Monday, February 20, 2017

A proposal on urban transport management

Arguably the two biggest immediate constraints facing large cities in developing countries like India are the availability of affordable housing and acute traffic congestion. Unlike several other problems, including the availability of adequate utility infrastructure and jobs, these two are not easily mitigated and the costs on the typical urban resident can be huge. 

In the absence of affordable housing within a reasonable enough distance from the city centre to make you feel that you are living in the city, a reality in most Indian cities, immigrants are forced into  living in outer suburbs or squat on cramped illegal settlements. This amplifies workplace commute times and adds to the traffic congestion. The latter spares none, reducing peak-time travels to crawls, and leaves a toxic smog of air pollution. This post will focus on urban transport. 

I have written earlier arguing that cities need to embrace several complementary policies to address the challenge of traffic congestion. The main levers are four-fold - increase the cost of vehicle ownership (higher emission standards, higher vehicle taxes etc), vehicle usage (congestion charging, higher parking fees etc), extensive promotion of public transport, and focus on transit-oriented development (higher FAR on transit corridors and around stations). Addressing traffic congestion is an ongoing process, with no final destination in terms of policies, and cities will have to constantly play with all these levers.  

The problem suffers from a serious incentive alignment and jurisdictional problem. The city residents suffer the consequences and the local government has no power or role in the exercise of at least two of the four policy levers - vehicle ownership and public transport. Both are the domain of state governments, leaving policies to control vehicle usage and transit oriented development as the only available lever with cities. It is indeed scandalous that, outside of road infrastructure, very few Indian cities spend anything on urban transport. 

Unfortunately, both these run into challenges of the political economy. Higher parking fees and congestion pricing risk inviting the wrath of the middle class vehicle users. Higher FAR on transit corridors, as the example of Mumbai DP 2034 shows, generates opposition from existing land owners. Also, there is the realisation that any progress on these as isolated events may not suffice.

In the circumstances, the standard response of Indian cities to traffic congestion has been road widening and fly-overs. That has run its course in all the larger cities. Now it is left to the demand side policies of internalising the costs of vehicle ownership and usage and the supply side one of expanding public transport. I have argued here that the odd-even vehicle ban in Delhi may have a crossing of the Rubicon moment in India. So is there a way forward?

How about an initiative whereby Government of India volunteers to support cities who embrace an integrated approach that combines all these levers? To start with, it may be tried out in 3-5 cities over a 10 year period. Some of the cities where metro rail systems have been sanctioned may be the best places to initiate this approach. Based on initial learnings, it can be gradually extended to other cities.

The cities should develop an integrated transport plan, with focus on addressing effective transport management. This should be done differently from the current approach of semi-cooked, cookie-cutter transport plans made on shoe-string budgets that every city flaunts. The plan should bring together all the levers and integrate them with existing policies, and be supported by credible data and  rigorous enough quantitative analysis. It should seek to align incentives, institutional roles, and resource requirements.

State governments should commit to transition the responsibility of urban transport to the local government, with adequate financial and institutional support. They should also evolve mechanisms to impose surcharge or higher registration and annual taxes on vehicles registered in the city, while minimising tax arbitrage opportunities.

Cities should commit to a progressively rising schedule of internalising vehicle usage charges - higher parking and congestion pricing, and pedestrianisation of certain areas. Most importantly, they should accept the incorporation of transit-oriented development into their master plans, with a plan for phased rise in FAR and corridor coverage, starting with the densest travel corridors. And cities should commit an increasing share of resources to invest in urban transport.

GoI should make conditional all its investments in metro-rail and other urban transport systems to the adoption of transit-oriented development and value capture frameworks. It should support any city which volunteers with the aforementioned reforms with significant long-term resource commitment.

All sides, as well as opinion makers, need to realise that there are no short-cuts like PPPs that can substitute for large public investments in urban transport. And public support will have to cover even a significant share of operating expenditures. It is for this reason that all financing options should be explored, including value capture instruments that can help socialise at least some of the private windfalls from these measures.

