Urbanisation trends - transportation and housing facts of the day

I have blogged earlier about unaffordable housing and traffic congestions being the biggest threat to urban growth. 

Take the example of housing. Increasing the stock of affordable housing is arguably one of the biggest public policy challenges. Even when the stock of housing increases, it's often the case that the increase is confined to the supply of higher value units. Worse still, thanks to trends like gentrification and housing increasingly an investment asset in the largest cities, the stock of affordable housing ends up shrinking. Sample this from New York City (via this report),

Between 2017 and 2021, New York City lost almost 100,000 units that had rented for less than $1,500 per month, while it added 107,000 units that rent for at least $2,300 per month... In Manhattan, for example, the median effective rent in April 2022 was $3,870, more than 38 percent higher than a year before and the highest level ever recorded.

One could say that these effects are much more pronounced in rapidly growing cities of the developing world. Rapid growth of the biggest cities have made them pockets of continuing asset bubbles which in turn attract speculative and other investors, thereby pricing out the middle-class and below. 

On the transportation side, nearly 160 years after the first metro rail system was launched in London in 1863, the £19 bn Crossrail project connecting the west and east of London became partially operational last week. It's designed to halve journey times and bring the city's four airports together with just one interchange, the Elizabeth Line will bring an additional 1.5 m people to within 45 minus of central London. The project is four years late and £4 bn over budget. 

The opening of Crossrail comes at a time when metro rail systems globally are facing a crisis. Passenger growth in metro railways have been stagnant for the last decade and Covid 19 dealt a body-blow. Even after the passing of Covid, commuter traffic is only 60-70% of pre-covid levels. Even more strikingly, overall all transport modes have declined over the last two decades as people have stayed at home.

Between 2002 and 2019, the average distance people in England travelled annually fell by 10 per cent and the number of trips by 11 per cent, according to official UK data. The decline was observed across almost all modes of transport, from short walks to public transport to driving. The trend is similar in Europe and the US, even though it is sometimes masked by population growth. Even before the pandemic, fewer people were commuting the full five days a week, and more employees were on short-term contracts or working in the less routine “gig” economy. This has weakened the economic case for shiny new urban transit projects in those places. Of the 56 new metro systems that opened worldwide between 2010 and 2020, 44 were in the Asia-Pacific region, according to the International Association of Public Transport, and just one was in Europe... The pandemic has accelerated and cemented the shift. Today, more so-called knowledge workers are based at home or in third spaces closer to home, such as cafés or co-working spaces, than ever before... In Greater London, public transport use last week was still down around 33 per cent compared with February 2020 levels, according to Google Mobility data. 

While commutes are stable or declining in mature urban systems in developed countries, they're exploding in the rapidly expanding developing country cities. Worsening the problem is the unaffordability of housing, which pushes people out to the suburbs, thereby increasing commute times. In other words, at their prevailing population levels, congestion and commute times increases faster than the urban population growth itself in most major developing country cities. 

Weekend reading links

1. David Gelles in the Times has a revisionist perspective on Jack Welch, widely considered the greatest chief executive of all time and described as "manager of the century" by Fortune magazine. Welles has a scathing summary of his deeply unflattering legacy,

Almost immediately after Mr. Welch retired in September 2001 with a $417 million severance package, G.E. went into a tailspin from which it would never recover. His pupils, though, went on to run dozens of other major companies, including Home Depot, Albertson’s, Chrysler and Boeing. Most of them failed. And in the decades since Mr. Welch assumed power, the economy at large has come to resemble his skewed priorities. Wages stagnated and jobs moved overseas. C.E.O. pay went stratospheric and buybacks and dividends boomed. Factories closed and companies found ways to pay fewer taxes. Beyond his enduring influence on the economy, Mr. Welch also redefined what it meant to be a boss, personifying an aggressive, materialistic style of management that endures to this day.

... he exerted a powerful and lasting influence on American business, informing how workers are treated, how shareholders are rewarded and how C.E.O.s comport themselves in an increasingly divisive age. When Donald J. Trump is elected president, when Jeff Bezos argues about inflation with the White House, when Elon Musk negotiates his $44 billion deal to buy Twitter by using the poop emoji — this is the world that Jack Welch helped create... In retirement, Mr. Welch continued to hold sway over the business world as an elder statesman, penning books and columns, and appearing on cable news to praise the executives he had groomed and continue his assault on taxation and regulation. Mr. Welch also pursued an unexpected retirement pastime: He became an internet troll... It was a career defined by a ruthless devotion to maximizing short-term profits at any cost, and punctuated by a foray into misinformation. And it opened the door to an era where billionaire C.E.O.s are endowed with vast power and near total impunity...

He was a compulsive dealmaker, fueling G.E.’s growth with a relentless series of mergers and acquisitions that took G.E. far from its industrial roots and set in motion a wave of corporate consolidation that would reduce competition in industries as diverse as airlines and media. He closed factories and fired employees by the tens of thousands, unleashing a series of mass layoffs that destabilized the American working class. He devised systems like “stack ranking,” which mandated that the bottom 10 percent of workers be fired each year, and took root at other companies. And he embraced offshoring and outsourcing, sending labor overseas and turning to other companies to provide back-office functions like accounting and printing... But more than the downsizing or the dealmaking, it was Mr. Welch’s obsession with finance that allowed him to steadily inflate G.E.’s valuation in the public markets... By the time he retired, the company derived much of its profit from GE Capital, which was essentially a giant unregulated bank... an amorphous, ever-changing collection of financial assets, capable of delivering whatever adjustments were most advantageous to the parent company in a moment’s notice. The finance division became G.E.’s center of gravity, ultimately accounting for 40 percent of its revenue and 60 percent of its profit. With so much money coursing through the finance division, Mr. Welch used it to his advantage, shifting zeros throughout a sprawling international web of subsidiaries, and extracting whatever he needed to meet or beat analysts’ estimates for nearly 80 quarters in a row, an unprecedented run. It was what one influential analyst called “earnings on demand.”

Never mind the diminution and break-up of GE and the corrosive implications of Jack's legacy, this is yet another example of how narratives endure despite overwhelming evidence to the contrary. 

I'm also inclined to believe that Jack Welch was the business counterpart to Milton Friedman in the academia in peddling a false and corrosive ideology that continues to exercise its hegemony. 

2. The stock market crash may have wiped trillions off Big Tech valuations, but as this Times story writes, they stand well positioned to widen their market dominance in any recession. 

3. Adam Tooze explains the success of Javelin anti-tank missiles which have been critical in the Ukrainian infantry's combat against the Russian tank-mounted cavalry. 

