1. A Brookings paper writes about the dominance of place-based policies in the $2.2 trillion US Build Back Better Plan. It also has links to a series of place-based research,
Brookings Metro, the Hamilton Project, and the Center for Sustainable Development, as well as scholars at other research organizations such as the Economic Innovation Group, Harvard University, the Washington Center for Equitable Growth, the Aspen Institute, and the Massachusetts Institute of Technology.
Economic orthodoxy informs us that selecting from among people, places, and industries (aka "picking winners") is fraught with problems. It is therefore advocated that such selections are best left to the dynamics of markets instead of using public policy. Professional economists have long scorned on industrial policy that sought to identify and target specific industries, businesses, entrepreneurs, or places for incentives like fiscal concessions and subsidies. But do markets have a superior wisdom in making effective choices? What's the empirical evidence on such policies? What should be the role of public policy in such choices?
2. Ajay Shah et al have a fascinating description of where in time today's India would stand in comparison with the development trajectory of countries like US and UK.
In terms of India's PPP adjusted GDP per capita, the comparable years for the US and UK were 1896 and 1894 respectively. In terms of women's labour force participation rate, India's 2021-22 rate of 9.2% compares very poorly with the earliest available data for US at 18.2% in 1890. The article has this table for asset ownership.
Scott Galloway predicts that super apps will be the way forward,
A super-app is a single mobile app that offers basic services including chat and payments, along with a suite of “mini-apps” from third parties, ranging from stores and restaurants to government agencies. Westerners aren’t familiar with them, but across much of Asia, super-apps are the internet. The largest is China’s WeChat, possibly the most used piece of software on the planet. On WeChat, you can find a date, hail a cab, pay utilities, even get divorced. An app reaches super status when it knits together a critical mass of services, makes them so easy to toggle across that, even if they aren’t as good as sole-purpose apps, the app becomes your OS for your digital life. The more services, the less reason to ever leave... The economics of super-apps are powerful — and possibly inexorable. I’m convinced that constructing a U.S. super-app is the strategic-imperative of the next decade and could result in the first $5 trillion company...Payment processing is the foundation of a super-app. It’s the glue that integrates core features with those provided by third parties on the platform, and it gives users the convenience of not needing to enter credit-card information across apps and sites. A shift in the arbitrage of attention, from ads to the more potent payments business, promises to fuel a historic merger-and-acquisition binge that will reshape the array of industries that tech derisively labels “content.” The likely biggest acquirers will be in finance — not just start-ups but Wall Street’s Old Guard, whose imminent panic will manifest in M&A banker fees.
4. NYT on private equity (excluding venture capital), which is sitting on $841 bn of dry powder in US alone at the end of first quarter of 2021.
As of September 2020, private equity funds had produced a 14.2 percent median annualized return, net of fees, over the previous 10 years, compared with 13.7 percent for the S&P 500, according to an analysis of indexes by the American Investment Council, a lobbying group for the industry, using the latest numbers offered. Public pension funds invested in private equity actually had worse returns than from the S&P 500 — 12.8 percent, net of fees... Since 2009... the median annual outperformance of private equity buyout funds has been “bouncing around on a median and average basis from 1 to 5 percent.” That’s down from around 15 percent in outperformance 20 years ago... which also shows that private equity returns peaked in the early 1990s...Ludovic Phalippou, a professor of finance at Oxford’s Said Business School, came to a harsher conclusion in a 2020 research paper that looked at North American private equity performance for funds launched between 2006 and 2015. It found that investors could have done just about as well with a stock index fund during that period, while the fees paid to private equity firms came to at least $230 billion, enabling the number of private equity multibillionaires to jump to 22 in 2020 from three in 2005.
5. The Times has an excellent graphical primer on the global supply chain crisis.
6. Interesting early assessment of Omicron from South Africa. While infection rates are likely higher or comparable, the intensity of infection may be lower.
7. FT has a long read on the emergence of Shein as the largest fast fashion retailer in the US, overtaking the likes of Zara and H&M. It is also perhaps the first Chinese brand to make a breakthrough in any global market segment.
