Economy

The writer is Dean of the Faculty at the Harvard TH Chan School of Public HealthThe past few months alone should have been an urgent wake-up call for us all — and particularly for world leaders gathering in Egypt for COP27. Floods in Nigeria have killed more than 600 people and damaged or destroyed vast areas of farmland. In Kenya, Somalia and Ethiopia, one of the worst droughts in decades is putting 22mn people, including 10mn children, at risk of starvation. Sub-Saharan Africa has been particularly hard hit, with 37 out of 52 countries suffering from extremely high food insecurity, according to a new report by the Institute for Economics and Peace and a staggering 206mn people at extreme risk of water insecurity.Unless we act now to support and scale innovation on the continent, things are going to get much worse for food and water security. By 2050, population in Africa will have increased by 95 per cent. This will put extraordinary pressure on its fragile food and water infrastructure, already the most vulnerable in the world and particularly threatened by global warming. Put simply, we are on the verge of a humanitarian catastrophe, and we — and the global leaders assembled at COP27 — must do all we can to avoid it. The most urgent priority is to provide immediate support to those affected by the latest natural disasters, as well as the drop in grain shipments from Ukraine. Unicef’s Rania Dagash recently warned of an “explosion of child deaths” in the Horn of Africa if we don’t do more to save lives. Wealthy nations must also deliver on the promise made in Paris in 2015, when we all set out to limit rising global temperatures to 1.5C. Given the immense suffering caused by food insecurity, acting is a moral imperative. But it also happens to be in the self-interest of the Global North. While African countries will bear the brunt of food and water shortages, it’s only a matter of time until these issues affect the rest of the world, in the form of higher migration pressure and supply chain disruptions. Warmer temperatures will also make zoonotic diseases more common, potentially causing another global pandemic. When that happens, the world will need African scientists such as Jean-Jacques Muyembe-Tamfum — who helped discover the Ebola virus in 1976 and is still working to identify new pathogens in Congo. But they must be able to operate in a politically and economically stable environment.Rebuilding the continent’s food and water systems to withstand future climate shocks will require international co-operation — and, critically, innovation led by African scientists, engineers, farmers, financiers, entrepreneurs and political leaders. Priorities should include increasing agricultural productivity, improving crop storage systems and providing farmers with high-yielding seeds and fertilisers. We also need to build early warning weather systems, flood barriers and new roads and railways to connect farmers to the areas most affected by food scarcity. Expanding access to groundwater would be a good place to start. According to the African Ministers’ Council on Water, the volume of groundwater in Africa is about 20 times that of river and lakes. Yet in drought-stricken sub-Saharan Africa, less than 5 per cent of what is available is currently being used. Expanding that and investing in desalination plants could strengthen the region’s resilience against droughts and other climate shocks; most countries in Africa have enough groundwater to last decades, even if rainfalls diminish. One economic simulation suggests that doubling investment in groundwater development in Uganda, for example, could increase the country’s agricultural gross domestic product by 7 per cent and lift 500,000 people out of poverty. That’s a powerful return. Too often, the Global North takes a top-down approach, imposing plans generated in America or Europe on other regions of the world. But the best way to solve Africa’s food and water crisis is to support Africans in developing their own solutions, drawing on their experience with local conditions, local politics and local capacity. Take the Hello Tractor app, designed to help farmers rent agricultural equipment and founded by a Kenyan entrepreneur, or Niger’s Tech Innov, a tele-irrigation system that automatically monitors temperature, soil moisture content and wind speed, and regulates the water flow accordingly. Great ideas, as we know, come from everywhere. We just need to be open to hearing them.In 2009, at COP15 in Copenhagen, wealthy countries committed to invest $100bn annually by 2020 for climate action in low- and middle-income countries. It’s time to deliver on that promise. We have a responsibility to make sure that the people who least contributed to this crisis don’t end up paying the highest price. More