The Javelin is a high-tech weapon that kills at ranges often exceeding those of the Russian tank guns. It is the product of breakthroughs in the postwar period that saw hollow charge warheads combined with more powerful rocket propulsion. The more powerful rockets allowed engagement at longer distance, but also raised problems of accuracy. Unlike a shell fired out of a cannon that - due to its extreme velocity, simple aerodynamics and the direction provided by the barrel - follows a predictable path, a rocket is too unsteady to guarantee a hit at long range. A long-range rocket requires guidance, through fins activated either by wire, or as in the case of the Javelin by infrared and a highly sophisticated internal guidance system. It was the combination of long-range rocket propulsion with guidance and shaped charge that created the modernAnti-tank Guided Missile (ATGM) - a weapon that combined the lightness and mobility of a personal anti-tank device - Panzerfaust, RPG - with the long-range striking power of an anti-tank gun.

4. The Chinese government has prioritised self-sufficiency in the manufacture of cutting-edge microchips as one of its important prongs in the competition with the US. But there have been doubts about the Chinese ability to master this technology. Sample this

Eric Johnson, the CEO of JSR, one of the world’s largest suppliers of a material critical for semiconductor production, has said a lack of industry infrastructure will make it “very difficult” for China to develop cutting-edge chipmaking technology despite a push for self-sufficiency... Johnson said China would struggle to master the sophisticated chipmaking technology based on a technique known as extreme ultraviolet or EUV lithography... EUV lithography is a highly demanding process using light to etch minuscule integrated circuits on to silicon wafers. Even if China “got a paper on exactly what the chemistries were . . . to manufacture that at the purities, and the precision and reproducibility is really tough”, Johnson said. “It’s not that simple and they don’t have the supply chain to support that, either.”

James Kynge reports of record increases in foreign investors and multinational corporations intending to shift production away from China or limit investments. 

5. A fascinating Bruegel data set outlines the responses from 18 European countries to the ongoing increases in energy prices. 

It's interesting that very few countries resorted to price, retail or wholesale, regulation. The primary means to mitigate the hardships from the price rises were targeted transfers and reduction in energy taxes. 

Interesting also that Spain and France have been the most activist among European countries.

6. The graphic tracks how US CPI inflation and Fed Funds rate have tracked each other over the last sixty years. 

7. LNG tankers facts of the day,

The big three South Korean shipbuilders — Korea Shipbuilding, Daewoo Shipbuilding & Marine Engineering and Samsung Heavy Industries — are the dominant producers of LNG ships, controlling more than 70 per cent of the global market. Large-size LNG carrier orders jumped nearly seven-fold in the first four months of this year, with the Korean builders winning 30 of a total of 47 ships ordered, according to shipbroker Clarksons... Prices for building new vessels have been rising for more than a year and are up more than 26 per cent since November 2020 to the highest level in nominal terms in 13 years, according to Clarksons.

8. ESG investing is also Tech washing? Were the high ESG investment returns concealed in their high Technology sector exposures? Alternatively, was the high ESG returns a consequence of their high correlation with growth stocks which benefited most from the market boom? 

9. Private equity is the biggest act in Wall Street.

Private equity firms announced a record 14,730 deals worth $1.2tn globally last year — that is nearly double the previous high in 2007. Employees at buyout firms pocketed $23.4bn for their work — significantly more than their investment banking pals operating on Wall Street.

It's only natural that it gets the attention of competition regulators. Sample this

Critics say the increasing market share of private equity groups in some industries has given them power to control prices and labour costs in ways that are often not in the best interests of consumers and workers... The healthcare sector is an example. Buyout deals in the industry ballooned from about $42bn in 2010 to $120bn in 2019 and many essential services, including emergency room services, mental health clinics and dentistry are now in the hands of private equity. In many areas, prices have gone up and the quality of care has deteriorated, according to multiple studies. The newspaper industry is another sector where private investment firms have expanded their footprint and drawn criticism, with concerns of cost-cutting at the expense of journalism.

10. Ruchir Sharma points to shadow banks as the big financial market risk this time around,

Shadow banks include creditors of many kinds, from pension funds to private equity firms and other asset managers. Together they manage $63tn in financial assets — up from $30tn a decade ago... Though it has pulled back recently under government pressure, China’s shadow banking sector is still among the largest in the world at 60 per cent of gross domestic product — up from 4 per cent in 2009 — and deeply enmeshed in risky lending to local governments, property companies and other borrowers. In Europe, the hotbeds include financial centres like Ireland and Luxembourg, where the assets of shadow banks, particularly pension funds and insurers, have been expanding at an 8 to 10 per cent annual pace in recent years...

After 2008, as regulators tightened the screws on public debt markets, many investors turned to these private channels, which have since quadrupled in size to nearly $1.2tn. A substantial chunk of it is direct lending from private investors to often risky private corporate borrowers, many of whom are in this market precisely because it is unregulated. Nothing highlights the frenzied search for yield in private markets more clearly than so-called business development companies. Some of the world’s biggest asset managers are raising billions for BDCs, which promise returns of 7 per cent to 8 per cent on loans to small, financially fragile companies. As one investor told me: swing a stick in Manhattan these days and you are bound to hit someone involved in private lending. 

And on the borrowers side,

The borrowers to watch most closely now are corporations. In the US, corporate debt as a share of assets remains near record highs, particularly for firms in industries hardest hit by the pandemic, including airlines and restaurants. A third of publicly traded companies in the US do not earn enough to make their interest payments. Any increase in borrowing costs will make life difficult for these companies, which need easy credit to survive. Many of them rely on expensive junk debt, which has doubled over the past decade to $1.5tn, or roughly 15 per cent of total US corporate debt. Their vulnerability was exposed early in the pandemic, when default risks briefly spiked, but was quickly covered up by massive injections of liquidity from the Fed. The biggest booms are under way in private markets.

11. More on the Sri Lankan crisis. A third of the country's debt is owed to foreign sovereign debt holders.

And its share has been increasing sharply since 2013, driven by the entry of China

This puts the problems in perspective

Sri Lanka’s reserves have fallen from $7.5bn in November 2019 to the point where finding $1mn is “a challenge”, Wickremesinghe, the new prime minister, said in an address last week. This has meant shortages of not only fuel but food and medicine, with hospitals forced to postpone surgeries. The country has the worst inflation in Asia at about 30 per cent in April and the currency has almost halved in value since it was floated in March.

12. The Chinese PM Li Keqiang warns of negative growth this quarter as the country reels from Covid lockdowns in Shanghai, Beijing, and other towns. 

13. From nothing, Adani Group has become the second largest cement manufacturer in India with its acquisition of Holcim's stakes in ACC and Ambuja Cements. This is an important driver, 

Between January 2003 and May 2022, the bellwether BSE Sensex grew at a compounded annual growth rate (CAGR) of 16.3%. That’s doubling in roughly four-and-a-half years. During the same period, leaders UltraTech, ACC and Ambuja all delivered a CAGR above 17%, with Ambuja leading at 19.1%... One reason for this is the oligopolistic nature of the industry, which has a few firms dominating production and market share.

