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    The Debt Problem Is Enormous, and the System for Fixing It Is Broken

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    Economists offer alternatives to financial safeguards created when the U.S. was the pre-eminent superpower and climate change wasn’t on the agenda.Martin Guzman was a college freshman at La Universidad Nacional de La Plata, Argentina, in 2001 when a debt crisis prompted default, riots and a devastating depression. A dazed middle class suffered ruin, as the International Monetary Fund insisted that the government make misery-inducing budget cuts in exchange for a bailout.Watching Argentina unravel inspired Mr. Guzman to switch majors and study economics. Nearly two decades later, when the government was again bankrupt, it was Mr. Guzman as finance minister who negotiated with I.M.F. officials to restructure a $44 billion debt, the result of an earlier ill-conceived bailout.Today he is one of a number of prominent economists and world leaders who argue that the ambitious framework created at the end of World War II to safeguard economic growth and stability, with the I.M.F. and World Bank as its pillars, is failing in its mission.Martin Guzman, a former finance minister in Argentina, is among the economists and world leaders who argue that the framework created at the end of World War II to safeguard economic growth and stability is not working.Nathalia Angarita for The New York TimesJavier Milei, the newly elected president of Argentina, at an election event in Salta, Argentina, in October. He has described himself as an “anarcho-capitalist.”Sarah Pabst for The New York TimesThe current system “contributes to a more inequitable and unstable global economy,” said Mr. Guzman, who resigned last year after a rift within the government.The repayment that Mr. Guzman negotiated was the 22nd arrangement between Argentina and the I.M.F. Even so, the country’s economic tailspin has only increased with an annual inflation rate of more than 140 percent, growing lines at soup kitchens and a new, self-proclaimed “anarcho-capitalist” president, Javier Milei, who this week devalued the currency by 50 percent.The I.M.F. and World Bank have aroused complaints from the left and right ever since they were created. But the latest critiques pose a more profound question: Does the economic framework devised eight decades ago fit the economy that exists today, when new geopolitical conflicts collide with established economic relationships and climate change poses an imminent threat?Volunteers serving free meals in Buenos Aires. Argentina’s economy is in a tailspin, with growing lines at soup kitchens.Rodrigo Abd/Associated PressProtests in Buenos Aires in 2001. A debt crisis in Argentina led to default, riots and a devastating depression.Fabian Gredillas/Agence France-Presse — Getty ImagesThis 21st-century clash of ideas about how to fix a system created for a 20th-century world is one of the most consequential facing the global economy.The I.M.F. was set up in 1944 at a conference in Bretton Woods, N.H., to help rescue countries in financial distress, while the World Bank’s focus was reducing poverty and investing in social development. The United States was the pre-eminent economic superpower, and scores of developing nations in Africa and Asia had not yet gained independence. The foundational ideology — later known as the “Washington Consensus” — held that prosperity depended on unhindered trade, deregulation and the primacy of private investment.“Nearly 80 years later, the global financial architecture is outdated, dysfunctional and unjust,” António Guterres, secretary general of the United Nations, said this summer at a summit in Paris. “Even the most fundamental goals on hunger and poverty have gone into reverse after decades of progress.”The world today is geopolitically fragmented. More than three-quarters of the current I.M.F. and World Bank countries were not at Bretton Woods. China’s economy, in ruins at the end of World War II, is now the world’s second-largest, an engine of global growth and a crucial hub in the world’s industrial machine and supply chain. India, then still a British colony, is one of the top five economies in the world.A session of the United Nations Monetary Conference in Bretton Woods, N.H., on July 4, 1944. Delegates from 44 countries are seated at the long tables.Abe Fox/Associated Press, via Associated PressAntónio Guterres, secretary general of the United Nations, said this summer that “the global financial architecture is outdated, dysfunctional, and unjust.”Martin Divisek/EPA, via ShutterstockThe once vaunted “Washington Consensus” has fallen into disrepute, with a greater recognition of how inequality and bias against women hamper growth, as well as the need for collective action on the climate.The mismatch between institution and mission has sharpened in recent years. Pounded by the Covid-19 pandemic, spiking food and energy prices related to the war in Ukraine, and higher interest rates, low- and middle-income countries are swimming in debt and facing slow growth. The size of the global economy as well as the scope of the problems have grown immensely, but funding of the I.M.F. and World Bank has not kept pace.Resolving debt crises is also vastly more complicated now that China and legions of private creditors are involved, instead of just a handful of Western banks.The World’s Bank’s own analyses outline the extent of the economic problems. “For the poorest countries, debt has become a nearly paralyzing burden,” a report released Wednesday concluded. Countries are forced to spend money on interest payments instead of investing in public health, education and the environment.An assembly line at the electric vehicle manufacturer Nio in Hefei, China. China’s economy was in ruins at the end of World War II but is now the world’s second largest and an engine of global growth.Qilai Shen for The New York TimesGita Gopinath, first deputy managing director of the International Monetary Fund, said of the current financial system, “We have countries strategically competing with amorphous rules and without an effective referee.”Jalal Morchidi/EPA, via ShutterstockAnd that debt doesn’t account for the trillions of dollars that developing countries will need to mitigate the ravages of climate change.Then there are the tensions between the United States and China, and Russia and Europe and its allies. It is harder to resolve debt crises or finance major infrastructure without bumping up against security concerns — like when the World Bank awarded the Chinese telecommunications giant Huawei a contract that turned out to violate U.S. sanctions policy, or when China has resisted debt restructuring agreements.“The global rules-based system was not built to resolve national security-based trade conflicts,” Gita Gopinath, first deputy managing director of the I.M.F., said Monday in a speech to the International Economic Association in Colombia. “We have countries strategically competing with amorphous rules and without an effective referee.”The World Bank and I.M.F. have made changes. The fund has moderated its approach to bailouts, replacing austerity with the idea of sustainable debt. The bank this year significantly increased the share of money going to climate-related projects. But critics maintain that the fixes so far are insufficient.“The way in which they have evolved and adapted is much slower than the way the global economy evolved and adapted,” Mr. Guzman said.Argentina’s new president devalued the currency by 50 percent this week.Sarah Pabst for The New York TimesA vegetables shop in Almagro in Buenos Aires. Argentina’s economy is South America’s second largest.Anita Pouchard Serra for The New York Times‘Time to Revisit Bretton Woods’Argentina, South America’s second-largest economy, may be the global economic system’s most notorious repeat failure, but it was Barbados, a tiny island nation in the Caribbean, that can be credited with turbocharging momentum for change.Mia Mottley, the prime minister, spoke out two years ago at the climate change summit in Glasgow and then followed up with the Bridgetown Initiative, a proposal to overhaul the way rich countries help poor countries adapt to climate change and avoid crippling debt.“Yes, it is time for us to revisit Bretton Woods,” she said in a speech at last year’s climate summit in Egypt. Ms. Mottley argues that there has been a “fundamental breakdown” in a longstanding covenant between poor countries and rich ones, many of which built their wealth by exploiting former colonies. The most advanced industrialized countries also produce most of the emissions that are heating the planet and causing extreme floods, wildfires and droughts in poor countries.Mavis Owusu-Gyamfi, the executive vice president of the African Center for Economic Transformation, in Ghana, said that even recent agreements to deal with debt like the 2020 Common Framework were created without input from developing nations.“We are calling for a voice and seat at the table,” Ms. Owusu-Gyamfi said, from her office in Accra, as she discussed a $3 billion I.M.F. bailout of Ghana.Yet if the fund and bank are focused on economic issues, they are essentially political creations that reflect the power of the countries that established, finance and manage them.And those countries are reluctant to cede that power. The United States, the only member with veto power, has the largest share of votes in part because of the size of its economy and financial contributions. It does not want to see its influence shrink and others’ — particularly China’s — grow.The impasse over reapportioning votes has hampered efforts to increase funding levels, which countries across the board agree need to be increased.A vegetable market in Accra, Ghana. “We are calling for a voice and seat at the table,” said Mavis Owusu-Gyamfi, the executive vice president of the African Center for Economic Transformation in Ghana.Natalija Gormalova for The New York TimesCustomers at lunch in Buenos Aires. Mr. Guzman and others pushing for change argue that indebted countries need more grants and low-interest loans with long repayment timelines.Sarah Pabst for The New York Times‘Big Hole’ in How to Deal With DebtStill, as Mr. Guzman said, “even if there are no changes in governance, there could be changes in policies.”Emerging nations need enormous amounts of money to invest in public health, education, transport and climate resilience. But they are saddled with high borrowing costs because of the market’s often exaggerated perception of the risk they pose as borrowers.And because they are usually compelled to borrow in dollars or euros, their payments soar if the Federal Reserve and other central banks raise interest rates to combat inflation as they did in the 1980s and after the Covid pandemic.The proliferation of private lenders and variety of loan agreements have made debt negotiations impossibly complex, yet no international legal arbiter exists.Zambia defaulted on its external debt three years ago, and there is still no agreement because the I.M.F., China and bondholders are at odds.There’s a “big hole” in international governance when it comes to sovereign debt, said Paola Subacchi, an economist at the Global Policy Institute at Queen Mary University in London, because the rules don’t apply to private loans, whether from a hedge fund or China’s central bank. Often these creditors have an interest in drawing out the process to hold out for a better deal.Mr. Guzman and other economists have called for an international legal arbiter to adjudicate disputes related to sovereign debt.“Every country has adopted a bankruptcy law,” said Joseph Stiglitz, a former chief economist at the World Bank, “but internationally we don’t have one.”The United States, though, has repeatedly opposed the idea, saying it is unnecessary.Rescues, too, have proved to be problematic. Last-resort loans from the I.M.F. can end up adding to a country’s budgetary woes and undermining the economic recovery because interest rates are so high now, and borrowers must also pay hefty fees.Those like Mr. Guzman and Ms. Mottley pushing for change argue that indebted countries need significantly more grants and low-interest loans with long repayment timelines, along with a slate of other reforms.“The challenges are different today,” said Mr. Guzman. “Policies need to be better aligned with the mission.”Mia Mottley, the prime minister of Barbados, offered a proposal this year to overhaul the way rich countries help poor countries adapt to climate change and avoid crippling debt.Sean Gallup/Getty ImagesFlash flooding in Bangladesh last year. The global economic framework was devised long before climate change posed an imminent threat to poor nations.Mushfiqul Alam/NurPhoto More