The city, state, and GoI can negotiate a tripartite agreement to implement the first phase of this over a 5-8 year period, with reasonable milestones and timelines.  

This approach has several benefits. The most important is that it enables more effective realisation of the full benefits of investments like those on metro rail systems. Currently, in the absence of higher FAR and value capture frameworks, metro rail projects are set up to struggle for their viability and benefit none but rentier landowners. Or programs like Smart Cities make isolated transport investments, whose full potential remain unrealised without complementary measures. Or an Urban Mass Transport Authority gets established and ends up as powerless Committee. Or city master plans remain disconnected from policy levers, thereby limiting the impact of both.

Another benefit of an integrated approach is that it binds everyone together into a compact, allowing burden sharing, and attenuating the political economy challenges. A congestion pricing or higher vehicle taxes can become palatable when seen as part of a package that includes investments in public transport.

This also creates the demand side pressures to proceed with an integrated implementation. It then becomes largely an effort to effectively implement the plan. It should be hoped that these cities will have at least one or two very competent enough set of officials during the period to generate the thrust required to achieve the objective.

Sunday, February 19, 2017

Paul Collier's on future of capitalism - social maternalism grounded on pragmatism?

Paul Collier (HT: Ananth) channels Jonathan Tepperman's recipe for successful national transformations from his book The Fix which chronicles ten case studies of national leaders,
eschew ideology; focus on pragmatic solutions to core problems, adjust as you go, but be as tough as is necessary.
The article is good in general, as Collier seeks to chart out a course of capitalism. He identifies "pragmatism" as the new ideology. He advocates the use of tax policies to generate growth - moving away from income-specific to context-specific taxes, that discriminates based on source of income (rents as against innovation), regulatory arbitraging (real economy versus sharing economy), resource misallocation (financial markets versus real economy), geographical privileges (cities as against suburbs and rural areas), etc. 

Consider the case of how cities privilege its residents and especially the high income earners among them,
A megacity is a powerful engine of inequality. Exceptional taxation is justified because only some of the high incomes generated in a megacity are attributable to the few who appear to earn them. The rest are attributable to everyone who contributes to the connectivity, including those who do not live in it. A straightforward example is land values. Since locating in the city enables firms and workers to be more productive, its land becomes valuable... London abounds in such “undeserving rich” because governments have been slow to use the tax system to offset them. Despite Brexit, London is a vast reservoir of unexploited tax potential: it is the new oil. The provinces are right to be angry. A metropolis differentially benefits the highly educated. The scope for specialization enables them to use specialist skills that become very valuable. Someone with the brains and opportunity to have fathomed the intricacies of finance will be hugely valuable within the City of London, and so will earn a fortune. But that productivity is in part due to advantages such as the integrity of English law and non-corrupt government, endowments from generations of national struggle. These super-returns from a London location accrue, by default and disproportionately, to the high-skilled worker; but there is a good normative case that they should be shared more evenly, and so highly educated Londoners are less deserving than they think. 
 And on resource misallocation,
Uncorrected, the market will generate too many asset managers and lawyers and too few innovators. What is needed instead is a redesign of corporate taxation... smart corporate taxation would shift resources from those activities where there are too many people to those where there are too few. It would become an instrument in delivering growth, not public services.
 On the sharing economy,
Those changes that cause major disruption, such as Uber and the impending switch to driverless vehicles, could be taxed, not so heavily as to prevent them but to ensure that they pay for the social costs that they inflict. Currently, tax systems are so antiquated that the same transaction is taxed more lightly in the “gig economy” than in a conventional business: in part, Uber, airbnb (and Amazon) are tax scams.
In corporate practices,
Currently, massive economic power is concentrated in the hands of chief executives, disciplined only by whether asset managers ditch their shares. This has led to two serious forms of abuse. One takes us back to rents: British CEOs virtually set their own pay, constrained only by City norms. As decency has eroded, their pay has risen 80 per cent in the past decade, with negligible evidence of enhanced performance. They are the highest-paid CEOs in Europe. The other abuse is that the bonus-driven short-termism of asset managers has made firms averse to long-term investment, not just in equipment but in their workforce. As labour markets have become more “flexible”, the low unemployment that flexibility has delivered has come at the price of reduced training.
Collier concludes,
I think of the pragmatic policies I have suggested as social maternalism. In this model the state would be active in both the economic and social spheres, but it would not overtly empower itself. Its tax policies would restrain the powerful from appropriating rents, rather than stripping income from the rich to help the poor. Its regulations would empower those who suffer from creative destruction to claim compensation, rather than attempting to frustrate the very process that gives capitalism its astonishing dynamic. Its inclusive nationalism would be a force for binding together, replacing the emphasis on the fragmented identities of grievances. Its social interventions would aim to sustain those families that are stressed, rather than assuming for itself the role of parent.