In keeping with the growing business concentration, the top five manufacturers make up 48% of cement production capacity of 550 mt. However, in terms of production, this is likely much higher since the top manufacturers have higher capacity utilisation, which has languished in the low-60s range. 

14. AK Bhattacharya points to the petrol taxes story in India,

From about $105 a barrel in 2013-14, its average price per barrel dropped to $84 in 2014-15 and $46 in 2015-16 before marginally moving up to $47 in 2016-17... For petrol, the excise duty per litre went up from Rs 9.48 in April 2014 to Rs 21.48 in April 2017, and for diesel the increase was equally steep from Rs 3.56 to Rs 17.33 in the same period... The government’s excise revenue from the petroleum sector as a result shot up from about Rs 78,000 crore in 2013-14 to Rs 1 trillion in 2014-15 and to Rs 2.43 trillion in 2016-17... By the end of March 2021, they rose to Rs 32.90 a litre for petrol and to Rs 31.80 a litre for diesel. The Centre’s excise revenue from this sector... by 2020-21, it went up to Rs 3.73 trillion... In 2017-18, the incidence of cess and surcharges accounted for about 56 per cent of the total central levies on petrol and about 35 per cent for diesel. By the end of March 2021, the share of cess and surcharges went up to 96 per cent for petrol and 94 per cent for diesel.

Two factors were responsible. One, the surcharge levied by way of special additional excise duty and the agriculture infrastructure and development cess rose to about to Rs 13.5 a litre for petrol and Rs 12 a litre for diesel. Two, the Finance Act of 2018 replaced the road cess with the road and infrastructure cess, imposing a new combined levy of Rs 8 per litre for both petrol and diesel. In the following three years, the road and infrastructure cess was raised to Rs 18 a litre for both petrol and diesel. Thus, by April 2021, the total levy of cess and surcharges rose to Rs 31.5 a litre for petrol and Rs 30 a litre for diesel. But the basic excise duty was kept at only Rs 1.4 a litre for petrol and Rs 1.8 a litre for diesel... the Centre’s revenue from road and infrastructure cess rose sharply from Rs 51,266 crore in 2018-19 to Rs 1.24 trillion in 2020-21 and Rs 2 trillion in 2021-22. Note that the share of road and infrastructure cess rose from 24 per cent in 2018-19 to 33 per cent in 2020-21 and to well over half of the total excise revenue from the petroleum sector in 2021-22... the Centre cut the road and infrastructure cess twice in the last six months — once in November 2021 and again last week. The cess thus declined from Rs 18 a litre to Rs 5 a litre for petrol and to Rs 2 a litre for diesel. As a result, the Centre lost about Rs 50,000 crore of revenue in 2021-22 and is expected to lose another Rs 86,000 crore in 2022-23.

15. In the biggest attempt to address conflicts of interests within audit and advisory firms, EY announced a surprise split of its audit work from its consulting, tax, and deal advisory work. 

An EY split would result in two separately owned businesses and would be a much bigger change than the more limited operational separation of the Big Four’s UK audit and advisory functions, which was agreed after corporate scandals at retailer BHS and outsourcer Carillion... The plans envisage an audit-focused firm being separated from the rest of the business... This firm would retain experts in areas such as tax to support company audits... EY’s surprise move... would force its rivals to consider following suit... EY, which employs 312,000 people in more than 150 countries, is structured as a network of legally separate national member firms that pay a fee each year for shared branding, systems and technology.

16. Martin Sandbu writes that deglobalisation does not show up in the statistics. World goods trade continues to grow.

And financial globalisation is going strong

Instead, Sandbu feels that we may be witnessing an era of "regionalised globalisation" involving regional blocs aligned by common values and governance. 

Simplicity, modularity, and speed in mega project construction

Alon Levy at Pedestrian Observations argues that Southern Europe (Italy, Spain, and Turkey in particular), South Korea, and Switzerland, followed by Nordic countries are the lowest-cost places for subways construction. 

On the reasons for this lower cost construction, he writes,

Like Italy, Spain has not undergone the creeping privatization of state planning so typical in the UK and, through British soft power, other parts of Northern Europe. Design is done by in-house engineers; there’s extensive public-sector innovation, rather than an attempt to activate private-sector innovation in construction. Southern European planning isn’t just cheap, but also good. Metro Milano says that M5 carries 176,000 passengers per day, for a cost of 1.35b€ across both phases; in today’s money it’s around $13,000 per rider, which is fairly low and within the Nordic range. Italian driverless metros push the envelope on throughput measured in peak trains per hour, and should be considered at the frontier of the technology alongside Paris. Milan, Barcelona, and Madrid have all been fairly good at installing barrier-free access to stations, roughly on a par with Berlin; Madrid is planning to go 100% accessible by 2028... Italian corruption levels in infrastructure are very low, and from a greater distance this also appears true of Spain.

The point about the superior public sector planning, design and innovation in infrastructure projects is interesting and goes against the conventional wisdom which almost reflexively attributes these only to the private sector.  

The blogpost also links to this post by Bent Flyvbjerg who finds speed and modularity as the two reasons for Madrid's metro success. Madrid Metro completed 76 stations covering 131 km in two four year phases from 1995 using radically innovative approaches to tunnelling and station building. 

The Madrid Metro leadership decided that no signature architecture would be used in the stations, although such embellishment is common, sometimes with each station built as a separate monument... Signature architecture is notorious for delays and cost overruns... Their stations would each follow the same modular design and use proven cut-and-cover construction methods, allowing replication and learning from station to station as the metro expanded. 

The project would eschew new construction techniques, designs, and train cars. Again, this mindset goes against the grain of most subway planners, who often pride themselves on delivering the latest in signaling systems, driverless trains, and so on... They cared only for what worked and could be done fast, cheaply, safely, and at a high level of quality. They took existing, tried-and-tested products and processes and combined them in new ways... 

Traditionally, cities building a metro would bring in one or two tunnel-boring machines to do the job. The Madrid leaders instead calculated the optimal length of tunnel that one boring machine and team could deliver — typically three to six kilometers in 200 to 400 days — divided the total length of tunnel they needed by that amount, and then hired the number of machines and teams required to meet the schedule. At times, they employed up to six machines at once, completely unheard of when they first did it. Their module unit was the optimal length of tunnel for one boring machine, and like the station modules, the tunnel modules were replicated over and over, facilitating positive learning. As an unforeseen benefit, the tunnel-boring teams began to compete with one another, accelerating the pace further... And by having many machines and teams operating at the same time, the Madrid Metro leadership could also systematically study which performed best and hire them the next time around. More positive learning.

There are three distinct features. One, keep it simple and avoid new things when existing techniques and technologies are just as good. Two, as far as possible modularise construction. Three, iterate while constructing and have feedback loops to integrate learning into the construction process. The combined result is low-cost and high-speed construction of world-class metro railway systems. 