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    New Mexico’s Spaceport America Is an Economic Dream Deferred

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    From his tiny gem store in southern New Mexico, Robert Hanseck spends his days untangling chakra beads and answering questions about the healing properties of amethyst crystals. After four decades behind the register, he has met thousands of wellness-minded tourists eager to explore the hot springs that span the region.But he almost never sees the type of traveler he was promised would transform his small town of Truth or Consequences: space enthusiasts.“It’s been a flop,” he said of Spaceport America, a project that was conceived as the vanguard of commercial space travel — and that has been promoted by state officials for more than two decades as a launchpad for the local economy.Less than a mile up the road, Arthur Burger, who owns an art gallery, recounted the moment in 2021, not long after he moved to town, when he watched in awe as a rocket plane soared into the sky beyond the nearby mountain range. He remembers the resounding boom.After years of delays, Virgin Galactic, the anchor tenant at Spaceport America, had sent its founder, Richard Branson, and a team to the edge of space — evidence at last, many in the area thought, that New Mexico was a front-runner in the commercial space race.“That week, people came in from London, from Taipei,” Mr. Burger said. “It was surreal.”In this stretch of rural New Mexico, there are plenty of opinions about Spaceport, a futuristic structure on a desolate stretch of desert that has cost more than $200 million in state and local funds.Residents in and around Truth or Consequences have waited for Spaceport to produce a payoff in aerospace-related jobs and tourism.Robert Hanseck at his gem store. He says he almost never sees the type of traveler he was promised would transform the town.Residents of Sierra County, which includes Truth or Consequences, and neighboring Doña Ana County have contributed millions from sales taxes to help subsidize the venture.Many say they are tired of waiting for the payoff that was supposed to come from aerospace-related jobs and from tourists drawn like storm chasers to the scene of the action. But others see it as an ambitious bet on the future that has finally begun to produce results.This year, Virgin Galactic has conducted six Spaceport launches, the most in any year so far, blasting researchers and space tourists who can afford the $450,000 ticket toward the edge of space.Virgin Galactic uses a carrier aircraft to take a rocket plane about 45,000 feet above Earth, and from there it disconnects and propels passengers to an altitude of more than 50 miles.Despite the recent momentum, another setback came in November when Virgin Galactic laid off 185 employees — 73 in New Mexico — reducing the company to around 800, and said it would suspend flights in mid-2024. The layoffs, according to the company, are meant to allow Virgin Galactic to focus resources on a new class of suborbital space planes. And this month, Mr. Branson told The Financial Times that he would no longer invest in Virgin Galactic, noting that the company “does not have the deepest pockets.”For Amanda Forrister, the mayor of Truth or Consequences, the idea that Spaceport will one day reshape her community still feels possible, but far from a guarantee.“It is a bit of a question mark,” she said.Getting In on the Ground FloorSpectators watched Virgin Galactic’s sixth and final launch of the year last month.The allure of rockets, space and what exists beyond us has deep roots in New Mexico.After a military balloon crashed near Roswell in 1947, that southeastern New Mexico town became part of the zeitgeist, driving decades of conspiracy theories from people who believe it was the crash site of an unidentified flying object used by aliens. The world’s first atomic bomb, developed at Los Alamos National Laboratory in the northern part of the state, was detonated at what is now the White Sands Missile Range, where the U.S. military still tests rockets.So in late 2005, when Gov. Bill Richardson announced a plan to collaborate with Virgin Galactic on a commercial spaceport in the state, it sounded to many like a natural fit — and a potential boon.“This is a unique opportunity for New Mexico to be on the ground floor of a new industry that will bring new companies, more high-wage jobs and opportunities that will move our state’s economy forward,” Mr. Richardson, who died in September, said when signing enabling legislation three months later.The reality of commercial space travel felt firmly within reach, and almost immediately Mr. Branson’s company began taking spaceflight reservations at $200,000 apiece.In 2006, construction began about 30 miles east of Truth or Consequences and ultimately used $218.5 million in public funds. From a distance, the circular structure, on 18,000 acres of sagebrush and yucca, looks almost like something from a sci-fi film. Cattle guards line the two-lane road that leads to its entrance. More than half the money to build it was allocated by the state, and the rest — $76.4 million — was generated from taxes in the local counties.Virgin Galactic’s rocket-powered plane, left, flew above its mother ship after its release on its way to the edge of space in August.Andres Leighton/Associated PressVoters in Doña Ana County approved a 0.25 percent gross receipts tax to support Spaceport in 2007, and Sierra County voters followed a year later. A state report released in 2005 estimated that by 2020, Spaceport could result in $550 million of additional annual economic activity and bring roughly 4,300 jobs to the area.“The economic impact of this new spaceport is potentially quite large, reflecting the strong upscale potential of the nascent space tourism industry,” the report said.The report also forecast 376 suborbital launches in 2019.In reality, it has created only a small fraction of that — $138 million in economic output in 2022 and about 800 jobs generated, according to a recent report from Spaceport. The first human spaceflight was in May 2021.“Looking at the numbers and what has taken place over the years, it’s been a bad investment,” said Shannon Reynolds, a Doña Ana County commissioner.Mr. Reynolds said Mr. Branson’s recent comments were dismaying.“If he will not invest in his own operation at Virgin Galactic, what are others supposed to deduce from this?” he asked. “I believe we bet on the wrong anchor tenant at the Spaceport.”