Saturday, February 18, 2017

Capitalism and Mathew effect

One of the characteristic features of modern capitalism is a Mathew Effect or a form of accumulative advantage. In simple terms, this translates everywhere to a trend where the rich and powerful become ever more so and the poor and weak become more diminished. 

This is pervasive across both the market for businesses and labor, across sectors. Large firms get larger by getting cheaper credit, recruiting better employees, capturing a far greater share of consumers who are also likely to spend more,  generating more surpluses, attracting more investors, and benefiting more from regulatory regimes. Citizens who strike gold with the ovarian lottery get richer by accessing better education, acquiring superior non-cognitive skills, getting higher-paying jobs, being more successful professionally, assortative mating within social cohorts, and so on.

In both cases, the opposite set of trends apply with even greater force to smaller businesses and less fortunate people. Furthermore, the proportion of beneficiaries among both businesses and labor across sectors has been shrinking rapidly over time, leading to egregious concentration of market power and incomes at the top of the respective ladders. Amplifying these trends is the capture of political institutions and control over the process of laying down the rules of the game in all spheres public life by the same set of small group of beneficiaries. Worse still, this control over political institutions leads willy-nilly to the erection of entry barriers that add more layers to an already inhospitable environment for vertical mobility for firms and labor. The financial market regulation in the US may be one of the best examples of "extractive institutions" in our modern economy. There is an inexorable dynamic to to these rapidly widening inequalities. 

The combination of technological advances, globalisation, and financialization over the past quarter century or so that may have hastened this trend. 

The latest data point in this comes from the market for academic instructors in higher education institutions in the US (HT: Ananth). In this fantastic Truman Capote award acceptance speech, Kevin Birmingham highlights a sobering picture of the scale of 'adjunctification' of faculty positions in US universities, 
Tenured faculty represent only 17 percent of college instructors. Part-time adjuncts are now the majority of the professoriate and its fastest-growing segment... A 2014 congressional report suggests that 89 percent of adjuncts work at more than one institution; 13 percent work at four or more... An English-department adjunct at Berkeley, for example, received $6,500 to teach a full-semester course... According to the 2014 congressional report, adjuncts’ median pay per course is $2,700... Thirty-one percent of part-time faculty members live near or below the poverty line. Twenty-five percent receive public assistance, like Medicaid or food stamps... We cannot blame this professional anemia on scarce funding. The largest adjunct-faculty increases have taken place during periods of economic growth, and high university endowments do not diminish adjunctification. Harvard has steadily increased its adjunct faculty over the past four decades, and its endowment is $35.7 billion. This is larger than the GDP of a majority of the world’s countries.
He points to a market failure which is a feature in most labor markets,
The key feature of adjunctification is a form of labor-market polarization. The desirability of elite faculty positions doesn’t just correlate with worsening adjunct conditions; it helps create the worsening conditions. The prospect of intellectual freedom, job security, and a life devoted to literature, combined with the urge to recoup a doctoral degree’s investment of time, gives young scholars a strong incentive to continue pursuing tenure-track jobs while selling their plasma on Tuesdays and Thursdays. This incentive generates a labor surplus that depresses wages. Yet academia is uniquely culpable... New faculty come from a pool of candidates that the academy itself creates, and that pool is overflowing. According to the most recent MLA jobs report, there were only 361 assistant professor tenure-track job openings in all fields of English literature in 2014-15. The number of Ph.D. recipients in English that year was 1,183. Many rejected candidates return to the job market year after year and compound the surplus... From 2008 to 2014, tenure-track English-department jobs declined 43 percent. This year there are, by my count, only 173 entry-level tenure-track job openings — fewer than half of the opportunities just two years ago. If history is any guide, there will be about nine times as many new Ph.D.s this year as there are jobs.
And this is telling,
Universities rely upon a revolving door of new Ph.D.s who work temporarily for unsustainable wages before giving up and being replaced by next year’s surplus doctorates. Adjuncts now do most university teaching and grading at a fraction of the price, so that the ladder faculty have the time and resources to write. We take the love that young people have for literature and use it to support the research of a tiny elite... If you are a tenured (or tenure-track) faculty member teaching in a humanities department with Ph.D. candidates, you are both the instrument and the direct beneficiary of exploitation. Your roles as teacher, adviser, and committee member generate, cultivate, and exploit young people’s devotion to literature.
Yes, while things may not be as dismal across departments, the broad trends are similar, not just in academia but everywhere in the labor market. Mathew Effect dominates. 

