When tectonic plates shift, the earth shakes. Tsunamis race around the globe in the form of shock waves. The global economy has experienced three such earthquakes in recent years. The Covid-19 pandemic has made us aware of the vulnerability of a globally integrated economy. When important components are stuck in quarantine in China, production lines in Germany come to a halt. Thus, in the organisation of global supply chains – which for decades have been trimmed down for efficiency (‘just in time’) – resilience (‘just in case’) will play a more important role in the future.
After the end of the unipolar moment, larger and smaller powers are vying for the best positions in the new world order. In the hegemonic conflict between China and the United States, the government under Joe Biden has verbally disarmed, but its export controls in the high-tech sector have all the more bite. This politicises the framework conditions for investment decisions. Market access, infrastructure projects, trade agreements, energy supplies and technology transfers are more and more being evaluated from a geopolitical point of view. Companies are increasingly faced with the decision of choosing one IT infrastructure, one market and one currency system over the other. The major economies may not decouple from each other across the board, but diversification (‘not all eggs in one basket’) is gaining momentum, especially in the high-tech sector. As this develops, we cannot rule out the possibility that economic blocs will form.
The experience with the ‘human uncertainty factor’ in the pandemic is also resulting in the acceleration of digital automation. Robots and algorithms make it easier to protect against geopolitical risks. In order to bring these vulnerabilities under control, the old industrialised countries are reorganising their supply chains. It remains to be seen whether this is purely for economic or logistical reasons (re-shoring or near-shoring), or whether geopolitical motives also play a role (friend-shoring).
Bloc formations
China must respond to these challenges. The fate of the People’s Republic will depend on whether it succeeds in charging to the head of the pack in worldwide technology, even without foreign technology and know-how. Anyone who believes that Beijing has no countermeasures up its sleeve will soon be proven wrong. In order to compensate for the closure of the developed export markets, the Silk Road Initiative has been opening up new sales markets and raw material suppliers for years. At the last party congress, the Chinese Communist Party officially approved a reversal of its development strategy. From now on, the gigantic home market will be the engine of the ‘dual circular economy’. Export earnings are still desired, but strategically they are being relegated to a supportive role.
One impetus behind China’s massive build-up of gold reserves serves is the goal of having its own (digital) currency take the place of the US dollar as the world’s reserve currency. Because China benefits more than anyone else from open world markets, it is continuing to rely on a globally networked world economy for the time being. Alternatively, Beijing could also be tempted to create its own economic bloc. The foundations for this have already been put into place, with the Regional Comprehensive Economic Partnership (RCEP), the BRICS Development Bank (NDB), the Asian Infrastructure Investment Bank (AIIB), the Silk Road Initiative (BRI) and bilateral cooperation in Africa, Latin America and the Middle East. The difficulties that Western companies face in the Chinese market should provide just a sample of what is looming if China makes market entry into such a bloc contingent on good political will.
But it is not just China. Generally, for all of Asia as the new centre of the world economy, these geoeconomic disruptions are tantamount to a tsunami. And the disruptions could hit developing countries particularly hard. Whether they are being cut from global supply chains for the sake of resilience or due to geopolitical factors, this brings equally devastating results. Of course, some economies are hoping to benefit from the diversification strategies of developed countries (i.e. the ‘China plus one’ strategy).
As with Europe, most Asian states depend on China’s dynamism for their economic development – and on the guarantees of the US for their security.
But digital automation neutralises what is often their only comparative advantage – cheap labour costs. Why should a European medium-sized company have to deal with corruption and power cuts, quality problems and sea routes lasting weeks, when the robots at home produce better and cheaper? Algorithms and artificial intelligence are also likely to replace millions of service providers in outsourced back offices and call centres. How are developing countries supposed to feed their (sometimes explosively) growing populations if, in the future, simple jobs are to be performed by machines in industrialised countries? And what do these geoeconomic disruptions mean for the social and political stability of these countries?
As with Europe, most Asian states depend on China’s dynamism for their economic development – and on the guarantees of the US for their security. Therefore, to varying degrees, they resist pressure to choose sides. Whether it will be possible to escape the pull of geoeconomic bipolarisation over the long term, however, is still an open question. If the splitting of IT infrastructures continues, it could be too costly to play in both technological worlds. American regulations prevent products with certain Chinese components from entering the market; but those who want to play on the Chinese market will not be able to avoid a steadily increasing share of Chinese components.
Reducing economic vulnerabilities through diversification
This type of global economy would also pose an existential challenge to export nations such as Germany. Even the short-term cutting off of Russian energy is a Herculean task. Decoupling from China at the same time seems difficult to imagine. But burying one’s head in the sand will not be enough. Neither nations nor businesses will be able to escape the pressure from Washington and Beijing. In the future, important economic, technological, and infrastructural decisions will increasingly be subject to geopolitical considerations. Therefore, reducing one-sided vulnerabilities through diversification is the right thing to do.