This appears to be the reasons for its success,
Inditex, the world’s biggest apparel retailer, pioneered the idea of quickly adapting catwalk styles into clothes that could be bought by ordinary consumers in stores. The likes of Boohoo in the UK and Fashion Nova in the US used a “test and repeat” model — producing small amounts of a range of styles — to accelerate that process to just a couple of weeks. But Shein has taken that down further — to as little as a week — and at much greater scale. Each day, it adds 6,000 new items online, far more than any comparable retailer manages. It responds in real time to trends picked up not by fashionistas and designers but by analytics software, which trawls through shopping and social media websites.While established fashion retailers rely heavily on Instagram, especially for social media promotion, Shein has piggybacked on the growth of TikTok, the Chinese short-video app that has also become wildly popular around the word. For Gen-Z consumers, the company has become synonymous with the TikTok phenomenon of influencers posting short clips of “Shein hauls”, parading an array of outfits to their online fans. Shein also makes a much greater proportion of its sales via mobile apps rather than conventional websites and has borrowed ideas from the world of gaming — such as countdown clocks and even games with discounts as prizes — to boost engagement and spend in that channel. Before shoppers check out, Shein’s app entices them to continue adding to the basket with the lure of gifts and express delivery if they hit a certain spending threshold... Shein has turned shopping into a form of online entertainment... Shein is also very cheap. The average unit price for its more than 600,000 products is just $7.90. Analysts at Morgan Stanley found that only Primark in Europe — which operates a traditional model of long lead-time manufacturing in south Asia — and Forever 21 in the US could consistently match it on prices of staples such as jeans, dresses and T-shirts.
This is an important contributor to its pricing competitiveness,
Most fashion retailers build a presence in their home market before expanding overseas, but Shein has never sold clothes in China itself. Instead it exports, largely using air freight, from its manufacturing base in Guangdong to key markets such as the US and Europe. Those transactions are free of export taxes in China and only a tiny minority of its shipments overseas incur import duties; the threshold at which consignments into the US qualify for assessment is $800, in the UK the equivalent is £135 and in Europe it is €150. Because Shein ships individual parcels from its base in southern China, almost all its packages fall below this threshold and are not subject to import duties in the US or Europe. This allows them to undercut rivals whose merchandise is subject to sales taxes. In addition, for much of its existence Shein benefited from discounted shipping rates owing to China’s classification as a “developing country” within the Universal Postal Union, the UN agency that co-ordinates postal policies, though changes made in 2020 have reduced the impact of these... Its manufacturing capacity is concentrated around Panyu, the industrial district of the southeastern province of Guangdong... Shein is able to pay suppliers quickly because its just-in-time model means very little cash is tied up in inventory. Its reliance on third-party logistics operators and lack of physical stores has also meant its growth has not required much capital.
This is the disturbing part about Chinese companies
The company’s detractors say its business model relies on tax loopholes, a flexible attitude to intellectual property and scant regard for corporate and social responsibility. “I think it should be closed down,” grumbles the chief executive of one big fashion retailer... Despite such a rapid rise, there is little public information about the company or its enigmatic founder, beyond that it started life selling Chinese-made goods from sunglasses to wedding dresses for export to individual customers in the US, and that it changed its name from SheInside to Shein in 2015... It has been accused of copying designs from multinationals such as Dr Martens and Levi’s to individual designers such as UK-based entrepreneurs Deborah Breen and Sarah Vaughan.
8. NYT pictorial essay on the ground zero for climate change, Australia,
The Black Summer bush fires of 2019 and 2020 were the worst in Australia’s recorded history. This year, many of the same areas that suffered through those epic blazes endured the wettest, coldest November since at least 1900... Life on the land has always been hard in Australia, but the past few years have delivered one extreme after another, demanding new levels of resilience and pointing to the rising costs of a warming planet. For many Australians, moderate weather — a pleasant summer, a year without a state of emergency — increasingly feels like a luxury.
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