We live in the age of "winner takes all" capitalism and with a declining share of winners.  In Rawlsian terms, it is minimax capitalism. This is arguably capitalism's biggest market failure. Its implications include declining business dynamism, shrinking labor market diversity, and erosion of the credibility of institutions that underpin modern economies.

And it may well carry the "seeds" of capitalism's own decline. Marx may well have been right, albeit with a delay of nearly two centuries! We need a version of "maximin capitalism", one where the rules of the game positively favour the less advantaged so as to counterbalance the inevitable Mathew Effect.

Thursday, February 16, 2017

Ireland and aircraft leasing fact of the day

The Economist has this on Ireland's role as the global hub for aircraft leasing,
Previously, airlines owned all their aircraft. Leasing allows them to finance rapid expansion or contraction of their fleets without taking on debt. Only 2% of aircraft were leased in 1980. Now over 40% are... Irish firms manage in excess of 5,000 commercial aircraft, worth over $130bn, accounting for half of all leased planes and a quarter of the fleet globally... The industry in Ireland is now growing so fast, it is skewing the country’s economic data. Official GDP growth of 26% in 2015 was largely the result of lessors buying so many new planes; the rest of the economy probably grew only by about 5%.

Tuesday, February 14, 2017

When we mistake the real for the ideal world

In recent weeks I have blogged on multiple occasions (here, here, here, and here) about how  intellectuals, barring a few honourable exceptions like Dani Rodrik, have got completely wrong the interpretation of important global trends like free trade and globalisation, financial deregulation and capital account liberalisation, premature deindustrialization and automation, cross-border labor migration, and global citizenship.

It does not require too much exploration to realise that large numbers of people lose their jobs either due to premature industrialisation or automation or off-shoring or competition from migrants. Similarly, national businesses lose market share to multinationals and finally exit the market, and economies are ravaged at increasing frequency by the vagaries of cross-border capital floods and sudden-stops. And the corollary of global citizenship is most often an abdication of actual "citizenship" responsibilities. 

In all these cases, the intellectual argument is that market adjustments happen to mitigate these effects. This is despite ample evidence that such adjustments, like with most other market based adjustments, take an inordinately long time, long enough to cause irreversible pain and damage to people and their societies. And the fiction continues that public policy will somehow redistribute gains from the winners to compensate the losers despite not even a single instance of such explicitly targeted redistribution initiative in any country of note in recent times.

There are two explanations for such responses. The materialistic explanation is that these trends have limited adverse impact on those who call themselves middle class and above. It can even be said that these trends even enhance their economic and social prospects. In fact, the "global citizens" may be the biggest beneficiaries of all these trends. In contrast, the brunt of each of these trends is felt by those at the lower levels of the income ladder. 