Flyvbjerg has a simple advise for construction of Megaprojects,

I’ve found that two factors play a critical role in determining whether an organization will meet with success or failure: replicable modularity in design and speed in iteration. If a project can be delivered fast and in a modular manner, enabling experimentation and learning along the way, it is likely to succeed. If it is undertaken on a massive scale with one-off, highly integrated components, it is likely to be troubled or fail.

See also this and this papers by Flyvbjerg on modularity and speed.

Infrastructure contracting: privatising gains and socialising losses - Heathrow edition

I have blogged about how private owners and operators of infrastructure assets while aggressively maximising the amount of profits they take out are loath to step in to cover losses. Instead they prefer to let it fall on the tax payers or customers. This market failure has been a feature of infrastructure ownership in UK and elsewhere.

The latest example is that of Heathrow airport which has suffered from the Covid 19 pandemic. FT writes about its response to a loss for the year which has topped £1.4 bn. 

There was a £5 charge for cars dropping off passengers. There was the £8.90 “pandemic tax” to cover fees for baggage handling, electricity and other services. Then there was the attempt to bump up the airport’s regulated assets base, or RAB — a mechanism that normally incorporates investment in the returns the airport can earn over an extended period of time — by a whopping £2.6bn to claw back losses. Regulator the Civil Aviation Authority rightly called that “disproportionate” in April, allowing £300m to be added to the RAB... The next battle is over the costs of operating the airport given lower passenger numbers, and who will bear the risks in this recovery. And again, it looks like the preferred answer is customers... The airport had suggested that fees, which are ultimately paid by travellers, be increased by 90 per cent over the next five years. In the event, the regulator has proposed charges rise by 15 to 60 per cent, which provoked a furious response from airlines and will now go to consultation.

Contrast this response of the owners of Heathrow with that during good times,

Heathrow’s consortium of wealthy owners, which include Spain’s Ferrovial and the Qatar Investment Authority, have taken £4bn in dividends out of the airport since 2012 — including £100m in April 2020. However, they didn’t put their hand in their pockets last year, despite the airport’s stretched finances. Now they seem remarkably determined to stress test the idea that travellers will continue to head through the doors come what may at what is already one of the world’s most expensive airports. 

Public finance accounting of capital expenditure I

This post draws attention to a problem with the nature of public finance accounting which comes in the way of public financing of essential infrastructure projects. 

Consider the following infrastructure requirements - piped rural and urban water supply, sewerage treatment and solid waste management facilities, municipal and village roads, rural connecting roads, state highways, storm water drains and cleaning of urban canals, school and hospital buildings etc. 

Aside from a few, the vast majority of these assets have limited or no revenue generation. But it's also widely accepted that not only do these investments enhance productivity in individuals and the economy, but they are also basic public goods and essential requirements for dignified life. In fact, one would argue that for a country aspiring to be a $5 trillion economy, potable drinking water supply, basic public health, connected habitations and population centres, paved streets, disease breeding and clogged drains and canals, schools and hospitals with basic facilities are a minimum requirement. 

The conventional wisdom on infrastructure financing is that in case of revenue generating assets, establish special purpose vehicles, transfer the asset to its balance sheet, put in some equity including by way of the land or site, mobilise debt by escrowing future revenue streams, undertake construction, and repay from the escrow. Wherever possible, it encouraged that this be done through the likes of public private partnerships. 

In case of infrastructure assets without or with limited revenue stream, the suggested financing source is from the budget. Since these is little or no revenue generation, raising project debt is ruled out. Therefore, to the extent that revenue receipts are equity, such projects are expected to be financed with equity.

However such budget financing has hard constraints. In fact, after excluding human resource expenditure and debt financing, a few universal subsidies (food and electricity) and welfare schemes (pensions, agriculture etc), repairs and assets maintenance, and the state government shares for the Central Sector Schemes (CSS), the budget resource remaining for capital expenditures is tiny. This applies to almost all states in India. 

It's just about sufficient to meet the requirements of a few roads and community assets, if at all. In the circumstances, very few state governments can ever hope to undertake large mandates like saturation of the state with any of those mentioned earlier even over a period of five years using budget finance alone. Five trillion dollar economy or not, we will need decades to fulfil even the basic public goods requirements!

So we have an infrastructure financing problem. On the one hand, even though these projects do not directly generate revenues, they are undoubtedly productivity enhancing and therefore expands the economy's production possibility frontiers and thereby increase the economic output and generate revenues for the government. In fact, there is a strong case that given the low baseline, these investments are low hanging fruits with high marginal productivity and incremental output increases, and thereby high multipliers. 

On the other hand, the public finance accounting limitation that recognises only direct revenues means that governments cannot raise debt for projects without direct revenues but with high indirect economic multipliers. In other words, governments cannot do what the private sector does in routine course - raise debt to finance projects which increases aggregate revenues. In a purely Econ 101 sense, this inability to use debt to supplement budget equity for projects that raise aggregate output and revenues of the government is an inefficiency. While the private sector leverages debt to finance its capital expenditures, governments are restrained from doing the same by its accounting conventions! 

How can this paradox be addressed?

Weekend reading links

1. FT has a long read on the challenges facing the global market for luxury goods. Asian shoppers accounted for more than 60% of the $300 bn (including cars) plus market in 2021.  

This is a stunning snippet

South Korea’s Shinsegae department store in the Gangnam district of Seoul recording sales of $2bn in 2021 — the highest turnover for a single store in the world.

Harrods in London had for long held the top spot.  

2. Another long read on the exploration for Lithium mining in the US, which may have the fifth highest reserves but very little of which is exploited. The search for efficiency and cost cutting, coupled with the dominance of environmental interests meant that there was little incentive to mine its own minerals.

The US’s willingness to allow its manufacturing to take place overseas has attracted criticism... “We outsource everything for slightly lower costs,” says Emily Hersh, an analyst at consultancy DBDC Group, and the chief executive of a company undertaking a lithium brine exploration project in Nevada. “We have punted the supply chains behind the technology we use and love to cheaper jurisdictions, or jurisdictions without stringent environmental policy, so that we can get them cheaper and faster.”

As the EVs market expands, the demand for battery minerals will grow dramatically

3. The rising interest rates have turned spotlight on housing markets in developed countries, which have experienced a sharp increase since the pandemic. The Economist has a good graphic which captures the health of housing market in western economies. 

As can be seen, outside of the Nordics, the western economies remain well placed to weather out the housing market bubble. 

