…January 2024

In any normal year January would be cold and wintry but this January has turned out to be much hotter than usual, but not in a good way. The Middle East conflict has widened, with the US and UK exchanging missiles with the Houthi group in Yemen, while Israel’s continuing war in Gaza fans unrest right across the region. 

This has led directly to a significant drop in the number of shipping companies willing to risk the Red Sea route, with many opting instead to take the long way around the horn of Africa. This has led to delays, most notably shutting down the Tesla European factory in Germany when parts ran short. It’s also contributing to a general rise in prices, undermining hope that many economies would finally get a grip on inflation this year.

Even more alarmingly, there is a distinct risk of fighting breaking out elsewhere. Israel has routinely exchanged fire with Hezbollah in Lebanon. Britain and the US have carried out several air raids in Yemen, while the US has bombed sites in Iraq and Syria. In addition, Pakistan and Iran have exchanged missile fire and the Jordanians have been accused of air strikes in Syria, plus a deadly attack on a US base in Jordan has raised the stakes even higher.

We also learned in January that 2023 was the hottest day since records began with every single day since July having been hotter than the same day of the previous year. This has a real impact on economics, leading to fires and rivers drying up, which affects everything from consumer demand to transport logistics. Tackling the climate crisis isn’t just about small steps like reducing how much plastic we use in packaging but should be seen as an opportunity to rethink the way we do things, particularly in terms of transport and manufacturing. And of course, financing, since capitalism depends on constant growth to deliver returns to attract investors. 

This year’s Davos forum – where the rich meet to debate how they want to run the world – threw up a new term, glocalisation, as an alternative to globalisation. This is prompted by the realisation that long supply chains leave countries, and companies, at risk of disruption – firstly from the pandemic, more recently from conflict. This has led some Western countries to talk about rebuilding their industrial base, notably the US through its Chips act. 

Otherwise, most G7 economies are starting to recover slowly. The USA is further ahead than Europe, with figures from the fourth quarter showing gross domestic product rising to 3.3 percent, rather than the expected 2 percent though this has not done much for President Biden’s approval ratings.

Donald Trump has won the first two Republican primaries and is almost certain to win his party’s nomination, despite a slew of court cases that show he is manifestly unfit to hold any kind of office. This has prompted much speculation on the death of American democracy but this is just part of a wider trend. When liberal democracies fail to help the silent majority in periods of economic turmoil, then those voters realise they have nothing else to lose and turn towards fascists. This simple truth is behind the British Brexit vote, the rise of populists such as Modi, Netanyahu and Putin, as well as the growing power of groups like the National Front in France, and the AfD in Germany. 

The possibility of a second Trump presidency has sparked panic amongst European leaders. Since the end of the Second World War, European defence strategy has been based on the idea that the Americans will come to our rescue. Eventually. American presidents have encouraged this dependency, discouraging the EU from setting up its own defence agency in the 1990s. But Trump has already said that he would not honour any NATO commitments to help allies. The first test is the Ukraine conflict; if the US grows tired of supporting Ukraine, what will this mean for the EU’s strategy in Ukraine, and for European defence as a whole. And where does this leave Britain? 

As this reality dawns, an alarming number of European politicians have started warning that a European war with Russia is almost inevitable. In the UK, the Defence Secretary, Grant Shapps, has said that we are moving from a “post war to a pre-war world” and that we need to plan for the war to come.

Meanwhile, the Indian company Tata Steel, is to shut down the blast furnaces at its Port Talbot steel plant in Wales as part of a four year plan to transition to electric arc furnaces for recycling steel. This will leave the UK as the only G20 economy unable to make steel, yet another example of Britain’s failure to upgrade its major industrial infrastructure. 

At the same time, a report from the levelling up, councils and communities committee says that local councils are badly underfunded and recommends the government allocate an extra £4 billion for local government. As it is, there’s likely to be a steep rise in council tax this Spring. Separately, the chancellor had floated the possibility of tax cuts in a vague attempt to woo voters but this was quickly slapped down by the IMF.

The Covid enquiry has taken its comedy revue to Edinburgh, where we have learned that the former first minister Nicola Sturgeon thought that Boris Johnson was the wrong prime minister to deal with the pandemic, and that senior Scottish government officials routinely deleted their WhatsApp messages. 

A TV drama has shone a light on the continuing debacle resulting from the government-owned Post Office intimidating and prosecuting sub-Post Masters to cover up faults in its Horizon software, which was developed by the Japanese company Fujitsu. The scandal has dragged on for nearly 20 years with politicians, both government and opposition, scrambling to explain themselves.

Meanwhile the Conservative Party, which increasingly resembles the Children’s cartoon Wacky Racers, is debating whether or not to change leaders. Again. The party put out a statement saying that Rishi Sunak, who is still prime minister, has the support of most of his MPs, which is hardly a ringing endorsement. The Tories warned that voting Labour at the next election would take the country back to square one, only to find that most people would welcome this kind of stability after the chaos of the last few years.