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The head of the International Monetary Fund is praising Zambia’s efforts to reform its economy and urging its creditors to restructure the country’s debts. Zambia was the first African country to default on its sovereign debt in the COVID era. Economists say prompt debt restructuring is needed to restart Zambia’s stagnant economy.

Speaking at the University of Zambia Tuesday, IMF managing director Kristalina Georgieva applauded Lusaka’s efforts to reform its economy, saying it had done its part and urging its creditors to do theirs.

She said the IMF had reached an understanding in principle with China to restructure almost $6 billion Zambia owes Beijing, one of its main creditors.

The IMF chief acknowledged global disruptions that shook Zambia’s economy.

“Over the last years, we have experienced two unthinkable events:  First COVID, that brought the world economy to a standstill for a prolonged period of time.  Second, the invasion by Russia of Ukraine,” said Georgieva.

Russia’s invasion of Ukraine in February last year disrupted food, energy, and other markets as western governments hit Moscow with sanctions and Russia’s navy stopped Ukraine’s grain exports. 

Zambia defaulted on its debt in November 2020, the first African country to do so after the COVID pandemic.

But Lusaka’s debt problem predates the pandemic.

The government under former President Edgar Lungu from 2015 more than doubled Zambia’s debt as a percentage of GDP, according to World Bank-collected data.

An IMF study released this month says corruption flourished under Lungu’s government, which his former ruling party rejects.

Current President Hakainde Hichilema, who was elected in 2021, pledged to tackle corruption and secured $1.3 billion in IMF support for Zambia’s debt with reforms that cut wasteful spending.   

Civil Society Debt Alliance economist Boyd Muleya said creditors’ delay in negotiating Zambia’s debt is slowing its economic recovery.

“So, the challenge that Zambia faces today mostly is the protracted nature of the debt restructuring process that we have seen and the challenge that further augments this conversation is the fact that there are no timelines that are set and so it creates a lot of uncertainties in terms of economic planning going forward,” said Muleya.

IMF director Georgieva met late Monday with President Hichilema and vowed to help resolve the impasse with creditors.

The Economics Association of Zambia’s Trevor Simumba said reaching a final deal on Zambia’s debt would also help the IMF reverse negative views in Africa on its strict policies.

“As you are aware the economy is stagnant, it’s not growing at a pace that’s required to grow in order to deal with the structural problems.  Simply by the textbook theories of the IMF in terms of the usual – we need to rein in inflation, we need to make sure that the exchange rate is stable, doesn’t depreciate, these things in reality don’t work,” he said.

Zambia says its foreign debt hit $17 billion last June as prices for copper, one of its key exports, crashed.

Zambia is Africa’s second largest producer of the valuable metal after the Democratic Republic of Congo.
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Swedish music streaming giant Spotify said Monday it was cutting six percent of its roughly 10,000 employees, the latest cost-cutting announcement among technology companies.

“In hindsight, I was too ambitious in investing ahead of our revenue growth. And for this reason, today, we are reducing our employee base by about six percent across the company,” Spotify chief executive Daniel Ek said on Spotify’s official blog.

“I take full accountability for the moves that got us here today,” Ek added.

The Swedish company, which is listed on the New York Stock Exchange, has invested heavily since its launch to fuel growth with expansions into new markets and, in later years, exclusive content such as podcasts.

Spotify has never posted a full-year net profit despite its success in the online music market. 

In recent months, tech giants such as Google parent company Alphabet, Facebook-owner Meta, Amazon and Microsoft have announced tens of thousands of job cuts as the sector faces economic headwinds.
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Rubber tapper Raimundo Mendes de Barros prepares to leave his home, surrounded by rainforest, for an errand in the Brazilian Amazon city of Xapuri. He slides his long, scarred, 77-year-old feet into a pair of sneakers made by Veja, a French brand.

At first sight, the expensive, white-detailed urban tennis shoes seem at odds with the muddy tropical forest. But the distant worlds have converged to produce soles made from native Amazonian rubber.

Veja works with a local cooperative called Cooperacre, which has reenergized the production of a sustainable forest product and improved the lives of hundreds of rubber tapper families. It’s a project that, though modest in scale, provides a real-life example of living sustainably from the forest.

“Veja and Cooperacre are doing an essential job for us who live in the forest. They are making young people come back. They have rekindled the hope of working with rubber,” Rogério Barros, Raimundo’s 24-year-old son, told The Associated Press as he demonstrated how to tap a rubber tree in the family’s grove in the Chico Mendes Extractive Reserve. Extractive reserves in Brazil are government-owned lands set aside for people to make a living while they keep the forest standing.

Rubber was once central to the economy of the Amazon. The first boom came at the turn of the 20th century. Thousands of people migrated inland from Brazil’s impoverished Northeast to work in the forest, often in slave-like conditions.

That boom ended abruptly in the 1910s when rubber plantations started to produce on a large scale in Asia. But during World War II, Japan cut the supply, prompting the United States to finance a restart of rubber production in the Amazon.