‘This Has Been a Long Road’Allan Turk, director of aerospace operations for Spaceport America, giving a talk. In recent years, Spaceport and Mr. Branson found themselves up against an increasingly crowded field of billionaire competitors.Nine days after Mr. Branson’s 2021 suborbital spaceflight — the one Mr. Burger watched from his art gallery — Jeff Bezos took a similar voyage with his aerospace company, Blue Origin, which launched from rural West Texas. Elon Musk’s SpaceX, which was briefly a tenant at Spaceport, now has launch sites in Florida, Texas and California.For many local residents, their deep frustration has been caused not only by the delays but also by concerns about the use of public funds.In 2020, Dan Hicks, the executive director of Spaceport America, was fired after a whistle-blower came forward with allegations of financial mismanagement and abuse of authority.The state hired a firm to investigate, and the state auditor said it had found “a severe breakdown of internal controls that resulted in possible waste and abuse of taxpayer funds.”In an interview, Scott McLaughlin, who succeeded Mr. Hicks as Spaceport’s executive director, said the recently released economic impact report by his team pointed to encouraging signs on the horizon.“This has been a long road requiring patience by the citizens and policymakers,” Mr. McLaughlin said. He noted that aside from Virgin Galactic, another key tenant is SpinLaunch, a company building technology aimed at providing rapid, low-cost access to space. The company had its first test flight in 2021.“A main priority of mine,” said Scott McLaughlin, the executive director of Spaceport, “is to find new tenants.”“A main priority of mine,” Mr. McLaughlin said, “is to find new tenants.”He said a large part of his job involved talking to companies almost weekly about Spaceport and giving tours to prospective tenants a couple of times a month.“Many of the companies we are talking to, though, are very early stage in their technology development, so our recruitment might go over two or more years,” Mr. McLaughlin said. “With young companies, it is hard to know who will eventually succeed or fail.”Before dawn on a recent morning — days before Virgin Galactic announced its plan to halt launches in the middle of next year — more than a dozen STEM educators and students arrived at Spaceport America for what would be Virgin Galactic’s sixth and final launch of the year.The air was frigid, and the group huddled on a concrete slab a short distance from the runway. At 9 a.m., the Virgin Galactic aircraft, known as V.M.S. Eve, lifted off, carrying two researchers and a space tourist who had paid $450,000.The aircraft circled high above in the sky before the rocket plane, known as V.S.S. Unity, separated and hurled the crew toward the edge of space for several minutes, reaching nearly three times the speed of sound. From liftoff to touchdown back at Spaceport, the mission lasted about an hour. It then takes Virgin officials weeks to prepare Unity for another launch.“It’s quite something to see,” Mr. McLaughlin said in a parking lot where about a dozen onlookers had traveled to watch the flight.“Sometimes this lot is full,” he said. “Sometimes it is not.”Earthbound AttractionsThe game show “Truth or Consequences” pledged to do a broadcast from the first place to rename itself after the program. Hence the town’s name, since 1950.While Spaceport America’s launch site address is given as Truth or Consequences, the heart of the town of 6,000 people is a 40-minute drive away on the Rio Grande.The town, once called Hot Springs, got its name in 1950 after the host of the game show “Truth or Consequences” pledged to air the program on its 10th anniversary from the first place to rename itself after the show.This time of year, as winter transplants arrive to escape the cold, cars with license plates from Minnesota and Montana line the main road. On a recent afternoon, hours after the launch, the Spaceport America visitor center in town, inside an old adobe-style building, was empty.Kathleen Sloan, a local journalist and longtime resident, said she was tired of promises about Spaceport and found the whole situation to be a bit of a farce since Virgin Galactic aircraft could theoretically take off from some airports.Local residents, she said, “have paid enough.”And yet the town’s growth is undeniable.In a little over a year, PreReal Investments, based in New York City, has bought more than 100 properties in Sierra County at a cost of roughly $40 million. The company plans to resell the mixture of homes and commercial spaces.But while the company promotes the property’s proximity to Spaceport America, “our choice was driven by the county’s natural resources,” said James Prendamano, PreReal’s chief executive.The “hot springs, a wide array of world-class outdoor activities” were critical to his investments, he said.“There will always be an interest in space,” said Marianne Blaue, center, of the Truth or Consequences Brewing Company, “and I think that is beneficial for the community.”That type of investment is reassuring, said Marianne Blaue, who moved to town with her husband, John Masterson, in 2016 after they left tech jobs in Seattle.Eager to help build a sense of community in their new home, they soon opened Truth or Consequences Brewing Company, the first brewery in town, and have noticed a steady stream of fellow transplants arriving, especially since the pandemic began.While Ms. Blaue knew a bit about Spaceport before moving, she hadn’t realized just how close it was to her new home. They’ve had Spaceport and Virgin employees and a handful of customers on space missions stop in for a beer, said Ms. Blaue, whose selection includes space-named brews such as Star Eater Black I.P.A. and Cosmic Blonde.“There will always be an interest in space,” she said, “and I think that is beneficial for the community.”On the afternoon of the recent launch, Mr. Hanseck, who owns the gem store, watched as cars trickled past his shop. This time of year, he said, most of his clients are snowbirds in town for the winter.Arthur Burger at his art gallery. He recalls the moment in 2021, soon after his arrival, when he watched a rocket plane soaring into the sky and heard a resounding boom.While Mr. Hanseck unpacked cardboard boxes of merchandise, he considered the longstanding promise of space tourists descending on his community. He chuckled to himself.“I know what people come here for, and it’s not to go to space,” he said. “It is wishful thinking at best.”On the same afternoon, Mr. Burger was at his gallery, working with a local artist to put up a new painting.He has enjoyed escaping the saturated art scene of Santa Fe, he said. These days, he spends much of his time showcasing the work of Sierra County artists, including high school students.“Did you hear the boom?” he said with excitement to a patron who lives in town, referring to the sound when the V.S.S. Unity re-entered the atmosphere. “There are few places in the world where you can see and hear something like that.” More