There is also a deep psychological explanation. All of us who consider ourselves a liberal, feel compelled to be politically correct and be on the right side of the ideological orthodoxy, a view reinforced by intense peer pressure as well as an urge to be doing and supporting the 'good', which has become intimately linked with the liberal ethos. Therefore, in all these cases, we try to complicate and over-intellectualise trends whose proximate effects are egregiously disturbing for the vast majority of citizens. Sometimes, instead of searching for rigorous enough evidence, which is invariably elusive, we just need to put aside our ideological blinkers and be practical in observing and using judgement to draw conclusions about what is happening around us. 

Free trade, globalisation, automation, financial market liberalisation, open borders and liberal immigration, and global citizenships are unqualified positive ideas, intimately associated with the progressive ideal. Critics of these ideals are the antithetical straw-men, undesirable vestiges of a less progressive and anti-liberal bygone era. Accordingly, any scepticism about them is not only anti-liberal, but also a concession to, even appeasement of, the critics. As Rodrik has acknowledged himself, such political correctness is pervasive even at the highest levels of the academia.

Politicians, whose incentives are closely aligned towards responding to the concerns of actual people living in the real world, cannot be faulted if they perceive these trends and respond to the concerns. As intellectuals and opinion makers, with their largely unqualified and vocal support for these trends, have abdicated the debating space for an engagement on realistic terms, it is only natural that extremist opinions and forces gain traction and become platforms for political mobilisation. 

None of this is an argument to pitch our tents behind the critics of all these trends, but a plea to be more nuanced in our appreciation of them. We need to appreciate the world for what it actually is and likely to be so for the foreseeable future and not what the world ought to be in our ideologically coloured imagination. 

Saturday, February 11, 2017

Weekend reading links

1. Times points to a new report that highlights the lack of dynamism in the US economy,
They cite federal data showing that in 1977, more than 16 percent of firms in the United States were less than a year old, a figure that had fallen to half that by 2014. New businesses have similarly done less to power new jobs than they once did, while the biggest, oldest firms account for a rising share of economic activity. Market concentration increased for two-thirds of industries between 1997 and 2012, the report found. That coincided with a steady rise in corporate profits as a share of gross domestic product, and in a decline in the share going to workers’ wages. The job market has become less fluid. The proportion of workers who change jobs in a given year has fallen from 12 percent in 2000 to 7 percent in 2015. Workers are also less likely to migrate within the country. In the 1970s, more than 3 percent of the population moved across state lines in a given year; since 2006, the number has hovered around 1.5 percent. Most startlingly, the creation of new companies has been concentrated in a small number of metropolitan areas: Dallas, Houston, Los Angeles, Miami and New York. From 2010 to 2014, those five regions created as many new businesses as the rest of the country combined. 
More evidence that the fundamental structure of the economy has changed significantly over the years and protectionist rhetoric that harp on returning manufacturing jobs may remain just that, rhetoric.

2. Yet more reminder that fixing complex challenges like improving farm incomes has to go far beyond elimination of middle-men through commodities exchanges and online trading platforms. This from the experience of Ethiopia Commodity Exchange (ECX), 
By connecting smallholder farmers to global markets, the exchange, launched with a fanfare in 2008, was supposed to help reduce hunger. The hope was it would reduce price volatility and incentivise farmers to plant crops. But staple foods such as haricot beans today account for less than 10% of its trade. Its annual turnover—worth about $1bn—is dominated instead by two export crops, coffee and sesame seeds. In 2015, despite a dire drought, Ethiopia did avoid famine, but the ECX played little role: its maize and wheat contracts had lapsed by then because of concerns that exports would jeopardise domestic food supplies. Cutting out middlemen seems not to have done much for smallholders: studies suggest that the share of international prices received by coffee farmers has barely budged over the past decade.
I had written earlier cautioning against excessive optimism with the electronic trading platform established in India with the objective of creating a unified national agricultural market.