After the war, Amazon latex commerce again fell into decline, even as thousands of families continued to work in poor conditions for rubber bosses. In the 1970s, these relatively wealthy individuals began selling land to cattle ranchers from the south, even though, in most cases, they didn’t actually own it, but rather just held concessions because they were well-connected with government officers.

These land sales caused the large scale expulsion of rubber tappers from the forest. That loss of livelihood and deforestation to make way for cattle raising is what prompted the famous environmentalist Chico Mendes — together with a cousin of Barros — to found and lead a movement of rubber tappers. Mendes would be murdered for his work in 1988.

After Mendes’ assassination, the federal government began to create extractive reserves so that the forest could not be sold to make way for cattle. The Chico Mendes reserve is one of these. But the story did not end with the creation of the reserves. Government attempts to promote the latex, including a state-owned condom factory in Xapuri, failed to create a reliable income.

What sets the Veja operation apart is that rubber tappers are now getting paid far above the commodity price for their rubber. In 2022, the Barros family received US$ 4.20 per kilo (2.2 pounds) of rubber tapped from their grove. Before, they made one tenth that amount.

This price that shoe company Veja pays the tappers includes bonuses for sustainable harvests plus recognition of the value of preserving the forest, explains Sebastião Pereira, in charge of Veja’s Amazonian rubber supply chain. The rubber workers also receive federal and state benefits per kilo.

Veja also pays bonuses to tappers who employ best practices and local cooperatives that buy directly from them. The criteria range from zero deforestation to the proper management of rubber trees. Top producers also receive a pair of shoes as a prize.

Veja’s rubber is produced by some 1,200 families from 22 local cooperatives spread across five Amazonian states: Acre, home to the Chico Mendes Extractive Reserve, Amazonas, Rondonia, Mato Grosso, and Pará.

All the rubber goes to the Cooperacre plant in Sena Madureira, in Acre state, where raw product is cut, washed, shredded into smaller pieces, heated, weighed, packed and finally shipped to factories that Veja contracts with in industrialized Rio Grande Sul state, thousands of miles to the south, as well as to Ceara state, in Brazil’s Northeast.

From there the sneakers are distributed to many parts of the world. Over the last 20 years, Veja has sold more than 8 million pairs in several countries and maintains stores in Paris, New York and Berlin. The amount of Amazon rubber it purchases has soared: from 5,000 kilos (11,023 pounds) in 2005 to 709,500 kilos (1.56 million pounds) in 2021, according to company figures.

However, it has not been a game changer for the forest in the Chico Mendes Extractive Reserve, where almost 3,000 families live. The illegal advance of cattle, an old problem, has picked up. Deforestation there has tripled in the past four years, amid the policies of former President Jair Bolsonaro, who was defeated in his reelection bid and left office at the end of last year.

Cattle long ago replaced rubber as Acre’s main economic activity. Nearly half of the state’s rural workforce is employed in cattle ranching, where only 4% live from forest products, mainly Brazil nuts.

According to an economic study by Minas Gerais Federal University, 57% of Acre’s economic output comes from cattle. Rubber makes up less than 1%.

Surrounded by cattle pasture and paved highway — the entry point for deforestation — Chico Mendes has the third highest rate of deforestation of any protected reserve in Brazil.

The growing pressure of cattle on the reserve, which has already lost 9% of its original forest cover, even led Veja to set up its own satellite monitoring system.

“Our platform shows a specific region where deforestation is rampant. So we may go there and talk. But we are aware that our role is to offer an alternative and raise awareness,” Pereira told the AP in a phone interview. “We are careful not to cross the line, as the public authority should be the one doing the law enforcement.”

According to Roberta Graf, who leads Acre’s branch of the association of federal environmental officials, the Veja experience is essential as it shows a path for living inside extractive reserves sustainably. But to achieve that, she argues, requires a joint effort that includes government at different levels, nonprofits and grassroots organizations.

“The forest communities still hold rubber tapping dear. They enjoy making a living off the latex,” she told the AP in an interview in her home in Rio Branco, Acre’s capital. “There are many forest products: copaiba, andiroba (vegetable oils), Brazil nuts, wild cacao, and seeds. The ideal should be to work with all of them according to what each reserve can offer.”
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Sri Lanka has moved closer to securing a crucial $2.9 billion loan from the International Monetary Fund after India extended financing assurances that Colombo needs from its major foreign creditors to get the bailout package. 

The IMF loan is critical for the tiny island country to begin a slow recovery process from its worst economic crisis in decades. 

Indian External Affairs Minister Subrahmanyam Jaishankar announced that the ministry would facilitate the IMF loan Friday in Colombo, where he met President Ranil Wickremesinghe and other senior Sri Lankan ministers.    

“India decided not to wait on others, but to do what we believe is right. We extended financing assurances to the IMF to clear the way for Sri Lanka to move forward,” Jaishankar said in a statement. “Our expectation is that this will not only strengthen Sri Lanka’s position but ensure that all bilateral creditors are dealt with equally.”  

India is the first of Sri Lanka’s major creditors to agree to restructuring the country’s debt. Colombo needs the same assurances from China, its largest lender, to clear the way for the disbursement of the loan, which the IMF had agreed to grant in August but which remains contingent on the support of its lenders.   