4. It has long been an orthodoxy of management that financial incentives in the form of bonuses spur productivity growth in businesses. Notwithstanding serious doubts, it has endured as a narrative. In this context Pilita Clark points to a study of by Professor Klaus Möller of Switzerland’s University of St Gallen which refutes this conventional wisdom,

Professor Klaus Möller of Switzerland’s University of St Gallen co-authored a study of salespeople at the Lichtenstein-based Hilti group, a family-owned company that sells construction products and services in 120 countries and wanted advice on reforming its pay-for-performance schemes. In early 2019, 190 Hilti salespeople in eastern Europe were switched from a salary that was 65 per cent fixed and 35 per cent dependent on meeting performance targets to an almost entirely fixed salary. (Small, non-monetary rewards such as family dinner vouchers were paid to teams that won internal company competitions for their performance.) The results were impressive: the country group outperformed the market by a factor of 1.4 in 2019, double the rate of 2018. Staff turnover fell by more than 4 per cent and satisfaction with pay rose by 19 per cent, double the company-wide increase. Crucially, sales efforts did not drop off... Hilti teams in other countries have adopted similar systems...

In many countries, bonuses first emerged in factories during the previous century to spur people doing simple, repetitive tasks to work faster and harder. It was relatively easy to judge how many widgets an individual worker produced each day, and pay a bonus accordingly. Today, more office workers collaborate in teams on complex tasks requiring co-operation and creativity. That makes it harder to judge exactly who is hurting or helping performance, yet bonuses have persisted.

Clark also refers to another study done by a big German retail chain which wanted to know if an attendance bonus would reduce absenteeism, 

A study was duly done of apprentice employees in 232 stores who were offered either extra money or more vacation days if they came to work as planned each month. Alas, the time-off bonus had no effect on absenteeism and the cash incentive made it worse: absenteeism surged by about 45 per cent, the equivalent of more than five extra days of absence a year per worker... It turned out that paying people to turn up to work sent unintended signals. Some staff thought it meant bunking off was rife — otherwise why would the company be paying for attendance? So they felt less guilty about being absent themselves. Others thought it showed the work they were being asked to do was unpleasant and underpaid, so they stayed home too.

5.  The application by Finland and Sweden to enter NATO is truly a landmark turn. To put it in perspective,

Sweden and Finland judged neutrality to be in their interests when faced by the Soviet threat, and in the Swedish case for centuries before that. They did not alter course, although they did join the European Union, in the more than three decades since the Cold War’s end. The shift in sentiment in the two countries in the past several months has been dramatic, one measure of how Mr. Putin’s determination to push NATO back and weaken support for it has produced the opposite effect — the rebirth of an alliance that had been casting around for a generation for a convincing reason to exist. Where no more than a quarter of the population in Sweden and Finland supported joining NATO last year, that number has risen sharply today — hitting 76 percent in a recent poll in Finland. Sweden’s governing Social Democratic Party, the country’s largest party and long a bastion of nonalignment, has embraced NATO membership in an extraordinary turnabout... Germany, a generally pacifist nation since it emerged from the rubble of 1945, has embarked on a massive investment in its armed forces, as well as an attempt to wean itself of dependence on energy from a Russia it had judged as, if not innocuous, at least a reliable business partner.

6. Here is the long list of businesses which have paused or exited from Russia. The latest are McDonalds and Renault. 

7. Jeff Bezos, like Elon Musk, appears to have lost it in this spat between him and the White House on the issue of rich not paying enough taxes. It's natural for the richest to take the cover of libertarian ideology to justify tax evasion. 

8. Shyam Saran reads the tea leaves from Chinese policy statements and speeches of top leaders and finds circumspection

The overall impression one gets from reading these speeches and their further elaborations is that China sees that the “changes unseen in a lifetime”, which had provided a strategic opportunity to advance China’s geopolitical influence, are shifting in a more adverse direction. China senses it is confronted with greater vulnerabilities even as the more positive factors appear to be losing steam. Its economy has slowed down and the persistence of its zero-Covid policy is leading to prolonged economic disruptions. The manner in which Russia has been crippled by economic and financial sanctions has heightened China’s vulnerability especially since its economy is far more integrated with the still West-dominated trade and financial systems. China may have declared victory too early. There are signs of a more cautious external posture going forward.

9.  From Business Standard on the carbon emissions from different energy sources

And the decline in storage costs

10. Kudumbashree self-help groups in Kerala should count as a genuine development success. It could be seen as the social counterpart to the political movement to decentralise governance. 

11. Sri Lanka becomes the first country in Asia-Pacific region after Pakistan in 1999 to undergo a hard default on its sovereign bonds.

12. A good summary of all the recessionary headwinds facing the world economy. 

13. Even as the world grapples with an inflationary spiral, Japan seems to be facing much calmer inflationary situation - while consumer prices rise 2.5% in April over the year earlier, core inflation was up just 0.8% from a year earlier. FT points to an interesting dynamic at work,

In the US and Europe, companies usually respond to a rise in raw material and commodity prices by transferring those costs to consumers. In Japan, however, businesses fear a public backlash if they raise prices, while workers — beaten down by decades of stagnant pay — do not demand the higher wages that would let them afford higher prices in the shops. If companies must pay more for imports but cannot increase their retail prices, they will suffer a squeeze on profits. They often react by seeking to cut wage costs, ultimately creating deflationary and not inflationary pressure. 

It points to other factors contributing to the muted inflation response,

First, a big chunk of the April inflation number reflected the disappearance from annual comparisons of cuts in mobile phone tariffs engineered by the then prime minister Yoshihide Suga last year. That means underlying inflation is less than the numbers suggest. Second, Japan’s economy has yet to recover to pre-pandemic levels, even though the country has never imposed the strict lockdowns carried out in other parts of the world. While there were fewer restrictions on economic activity, people have continued to take precautionary measures, even after most of the elderly were vaccinated against Covid-19. Japan is still closed to tourists. That has hit consumer spending hard. Third, while weakness in the yen used to provide a big stimulus to the Japanese economy, that effect is more muted than in the past. Big Japanese companies have relocated much of their supply chain to China. Demand for the capital goods Japan does still export has been heavily hit by the weakness of the Chinese economy.

14. From an FT long read about long distance truckers, this snippet about cross-border restrictions due to Brexit,

... requiring trucks going into the Republic of Ireland from the UK to present 700 pages of documents that take eight hours to prepare. Archie Norman, chair of Marks and Spencer, said this week: “Some of the descriptors, particularly of animal products, have to be written in Latin and in a certain typeface.” Every sandwich containing butter, he said, requires an EU vet certificate, which means employing 13 vets and budgeting for 30 per cent more driver time... The metaphor of supply “chains” makes the process sound orderly and smooth, but from the first this journey along them was more like an adventure through a wild ecosystem in which we were a prey, dashing between safe habitats such as lorry parks and filling stations, hunted by authorities, legislation and customs rules that sought to charge, delay or stop us.

15. Chinese economy, an April 2022 status check,

Retail sales down 11 per cent from a year earlier, against an expected decline of less than 7 per cent. Industrial production dropped 2.9 per cent. Manufacturing was particularly weak, with auto production falling 41 per cent. Export growth was 4 per cent, a screeching slowdown from 15 per cent growth in March. Real estate activity collapsed, with construction starts falling 44 (!) per cent

  

Reimagining Management Information Systems for frontline supervisors in governments

A Management Information System (MIS) forms the backbone of program management. In their digital form, they have cognitively striking and user-friendly monitoring Dashboards. 