A geoeconomic tsunami will roll around the globe, crushing old structures in its path.
On the other hand, some of the lessons drawn from the over-reliance on Russian energy before the war seem short-sighted. For decades, the German economy has integrated itself more deeply into the world economy than many other countries, with the goal of avoiding violent conflicts through interdependence. It cannot break out of these interdependencies from one day to the next. Reducing economic vulnerabilities through diversification is therefore the right move, while decoupling for ideological reasons is the wrong one. Germany should therefore beware of sacrificing its economic future to an overly ambitious value-based foreign policy. This is because losses of prosperity translate into fears of the future and social decline at home – a fertile breeding ground for right-wing populists and conspiracy theorists.
The geopolitical race, digital automation and the reorganisation of supply chains according to resilience criteria are mutually reinforcing processes. It is not only companies that have to rethink their business models – entire national economies need to adapt their development models in order to be able to survive in a rapidly changing global economy. The particular difficulty lies in having to make investment decisions today without being able to foresee exactly what the world of tomorrow will look like. Looking into the crystal ball, some think they can see an age of de-globalisation. And in fact, in the wake of the 2008 financial crisis, the peak of globalisation, as measured by the volume of world trade and capital exports has already passed. However, de-globalisation is not synonymous with a relapse into autarkic national economies. A stronger regionalisation of the more networked global economy is more likely. In view of the political, social and cultural upheavals of turbo-globalisation, this need not be the worst of possible outcomes.
In order to prevent the regionalisation of the world economy from turning into the formation of competing blocs with high prosperity losses for everyone, there is a need for new partnerships on an equal footing.
One thing is certain: A geoeconomic tsunami will roll around the globe, crushing old structures in its path. The hope is that out of the ‘creative destruction’ that Joseph Schumpeter spoke of, there will emerge a more resilient, sustainable and diversified global economy. However, without political shaping of the new world economic order, the opposite could also occur. Politically, this means adapting the rule-based world order so that it remains a stable framework for an open world economy because even the organisation of a regionalised world economy needs global rules of the game that everyone adheres to. Therefore, with few exceptions, nearly all nations have a great interest in the functioning of rules-based multilateralism. However, in the Global South, there is already a great deal of distrust towards the existing world order. In reality, according to some, this amounts to the creation of the old and new colonial powers, whose supposedly universal norms do not apply to everyone but are instead violated at will by the permanent members of the UN Security Council.
In order to break through current blockages, such as those of the World Trade Organization (WTO), the emerging powers must be granted representation and a voice in the multilateral institutions that would be commensurate with their newfound importance. Europe will have to accept a relative loss of influence because, as a rule-based supranational entity, its survival and prosperity depend on an open, rule-based world (economic) order.
Instead of morally elevating itself above others, Europe must concentrate all its energies on maintaining the conditions for the success of its economic and social model. In order to prevent the regionalisation of the world economy from turning into the formation of competing blocs with high prosperity losses for everyone, there is a need for new partnerships on an equal footing beyond the currently popular comparisons of democracies and autocracies. In order for new trust to develop, the global challenges (climate change, pandemics, hunger, migration) that particularly affect the Global South must finally be tackled with determination.
Almost seven years since news broke of an alleged conspiracy to fix the price of packaged bread across Canada, the saga isn’t over: the Competition Bureau continues to investigate the companies that may have been involved, and two class-action lawsuits continue to work their way through the courts.
Here’s a timeline of key events in the bread price-fixing case.
Oct. 31, 2017: The Competition Bureau says it’s investigating allegations of bread price-fixing and that it was granted search warrants in the case. Several grocers confirm they are co-operating in the probe.
Dec. 19, 2017: Loblaw and George Weston say they participated in an “industry-wide price-fixing arrangement” to raise the price of packaged bread. The companies say they have been co-operating in the Competition Bureau’s investigation since March 2015, when they self-reported to the bureau upon discovering anti-competitive behaviour, and are receiving immunity from prosecution. They announce they are offering $25 gift cards to customers amid the ongoing investigation into alleged bread price-fixing.
Jan. 31, 2018: In court documents, the Competition Bureau says at least $1.50 was added to the price of a loaf of bread between about 2001 and 2016.
Dec. 20, 2019: A class-action lawsuit in a Quebec court against multiple grocers and food companies is certified against a number of companies allegedly involved in bread price-fixing, including Loblaw, George Weston, Metro, Sobeys, Walmart Canada, Canada Bread and Giant Tiger (which have all denied involvement, except for Loblaw and George Weston, which later settled with the plaintiffs).
Dec. 31, 2021: A class-action lawsuit in an Ontario court covering all Canadian residents except those in Quebec who bought packaged bread from a company named in the suit is certified against roughly the same group of companies.
June 21, 2023: Bakery giant Canada Bread Co. is fined $50 million after pleading guilty to four counts of price-fixing under the Competition Act as part of the Competition Bureau’s ongoing investigation.
