million so far and will donate another 20 million this year. If another year and a half is needed to donate the remaining 50 million doses, then, as Throup herself said, “new variants will keep emerging”. We’ve already had Omicron. How many more variants will it take to persuade rich countries to make good on their vaccine pledges while they can still make a difference?

Our planet environment, natural resources, geopolitics

Climate wisdom
“When it comes to climate change,” Justin Welby, the archbishop of Canterbury said in his new year message, “it is tempting to despair. But there are real reasons to hope.” The reasons: people are campaigning for justice, world leaders recognise the problem, and they took important steps at Cop26 in November. The summit was widely described as a failure for not meeting two of its major stated goals: phasing out coal and renewing emissions targets for 2030 to limit global warming to 1.5℃. People, at least, will have to continue with the campaigning.

Thanks for reading, and do share this around.

Paul Caruana Galizia

Edited by Giles Whittell and produced by Phoebe Davis.

Photographs Getty Images

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