However, the conventional MIS systems, either as physical reports or digital Dashboards, are typically designed to inform the monitoring requirements of higher-level officials about the progress of program implementation. The data captured, their periodicity, the process-flows, and reports generated reflect this imperative. 

There is limited attention paid to the supervisory requirements of frontline managers – the block education/agriculture/engineering officers, the town planning supervisors, the health inspectors, the revenue inspectors, the Station House Officers etc. Their requirements are for granular and periodic enough information which is both relevant to their supervisory functions and is actionable by them. 

For example, a school inspector can prioritise his/her inspection schedules based on information about which schools are performing poorly on the 3-4 specific indicators (say, syllabus coverage, student attendance rates, internal exam scores, budget utilisation etc) on each of which they also have instruments and the power to act to improve the situation. There is little point deluding them with non-actionable (at their level) information on absence of toilets and other infrastructure, teacher vacancies, inadequate teacher training, low college enrolment rate etc, all of which are however useful feedback to officials at much higher levels. 

Instead, MIS reporting systems (physical or digital) must be designed bottom-up. Primarily they should respond to the supervisory needs of the frontline managers. They also should respond to the monitoring requirements of district and HoD level officials, and system improvement feedback requirements of government level officials. 

Some questions to examine in the design of such MIS

1. What are the information requirements for frontline officials – implementing officials and frontline managers? Is the relevant data being captured and with the required periodicity? Is the decision-support information being reported as actionable feedback?

2. What are the information requirements for monitoring the progress of implementation? What periodicity of its collection? How is it being reported? Which categories/levels of officials require this information?

3. What information is required for system improvement measures? What periodicity of its collection? How is it being reported? Which categories/levels of officials require this information?

Alain Bertaud on Building new cities

An excellent Alain Bertaud interview where he discusses the idea of creating new cities. 

He does not in general agree with creation of new cities,

New city projects often start by highlighting their nice infrastructure, like Neom in Saudi Arabia. But nobody will move to a city with a good sewer system but no jobs. Historically, infrastructure follows the market, not the other way around. This is why, for example, the Greeks founded my home city of Marseilles: It exported local wine and cork and imported olive oil. During Roman times it became a portal for shipping grain from North Africa to Gaul. Then there’s the issue of cash flow. When you build a new city, you have negative cash flow for a long time. Essential early infrastructure like roads and airports aren’t cheap, and it takes time for land sales and tax revenue to start coming in. This might work for new capital cities like Canberra or Chandigarh, which had the financial backing of millions of taxpayers, but it won’t work for most new cities.

On successful examples of new city formation,

True new cities start with something that attracts a lot of people and go from there. This is the story of Orlando, one of the fastest-growing cities in the U.S. Disney created a lot of jobs there in the 1970s, and thanks to tourism, you quickly get a major international airport. Before you know it, you have a diversified city... Often, new international trade routes are the draw. For example, expect to see new cities emerge in Central Asia as China’s Belt and Road initiative creates a lot of new hubs. This is the story of Atlanta, by the way: It built an economy around being a rail junction. Or we might see new cities in the Arctic, as climate change opens up new Arctic shipping lanes. This is the story of Vancouver — a connection to the Pacific Ocean.

On what he thinks is necessary requirements if we are to establish new cities - the need to marry planning with bottom-up market-based evolution,

The first thing you need to do is clearly demarcate the public and private realms... These are design problems that need to be done all at once and in a top-down way before a healthy city can start to grow. Second, you need to set up some way to finance infrastructure... If you set it up correctly, new development should incrementally pay for itself... Beyond these two considerations, don’t overthink it. The key is to lay the groundwork for a land market that will reveal the right way to allocate land uses and densities. This is partly what went wrong with Brasília — planners thought they could plan out every little detail about the city, right down to how many shops each neighborhood should have, and the results have been less than ideal. Compare Brasília to Hong Kong, arguably one of the most successful new cities in modern history. Instead of micromanaging everything, the government focused on stewarding the public realm and providing quality public services. Otherwise, they mostly let markets design the built form of the city in a spontaneous and evolutionary way.

This nuance is missing in the likes of Paul Romer's Charter Cities.  

I am not convinced by the idea of building new cities, especially in developing countries. They are too grandiose as projects to be structured to a reasonable degree of satisfaction through planning and enabling regulations in the messy political economy and weak state capacity environments. However, what's possible is that once new communities start to emerge from housing developments, governments can step in with enabling regulations and investments to support their growth as future small towns. 

More on how the west views Russia

Since the Russian invasion of Ukraine, I have blogged on multiple occasions to highlight an alternative narrative to the mainstream one being conveyed in western mainstream media. The most famous interpreter of this view has been the political scientist John Mearsheimer. 

However, this should not be treated as a justification for the barbaric and criminal nature of the bombings and killings, but merely an explanation or motivations behind the invasion itself. A continuation of the mainstream narrative which absolves America of all blame and puts everything on Russia, while politically convenient and popular at home, is a recipe for catastrophic consequences. 

In this spirit, a long read in the Times by Roger Cohen on Vladimir Putin reveals several important things about western perceptions on Russia. 

Hidden in the middle is this nugget which captures the nub of the problem.

Arriving in Moscow as the U.S. ambassador in 2005, William Burns, now the C.I.A. director, sent a sober cable, all post-Cold War optimism dispelled. “Russia is too big, too proud, and too self-conscious of its own history to fit neatly into a ‘Europe whole and free,’” he wrote. As he relates in his memoir, “The Back Channel,” Mr. Burns added that Russian “interest in playing a distinctive Great Power role” would “sometimes cause significant problems.”

And this on the specific issue of Ukraine,

The United States, however, with the Bush presidency in its last year... wanted a “Membership Action Plan,” or MAP, for Ukraine and Georgia, a specific commitment to bringing the two countries into the alliance, to be announced at the April 2008 NATO summit in Bucharest... France joined Germany in Bucharest in opposing the MAP for Georgia and Ukraine... Mr. Burns, as ambassador, was opposed. In a then-classified message to Ms. Rice, he wrote: “Ukrainian entry into NATO is the brightest of all redlines for the Russian elite (not just Putin). In more than two and a half years of conversations with key Russian players, from knuckle-draggers in the dark recesses of the Kremlin to Putin’s sharpest liberal critics, I have yet to find anyone who views Ukraine in NATO as anything other than a direct challenge to Russian interests.”

In the sweep of history, Russia is a great power. And great powers have to treated so. The expectation that Russia could accept subservience to American hegemony and its institutions was fatally flawed. 