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    Europe and Asia React to U.S. Push for Tech and Clean Energy

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    Other governments, particularly in Europe, are trying to counter the Biden administration’s industrial policies with their own incentives.The United States has embarked on the biggest industrial policy push in generations, dangling tax breaks, grants and other financial incentives to attract new factories making solar panels, semiconductors and electric vehicles.That spending is aimed at jump-starting the domestic market for crucial products, but it has implications far outside the United States. It is pushing governments from Europe to East Asia to try to keep up by proposing their own investment plans, setting off what some are calling a global subsidy race.Officials, particularly in Europe, have accused the United States of protectionism and have spent months complaining to the Biden administration about its policies. Governments in the European Union, in Britain and elsewhere are debating how to counteract America’s policies by offering their own incentives to attract investment and keep their companies from relocating to the United States.“I think we all deny that there is a subsidy race, but up to a certain extent, it’s happening,” said Markus Beyrer, the director general of BusinessEurope, Europe’s largest trade association.The United States is deploying nearly $400 billion in spending and tax credits to bolster America’s clean energy industry through the Inflation Reduction Act of 2022. Another $280 billion is aimed at facilities that manufacture and research semiconductors, as well as broader technological research.The Biden administration says the full agenda will unleash $3.5 trillion in public capital and private investment over the next decade. It is both a response to the hefty subsidies offered by governments in China and East Asia and an attempt to rebuild an American factory sector that has been hollowed out by decades of offshoring.Fredrik Persson, left, and Markus Beyrer, executives of BusinessEurope, a large trade group. “I think we all deny that there is a subsidy race, but up to a certain extent, it’s happening,” Mr. Beyrer said.Virginia Mayo/Associated PressThe administration says the investments will put the United States in a better position to deal with climate change and make it less dependent on potentially risky supply chains running through China.But the spending has sparked concerns about taking government resources away from other priorities, and adding to the debt loads of countries when high interest rates make borrowing riskier and more expensive. Gita Gopinath, the first deputy managing director of the International Monetary Fund, said in an interview in October that the spending race was “a matter of concern.”Ms. Gopinath pointed to statistics showing that whenever the United States, the European Union or China enacts subsidies or tariffs, there is a very high chance that one of the other two will respond with its own subsidies or tariffs within a year.“We are seeing a tit-for-tat there,” Ms. Gopinath said.The spending competition is also straining alliances by giving the companies that make prized products like batteries, hydrogen and semiconductors the ability to “country shop,” or play governments against one another other as they try to find the most welcoming home for their technologies.Freyr Battery, a company founded in Europe that develops lithium ion batteries for cars, ships and storage systems, was partway through building a factory in Norway when its executives learned that the Inflation Reduction Act was under development. In response to the law, the company shifted production to a factory in Georgia.“We think it is a really ingenious piece of modern industrial policy, and consequently, we’ve shifted our focus,” Birger Steen, Freyr’s chief executive officer, said in an interview. “The scaling will happen in the United States, and that’s because of the Inflation Reduction Act.”Mr. Steen said the company was keeping the Norwegian factory ready for a “hot start,” meaning that production could scale up there if local policies become friendlier. The company is talking to policymakers about how they can compete with the United States, he said.Some countries are reaping direct benefits from U.S. spending, including Canada, which is included in some of the clean energy law’s benefits and has mining operations that the United States lacks.Canada’s lithium industry stands to benefit as battery manufacturing moves to the United States and companies look for nearby sources of raw material.Brendan George Ko for The New York TimesKillian Charles, the chief executive at Brunswick Exploration in Montreal, said in an interview that Canada’s lithium industry stood to benefit as battery manufacturing moved to the United States and companies looked for nearby sources of raw material.But in most cases, the competition seems more zero-sum.David Scaysbrook, the managing partner of the Quinbrook Infrastructure Partners Group, which has helped finance some of the largest solar and battery projects in the United States, said that America’s clean energy bill was the most influential legislation introduced by any country and that other governments were not able to replicate “the sheer scale” of it.“Other countries can’t match that fiscal firepower,” he said. “Obviously, that’s a threat to the E.U. or other countries.”The United States has sought to allay some of its allies’ concerns by signing new trade agreements allowing foreign partners to share in some of the clean energy law’s benefits. A minerals agreement signed with Japan in March will allow Japanese facilities to supply minerals for electric vehicles receiving U.S. tax credits. American officials have been negotiating with Europe for a similar agreement since last year.But at a meeting in October, the United States and Europe clashed over a U.S. proposal to allow labor inspections at mines and facilities producing minerals outside the United States and Europe. Officials are continuing to work toward completing a deal in the coming weeks, but in the meantime, the lack of agreement has cast a further pall over the U.S.-E.U. relationship.Biden administration officials have continued to defend their approach, saying that the Inflation Reduction Act does not signal a turn toward American protectionism and that climate spending is badly needed. Even with such significant investments, the United States is likely to fall short of international goals for curbing global warming.John Podesta, the senior adviser to the president for clean energy innovation, said in a conversation at the Brookings Institution in October that foreign governments had been doing “a certain amount of bitching.” But he said the U.S. spending had ultimately spurred action from other partners, including a green industrial policy that Europe introduced early this year.“So with the bitching comes a little bit more shoulder to the wheel, so that’s a good thing,” he added.Ursula von der Leyen, president of the European Commission, presented the European Union’s Green Deal Industrial Plan in Brussels in February after the United States enacted the Inflation Reduction Act.Yves Herman/ReutersIn addition to the Green Deal Industrial Plan, which the European Union proposed in February, the bloc has approved a significant green stimulus program as part of an earlier pandemic recovery fund, and additional spending for green industries in its latest budget.Japan and South Korea have proposed their own plans to subsidize green industries. In the technology industry, South Korea and Taiwan both approved measures this year offering more tax breaks to semiconductor companies, and Japan has been setting aside new subsidies for major chipmakers like TSMC and Micron.Europe also proposed a “chips act” last year, though its size is significantly smaller than the American program’s. And China has been pumping money into manufacturing semiconductors, solar panels and electric vehicles to defend its share of the global market and prop up its weakening economy.The competition has also given rise to anxieties in smaller economies, like Britain, about the ability to keep up.“The U.K. is never going to compete on money and scale at the same level as the U.S., E.U. and China because we are firstly under fiscal constraints but also just the size of the economy,” said Raoul Ruparel, the director for Boston Consulting Group’s Center for Growth and a former government special adviser.British officials have made it clear that they don’t intend to offer a vast array of subsidies, like the United States, and are instead relying on a more free-market approach with some case-by-case interventions.Some economists and trade groups have criticized this approach and Britain’s resistance to creating a sweeping industrial strategy to shape the economy more clearly toward green growth, with the assistance of subsidies.“The question is, do you want to capture the economic benefits along the way and do you want to tap into these sources of growth?” Mr. Ruparel asked.TSMC is building a $7 billion plant in Kikuyo, Japan. Japan has been setting aside new subsidies for major chipmakers like TSMC and Micron.Kyodo News, via Getty ImagesSome experts insist fears of a subsidy race are overblown. Emily Benson, a senior fellow at the Center for Strategic and International Studies, said the scale of overall spending by the United States and the European Union was not significantly different, though European spending was spread out over time.“I don’t see some huge kickoff to this massive subsidy race that will completely upend global relations,” Ms. Benson said.Business leaders and analysts said the frustration in the European Union stemmed partly from broader economic concerns after the conflict with Russia. The combination of higher energy prices and tougher competition from the United States and China has pushed down foreign direct investment in Europe and sparked other fears.Fredrik Persson, the president of BusinessEurope, said the companies his group represented had “a very strong reaction” to the Inflation Reduction Act.“We fully support the underlying direction with the green transition, but it came at a sensitive moment,” he said.Madeleine Ngo More