Sri Lankan officials expressed optimism that they will also get Beijing’s backing soon.  

“We can say that discussions with China are at the final stage and we expect their assurances in the next few days,” Sri Lanka’s deputy treasury secretary, Priyantha Ratnayake, told reporters. “Once China also gives assurances soon, then Sri Lanka will work to get [IMF] approval as soon as possible.”  

Sri Lanka went virtually bankrupt last year as it grappled with severe foreign exchange shortages to pay either for essential imports or its foreign creditors. Since then, it has grappled with runaway inflation of food and fuel prices. It also suspended repayment of $7 billion in foreign debt due last year.  

The Indian foreign minister also expressed New Delhi’s commitment to increase investment flows to hasten Sri Lanka’s economic recovery.

“India will encourage greater investments in the Sri Lankan economy, especially in core areas like energy, tourism, and infrastructure,” Jaishankar said.   

India has extended assistance of about $4 billion since Sri Lanka’s economy sank. “For us, it was an issue of the neighborhood first and not leaving a partner to fend for themselves,” he said. 

The two countries are expected to sign a memorandum of understanding for a renewable power project for three islands in Sri Lanka. 

Sri Lanka, which will have to implement stringent reforms to get the IMF loan, has raised taxes and tightened government spending. It has also announced deep cuts in its defense expenditure, saying it will slash its army by one third.  

Political stability has returned to the country after it was rocked by widespread citizen protests that led to the resignation of former president Gotabaya Rajapaksa, who was widely blamed for the crisis.  

The severe fuel and food shortages have also eased and tourists are returning to the county, helping the recovery of its tourist-dependent economy. But the dramatic rise in the cost of living continues to pose a challenge to millions in the country. 
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Alphabet Inc., the parent company of tech giant Google, announced Friday it is laying off 12,000 workers across the entire company — cuts reflecting six percent of the company’s total workforce.

In an email to employees Friday, Chief Executive Officer Sundar Pichai said the company saw dramatic growth over the past two years and hired new employees “for a different economic reality than the one we face today.” He said he takes full responsibility for the decisions that led to where the company is today.

In his email, Pichai said the layoffs come following “a rigorous review across product areas and functions” to ensure the company’s employees and their roles are aligned with Google’s top priorities. “The roles we’re eliminating reflect the outcome of that review,” he said.

In the email, Pichai said U.S. employees to be laid off already have been notified, while it is going to take longer for employees in other countries because of different laws and regulations.

Google’s decision comes the same week other big tech companies, Meta Platforms Inc. – the parent company of Facebook and Instagram, Twitter Inc., Microsoft and Amazon, announced they were laying off thousands of employees.

Some information for this report was provided by The Associated Press and Reuters. 

 
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The U.S. has begun taking “extraordinary measures” to avoid spending that would breach the country’s $31.4 trillion debt ceiling, Treasury Secretary Janet Yellen told lawmakers Thursday, touching off a Washington debate on how to avoid a default on the government’s financial obligations and calamity for the global economy.

The Treasury chief said she has started to suspend investments in the Civil Service retirement fund for government workers and a retiree health plan for postal workers that weren’t immediately needed to pay beneficiaries but warned those measures were only a stopgap until June 5.  

Yellen told key congressional leaders they need to increase the government’s debt ceiling, which has been done 78 times since 1960 — or, less likely — do away with any spending limit, which is the practice in most countries throughout the world.

The U.S. government routinely fails to balance its annual budget, often spending $1 trillion or more than it collects in taxes, and then reaches its debt ceiling set by Congress and agreed to by sitting presidents.

The U.S. has never defaulted on its worldwide financial commitments, such as to China, Japan and other countries that have bought its debt, or on obligations to some taxpayers, such as pension and health care payments to older Americans.

But the political debate in the U.S. over increasing the debt limit to make payments on spending already approved by Congress and a succession of presidents has often intertwined with heated discussions over future spending, leading to a standoff as spending approaches the debt ceiling.  

Once such stalemate occurred in 2011, when Democratic President Barack Obama eventually reached agreement with Republican congressional opponents to increase the debt ceiling while also curbing spending for much of the past decade.

Now, the newly empowered but narrow Republican majority in the House of Representatives is similarly calling for future spending cuts to keep 2024 discretionary federal spending for government agencies at 2022 levels.  

House Speaker Kevin McCarthy told reporters this week, “I don’t see why you would continue the past behavior.”

But the White House is balking and instead demanding a “clean vote” on increasing the federal debt ceiling that is not linked to new spending totals. President Joe Biden said he will not curb pension and health care assistance for older Americans.

“Americans have every right to expect that Congress will come together as they have dozens and dozens and dozens of times before in a bipartisan fashion to make sure we keep the American economy on this stable path,” White House spokeswoman Olivia Dalton told reporters aboard Air Force One as they accompanied Biden to California to view storm damage in the state.  

No negotiations have been held with congressional leaders.