Oct. 25 2023: Canada Bread files a statement of defence in the Ontario class action denying participating in the alleged conspiracy and saying any anti-competitive behaviour it participated in was at the direction and to the benefit of its then-majority owner Maple Leaf Foods, which is not a defendant in the case (neither is its current owner Grupo Bimbo). Maple Leaf calls Canada Bread’s accusations “baseless.”
Dec. 20, 2023: Metro files new documents in the Ontario class action accusing Loblaw and its parent company George Weston of conspiring to implicate it in the alleged scheme, denying involvement. Sobeys has made a similar claim. The two companies deny the allegations.
July 25, 2024: Loblaw and George Weston say they agreed to pay a combined $500 million to settle both the Ontario and Quebec class-action lawsuits. Loblaw’s share of the settlement includes a $96-million credit for the gift cards it gave out years earlier.
Sept. 12, 2024: Canada Bread files new documents in Ontario court as part of the class action, claiming Maple Leaf used it as a “shield” to avoid liability in the alleged scheme. Maple Leaf was a majority shareholder of Canada Bread until 2014, and the company claims it’s liable for any price-fixing activity. Maple Leaf refutes the claims.
This report by The Canadian Press was first published Sept. 19, 2024.
Companies in this story: (TSX:L, TSX:MFI, TSX:MRU, TSX:EMP.A, TSX:WN)
TORONTO – Canada’s main stock index was up more than 250 points in late-morning trading, led by strength in the base metal and technology sectors, while U.S. stock markets also charged higher.
The S&P/TSX composite index was up 254.62 points at 23,847.22.
In New York, the Dow Jones industrial average was up 432.77 points at 41,935.87. The S&P 500 index was up 96.38 points at 5,714.64, while the Nasdaq composite was up 486.12 points at 18,059.42.
The Canadian dollar traded for 73.68 cents US compared with 73.58 cents US on Thursday.
The November crude oil contract was up 89 cents at US$70.77 per barrel and the October natural gas contract was down a penny at US2.27 per mmBTU.
The December gold contract was up US$9.40 at US$2,608.00 an ounce and the December copper contract was up four cents at US$4.33 a pound.
This report by The Canadian Press was first published Sept. 19, 2024.
VANCOUVER – Supervised injection sites are saving the lives of drug users everyday, but the same support is not being offered to people who inhale illicit drugs, the head of the BC Centre for Excellence in HIV/AIDS says.
Dr. Julio Montaner said the construction of Vancouver’s first indoor supervised site for people who inhale drugs comes as the percentage of people who die from smoking drugs continues to climb.
The location in the Downtown Eastside at the Hope to Health Research and Innovation Centre was unveiled Wednesday after construction was complete, and Montaner said people could start using the specialized rooms in a matter of weeks after final approvals from the city and federal government.
“If we don’t create mechanisms for these individuals to be able to use safely and engage with the medical system, and generate points of entry into the medical system, we will never be able to solve the problem,” he said.
“Now, I’m not here to tell you that we will fix it tomorrow, but denying it or ignoring it, or throw it under the bus, or under the carpet is no way to fix it, so we need to take proactive action.”
Nearly two-thirds of overdose deaths in British Columbia in 2023 came after smoking illicit drugs, yet only 40 per cent of supervised consumption sites in the province offer a safe place to smoke, often outdoors, in a tent.
The centre has been running a supervised injection site for years which sees more than a thousand people monthly and last month resuscitated five people who were overdosing.
The new facilities offer indoor, individual, negative-pressure rooms that allow fresh air to circulate and can clear out smoke in 30 to 60 seconds while users are monitored by trained nurses.
Advocates calling for more supervised inhalation sites have previously said the rules for setting up sites are overly complicated at a time when the province is facing an overdose crisis.
More than 15,000 people have died of overdoses since the public health emergency was declared in B.C. in April 2016.
Kate Salters, a senior researcher at the centre, said they worked with mechanical and chemical engineers to make sure the site is up to code and abidies by the highest standard of occupational health and safety.
“This is just another tool in our tool box to make sure that we’re offering life-saving services to those who are using drugs,” she said.
Montaner acknowledged the process to get the site up and running took “an inordinate amount of time,” but said the centre worked hard to follow all regulations.
“We feel that doing this right, with appropriate scientific background, in a medically supervised environment, etc, etc, allows us to derive the data that ultimately will be sufficiently convincing for not just our leaders, but also the leaders across the country and across the world, to embrace the strategies that we are trying to develop.” he said.
Montaner said building the facility was possible thanks to a single $4-million donation from a longtime supporter.
Construction finished with less than a week before the launch of the next provincial election campaign and within a year of the next federal election.
Montaner said he is concerned about “some of the things that have been said publicly by some of the political leaders in the province and in the country.”
“We want to bring awareness to the people that this is a serious undertaking. This is a very massive investment, and we need to protect it for the benefit of people who are unfortunately drug dependent.” he said.
This report by The Canadian Press was first published Sept. 18, 2024.