Today’s top storiesA wave of support for Republicans failed to materialise in the US midterm elections but the GOP is still set to take the House of Representatives, while control of the Senate is on a knife-edge. Get the latest from our live results blog. Join FT journalists and veteran commentator Norm Ornstein on November 10 1300 GMT/0800 EST for a subscriber-exclusive webinar to discuss the results. Register for free here and submit your questions in advance.China’s factory gate prices fell 1.3 per cent in October, the first year-on-year decline since December 2020, in another sign of the damping effect of Covid-19 lockdowns on demand. Factory managers in southern China reported a fall in orders in October of as much as 50 per cent.UK chancellor Jeremy Hunt is considering cutting the threshold on the top rate of income tax and targeting inheritance tax as he seeks solutions to the country’s £54bn black hole in next week’s Autumn Statement. Plans for low-tax investment zones are to be scrapped. Good evening.Today’s announcement by Meta of 11,000 job cuts, the largest retrenchment in its history, is a striking example of how the global economic downturn is hurting Big Tech.Last month we reported that the broader technology sector had lost nearly $1tn in market value in the course of a week, but the most noticeable signs of slowdown are at social media companies.Their biggest headache is the abrupt halt to a decade-long boom in social media advertising. US advertisers are forecast to spend $65bn on the sector in 2022, a year-on-year increase of just 3.6 per cent and about 10 times slower than in 2021, according to eMarketer. This is creating serious problems at companies such as Meta — owner of Facebook, Instagram and WhatsApp — where advertising is the main source of revenue. Ecommerce has declined from its pandemic peaks, while competition for eyeballs has increased. Investors are also failing to share head honcho Mark Zuckerberg’s enthusiasm for the metaverse. On top of this, Meta faces difficulties in targeting and measuring advertising because of changes in privacy policy at Apple. Apple last year began forcing app developers to get permission to track users and serve them personalised ads on their devices, a move that has also led to small businesses cutting back marketing spending.One of Meta’s newer competitors, TikTok, is also in trouble. Although the Chinese-owned company is still growing quickly, it is struggling with the same problems as its older rivals. As we report today, it has slashed global revenue targets after making sweeping leadership changes in the US, its largest market. Staff have also been told that the planned Hong Kong IPO of parent company ByteDance was unlikely to take place this year. Job cuts are also the order of the day at Twitter as new “chief Twit” Elon Musk takes a scythe to the company’s workforce to address a “massive drop in revenue”. Advertisers, including big brands such as L’Oréal, General Motors and Mondelez, have also got the jitters over Musk’s plans to relax controls of content, fearful the platform will be swamped by a wave of hate speech and misinformation. There was bad news, too, for YouTube, owned by Google parent Alphabet, which reported disappointing ad revenues — falling for the first time since the company started reporting its performance separately in 2020. Smaller social media company Snap has also ditched about a fifth of its workforce after reporting slowing growth figures.One final sobering thought: social media’s forecast growth rate for 2022 is almost the same as traditional outlets such as TV and radio — whose audiences have been shrinking for years.Need to know: UK and Europe economyUK plans to review or repeal all EU-derived laws by the end of 2023 have hit a snag: ministers have discovered an additional 1,400 pieces of legislation.European Central Bank officials challenged the idea of a “dovish pivot,” arguing for the continuation of aggressive rate rises. The ECB will also be on the lookout for signs of a wage-price spiral after a new tracker showed pay growth accelerating.New proposals from Brussels would tighten sanctions on EU members that violate the bloc’s fiscal rules, as contained in the stability and growth pact. The rules were suspended during the pandemic but enforcement resumes in 2024. Energy crisis latest: Economic advisers to the German government said it should consider raising taxes on the rich to fund its €200bn plan to cap gas and electricity prices. The threat of widespread blackouts and rationing is waning but Europe should not be complacent about energy security, argues the FT editorial board. The boss of Spanish utility Iberdrola was also critical of Europe’s response, as was Czech energy minister Jozef Síkela.Need to know: Global economyChief economics commentator Martin Wolf says faster investment is needed to help poorer countries cope with climate change. And affected nations, many of which are beset by debt, say they need grants, rather than loans. Read more in our special report: Managing Climate Change.