If the government defaults — essentially running out of money to pay its debts — payments to U.S. bond holders, foreign governments and individual Americans alike, would be delayed until a new debt ceiling is reached. So could paychecks to government workers and monthly payments to pensioners and health care providers.

In addition, the credit rating of the U.S. could be cut, and stock markets destabilized, as occurred in 2011.

Yellen warned that Congress needs to act to avoid such financial turmoil.     

“The period of time that extraordinary measures may last is subject to considerable uncertainty, including the challenges of forecasting the payments and receipts of the U.S. Government months into the future,” she told congressional leaders. “I respectfully urge Congress to act promptly to protect the full faith and credit of the United States.”
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Software giant Microsoft on Wednesday became the latest major company in the tech sector to announce significant job cuts when it reported it would lay off 10,000 employees, or about 5% of its workforce.

Microsoft’s job cuts come just as e-commerce leader Amazon begins a fresh round of 18,000 layoffs, extending a wave of other major cuts at Twitter, Salesforce and dozens of smaller technology firms in recent weeks.

The phenomenon of job losses in the tech sector has global reach but has been keenly felt in Silicon Valley and other West Coast tech hubs in the United States. The website layoffs.fyi, which tracks job cuts in the tech industry, has identified well over 100 tech firms announcing layoffs since January 1 across North and South America, Europe, Asia and Australia. In all, the website has counted more than 1,200 firms making layoffs since the beginning of 2022.

Changing environment

In an interview at the World Economic Forum in Davos, Switzerland, on Wednesday, Microsoft CEO Satya Nadella appeared to suggest that retrenchment in the tech sector was a result of reduced consumer demand.

“During the pandemic, there was rapid acceleration,” Nadella said. “I think we’re going to go through a phase today where there is some amount of normalization in demand.”

He said the company would seek to drive growth by increasing its own productivity. The interview took place before Microsoft officially announced the layoffs.

One major focus of the layoffs, according to multiple media reports, was the division of the company that makes augmented reality systems, including the company’s HoloLens goggles and the Integrated Visual Augmentation System, which until recently were being developed in cooperation with the U.S. Army.

Later in the day in an email to employees, Nadella wrote, “These are the kinds of hard choices we have made throughout our 47-year history to remain a consequential company in this industry that is unforgiving to anyone who doesn’t adapt to platform shifts.”

However, he signaled the company would continue hiring in areas such as artificial intelligence that management believes are strategically important.

Also on Wednesday, Doug Herrington, head of Amazon’s global retail business, said his company was restructuring to meet consumers’ demands but would continue to invest in areas where it saw the potential for growth, including its grocery delivery business.

Stronger, perhaps

Wayne Hochwarter, who teaches business administration at Florida State University, described the layoffs at Microsoft and Amazon as examples of businesses making adjustments to their workforces in the face of a changing business climate.

“I think they overestimated the trends in personal purchasing patterns, and they thought, ‘OK, we’re going to make sure we’re not shorthanded,’” he told VOA. “And then when things softened a little bit, they realized they had hired too many people.”

He also warned against reading too much into the latest layoffs.

“I don’t think the tech sector is going to heck in a handbasket,” he said. “They may have reevaluated where things are going to go, but I don’t see this as a catalyst for sending us into economic deterioration, or anything that’s going to put a crimp on the economy.”

Looking to the future, Hochwarter said, the workforce changes are “probably going to make them stronger companies.”

Weathering the storm

Margaret O’Mara, author of the book The Code: Silicon Valley and the Remaking of America, told VOA that the current run of layoffs in the U.S. was just the latest chapter in a long cycle of booms and busts in the tech sector.

In some important respects, she said, it’s a story about more than just a misreading of trends in consumer preferences.

“It’s similar to other downturns, and there have been many — for every boom there was a bust — in that their macro[economic] conditions have shifted,” she said. “Tech is an industry that’s very much fueled by investment capital and the stock market.”

O’Mara said that over the last 10 years, with low interest rates and large amounts of cash flowing through the economy, conditions have been “extraordinary” for the growth of U.S. tech companies. As those conditions change, so does the amount of money investors want to put into tech firms.

However, O’Mara, a professor of American history at the University of Washington, said it was important not to look at conditions today as similar to the catastrophic dot-com bust of 2000.

“Tech is many orders of magnitude larger than it ever has been before,” she said. “We are talking about platform companies that are unlike the dot-coms, which were very young and very frothy, and it was easy for their value to collapse. They weren’t providing the essential services … fundamental to the rest of the economy.”

By contrast, she said, companies like Microsoft and Amazon have deep connections to the broader U.S. economy and should be able to withstand the current economic headwinds.

Difficult for H-1B visa holders

A disproportionate share of workers in the U.S. technology sector are non-citizens who hold H-1B visas, which allow companies to sponsor them. Layoffs are particularly difficult for visa holders — the overwhelming majority of whom are from India — because once their employment is terminated, they have just 60 days to find a new sponsor. Otherwise, they are required to leave the country.

Hochwarter said he thought companies would pull back on hiring H-1B visa workers, at least for the time being.

“My sense is that because that takes a great deal of effort and energy on the part of the employing organization, they’re probably going to start cutting down on those because they’re just not quite as needed,” he said.