From rewriting history (western history narratives downplay the critical role played by Russia in Hitler's defeat and the likes of Victory Day, instead preferring to play-up D-Day and the likes), to covert and overt assistance to pro-democracy forces in Russia, to the NATO expansion into the Russian near-abroad, the Americans have done little to assuage apprehensions and engage with Russia as not a subservient power. In fact, Cohen condescendingly describes the Russian role in the defeat of Germany in the World War II as Russian "mythmaking".

Winners and losers from the Ukraine invasion

It's coming to nearly three months since Russia invaded Ukraine. The war is now a stalemate and it appears set to continue for some time. As the fog clears, it may be time to look at who have been the winners and losers from this invasion.

It's easy enough to argue that the biggest loser is Russia. Vladimir Putin's decision to invade Ukraine must rank among the worst miscalculations by any major leader in history. It's surely the biggest strategic blunder by any leader since the war. Over the space of three months, Russia's economic prospects have been pushed back decades. More than the freezing of Russian foreign finances and other sanctions themselves, the actions of western countries have shaped expectations among businesses and investors that are deeply detrimental to Russia's long-term prospects. Besides the economic damage and prospect of extended period of economic and political isolation portend bleak future. This is just a long list of companies which have paused or exited Russia. 

Economically too Russia loses its massive captive market for natural gas, coal, and other commodities. While it'll eventually find other buyers, it will come at a steep cost and with all the uncertainties. Politically, instead of deterring the expansion of NATO, the invasion looks set to expand the boundaries of NATO. It has succeeded in convincing Finland to abandon its 75 years of neutrality and apply to join NATO. 

For decades in Finland’s case and centuries in Sweden’s, the thought of joining a military alliance was all but impossible. Now, in the 81 days since Russia launched its full-scale war against Ukraine, the situation has changed so dramatically that Sweden and Finland are rushing into Nato with large majorities in both their parliaments and populations backing them.

In one stroke Putin has upended decades and even centuries long beliefs and trends, materialising exactly the same scenario that he has sought to eliminate! Talk about self-goals...

It's difficult to imagine Russia being seen as anything other than a rogue state as long as Vladimir Putin remains in power. There are also no signs of his hold on power slipping because of the debacle. And even if Putin leaves after a few years, the damage done to the Russian psyche by NATO encirclement and political and economic isolation would be such that it would harden Russian nationalism and prevent a genuine rapprochement. 

The other big loser is China. In fact, in the final analysis, the Russian invasion and the Chinese actions around it coupled with the latest Covid lockdowns, may have hastened the decline in China's fortunes which (as this blog has held) started with President Xi Jinping's authoritarian turn. The internal and external aggressions of recent years, bullying and wolf warrior diplomacy, and the worsening economic relations with US had already sown the seeds for China's economic slowdown. I blogged here.

The large captive western markets and free access to western multinationals and their technologies already look like things of the past. We are already well on the way to a near total freezing out of China from access to strategically important sectors and technologies. The Covid lockdowns and manufacturing supply chain disruptions have highlighted the need for diversification away from China. Economically too, it was inevitable that the debt-fuelled growth reach its limits. The latest developments may be the final blow. 

The biggest winner appears to be the western democracies. As I have blogged here, the speed with which they mobilised together and the resolve with which they sanctioned Russia puts to rest conversations about the steep decline of United States as a global superpower and the imminent demise of the western alliance.  The Russia-China axis has restored the "enemy" which had gone missing after the collapse of the Soviet Union. 

But the gains go beyond the political realm. The Chinese threat had already started to spur transatlantic cooperation in technology sectors and the Russian invasion will only strengthen the trends. A Trans-Atlantic Technology Council (TTC) has been established to respond "to efforts by the likes of China and Russia to build an autocratic digital world and bring the physical supply chains that underpin it under their control". It has the potential to become the platform for US and EU to co-ordinate digital policies. 

The two sides have created ten working groups, ranging from “technology standards” and “secure supply chains” to “investment screening” and “climate and clean tech”. The structure of the TTC allows the relevant agencies and experts in Brussels and Washington to develop working relationships that go beyond ad hoc encounters that have long dominated transatlantic policymaking. It is a practical forum in which they can resolve their digital differences. Officials once barely knew who was in charge of a given topic on the other side of the Atlantic. Now they can just jump on a video call... The TTC has already helped move negotiations along in several areas, particularly with regard to a new version of “Privacy Shield”, an agreement to create a clear legal basis for flows of personal data across the Atlantic... Another project that has benefited from the TTC is the “Declaration for the Future of the Internet”, which was announced on April 28th and signed by more than 60 countries.

The combination of shocks from the Russian invasion and the supply chain disruptions due to Chinese Covid lockdowns and worsening relations with China, means that supply chain re-alignments and reshoring will be hastened. It's no longer a matter of whether such re-alignments will happen, but what will be the degree of re-alignment and diversification away from China. 

Reshoring will revive manufacturing in the west and create jobs. It'll certainly bring back several parts of the manufacturing supply chain. The Cold War will make the western economies refocus on control over critical technologies. All this spur domestic R&D and investments. It's already in motion in several areas, semiconductors being only the most prominent of them. 

Then there is the energy recalibration away from Russia. This has the potential to foster innovation, spur investments, and create jobs across Europe and the US. There will be greater investments in green energy technologies to substitute away from Russian coal and large expansion LNG terminals across Europe. 

Fundamentally, such reshoring and diversification will also mean companies shift away from efficiency maximisation at all costs towards a strategy that combines the pursuit of efficiency with resilience. The result will be higher costs, lower profits, and higher prices for western businesses and consumers. Interestingly, this pain has the promise of laying the foundations for a revival of economic dynamism and more equitable and sustainable economic growth in the western economies. 

Weekend reading links

1. A stand out winner from the Russian invasion of Ukraine is Qatar. With its massive gas reserves, it has become the most important source of incremental gas supplies for Europe. 

Europe’s clamoring for liquefied natural gas, or LNG, comes after Qatar started a $30 billion project to boost its exports by 60% by 2027. The extra demand means more competition among buyers for long-term supply contracts and, most likely, better terms for Qatar. Before the outbreak of the Ukrainian war, some analysts doubted there’d be enough business to justify the expansion plan. Now, Qatar is sounding out customers about an even bigger enlargement... Qatar is reaping benefits already. The $200 billion economy is set to grow 4.4% this year, the most since 2015, according to Citigroup. Gross domestic product per person will soar to almost $80,000, back up toward levels in places like the Cayman Islands and Switzerland. The start of what could be a gas “supercycle” comes just as the World Cup construction boom that powered the economy in recent years comes to an end, according to Ziad Daoud, chief emerging markets economist at Bloomberg Economics. “The timing is fortunate for Qatar, which could see a new driver of growth for this decade,” he said.

2. India's cereal exports have been rising.

But the abrupt decision to temporarily ban wheat exports should come as a dampener. 