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Russia has leapfrogged Iraq and Saudi Arabia to become India’s largest supplier of oil as sanctions force it to cut prices of its crude. Our latest Behind the Money podcast discusses how Russia is plundering Ukraine’s grain industry.Need to know: businessFears of contagion hit the crypto industry after a storm engulfed the FTX exchange. Prices have tumbled on investor worries about the possible collapse of Alameda Research, one of its biggest traders, which has sought a rescue from rival Binance.UK retail bellwether Marks and Spencer said it expected a “material contraction” in customer demand and more company failures next year as the cost of living crisis deepened. Sector data showed a doubling in the proportion of UK households struggling with their finances and annual grocery bills rising by £682.In the depths of the pandemic in 2020 we spoke to some of the typical small businesses that form the bedrock of the UK economy. Two years later we find them almost as downbeat.The World of WorkAn estimated 100mn people are suffering with long Covid yet the illness is being badly handled in many workplaces. Listen to the new Working It podcast on a growing global health crisis. One in five Britons say they have faced discrimination at work within the past year, according to a new survey. Ageism was the most common cause and could be one of the factors contributing to the exodus of older people from the workforce.Lay-offs in middle management in US companies such as Walmart and Ford have raised fears of a “white-collar” recession. One economist blamed the surplus on the rush to snap up professional talent when the economy bounced back from the pandemic.UK businesses are ditching office space as energy bills soar, gathering staff on fewer floors and shutting down services on others. Get the latest worldwide picture with our vaccine trackerSome good newsA company based in the north of England is providing the elderly and disabled with free emergency plumbing and heating services during the winter months. Depher (Disability and Elderly Plumbing and Heating Emergency Repair), which has been commended by the prime minister’s office for its work, relies on public donations to cover labour and materials.Depher provides the elderly and disabled free emergency plumbing and heating services during the winter months © AFP via Getty Images More

Germany should consider raising taxes on the wealthiest people to fund its €200bn plan to cap gas and electricity prices, a group of leading economic advisers to the government recommended on Wednesday.Ulrike Malmendier, one of the five members of Germany’s council of economic experts, said that because the country cannot target its energy support package only at the most needy, it should also “look at the more uncomfortable side” of how to fund it.“These measures are not super well-targeted because we can’t send cheques to certain households and not others,” said Malmendier, an economics professor at the University of California at Berkeley who joined the council in September, in an interview. “So we could counterbalance this by doing something on where the money comes from.”She said the council had suggested three ways to tackle this, including raising the top rate of tax, introducing a “solidarity charge” levied on high earners or postponing the government’s plan to reduce tax rates to cushion households from soaring inflation.The recommendations on tax policy in the council’s annual report are likely to stir intense debate in the ruling coalition, which must give an official response in the next eight weeks. After parts of the report leaked this week, the idea of higher taxes on the rich was welcomed by officials in chancellor Olaf Scholz’s Social Democrat party and his coalition partners in the Green party. But it was rejected by the third member of the coalition — the liberal FDP — and by the opposition Christian Democrats.Christian Lindner, finance minister, on Wednesday gave the proposal short shrift. “The government will not raise taxes further,” the FDP leader said, adding that businesses and households are already weighed down by rising prices. “It would be extremely dangerous to increase the tax burden during a period of economic uncertainty.”The council predicted gross domestic product in the EU’s largest economy would grow 1.7 per cent this year before contracting 0.2 per cent in 2023 — a less gloomy view than the government’s recent forecast and those of many economists. But it warned inflation, which hit 11.6 per cent in the year to October, would stay high — averaging 8 per cent this year and 7.4 per cent in 2023.The advisers’ recommendations that Berlin should consider keeping the country’s three remaining nuclear power stations running beyond next April and lifting a ban on fracking of shale gas reserves to ease pressure on the electricity market are also likely to divide the coalition.“We face a new reality on energy supplies and have to accept it is never going to go back to the way it used to be,” said Malmendier. “We might need to think more strongly about sources of energy and minerals we have here in Germany.”She said the government should consider more subsidies for renewable energy, such as green hydrogen, as well as lifting its ban on fracking to tap into German shale gas reserves, mining its deposits of lithium to boost battery production and extending the life of nuclear plants.