3. Jayan Jose Thomas has a decomposition of the new entrants to India's work force,
They (NSSO and Census) suggest that between 2004-05 and 2011-12, the population in the age group of 15-59 increased at the rate of 16.2 million a year. During the same period, the population of students 15 years or older increased at the rate of 5.9 million a year. Students do not form part of the workforce. Therefore, if we subtract the growth of students from the growth of the working-age population, we obtain an estimate of the growth of the potential workforce. This is found to be 10.3 (that is 16.2–5.9) million a year for India between 2004-05 and 2011-12. During the same period, however, the workforce engaged in agriculture and allied activities declined at the rate of 4.4 million a year. Assume that the workers who shifted out of agriculture sought employment in industry and services. If so, the potential workforce in industry and services in India grew at the rate of 14.7 (that is, 10.3+4.4) million a year between 2004-05 and 2011-12.
4. Donald Trump is a master of shifting the frames of reference. He takes outrageous public positions with his tweets, be it abusing opponents, intimidating judges, maligning journalists, or indulging in naked nepotism. Once the dust settles down, he would have invariably shifted the terms of discussion on the issue the next time it crops up.

The first instance of such expressions (or tweets) would have shaken up the social conscience and aroused anger. But after two or three iterations of such abuse, intimidation, or nepotism, the moral indignation of the social collective becomes attenuated. They become the new normal!

The gradual social reconciliation with the massive conflicts of interest that is egregious is the perfect example. This is a teachable example of how public morals slip down the slope, most likely irreversibly.

5. Times has this story of Foxconn's largest factory in Zhengzhou which makes nearly half of all iPhones,
Zhengzhou, a city of six million people in an impoverished region of China. Running at full tilt, the factory here, owned and operated by Apple’s manufacturing partner Foxconn, can produce 500,000 iPhones a day. Locals now refer to Zhengzhou as “iPhone City.” The local government has proved instrumental, doling out more than $1.5 billion to Foxconn to build large sections of the factory and nearby employee housing. It paved roads and built power plants. It helps cover continuing energy and transportation costs for the operation. It recruits workers for the assembly line. It pays bonuses to the factory for meeting export targets...
Foxconn receives a bonus when it meets targets for exports. Those subsidies, according to the government records, totaled $56 million in the first two years of production, when the factory was exclusively dedicated to the iPhone. The bonus is small on each of the tens of millions of iPhones produced during that period. But the subsidies add up: The government records list more than a dozen other forms of financial aid at the Zhengzhou operation. The Zhengzhou government eliminated corporate taxes and value-added taxes that Foxconn pays for the first five years of production; they are half the usual rate for the next five. The city lowered Foxconn’s social insurance and other payments for workers, by up to $100 million a year. The customs operation is also in a so-called bonded zone, an area that China essentially considers foreign soil, subject to different import and export rules. This setup allows Apple to sell iPhones more easily to Chinese consumers.
Foxconn is clearly able to have its way with national governments, even in China. No wonder its similar expectations from state governments in India.

6. The always excellent Dani Rodrik takes aim another holy cow among liberals, the "global citizen". He questions what global citizens do, 
Real citizenship entails interacting and deliberating with other citizens in a shared political community. It means holding decision-makers to account and participating in politics to shape the policy outcomes. In the process, my ideas about desirable ends and means are confronted with and tested against those of my fellow citizens. Global citizens do not have similar rights or responsibilities. No one is accountable to them, and there is no one to whom they must justify themselves. At best, they form communities with like-minded individuals from other countries. Their counterparts are not citizens everywhere but self-designated “global citizens” in other countries.
Despite its apparent simplicity, most intellectuals fail consistently to grasp this insight,
We have to live in the world we have, with all its political divisions, and not the world we wish we had. The best way to serve global interests is to live up to our responsibilities within the political institutions that matter: those that exist.
I cannot agree more and it is amazingly ubiquitous.  

7. Talking about Dani Rodrik, see this nice profile. And this captures the essence of the difference between conventional economists and people like Dani,
THERE ARE ECONOMISTS who teach the well-known postulate that free trade improves global well-being. There are other social scientists and popular critics who contend that laissez-faire trade can be bad for equality, for social stability, and even for economic efficiency, just as pure laissez-faire is not optimal at home.
And then there is Dani Rodrik.
This applies to not just free trade, but as I have blogged earlier automation, capital account liberalisation, migration, global citizenship etc.