On Wednesday, U.S. Secretary of Labor Martin Walsh, speaking at Davos, bemoaned the state of U.S. immigration law, saying it denies the U.S. the workers it needs to drive economic growth.

“We need immigration reform in America. America has always been a country that has depended on immigration. The threat to the American economy long term is not inflation, it’s immigration,” he said. “It’s not having enough workers.”
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In his meeting with Dutch Prime Minister Mark Rutte on Tuesday at the White House, President Joe Biden appeared to have made no progress to get the Netherlands to support U.S. restrictions on exporting chip-making technology to China, a key part of Washington’s strategy in its rivalry against Beijing. White House Bureau Chief Patsy Widakuswara has this report.
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The World Economic Forum is back with its first winter meetup since 2020 in the Swiss Alpine town of Davos, where leaders are seeking to bridge political divisions in a polarized world, buttress a hobbling economy and address concerns about a climate change — among many other things.

Sessions will take up issues as diverse as the future of fertilizers, the role of sports in society, the state of the COVID-19 pandemic and much more. Nearly 600 CEOs and more than 50 heads of state or government are expected, but it’s never clear how much concrete action emerges from the elite event.

Here’s what to watch as the four-day talkfest and related deal-making get underway in earnest Tuesday:

Who’s Coming?

Back in the snows for the first time since the pandemic and just eight months after a springtime 2022 session, the event will host notables like European Union Commission President Ursula von der Leyen, U.S. climate envoy John Kerry, and the new presidents of South Korea, Colombia and the Philippines.

Chinese Vice Premier Liu He addresses the gathering Tuesday, a day before his first meeting with his U.S. counterpart, Treasury Secretary Janet Yellen, in Zurich. Yellen will skip Davos.

Who else is missing? U.S. President Joe Biden, Chinese President Xi Jinping, British Prime Minister Rishi Sunak, Indian Prime Minister Narendra Modi and French President Emmanuel Macron.

Russian President Vladimir Putin, of course: Envoys from his country has been shunned because of his war in Ukraine.

Ukrainian first lady Olena Zelenska was on her way to Davos and will speak Tuesday, while her husband, President Volodymyr Zelenskyy, will give a remote address Wednesday and other officials from Ukraine are appearing on panels.

Outside the main convention center, a themed venue known as Ukraine House is hosting a concert, photo exhibits, seminars, cocktail events and other meetings this week to drum up support for Ukraine’s efforts to drive out Russian forces.

Economic Focus

The slowdown in the global economy will be a major theme at Davos, with officials ranging from International Monetary Fund Managing Director Kristalina Georgieva and European Central Bank President Christine Lagarde speaking in sessions.

Inflation soared as the world reopened from the pandemic and Russia invaded Ukraine, driving up food and energy prices, and though it has started to slow in major economies like the U.S. and those in Europe, inflation is still painfully high.

Georgieva said in an IMF blog post Monday that divides between nations — the theme at Davos this year is “Cooperation in a Fragmented World” — are putting the global economy at risk by leaving “everyone poorer and less secure.”

Georgieva urged strengthening trade, helping vulnerable countries deal with debt and ramping up climate action.

Prioritizing Climate

A major climate theme emerging from the forum’s panel sessions is the energy transition from fossil fuels to clean energy. Former U.S. Vice President Al Gore will be talking about decarbonization, efforts to build clean energy infrastructure and ensure an equitable transition.

It follows a strong year for the energy transition: Many countries passed incentives for renewable energy in 2022.

One hot topic on the agenda — harnessing nuclear fusion — focuses on science that offers immense potential but is many decades away from a commercial rollout that could feed the world’s skyrocketing thirst for energy.

Sessions on issues like adaptation to climate change and panels on deforestation, biodiversity and the future of environmental protection will give a greener hue to the gathering.

Critical Voices

The elite gathering is regularly skewered by critics who argue that attendees are too out-of-touch or profit- or power-minded to address the needs of common people and the planet.

Throughout the week, critics and activists will be waiting outside the Davos conference center to try to hold decision-makers and business leaders to account.

It started Sunday, when dozens of climate activists — some with clown makeup — braved snowfall to wave banners and chant slogans at the end of the Davos Promenade, a thoroughfare now lined with storefront logos of corporate titans like Accenture, Microsoft, Salesforce, Meta, as well as country “houses” that promote national interests.

Greenpeace International also blasted use of corporate jets that ferry in bigwigs, saying such carbon-spewing transportation smacks of hypocrisy for an event touting its push for a greener world. It said over 1,000 private-jet flights arrived and departed airports serving Davos in May.

Forum President Borge Brende acknowledged Sunday that some government leaders and CEOs fly in that way.

“I think what is more important than that is to make sure we have agreements on how we, overall, move and push the envelope when it comes to the green agenda,” he said.
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As the annual World Economic Forum gets underway this week in Davos, Switzerland, Oxfam says extreme wealth and extreme poverty have increased simultaneously for the first time in 25 years. The charity is calling for fairer taxation amid soaring global inequality, as Henry Ridgwell reports. Videographer: Henry Ridgwell
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As the annual World Economic Forum (WEF) gets underway this week at the Swiss ski resort of Davos; the charity Oxfam says extreme wealth and extreme poverty have increased simultaneously for the first time in 25 years – and is calling for fairer taxation in response to the soaring inequality. 