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    Cómo sale el dinero de China

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    Las personas chinas acaudaladas han sacado cientos de miles de millones de dólares del país este año, aprovechando el fin de las precauciones por covid que habían sellado casi por completo las fronteras de China durante casi tres años.Están utilizando sus ahorros para comprar apartamentos en el extranjero, acciones y pólizas de seguros. Ahora que pueden volar de nuevo a Tokio, Londres y Nueva York, los viajeros chinos han comprado apartamentos en Japón y han invertido dinero en cuentas en Estados Unidos o Europa que pagan intereses más altos que en China, donde las tasas son bajas y sigue cayendo.La salida de dinero indica, en parte, el malestar existente en China por su vacilante recuperación tras la pandemia, así como por problemas más profundos, como la alarmante desaceleración del sector inmobiliario, principal depósito de riqueza de las familias. Para algunas personas, también es una reacción a los temores sobre la dirección de la economía bajo el liderazgo de Xi Jinping, que ha tomado medidas enérgicas contra las empresas y ha reforzado la influencia del gobierno en muchos aspectos de la sociedad.En algunos casos, los residentes chinos están improvisando maneras de eludir los estrictos controles gubernamentales de su país sobre las transferencias de dinero al extranjero. Han comprado lingotes de oro lo suficientemente pequeños como para esparcirlos discretamente por el equipaje de mano, así como grandes cantidades de divisas extranjeras.Los bienes inmuebles también son una opción. Los chinos se han convertido en los principales compradores de apartamentos en Tokio que cuestan 3 millones de dólares o más, y a menudo pagan con maletas llenas de dinero en efectivo, dijo Zhao Jie, director ejecutivo de Shenjumiaosuan, un servicio en línea de venta de inmuebles en Tokio. “Es un trabajo muy duro contar esta cantidad de dinero en efectivo”.Antes de la pandemia, dijo, los compradores chinos solían comprar estudios en Tokio por 330.000 dólares o menos para alquilarlos. Ahora compran unidades mucho más grandes y obtienen visas de inversión para trasladar a sus familias.El Park Tower Harumi, un complejo de apartamentos de lujo en Tokio que ha atraído a compradores de China continental.Hiroko Masuike/The New York TimesLos jardines del Branz Tower Toyosu, otro proyecto de apartamentos de lujo en Tokio que también ha atraído a compradores de China continental.Hiroko Masuike/The New York TimesEn total, se calcula que este año han salido de China unos 50.000 millones de dólares al mes, principalmente de hogares chinos y empresas del sector privado.Los expertos dijeron que el ritmo de salida de dinero de China probablemente no representaba un riesgo inminente para la economía del país, de 17 billones de dólares, en gran parte porque las exportaciones de muchos de los principales productos manufacturados del país son fuertes, lo que devuelve un flujo constante de efectivo.Una amplia operación para enviar los ahorros familiares a otra parte podría ser motivo de alarma. Las salidas de dinero a gran escala han desencadenado crisis financieras en las últimas décadas en América Latina, el sudeste asiático e incluso la propia China, a finales de 2015 y principios de 2016.Hasta ahora, todo indica que el gobierno chino cree tener la situación bajo control. La salida de dinero de China ha debilitado la moneda, el renminbi, frente al dólar y otras divisas. Y esa debilidad del renminbi ha ayudado a mantener las exportaciones del país, que sostienen decenas de millones de empleos chinos.El flujo de dinero que sale de China “es muy manejable”, dijo Wang Dan, economista jefe para China en la oficina de Shanghái del Hang Seng Bank.Personas comprando joyas en LukFook.Billy H.C. Kwok para The New York TimesLos legisladores chinos siguen recurriendo a algunos de los límites a la salida de dinero del país que impusieron para frenar la crisis monetaria hace ocho años. Otras restricciones que se hicieron entonces, como el escrutinio de las exportaciones e importaciones para detectar estrategias encubiertas de transferencias internacionales de dinero, se dejaron sin efecto y no se han vuelto a imponer este año, a pesar de que se han reanudado las salidas de dinero.La salida de dinero de China ha igualado aproximadamente la entrada de dinero por los grandes superávits comerciales del país. Para consternación de muchos países, sobre todo europeos, China está exportando cada vez más paneles solares, autos eléctricos y otros productos avanzados, incluso cuando ha reemplazado más importaciones por producción nacional.El valor del renminbi cayó a principios de año a su nivel más bajo en 16 años. Durante gran parte de los dos últimos meses, se mantuvo en torno a los 7,3 por dólar, antes de subir un poco en la última semana.En 2015, los inversores que operan a tiempo real observaron fuertes ventas masivas de acciones chinas, cuando la salida de dinero del país provocó turbulencias en los mercados de todo el mundo.Ng Han Guan/Associated PressLa oleada de dinero que salió de China hace ocho años fue provocada por una caída en la bolsa de valores y un intento fallido de devaluar la moneda de forma controlada. El banco central de China tuvo que gastar hasta 100.000 millones de dólares al mes de sus reservas de divisas extranjeras para apuntalar el renminbi.En cambio, China parece haber gastado unos 15.000 millones de dólares al mes desde mediados de verano para estabilizar su moneda, según datos del banco central. “No hay nada que sugiera que sea desordenada”, dijo Brad Setser, especialista en finanzas internacionales del Consejo de Relaciones Exteriores. “La escala de la presión sigue siendo mucho menor que en 2015 o 2016”.Las salidas de 2015 y 2016 reflejaron los esfuerzos de las grandes empresas estatales por trasladar fuertes sumas de dinero al extranjero. En la actualidad, el gobierno ejerce un control político más estricto sobre esas empresas, y no ha habido indicios de una urgencia por movilizar dinero de su parte.En cambio, las empresas privadas y los hogares chinos han estado trasladando dinero al extranjero. Pero gran parte de la riqueza de la gente está anclada a bienes inmuebles, que no pueden venderse fácilmente.Al mismo tiempo, las empresas ilegales de cambio de moneda de Shanghái, Shenzhen y otras ciudades que solían convertir el renminbi en dólares y otras divisas extranjeras fueron cerradas por redadas policiales hace ocho años.Turistas chinos frente al Casino Londoner de Macao en octubrePeter Parks/Agence France-Presse — Getty ImagesTuristas chinos en un ferry durante una excursión a Hong KongBilly H.C. Kwok para The New York TimesY los reguladores han cerrado casi todos los viajes de apuestas a Macao, una región china de administración especial. Estos viajes permitían a los chinos adinerados comprar fichas de casino con renminbi, apostar una parte en el bacará o la ruleta y convertir el resto en dólares.Pekín también ha prohibido la mayoría de las inversiones extranjeras en hoteles, torres de oficinas y otros activos de escaso valor geopolítico. El arquitecto de las restricciones a la inversión extranjera en China, Pan Gongsheng, fue ascendido en julio a gobernador del banco central, el Banco Popular de China.Pero los hogares y las empresas siguen arreglándoselas para enviar dinero al extranjero.Una tarde reciente, las sucursales del Banco de China y del China Merchants Bank en China continental vendían lingotes de oro un 7 por ciento más caros que sus bancos afiliados en la adyacente Hong Kong. Esa diferencia de precios indica que, dentro de China, existe una gran demanda de oro, que puede trasladarse fácilmente fuera del país.Otro truco que están utilizando los residentes de China continental para sacar su dinero es abrir cuentas bancarias en Hong Kong y luego transferir dinero para comprar productos de seguros que se asemejan a certificados de depósito bancario. Según la Autoridad de Seguros de Hong Kong, las primas de las nuevas pólizas de seguro vendidas a los habitantes de China continental que visitan Hong Kong fueron un 21,3 por ciento más altas en el primer semestre de este año que en el primer semestre de 2019, tras casi desaparecer durante la pandemia.Una larga fila frente al Banco de China en Hong Kong el lunesBilly H.C. Kwok para The New York TimesEn una sucursal del Banco de China en la península de Kowloon, en Hong Kong, los habitantes de China continental esperaban a las 7:30 de una mañana reciente para abrir cuentas, 90 minutos antes de la apertura del banco. La fila era tan larga a las 8 a. m. que quien llegaba más tarde tenía suerte de llegar al principio de la fila antes de que terminara la jornada laboral, dijo Valerius Luo, agente de seguros de Hong Kong.Las familias suelen invertir entre 30.000 y 50.000 dólares estadounidenses en productos de seguros, varias veces más que antes, mientras buscan lugares seguros donde colocar sus ahorros, dijo Luo. “Sigue habiendo personas con un capital poderoso”, dijo, “y quieren un paquete de inversión que conserve el valor”.Li You More