8. Economist has a good article which once again highlights the implications of big data on privacy and why it has to be dealt with extreme care,
But critics fear too much data-crunching could actually increase financial exclusion. The riskiest customers, and those offline, might be priced out. The more the industry relies on complex—and proprietary—algorithms, feeding machines that keep learning, the harder it will be for customers, and regulators, to untangle why they were rejected. And algorithms can be wrong. A bilingual speaker’s search-engine entries could look erratic; a social-worker’s location-tracker could imply a risky lifestyle. And since it is unclear how judgments are made, says Frederike Kaltheuner, from Privacy International, “you could get stuck in a Kafkaesque situation where you’re put in a certain box and can’t find out why, and can’t get out.”... People give uninformed consent to all sorts of things online. But users can feel tricked and spied on if they learn their data have been sold or used in unexpected ways... 
Regulators have a role to play, particularly in dealing with questions of discrimination and exclusion. If using someone’s browsing history to exclude them from an offer for a cheap flight is OK, is it also reasonable to use those data to lock them out of health insurance (eg, by assuming that someone who Googles doughnut shops is a bad risk)? Now that Amazon sells loans, Alibaba has a payments business and Facebook has patented a credit-rating system, regulators should be at least as worried about non-traditional financiers and fintech startups, which sometimes escape regulation. 
9. On the increasingly relevant subject of whether internet companies, especially on e-commerce side, should be regulated like regular entities performing similar services. As the Economist writes, currently "they are not legally responsible, either for what their users do or for the harm that their services can cause in the real world". Accordingly, Airbnb and Uber have disclaimed any liability from their services and been spared the more rigorous standards followed by their brick-and-mortar counterparts. But as this market expands problems are emerging,
Airbnb’s inventory of 2.3m rooms makes it bigger than the three largest hotel chains—Hilton, Marriott and InterContinental—combined. Incumbents are demanding that online rivals obey rules that constrain everyone else... Airbnb stands accused of reducing the supply of affordable housing in big cities. Uber is said to worsen traffic problems and to weaken public-transport systems by luring away passengers. Facebook and Twitter are accused of enabling the spread of fake and biased news during America’s election. Such services have also become favourite hangouts for bullies and trolls...
It is also becoming exceedingly hard to maintain that platforms are—like telecoms networks—“neutral”. The argument that they do not interfere in the kind of content that is shown was a key rationale for exempting them from liability. But they are starting to resemble regulators themselves, which makes it odder still that they act outside legal limits. Facebook’s algorithms determine what members see in their news feeds. Uber’s software decides what drivers get paid. It is getting easier to police platforms, too, thanks to artificial-intelligence techniques which can recognise and predict patterns of bad user behaviour.
10. Finally, the popular narrative on migration is largely confined to the refugees and migrations from South to North. As the Economist writes, a much larger migration happens in Asia. Consider this, 
China has long been able to satisfy its demand for labour by moving rural citizens to cities. Over the past 30 years around 150m Chinese have left the countryside to staff factories, cook in restaurants and clean homes. But with China’s population ageing, foreign workers have begun filling the gap: as many as 50,000 Vietnamese illegally cross the border into the southern province of Guangxi each spring to help harvest sugar cane. In 2015 the provincial government started a programme to bring Vietnamese workers into local factories in one city. Off to a good start, it is being introduced in other parts of Guangxi.
China remains a net exporter of labour, but the balance is shifting quickly. Over the next 30 years its working-age population will shrink by 180m. How China handles this fall will play a large role in shaping Asian migration patterns. Manufacturers can move factories to labour-rich countries, or invest in automation. Other industries lack that option. The ILO forecasts that China will need 20m more domestic workers as it ages.
The impending collapse of the workforce is not an exclusively Chinese problem. To keep the share of its population at working age steady, East Asia would have to import 275m people between the ages of 15 and 64 by 2030. South-East Asia would have to attract 6m... South Asia, meanwhile, could afford to lose 134m workers—India alone could send more than 80m abroad—without worsening its dependency ratio. China’s projected shortfall in 2030 is equivalent to 24% of its current working-age population; in Bangladesh the likely surplus is 18%.

