Three surprises that could inflame commodity markets in 2024 - The Economist   

As Russia continues to pound Kyiv, Western sanctions are beginning to cripple Arctic LNG 2, the aggressor’s largest gas-export project. In the Red Sea, through which 10% of the world’s seaborne oil travels, American forces are doing their best to repel drone attacks by Yemen’s Houthi rebels. On January 3rd local protests shut down production at a crucial Libyan oilfield. A severe drought in the Amazon risks hampering maize shipments from Brazil, the world’s largest exporter of the grain.

And yet, across commodity markets, calm somehow prevails. After a couple of years of double-digit rises, the Bloomberg Commodity index, a benchmark that covers raw-material prices, fell by more than 10% in 2023 (see chart). Oil prices, at a little under $80 a barrel, are down by 12% over the past quarter and are therefore well below the levels of 2022. European gas prices hover near their lowest levels in two years. Grains and metals are also cheap. Pundits expect more of the same this year. What, exactly, would it take to rock markets?

After successive shocks inflamed prices in the early 2020s, markets have adapted. Demand, held back by suppressed consumption, has been relatively restrained. But it is the supply response to elevated prices, in the form of an increase in output and a reshuffling of trade flows, that makes the world more shockproof today. Investors are relaxed because supply levels for many commodities look better than they have since the late 2010s.

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Robert Solow was an intellectual giant - The Economist   

Ensconced in a lorry, hidden from the enemy by the brow of a hill, the young Robert Solow decoded the radio signals of Nazi platoons across Italy. “We were very, very good at it,” he said. The trick was to get close to the enemy but not too close: near enough to pick up their transmissions, but not so near as to risk capture.

The codes were not fancy—it was “combat stuff”. But if they could be broken quickly, they might reveal an ammunition delivery that could be thwarted. The radiomen were not fancy either. Most were high-school graduates. Even Solow, who would go on to earn a Nobel prize in economics, the Presidential medal of freedom and a Portuguese knighthood, before his death on December 21st 2023, was “middle-middle-class”. He was educated at Brooklyn state schools. He preferred softball to books, and was destined for Brooklyn College until a teacher spotted his potential, broadened his reading, and encouraged him to apply to Harvard University, which he joined two years early and rejoined after the war.

What he craved was more precious than prizes: the esprit de corps that comes from membership of a small, highly motivated band of colleagues. “If you’re in a group that is doing good work, it’ll have a high morale. And if it has high morale, it’ll do good work,” he once said. As an economist, he liked formal models and mathematics. But nothing too fancy. Over-refinement reminded him of the man who knew how to “spell banana” but did not “know when to stop”. His strategy was to break big questions—about growth, resources, unemployment—into littler ones, in the hope that small answers would aggregate into larger ones.

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Can the carbon-offset market be saved? - The Economist   

“As soon as a coin in the coffer rings, the soul from purgatory springs,” ran an early advertising jingle attributed to Johann Tetzel, a 16th-century indulgence salesman. Funding the church offered believers an alternative to paying for sins in the afterlife. The carbon-credit market promises something similar. Instead of reducing your carbon footprint, why not simply pay someone else to do it for you?

It is a nice idea. Yet the voluntary carbon market—as opposed to compliance markets, such as the EU’s emissions-trading scheme—is in turmoil. Latter-day Martin Luthers, whose objections to Tetzel led to the Reformation, have pointed out that offsets struggle to prove they make a difference to emissions: renewable projects are often viable on their own, thus providing funding does not lower emissions.

Scandals have also sapped investor appetite. A report by the Guardian, a British newspaper, alleged that many leading “nature-based” offsets, which usually attempt to restore forests, are junk. Activists argue that middle men hog the proceeds and indigenous people fail to benefit. Prices for nature-based offsets plunged from $15 a tonne after the COP climate summit in Glasgow two years ago to a disastrous $0.10 a tonne after the recent meeting in Dubai, according to Xpansiv, an exchange.

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How to get rich in the 21st century - The Economist   

By 2050 there will be a new crop of economic powers—if things go to plan. Narendra Modi, India’s prime minister, wants his country’s GDP per person to surpass the World Bank’s high-income threshold three years before then. Indonesia’s leaders reckon that they have until the mid-century mark (when an ageing population will start to drag on growth) to catch up with rich countries. 2050 is also the scheduled finale for Muhammad Bin Salman’s reforms. Saudi Arabia’s crown prince wants to transform his country from an oil producer into a diversified economy. Other smaller countries, including Chile, Ethiopia and Malaysia, have schemes of their own.

These vary widely, but all have something in common: breathtaking ambition. India’s officials think that GDP growth of 8% a year will be required to meet Mr Modi’s goal—1.5 percentage points more than the country has managed on average over the past three decades. Indonesia will need growth of 7% a year, up from an average of 4.6% over the same period. Saudi Arabia’s non-oil economy will have to grow by 9% a year, up from an average of 2.8%. Although 2023 was a good year for all three, none experienced growth at this sort of pace. Very few countries have maintained such growth for five years, let alone for thirty.

Nor is there an obvious recipe for runaway growth. To boost prosperity, economists typically prescribe liberalising reforms of the sort that have been advanced by the IMF and the World Bank since the 1980s under the label of the “Washington Consensus”. Among the most widely adopted are sober fiscal policies and steady exchange rates. Today technocrats urge looser competition rules and the privatisation of state-owned firms. Yet these proposals are ultimately concerned with removing barriers to growth, rather than supercharging it. Indeed, William Easterly of New York University has calculated that, even among the 52 countries which had policies most consistent with the Washington Consensus, GDP growth only averaged 2% a year from 1980 to 1998. Mr Modi and Prince Muhammad are unwilling to wait—they want to develop, fast.

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