Hundreds of billionaires, dozens of government ministers and central bank governors are due to attend the WEF, widely seen as a get together for the global super rich. In its report, “Survival of the Richest,” published Monday, Oxfam says the world’s billionaires are becoming richer.

“Davos is back in January. The festival of wealth is back. And we’re bringing alarming new findings which show that the one percent, the richest one percent in the world have grabbed nearly two-thirds of all new wealth created since 2020,” Oxfam America’s director of economic justice, Nabil Ahmed, told VOA. 

The charity says that gain in wealth equates to $42 trillion, nearly twice as much as the bottom 99% of the world’s population earns. 

Pandemic profits 

Oxfam says the source of that wealth is partly government money: emergency liquidity pumped into the global economy as the coronavirus pandemic forced countries into lockdown in 2020. 

“That was essential. But at the same time the ultra-wealthy were able to really ride this asset boom that resulted, the stock market boom that resulted. And without the guardrails of progressive taxation in the economy, the ultra-wealthy were really able to line their pockets,” Ahmed said.

Inflation 

Oxfam calculates that at least 1.7 billion workers now live in countries where inflation is outpacing wages, meaning people are becoming poorer. The wealth of billionaires, however, has surged as inflation drives up food and energy prices. 

“The current cost-of-living crisis, with spiraling food and energy prices, is also creating dramatic gains for many at the top. Food and energy corporations are seeing record profits and making record pay-outs to their rich shareholders and billionaire owners. Corporate price profiteering is driving at least 50% of inflation in Australia, the U.S. and Europe, in what is as much a ‘cost-of-profit’ crisis as a cost-of-living one,” the Oxfam report says.

“We were able to show how 95 food and energy corporations have actually been able to double their profits in 2022,” the charity’s Ahmed told VOA.

Fair taxes 

Oxfam is calling for windfall taxes imposed on energy companies to be extended to food companies making big profits. It also wants a tax of up to 5% on the world’s multimillionaires and billionaires.  

“The spectacular rise of wealth and income at the very top has coincided with a collapse in taxes on the richest 1%. While there are differences between countries, the general trend towards lower taxes for the rich has been remarkably similar across all regions of the world,” the report says.

“Extreme inequality is not inevitable,” Ahmed told VOA. “This isn’t about nurses, teachers, the middle class. This is really about those at the very top, ensuring that they’re paying far fairer taxes.”

Solutions 

The president of the WEF maintained that the annual Davos summit does benefit the whole world. 

“So much is at stake, we really need to find solutions on the wars and conflicts. We also have to secure that we don’t go into a recession, and we have 10 years of low growth, as we had in the 1970s. That is at stake, and we need all the stakeholders to be part of working towards a safer and more inclusive growing global economy,” World Economic Forum President Borge Brende told The Associated Press.

Some of the information in this report came from The Associated Press.
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Big oil firms came under pressure at the start of the World Economic Forum (WEF) from activists who accused them of hijacking the climate debate, while a Greta Thunberg-sponsored “cease and desist” campaign gained support on social media.

Major energy firms including BP BP.L, Chevron CVX.N and Saudi Aramco 2222.SE are among the 1,500 business leaders gathering for the annual meeting in the Swiss resort of Davos, where global threats including climate change are on the agenda.

“We are demanding concrete and real climate action,” said Nicolas Siegrist, the 26-year-old organiser of the protest who also heads the Young Socialists party in Switzerland.

The annual meeting of global business and political leaders opens in Davos on Monday.

“They will be in the same room with state leaders and they will push for their interests,” Siegrist said of the involvement of energy companies during a demonstration attended by several hundred people on Sunday.

The oil and gas industry has said that it needs to be part of the energy transition as fossil fuels will continue to play a major role in the world’s energy mix as countries shift to low carbon economies.

On Monday, a social media campaign added to the pressure on oil and gas companies, by promoting a “cease and desist” notice sponsored by climate activists Thunberg, Vanessa Nakate and Luisa Neubauer, through the non-profit website Avaaz.

It demands energy company CEOs “immediately stop opening any new oil, gas, or coal extraction sites, and stop blocking the clean energy transition we all so urgently need,” and threatens legal action and more protests if they fail to comply.

The campaign, which had been signed by more than 660,000 people, had almost 200,000 shares on Monday morning.

Sumant Sinha, who heads one of India’s largest renewable energy firms, said it would be good to include big oil companies in the transition debate as they have a vital role to play.

“If oil people are part of these conversations to the extent that they are also committing to change then by all means. It is better to get them inside the tent than to have them outside the tent,” Sinha, chairman and CEO of ReNew Power, told Reuters, saying that inclusion should not lead to “sabotage.”

Rising interest rates have made it harder for renewable energy developments to attract financing, giving traditional players with deep pockets a competitive advantage.