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    China’s Xi Jinping Draws Elon Musk, Tim Cook and other U.S. CEOs to Gala in San Francisco

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    Amid frosty U.S.-China relations, Xi Jinping emphasized friendship in an address to executives from Apple, Boeing, Nike and others.The streets outside the San Francisco hotel where Chinese leader Xi Jinping addressed a crowd of American business executives Wednesday night were chaotic, echoing with police sirens and the chants of protesters. A woman had strapped herself to a pole 25 feet in the air in front of the hotel, yelling “Free Tibet!” as a cold rain fell.But inside the ballroom of the Hyatt Regency, the atmosphere was warm and friendly. More than 300 executives and officials listened attentively as Mr. Xi — the leader of a country often considered America’s greatest rival — spoke for over half an hour about an enduring friendship between China and the United States that could not be diminished by recent turmoil.Mr. Xi spoke of pandas. He spoke of Ping-Pong. He spoke of Americans and Chinese working together during World War II to battle the Japanese. He addressed the tensions that have rocked U.S. and Chinese relations in the past year only briefly and obliquely, comparing the relationship to a giant ship that was trying to navigate through storms.“The number one question for us is: are we adversaries, or partners?” Mr. Xi asked. Seeing the other side as a competitor, he said, would only lead to misinformed policy and unwanted results. “China is ready to be a partner and friend of the United States.”Among those who paid thousands of dollars to attend the dinner and hear Mr. Xi’s message were Tim Cook, the chief executive of Apple, Larry Fink of BlackRock, and Jerry Brown, the former governor of California. They mingled with executives from Boeing, Pfizer, Nike and FedEx. Elon Musk popped by during the cocktail hour to greet Mr. Xi, but departed before dinner began.Mr. Xi’s tone was welcomed by many of those in attendance, who believe that more engagement between the United States and China will improve the lives of people in both countries, reduce misunderstandings and potentially even deter a war.“I think it’s important Americans and Chinese are meeting again face to face,” John L. Holden, managing director for China of McLarty Associates, a consultancy, said as he queued outside the hotel. “This is not a magic bullet, but it is something that can provide possibilities that wouldn’t exist otherwise.”President Biden met with Mr. Xi earlier in the day at the Filoli Estate outside of San Francisco.Doug Mills/The New York TimesMr. Xi’s positive tone, and the enthusiasm of some of the event’s attendees, struck a sharp contrast with much of the recent conversation in the United States about China, which has focused on potential economic and security threats.Republican lawmakers have blasted President Biden for his “zombie engagement” with China. Recent polls have shown that Americans are more concerned about the rise of China than at any point since the end of the Cold War.At a news conference Wednesday, Mr. Biden celebrated a successful meeting with Mr. Xi earlier that day, which had resulted in agreements to fight drug trafficking and increase communication between the countries’ militaries. But when asked if he still thought Mr. Xi was a dictator, Mr. Biden replied: “Well, look, he is.”China has for decades been an attractive market for American businesses because of its size and growth, but the country’s slowing economy and increasingly authoritarian bent have been cooling the enthusiasm executives feel toward China.Foreign companies say the Chinese government has been slowly squeezing them out in favor of local competitors. While some think Chinese leaders have been shaken by a recent drop-off in foreign investment in China and are motivated to mend ties, executives are still concerned about recent crackdowns in China on foreign business and strict regulations, including on how companies use Chinese data.For companies that manufacture in China, supply chain disruptions during the pandemic also sent a strong message that firms should not rely on a single country for their goods, and kicked off a trend toward “de-risking.” Still, some American businesses are still making a lot of money in China. “I don’t think that anybody thinks that one dinner, or one visit, or one conference is going to reverse all the hostility that has built up between the U.S. and China,” Michael Hart, the president of the American Chamber of Commerce in China, said in an interview on Tuesday. But he added that if Mr. Xi had a friendlier stance toward the United States, “that will hopefully mean a slightly more friendly operating environment toward U.S. business in China.”Supporters of Mr. Xi near his hotel in San Francisco on Tuesday.Jim Wilson/The New York TimesIn the ballroom, 34 tables were laid with roses and orchids. They were numbered 1 to 39, skipping any number with a four, which in Chinese sounds similar to death, as well as unlucky number 13. Guests chose between a coffee-crusted Black Angus steak and vegetable curry with jasmine rice and toasted pistachios.Gina Raimondo, the U.S. secretary of commerce who spoke at the dinner, thanked Mr. Xi for a productive meeting earlier that day, where Chinese officials had met with Mr. Biden and his deputies.“We all know that we have differences,” Ms. Raimondo said at the dinner. “I’m not going to pretend otherwise. That being said, President Biden has been very clear that while we compete with China and other countries, we do not seek conflict and we do not seek confrontation.”“We want robust trade with China,” Ms. Raimondo said. She said that many of the people in attendance remained keenly interested in doing business in China. “I know that because many of you come to see me and tell me that,” she said, to laughter.Mr. Xi, who has overseen China’s military modernization and increasingly robust projection of power abroad, emphasized China’s commitment to a rules-based international system, its efforts to eradicate poverty, and its peaceful nature. Mr. Xi also touted his personal connections to the United States, including the time he spent in Iowa in the 1980s and an old photo he said he keeps of himself in front of the Golden Gate Bridge.“China has no intention to challenge the United States or unseat it,” he said.Stephen A. Orlins, the president of the National Committee on United States-China Relations, one of the groups sponsoring the event, said he was there when the committee hosted previous Chinese leaders in the United States — Deng Xiaoping, Jiang Zemin and Hu Jintao — and that all had projected a friendly demeanor. He recalled Mr. Deng famously donning a cowboy hat during a U.S. visit in 1979.“When they stand in front of an American, they tend to be more constructive and pro-American. It’s just part of what happens,” Mr. Orlins said. “They’re not going to come to an event like this and put their thumb in the eye of us as the sponsors and the audience.”Mr. Xi touted his connections to the United States during his speech. Jeff Chiu/Associated PressMr. Orlins’ group and the other organizer of the event, the U.S.-China Business Council, went through a logistical Olympics to set up the dinner. Because of security concerns, the organizers could not reveal the location until the day before, and guests received an invitation to an event with an unnamed “senior Chinese leader.”Mr. Orlins said his group knew that Mr. Xi had attended every meeting of the international grouping known as the Asia-Pacific Economic Cooperation, and concluded that he would do the same when the meeting occurred in San Francisco this week. So they extended an invitation nine months ago to host Mr. Xi.Three or four weeks ago, Mr. Orlin said he was told that Mr. Xi’s presence was still uncertain, but that he should start preparations.The Chinese protocol office peered over every attendee; they were extremely sensitive about security, especially since someone had crashed a sedan into the Chinese consulate in San Francisco just weeks before. The White House insisted that the dinner happen after Mr. Biden’s meeting with Mr. Xi Wednesday, so as not to upstage that event.The groups had to hire copious security and staff, and even fly in translation equipment, since local supplies were already claimed by the Asia-Pacific conference. Even though far more people wanted to attend the event than there was capacity for, Mr. Orlin said the $40,000 the groups charged for some tables would only partially recoup the costs of the event.Mr. Orlins said the Chinese had prepared three versions of a speech Mr. Xi could deliver that night. After Wednesday’s events with Mr. Biden, Mr. Xi had picked the friendliest one. More