Friday, February 10, 2017

Jeff Sachs on foreign policy and international development

Ananth points to this fine, fine Jeff Sachs interview which should count as among the most prudent assessments of global geopolitics and international development. At a time when political correctness and ideological biases are commonplace among the intelligentsia, this comes out as a refreshing acknowledgement of the reality. 

He attributes populism to rising nationalism, weakening of US Foreign Policy, refugee crisis, and the crisis on the centre left. Sample this on immigration,
All of the Scandinavian countries, and their neighbors in northern Europe, have right-wing populist parties, with some approaching power... For me, the most pertinent fact is that populist Scandinavians are calling for a social-democratic order, but one for Danes or Swedes or Norwegians alone. They like their society; they just don’t want newcomers. So, it’s explicitly anti-migrant – essentially a demographic and cultural reflex... I think people really like their social order – again, I don’t think we know how to make economies work better than those countries do. What many of their people apparently don’t like is Muslims living in their country. They don’t want mosques in their neighborhoods. That’s not true of everybody, of course, but that’s what the backlash reflects. 
And on the challenge facing Africa,
Africa’s demographic trajectory is deeply worrisome because it is built on an extremely high fertility rate that will hinder its own sustainable development. In Sub-Saharan Africa, the average fertility rate remains more than five children per woman, and the resulting population trajectory is roughly a quadrupling of the continent’s population by the end of this century. That means about four billion people in Sub-Saharan Africa, compared to a European population that might be around 500 million at the end of the century... the bottom line is that Africa will never achieve successful development if it reaches four billion people at the end of this century. That trajectory would lead to unbearable environmental stress, hunger, war, water depletion, and destruction of remaining biodiversity. It would be a disaster first and foremost for Africa.
This assessment of "regime change" foreign policy is spot on,
In my opinion, it is a US-Saudi-Turkish war of regime change that is essentially stupid and against international law. The reason we have a refugee crisis is not because of Syrian President Bashar al-Assad, but because the US, the Saudis, and the Turks said in 2011 that Assad should be overthrown. It was a stupid idea – just as stupid as the idea of overthrowing Libya’s Muammar el-Qaddafi in 2011 and Iraq’s Saddam Hussein in 2003... Assad wasn’t such a danger from 2000 to 2010. Syria was a normal country with autocratic rule. It wasn’t a global humanitarian disaster. It became a disaster in the spring of 2011, and especially on August 18, 2011, when Barack Obama said that Assad must go. That was Obama’s worst foreign-policy blunder, and we’re still living with the consequences. Why would a US president say that another country’s president must go? The idea that the US can choose who should lead other countries has been a complete failure.
And on the surprisingly less discussed concern that Russia rightfully harbours with the presence of NATO in its "near abroad",
SS: Then why did Russia invade Ukraine, annex Crimea, and back the separatists in Donbas?

JS: I think that the US made a huge mistake in trying to flip Ukraine to NATO.
SS: Ukrainians wanted to join NATO.
JS: I know, but the US should say: “No way.”
SS: Why?

JS: Because that’s geopolitics.
SS: What should these countries do? Must they be subordinate to Russia?

JS: Imagine that Mexico’s leaders, having decided that Trump poses a grave threat to their country’s security, formed a military alliance with China. As far as I’m concerned, it would be their choice to make. But US policymakers – Republicans and Democrats alike – wouldn’t see it that way. I don’t know what would happen the next day, but I wouldn’t want to be in Mexico City, or perhaps anywhere in the world (which would all be threatened). This is reality. And it’s why a sensible US leader would say to the Ukrainians: we care for you, we love you, but we don’t want you in NATO, because we don’t want to provoke a conflict with the major power on your border.