As delegates began to arrive in Davos, Debt for Climate activists protested at a private airport in eastern Switzerland, which they said would be used by some WEF attendees, and issued a statement calling for foreign debts of poorer countries to be cancelled in order to accelerate the global energy transition.
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The outlook for the year ahead and beyond is not very promising. The International Labor Organization warns that the current global economic slowdown will force millions of workers to accept lower quality, poorly paid jobs.  

In its “World Employment and Social Outlook: Trends 2023” report, the ILO predicts global unemployment will rise by 3 million for a total of 208 million this year with similar projections for 2024. 

ILO director of work quality, Manuela Tomei, said both the quantity and quality of jobs will deteriorate, and that working conditions are expected to worsen while wages go down. 

“Workers in low- and middle-income countries are expected to be hardest hit,” Tomei explained. “And with the pandemic and the economic slowdown across the globe, the prospects of seeing a reduction in informality and poverty have and will deteriorate further.”  

The report warns the cost-of-living crisis will push more people into poverty, widening the gap between rich and poor. It also notes that about 2 billion people, mainly in developing countries, work in the informal economy.  

According to the report, the slowing global economy is likely to reverse the progress which has been made since 2004 in moving people out of the informal sector.  

In addition to the millions of reported unemployed, the ILO says 473 million people last year stopped actively searching for work. It explains they either were discouraged about prospects of finding a job or had other obligations such as care responsibilities. 

For the first time since the 1970s, Tomei said stagflation conditions— that is high inflation and low growth combined — are threatening productivity and labor market recovery. 

She added that, “The Ukrainian war, geopolitical tensions, disruption in supply chains, high inflation, the tightening of monetary policies, and great uncertainty overall are all contributing to depressing the prospects for labor markets.”   

The ILO reports young people aged 15 to 24 are facing severe difficulties in finding employment, and that they are three times more likely to be out of a job than adults. It adds young women are faring much worse than young men, and that only 47.4 percent of women participated in the global labor force last year compared with 72.3 percent for men. 
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The increase in U.S. consumer prices eased again in December, dropping for the sixth straight month after reaching a four-decade high in mid-2022, the government reported Thursday.  

The Bureau of Labor Statistics said its consumer price index rose at an annualized 6.5% pace last month, down from the 7.1% figure in November and off sharply from the peak of 9.1% last June. December prices edged down a tenth of a percentage point from November. 

While U.S. shoppers might notice some relief when they pay for their groceries and other purchases, inflation is still well above the normal 2% figure that policy makers at the Federal Reserve, the country’s central bank, strive for. 

Some U.S. economists are still predicting a recession in the U.S. economy, the world’s largest, later this year, but job growth has remained strong, with 233,000 new jobs added in December. 

On Thursday, the Labor Department reported that applications for unemployment benefits fell last week to their lowest level in 15 weeks, to a total of 205,000. Jobless claims are generally viewed as an indicator of layoffs. Some high-profile companies, like the Goldman Sachs investment banking company and Cable News Network, have laid off workers, but plenty of other companies are still looking to hire more employees.  

The U.S. unemployment rate is at 3.5%, a 53-year low. 

Inflation, however, remains the main point of concern for Federal Reserve policy makers.  

The central bank raised its benchmark interest rate seven times last year in an effort to slow job growth and increase the cost of borrowing for businesses and consumers alike, on the presumption that the higher loan costs would bring down inflation.  

The strategy appears to be working, but only slowly. 

The Fed has indicated it plans to raise rates another two or three times in the coming months before halting further increases but leaving the benchmark rate at a high level. 
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The World Bank slashed its 2023 growth forecasts on Tuesday to levels teetering on the brink of recession for many countries as the impact of central bank rate hikes intensifies, Russia’s war in Ukraine continues, and the world’s major economic engines sputter.

The development lender said it now expected global GDP growth of 1.7% in 2023 — the slowest pace outside the 2009 and 2020 recessions in nearly three decades. In its previous Global Economic Prospects report, in June 2022, the bank had forecast 2023 global growth at 3.0%

The bank said major slowdowns in advanced economies, including sharp cuts to its forecast to 0.5% for both the United States and the euro zone, could foreshadow a new global recession less than three years after the last one.

“Given fragile economic conditions, any new adverse development — such as higher-than-expected inflation, abrupt rises in interest rates to contain it, a resurgence of the COVID-19 pandemic or escalating geopolitical tensions — could push the global economy into recession,” the bank said in a statement accompanying the report.

The bleak outlook will be especially hard on emerging market and developing economies, the World Bank said, as they struggle with heavy debt burdens, weak currencies and income growth, and slowing business investment that is now forecast at a 3.5% annual growth rate over the next two years — less than half the pace of the past two decades.

“Weakness in growth and business investment will compound the already devastating reversals in education, health, poverty and infrastructure and the increasing demands from climate change,” World Bank President David Malpass said in a statement.

China’s growth in 2022 slumped to 2.7%, its second slowest pace since the mid-1970s after 2020, as zero-COVID restrictions, property market turmoil and drought hit consumption, production and investment, the World Bank report said. It predicted a rebound to 4.3% for 2023, but that is 0.9 percentage-point below the June forecast due to the severity of COVID disruptions and weakening external demand.