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    Las Vegas Unions and MGM Resorts Reach Tentative Labor Agreement

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    The deal, the second in two days with a major resort operator, was announced on the day before a strike deadline set by two major unions.Two unions representing hospitality workers announced on Thursday a tentative labor agreement with a second major Las Vegas hotel operator, MGM Resorts International, a day before a strike deadline set by the unions.Culinary Workers Union Local 226 and Bartenders Union Local 165 said a deal had been reached on a five-year contract covering 25,400 workers at MGM Resorts, which runs eight Las Vegas properties: the Aria, Bellagio, Excalibur, Luxor, Mandalay Bay, MGM Grand, New York-New York and Park MGM.The unions, which are affiliates of UNITE HERE, announced on Wednesday that they had struck a deal with Caesars Entertainment, another major resort operator in the city.The unions said last week that their members would go on strike if an agreement with the city’s three main resort operators was not reached by Friday. The unions are still negotiating with Wynn Resorts.The unions have been negotiating with the resorts since April. The agreement would avert a strike at MGM’s resorts, although the unions’ members still need to ratify the new contract.Ted Pappageorge, the head of Local 226, said in a statement that with the new deal, MGM workers “will be able to provide for their families and thrive in Las Vegas.” The unions said the agreement with MGM included the largest wage increases “ever negotiated in Culinary Union’s 88-year history,” a workload reduction for some members and increased safety protections, among other benefits.“We’re pleased to have reached a tentative agreement that averts a strike, gives our culinary union employees a well-earned boost to pay and benefits and reduces workloads,” Bill Hornbuckle, the chief executive of MGM Resorts, said in a statement.It’s not yet clear how big of a pay increase union members will receive, but Mr. Hornbuckle, told analysts on an earnings call Wednesday that a deal would result in “the largest pay increase in the history of our negotiations with the culinary union.” He added that the company would harness “technology and process improvements to help offset the incremental labor costs we expect.” The deal with the union includes some protections from new technologies that would affect their jobs.The deals with the resort operators were reached about a week before the Las Vegas Grand Prix, a Formula 1 race that winds through the Strip, where most of the resorts are. The event promises to be a major moneymaker for the city’s hospitality industry: Mr. Hornbuckle said his company had sold more than 10,000 tickets to the event and expected to attract $60 million in extra hotel revenue that weekend. More

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    Risk of a Wider Middle East War Threatens a ‘Fragile’ World Economy