Germany’s three nuclear power stations had been due to be shut at the end of this year. But Scholz announced last month they would keep running for longer to avoid potential blackouts and energy rationing due to a sharp fall in Russian gas supplies following Moscow’s invasion of Ukraine. The FDP has called for the plants to run until 2024, but the Greens have rejected this because it would force the operators to acquire new fuel rods — a development the environmental party considers unacceptable. Robert Habeck, the Green vice-chancellor and economy minister, has also rejected recent calls to lift the country’s ban on fracking, which is seen by the FDP as a way to offset lower gas supplies from Russia. Malmendier said Germany’s economy had undergone “a big break” caused by structural changes in the energy market, geopolitics and demographics. The government should consider making it easier for people to move to the country if offered a job, she said, adding that net immigration of 400,000 a year is needed to avoid a decrease in the workforce, up from 329,000 last year. More

WASHINGTON (Reuters) – U.S. Deputy Secretary of State Wendy Sherman will visit Mexico this week to build on momentum following the two countries’ bilateral High-Level Economic Dialogue (HLED) and prepare for next month’s American Leaders’ Summit, the State Department said on Wednesday. Sherman will visit Mexico City from Nov. 9-10, the department said in a statement. She will meet with Mexican business leaders and activists, and speak with students at Universidad La Salle, it added. More

NEW YORK (Reuters) – Private equity firm TPG Inc said on Wednesday its after-tax distributable earnings fell more than 60% due to a plunge in asset sales across its private equity, growth, real estate, and impact businesses. The Fort Worth, Texas-based firm said after-tax distributable earnings, which represents the cash used to pay dividends to shareholders, fell to $113 million from $283 million a year ago, below an average analyst forecast of $154 million, according to Refinitiv data.TPG generated just $5 million from asset divestments during the quarter, a significant drop from $141 million a year earlier, as the firm held off from sales amid the financial market volatility caused by higher interest rates and geopolitical tensions.Blackstone (NYSE:BX) Inc, Carlyle Group (NASDAQ:CG) Inc, KKR & Co (NYSE:KKR) Inc, and Apollo Global Management (NYSE:APO) Inc also reported a decline in earnings owing to slower asset divestments and capital markets activity.”We were a significant seller in much better market conditions for sellers. Our bias is to moderate our sales in this environment and focus on growing our companies,” TPG Chief Financial Officer Jack Weingart said.During the quarter, TPG said its private equity funds appreciated by 2.3%, growth funds rose by 3.8% and impact funds were up 2.9%, though its real estate funds depreciated by 0.4%.Under generally accepted accounting principles, TPG reported net income of $53.2 million, down 74% from $205.1 million driven by a sharp drop in investment gains.”Our posture is still the same, which is we think this is still an interesting environment with the right opportunities for investing,” TPG Chief Executive Jon Winkelried said.TPG said it raised $8.2 billion of new capital, spent $2.5 billion on new acquisitions, generated fee-related earnings of $121 million, retained $46.4 billion of unspent capital, and declared a dividend of 26 cents per share. Total assets under management stood at $135.1 billion, up 7% from the prior quarter, driven by strong fundraising. More

