The Economist Asia Edition July 23, 2022

Mario Draghi tendered his resignation as prime minister of Italy, after three of the four main parties in his governing coalition refused to support him in a motion of confidence. Unless a fresh government can be formed, which looks unlikely, the probable outcome is an early election. Polls predict that will bring a hard-right alliance to power. The upheaval imperils the reform package Mr Draghi drew up, which has allowed Italy to access €200bn ($204bn) from the EU’s covid-recovery fund. Russia resumed gas supplies to Europe through the Nord Stream 1 pipeline, albeit at reduced levels, according to its operator. There had been concerns that Russia would cut off the flow of gas following a ten-day maintenance period. Earlier, the EU urged member states to reduce their gas use by…

Britain’s annual rate of inflation rose to 9.4% in June, from 9.1% in May. Motor-fuel prices were up by 42%, the highest rate since the current series of data began in 1989, the cost of food increased by nearly 10% and clothing by 6%. The price of second-hand cars, a big contributor to inflation a year ago, continued to fall. The figures add pressure on the Bank of England to bring in bigger increases to interest rates. Andrew Bailey, the bank’s governor, said a rise of half a percentage point was “on the table” for its next meeting on August 4th. The London Stock Exchange saw its biggest stockmarket debut in a decade. Haleon, a spin-off from GlaxoSmith-Kline, began trading with a market capitalisation of £30.5bn ($36.4bn). It is a…

IF YOU ARE the type of person who is loth to invest in firms that pollute the planet, mistreat workers and stuff their boards with cronies, you will no doubt be aware of one of the hottest trends in finance: environmental, social and governance (ESG) investing. It is an attempt to make capitalism work better and deal with the grave threat posed by climate change. It has ballooned in recent years; the titans of investment management claim that more than a third of their assets, or $35trn in total, are monitored through one ESG lens or another. It is on the lips of bosses and officials everywhere. You might hope that big things would come from this. You would be wrong. Sadly those three letters have morphed into shorthand for…

AND THEN there were two. On July 20th Tory MPs chose Rishi Sunak, a former chancellor of the exchequer, and Liz Truss, the foreign secretary, to battle it out to become their new leader and Britain’s next prime minister. The candidates, who will campaign for the votes of Conservative Party members over the coming weeks, agree on at least one thing: Britain sorely needs growth. The 15-year period between 2004 and 2019 was the weakest for growth in GDP per person since the one between 1919 and 1934—and that was before the shocks of Brexit and covid-19. Boosting Britain’s feeble growth will require an honest assessment of what the country does well, not just where it lags behind. That may seem head-smackingly obvious. But it needs saying. The Tories won…

THERE COMES a moment when the penny drops. And in Britain this week the sound of dropping pennies was loud. Though Britons are by no means the worst affected by the heatwaves now sweeping the northern hemisphere, they have been in awe of a particular round number: 40°C. This is an air temperature never before recorded in the United Kingdom. But it was matched and exceeded in several places on July 19th. It is one thing to understand intellectually that anthropogenic global warming is real, quite another to feel one’s own brain baking. That record rammed the point home in Britain. In the rest of Europe, in parts of China and in North America similar lessons were being learned, with wildfires raging and people dying of heatstroke. Heatwaves are nothing…

WHENEVER AMERICA’S Federal Reserve raises interest rates, investors reflexively worry about a crisis in emerging markets. Today it might appear the usual pattern is playing out. On July 27th the Fed is expected to raise rates by another three-quarters of a percentage point. Meanwhile, Sri Lanka has run out of foreign exchange, Argentina faces another default and many poor countries are in trouble (see Finance & economics section). Look more closely, however, and the world economy has been transformed in ways that mean the nature and consequences of emerging-market turmoil have changed. The archetypal emerging-market crisis was in 1997-98. As the Fed raised rates, pulling capital back to America, Thailand’s currency peg broke, leading to a panic that floored South Korea and Indonesia. It then spread to Brazil and Russia,…