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    After shocks from the pandemic and Russia’s invasion of Ukraine, there’s little cushion if the fighting between Hamas and Israel becomes a regional conflict.Fears that Israel’s expanding military operations in Gaza could escalate into a regional conflict are clouding the global economy’s outlook, threatening to dampen growth and reignite a rise in energy and food prices.Rich and poor nations were just beginning to catch their breath after a three-year string of economic shocks that included the Covid-19 pandemic and Russia’s invasion of Ukraine. Stinging inflation has been dropping, oil prices have stabilized and predicted recessions have been avoided.Now, some leading international financial institutions and private investors warn that the fragile recovery could turn bad.“This is the first time that we’ve had two energy shocks at the same time,” said Indermit Gill, chief economist at the World Bank, referring to the impact of the wars in Ukraine and the Middle East on oil and gas prices.Those price increases not only chip away at the buying power of families and companies but also push up the cost of food production, adding to high levels of food insecurity, particularly in developing countries like Egypt, Pakistan and Sri Lanka.As it is, nations are already struggling with unusually high levels of debt, limp private investment and the slowest recovery in trade in five decades, making it tougher for them to grow their way out of the crisis. Higher interest rates, the result of central bank efforts to tame inflation, have made it more difficult for governments and private companies to get access to credit and stave off default.Israeli soldiers surveying destruction in Kfar Azza, a community near the Gaza border that Hamas militants raided last month.Tamir Kalifa for The New York Times“All of these things are happening all at the same time,” Mr. Gill said. “We are in one of the most fragile junctures for the world economy.”Mr. Gill’s assessment echoes those of other analysts. Jamie Dimon, the chief executive of JPMorgan Chase, said last month that “this may be the most dangerous time the world has seen in decades,” and described the conflict in Gaza as “the highest and most important thing for the Western world.”The recent economic troubles have been fueled by deepening geopolitical conflicts that span continents. Tensions between the United States and China over technology transfers and security only complicate efforts to work together on other problems like climate change, debt relief or violent regional conflicts.The overriding political preoccupations also mean that traditional monetary and fiscal tools like adjusting interest rates or government spending may be less effective.The brutal fighting between Israel and Hamas has already taken the lives of thousands of civilians and inflicted wrenching misery on both sides. If the conflict stays contained, though, the ripple effects on the world economy are likely to remain limited, most analysts agree.Jerome H. Powell, the Federal Reserve chair, said on Wednesday that “it isn’t clear at this point that the conflict in the Middle East is on track to have significant economic effects” on the United States, but he added, “That doesn’t mean it isn’t incredibly important.”Mideast oil producers do not dominate the market the way they did in the 1970s, when Arab nations drastically cut production and imposed an embargo on the United States and some other countries after a coalition led by Egypt and Syria attacked Israel.At the moment, the United States is the world’s largest oil producer, and alternative and renewable energy sources make up a bit more of the world’s energy mix.“It’s a highly volatile, uncertain, scary situation,” said Jason Bordoff, director of the Center on Global Energy Policy at Columbia University. But there is “a recognition among most of the parties, the U.S., Europe, Iran, other gulf countries,” he continued, referring to the Persian Gulf, “that it’s in no one’s interest for this conflict to significantly expand beyond Israel and Gaza.”Mr. Bordoff added that missteps, poor communication and misunderstandings, however, could push countries to escalate even if they didn’t want to.And a significant and sustained drop in the global supply of oil — whatever the reasons — could simultaneously slow growth and inflame inflation, a cursed combination known as stagflation.Women buying and selling grain in Yola, Nigeria. The aftereffects of the pandemic have stunted growth in emerging markets like Nigeria.Finbarr O’Reilly for The New York TimesGregory Daco, chief economist at EY-Parthenon, said a worst-case scenario in which the war broadened could cause oil prices to spike to $150 a barrel, from about $85 currently. “The global economic consequences of this scenario are severe,” he warned, citing a mild recession, a plunge in stock prices and a loss of $2 trillion for the global economy.The prevailing mood now is uncertainty, which is weighing on investment decisions and could discourage businesses from expanding into emerging markets. Borrowing costs have soared, and companies in several countries, from Brazil to China, are expected to have trouble refinancing their debt.At the same time, emerging markets like Egypt, Nigeria and Hungary have experienced some of the worst scarring from the pandemic, according to Oxford Economics, a consulting firm, resulting in lower growth than had been projected.Conflict in the Middle East as well as economic strains could also increase the stream of migrants heading to Europe from that region and North Africa. The European Union, which is teetering on the brink of a recession, is in the middle of negotiations with Egypt over increasing financial aid and controlling migration.China, which gets half its oil imports from the Persian Gulf, is struggling with a collapse in the real estate market and its weakest growth is nearly three decades.By contrast, the United States has confounded forecasters with its strong growth. From July through September, the economy grew at an annual rate of just a shade under 5 percent, buoyed by slowing inflation, stockpiled savings and robust hiring.India, backed by enthusiastic consumers, is on track to perform well next, with estimated growth of 6.3 percent.A natural gas pipeline terminal in Ashkelon, Israel, in 2017. When it comes to energy markets, events in the Middle East “will not stay in the Middle East,” said M. Ayhan Kose, a World Bank economist.Tamir Kalifa for The New York TimesThe region with the gloomiest prospects is sub-Saharan Africa, where, even before fighting broke out in Israel and Gaza, total output this year was estimated to fall 3.3 percent. Incomes in the region have not increased since 2014, when oil prices crashed, said M. Ayhan Kose, who oversees the World Bank’s annual Global Economic Prospects report.“Sub-Saharan Africa has already experienced a lost decade,” Mr. Kose said in an interview. Now “think about another lost decade.”As far as energy markets are concerned, something that “happens in the Middle East will not stay in the Middle East,” he added. “It will have global implications.” More

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    Russia’s Central Bank Raises Rates to 15 Percent to Curb Inflation

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    The jump, from 13 percent, would bring a long period of “tight monetary conditions” in order to ease price pressures, the bank said. Russia’s Central Bank on Friday raised its key interest rate by two percentage points to 15 percent, a bigger increase than expected as the bank said it was trying to bring down stubbornly high inflation. The central bank, which said the annual inflation rate would range from 7 to 7.5 percent this year, predicted a long period of “tight monetary conditions” in order to bring the rate down close to its target of 4 percent.Driving the price pressures is “steadily rising domestic demand,” the bank said in its statement, spurred by the Kremlin’s decision to inject more money into the economy as it fights a war in Ukraine. The surge in spending “is increasingly exceeding the capabilities to expand the production of goods and the provision of services,” the bank said.At a news conference Friday, Elvira Nabiullina, the head of the Central Bank, said that increased government spending was one of the reasons for the interest rate increase. Russia’s defense budget has more than tripled since last year’s invasion of Ukraine, and it is scheduled to reach almost a third of the government’s spending next year.Russia was largely successful at weathering the immediate storm produced by sanctions aimed at punishing it for the invasion. The restrictions greatly curtailed its lucrative trade with Western countries and largely isolated it from the global financial system.But as Russia spends vast amounts on its war machine, its industrial production and labor markets are unable to keep up with the increased demand, translating into higher inflation and high levels of borrowing.GUM, a luxury shopping mall in Moscow, in August last year.Nanna Heitmann for The New York TimesYevgeny Nadorshin, the chief economist at the PF Capital consulting company in Moscow, said the central bank’s effort to slow the economy by raising interest rates could “suffocate the country’s growth.” “We are in the moment when growth is transforming into a recession,” Mr. Nadorshin said.He pointed to Russia’s mortgage and consumer borrowing markets, which have experienced rapid expansion. “People are still tense about the economy, but they feel that in the moment, things are much better than expected,” Mr. Nadorshin said in a phone interview. “People feel that this is a short period that they must take advantage of.”But Dmitri Polevoy, an economist in Moscow, said that despite high interest rates, he doesn’t see major risks with the Russian economy.“This story is exclusively about inflation,” Mr. Polevoy said in written comments to questions posed through a messaging service. “Under the current budgetary policy and with the same external conditions,” he said, “the risk of a recession is low.”After experiencing a nosedive following the invasion of Ukraine, the Russian economy has returned to growth. The International Monetary Fund recently estimated economic output would rise 2.2 percent this year, as oil exports have largely evaded Western sanctions and found new customers in India, China and other countries.The country has also been able to import Western goods from some former Soviet republics, as well as Turkey and Gulf States. Russian businesses, including banks, have adapted too, serving needs since the departure of many Western companies. More