LONDON/DHAKA (Reuters) -The International Monetary Fund (IMF) provisionally agreed a $4.5-billion support programme on Wednesday for Bangladesh, with the country’s finance minister saying the deal would help prevent economic instability escalating into a crisis. Bangladesh’s $416-billion economy has been one of the world’s fastest growing for years. But rising energy and food prices, sparked by Russia’s invasion of Ukraine, along with shrinking foreign exchange reserves, have swelled its import bill and current account deficit.On Wednesday it became the third South Asian nation to secure a “staff-level agreement” with the IMF for loans this year, after Pakistan and Sri Lanka.”The heat of the global economy has affected our economy to some extent,” Finance Minister A.H.M. Mustafa Kamal told reporters after the IMF announcement. “We requested the IMF loan as a precautionary measure to ensure that this instability does not escalate into a crisis.”The Fund said a “staff-level agreement” had been reached for a 42-month arrangement, including about $3.2 billion from its Extended Credit Facility (ECF) and Extended Fund Facility (EFF), plus about $1.3 billion from its new Resilience and Sustainability Facility (RSF).”The objectives of Bangladesh’s new Fund-supported program are to preserve macroeconomic stability and support strong, inclusive, and green growth, while protecting the vulnerable,” the lender said in a statement.A staff-level agreement is typically subject to approval by IMF management and consideration by its Executive Board, which is expected in the coming weeks.Bangladesh’s economic mainstay is the export-oriented garment industry, which is bracing for a slowdown as big customers like Walmart (NYSE:WMT) are saddled with excess stocks as inflation forces people to prioritise their spending.The country’ foreign exchange reserves had dwindled to $35.74 billion by Nov. 2 from $46.49 billion a year ago, central bank data showed.The IMF said Bangladesh has put together a programme to foster growth that includes measures to contain inflation and strengthen the financial sector.Finance Minister Kamal said the IMF team agreed with the government’s economic reforms. Earlier, in August, Bangladesh hiked fuel prices by around 50% in a move to trim its subsidy burden, but government officials denied at the time that this was a prerequisite for the IMF loan. Funds will be disbursed in seven tranches, Kamal said, adding that the first instalment will be available in February 2023. More

BRUSSELS (Reuters) – The European Commission proposed on Wednesday to change the EU’s fiscal rules so that governments would negotiate individual debt reduction paths of a length linked to reforms and investments, despite scepticism from some members including Germany. The change, which moves away from the current one-size-fits-all obligation of annual debt cuts of 1/20th of the excess above 60% of GDP, is meant to make governments “own” their debt plans, rather than see them as externally imposed by Brussels. But some EU capitals, notably Berlin, fear that longer and individually negotiated debt reduction paths would encourage governments to postpone difficult decisions to near the end of the time frame or even until after their mandates expire.The changes are needed because a surge in public debt in European Union countries resulting from measures to support households and businesses through COVID-19 has left existing debt reduction requirements looking unrealistically ambitious.”EU countries now face significantly higher debt and deficit levels that vary widely,” Commission Vice President Valdis Dombrovskis told a news conference.”New challenges such as the green and digital transitions and energy supply issues will require us to make major reforms and investments for years to come.” Another key change proposed by the executive Commission is to focus the rules on net primary spending – government expenditure that excludes debt interest – which is directly observable during the year and under government control.That would address governments’ long-standing complaints that the current rules focus on a country’s structural deficit – a complex, calculated indicator that is not directly observable and prone to strong revisions.”Fiscal rules would focus on reducing debt where it is high, based on Member States’ own plans that must respect clear EU conditions. Once the plan is agreed, monitoring will be based on a simple expenditure rule, while stronger enforcement measures will ensure compliance,” Dombrovskis said. More

BRASILIA (Reuters) – Brazil’s Economy Ministry predicted on Wednesday a GDP growth range in 2023 between 1.4% to 2.9%, arguing that the structural growth of the economy is now higher than seen in the recent past.The Ministry’s Economic Policy Secretariat stated in a report that the persistence of forecast errors for the Brazilian GDP in the last three years may indicate a change in the growth trend, drawing attention to the positive effects in the short term of a higher investment rate. More