The World Bank noted that some inflationary pressures started to abate as 2022 drew to a close, with lower energy and commodity prices, but warned that risks of new supply disruptions were high, and elevated core inflation may persist. This could cause central banks to respond by raising policy rates by more than currently expected, worsening the global slowdown, it added.

The bank called for increased support from the international community to help low-income countries deal with food and energy shocks, people displaced by conflicts, and a growing risk of debt crises. It said new concessional financing and grants are needed along with the leveraging of private capital and domestic resources to help boost investment in climate adaptation, human capital and health, the report said.

The report comes as the World Bank’s board this week is expected to consider a new “evolution road map” for the institution to vastly expand its lending capacity to address climate change and other global crises. The plan will guide negotiations with shareholders, led by the United States, for the biggest revamp in the bank’s business model since its creation at the end of World War II.
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Ant Group’s founder Jack Ma will give up control of the Chinese fintech giant in an overhaul that seeks to draw a line under a regulatory crackdown that was triggered soon after its mammoth stock market debut was scuppered two years ago.

Ant’s $37 billion IPO, which would have been the world’s largest, was cancelled at the last minute in November 2020, leading to a forced restructuring of the financial technology firm and speculation the Chinese billionaire would have to cede control.

While some analysts have said a relinquishing of control could clear the way for the company to revive its IPO, the changes announced by the group on Saturday, however, are likely to result in a further delay due to listing regulations.

China’s domestic A-share market requires companies to wait three years after a change in control to list. The wait is two years on Shanghai’s Nasdaq-style STAR market, and one year in Hong Kong.

A former English teacher, Ma previously possessed more than 50% of voting rights at Ant but the changes will mean that his share falls to 6.2%, according to Reuters calculations.

Ma only owns a 10% stake in Ant, an affiliate of e-commerce giant Alibaba Group Holding Ltd (9988.HK), but has exercised control over the company through related entities, according to Ant’s IPO prospectus filed with the exchanges in 2020.

Hangzhou Yunbo, an investment vehicle for Ma, had control over two other entities that own a combined 50.5% stake of Ant, the prospectus showed.

Ma’s ceding of control comes as Ant is nearing the completion of its two-year regulatory-driven restructuring, with Chinese authorities poised to impose a fine of more than $1 billion on the firm, Reuters reported in November.

The expected penalty is part of Beijing’s sweeping and unprecedented crackdown on the country’s technology titans over the past two years that has sliced hundreds of billions of dollars off their values and shrunk revenues and profits.

But Chinese authorities have in recent months softened their tone on the tech crackdown amid efforts to bolster a $17-trillion economy that has been badly hurt by the COVID-19 pandemic.

“With the Chinese economy in a very febrile state, the government is looking to signal its commitment to growth, and the tech, private sectors are key to that as we know,” said Duncan Clark, chairman of investment advisory firm BDA China.

“At least Ant investors can (now) have some timetable for an exit after a long period of uncertainty,” said Clark, who is also an author of a book on Alibaba and Ma.

REGULATORY SCRUTINY

Ant operates China’s ubiquitous mobile payment app Alipay, the world’s largest, which has more than 1 billion users.

Ant, whose businesses also span consumer lending and insurance products distribution, said Ma and nine of its other major shareholders had agreed to no longer act in concert when exercising voting rights, and would only vote independently.

It added that the shareholders’ economic interests in Ant will not change as a result of the adjustments.

Ant also said it would add a fifth independent director to its board so that independent directors will comprise a majority of the company’s board. It currently has eight board directors.

“As a result, there will no longer be a situation where a direct or indirect shareholder will have sole or joint control over Ant Group,” it said in its statement.

Reuters reported in April 2021 that Ant was exploring options for Ma, one of China’s most successful and influential businessmen, to divest his stake in Ant and give up control.

The Wall Street Journal reported in July last year, citing unnamed sources, that Ma could cede control by transferring some of his voting power to Ant officials including Chief Executive Officer Eric Jing.

Ant’s market listing in Hong Kong and Shanghai was derailed days after Ma publicly criticized regulators in a speech in October 2020. Since then, his sprawling empire has been under regulatory scrutiny and going through a restructuring.

Once outspoken, Ma has largely remained out of public view since the regulatory crackdown that has reined in the country’s technology giants and did away with a laissez-faire approach that drove breakneck growth.

“Jack Ma’s departure from Ant Financial, a company he founded, shows the determination of the Chinese leadership to reduce the influence of large private investors,” said Andrew Collier, managing director of Orient Capital Research.

“This trend will continue the erosion of the most productive parts of the Chinese economy.”

As Chinese regulators frown on monopolies and unfair competition, Ant and Alibaba have been untangling their operations from each other and independently seeking new business, Reuters reported last year.

Ant said on Saturday that its management would no longer serve in the Alibaba Partnership, a body that can nominate the majority of the e-commerce giant’s board, affirming a change that started mid-last year.
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