3. Global economic prospects weaken, financial markets get seized by uncertainty, the US Dollar rises, and EM's suffer sudden stop and capital flow reversal. This is a constant feature and is happening now too. 

March alone saw the sixth consecutive month of FPI outflows, which was the most severe since March 2020 (after the pandemic scare) on the back of continued geopolitical risks, elevated inflation led by supply side issues, rising commodity costs... Apart from India, other emerging markets, including Taiwan, Korea and the Philippines also saw massive outflows so far this fiscal. The record fall was mainly due to the massive outflows of USD 5.4 billion in March and a whopping USD 15.7 billion in FY22. Such a massive pullout came after they pumped in USD 23 billion in 2020 and USD 3.7 billion in 2021.

4. Striking numbers about the Mathew Effect in school education in UK

All fee-paying (private) schools... collectively educate about 6% of the British school-age population. They also make up a disproportionate share of the student body at top universities (40% at Oxford, 35% at Cambridge, 32% at the London School of Economics) and of elite British professions (65% of senior judges, 29% of members of Parliament, 43% of journalists... Adjusted for inflation [at the time this was written in March 2020], British private schooling has become three times more expensive since 1980. The rise owes in part to a facilities arms race that ran unimpeded until the financial crash of 2008, as schools once synonymous with character-forming privation became increasingly luxe.

The article describes how England's private schools are increasingly establishing their franchises abroad, especially in Eastern Europe, East Asia, and Middle East.

As fee escalation put private schools beyond the reach of their traditional demographics, they started admitting more students from overseas, but the gambit had limits. Bringing in too many foreign students risked diluting the Harry Potteresque cachet that had attracted their parents in the first place. “They don’t want to have lots of internationals. They want lots of British kids,” says Lorna Clayton, whose company Academic Families places foreign students in U.K. schools. So the schools came up with franchising, which would bring in money and spread tradition without altering the original product, while also providing overseas parents with a more affordable way for their children to attend internationally reputable schools.

5. India middle class fact of the day

India’s movie-loving, value-conscious customers have already humbled streaming godfather Netflix, which initially priced too high and had to shelve plans for India that included building a wholly owned post-production facility. It had to ratchet back ambitions to sign up 100mn subscribers — according to Media Partners Asia, they ended last year with fewer than 6mn.

If India did indeed have a middle class in the 250 million range, then the number of Netflix connections should have been several multiples of the lowly 6 million!

6. From the same article above, Amazon is trying to get its business model right in India.

Unlike other countries, where Amazon Prime subscribers mostly sign up to get faster deliveries, India’s Amazon Prime subscribers are primarily paying to watch movies and TV. “In developed markets, Prime service is sold primarily on the back of privileged delivery,” Shah said. “In India it’s the other way round, more people subscribe for video than for delivery benefits.” The big difference between Amazon and Netflix or Disney Plus Hotstar is that Amazon has many other things to sell you besides light comedies and cricket. If the company can convert watchers into customers in one of the world’s fastest growing ecommerce markets, then it will have hit the jackpot. “Amazon clearly sees video as a way to monetise India’s ecommerce opportunity,” Shah added.

I'm not sure that the video subscribers will buy much through Amazon.

7. A reflection of the fragmented nature of the natural gas market comes from the relative prices in Europe and US.

8. While we observe the markets roiled over inflation and interest rates, it's important to put the bond markets in perspective.

9. More on the great resignation in the US labour market,

More than 40 million people left their jobs last year, many in retail and hospitality. It was called the Great Resignation, and then a rush of other names: the Great Renegotiation, the Great Reshuffle, the Great Rethink. But people weren’t leaving work altogether... What workers realized, though, is that they could find better ways to earn a living. Higher pay. Stable hours. Flexibility. They expected more from their employers, and appeared to be getting it... Many of last year’s job quitters are actually job swappers, according to data from the Bureau of Labor Statistics and the census, which shows a nearly one-to-one correlation between the rate of quitting and swapping. Those job switchers have tended to be in leisure, hospitality and retail. In leisure and hospitality, the rate of workers quitting rose to nearly 6 percent from 4 since the pandemic began; in retail it jumped to nearly 5 percent from 3.5. White collar employers still struggled to hire, but they saw far fewer resignations... When workers switched jobs, they often increased their pay. Wages grew nearly 10 percent in leisure and hospitality over the last year, and more than 7 percent in retail. Workers were also able to increase their shift hours, as rates of those working part-time involuntarily declined. A slim share of people left the work force entirely, though for the most part that was driven by older men retiring before age 65 — and some of them are now coming back to work.

10. US stock market ownership fact of the day,

According to an analysis by the New York University economics Professor Edward Wolff, the top 5 percent of American wealth holders own 72 percent of all stocks.

11. On the possibility of imported inflation from China for US consumers,

Goods made (in whole or in part) in China made up less than 2% of American personal consumer spending in 2017, according to economists at the Federal Reserve Bank of San Francisco. China’s covid-related bottlenecks could have larger ripple effects, say by allowing rival manufacturers to raise their prices. Most American inflation, however, is made in America.

12. India's cash transfer system fact of the day,

India has also found a workaround to redistribute more to ordinary folk who vote but rarely see immediate gains from economic reforms: a direct, real-time, digital welfare system that in 36 months has paid $200bn to about 950m people.

13. The Economist has a rare bullish story on India,

As the pandemic recedes, four pillars are clearly visible that will support growth in the next decade: the forging of a single national market; an expansion of industry owing to the renewable-energy shift and a move in supply chains away from China; continued pre-eminence in it; and a high-tech welfare safety-net for the hundreds of millions left behind by all this.

There is a dilemma lurking behind the industrial growth story - reconciling the need for large scale private investments and the threat of business concentration

Saurabh Mukherjea of Marcellus, an asset manager, calculates that India’s top 20 firms earn 50% of corporate India’s cashflows. They are making money fast enough to take risks with their earnings instead of having to borrow to excess. The ambitious giants include conglomerates—Adani (energy, transport), Reliance Industries (telecoms, chemicals, energy, retail), Tata (it, retail, energy, cars)—and more focused giants such as JSW (mainly steel). Those four firms alone plan to invest more than $250bn over the next five to eight years in infrastructure and emerging industries; in doing so they intend to develop local supply chains, which fits with government goals. Mukesh Ambani of Reliance says he will cut the price of green hydrogen to $1 per kilogram by 2030, for instance, from about $5 today. Tata is rolling out battery plants, electric vehicles and semiconductors. These are huge, risky bets that few other firms would dare take.

Finally, some figures on the national social safety net

In the year to March, payments reached $81bn, or 3% of GDP, up from 1% four years earlier. Payments have totalled $270bn since 2017. Roughly 950m people have benefited, at an average of $86 per person per year. That makes a difference to struggling households: India’s extreme poverty line is about $250 per person per year at market exchange rates. Mr Modi has not managed to initiate a national jobs boom, but he has created a national safety-net of sorts.