1. Contribution of immigrants to innovation in the US,
We find immigrants represent 16 percent of all US inventors, but produced 23 percent of total innovation output, as measured by number of patents, patent citations, and the economic value of these patents. Immigrant inventors are more likely to rely on foreign technologies, to collaborate with foreign inventors, and to be cited in foreign markets, thus contributing to the importation and diffusion of ideas across borders. Using an identification strategy that exploits premature inventor deaths, we find that immigrant inventors create especially strong positive externalities on the innovation production of their collaborators, while natives have a much weaker impact. A simple decomposition illustrates that immigrants are responsible for 36% of aggregate innovation, two-thirds of which is due to their innovation externalities on their native-born collaborators.
2. Latest status on world nuclear forces (HT: Adam Tooze)
3. The impact of Nokia's decline on Finland's economy,
Finland... with a population of 5.5 million and a GDP roughly equal to the state of Oregon experienced what looked like a high tech-led productivity revolution. Real GDP per capita in local currency terms rose 55 percent from 1995 to 2007—nearly double the US increase... but from 2008 to 2019 real Finnish per capita income declined... large part is due to Finland having many of its growth eggs in a single basket: Nokia. Nokia’s handsets and related telephony equipment accounted for 20 percent of Finnish exports at peak, driving Finland’s current account surplus to nearly 7 percent of GDP. When the Apple iPhone launched in 2007, Nokia’s handset market collapsed, exports fell by half, Finland’s current account swung into deficit, and a decade plus of economic stagnation began.
This Nokia Risk is raised in an article by Herman Schwartz, who says there are other countries facing this risk,
A larger group of seven countries—all of them relatively small, rich, and with stable governments—are similarly exposed. In Denmark, Israel, South Korea, Sweden, Switzerland, and Taiwan a handful of firms account for a hugely disproportionate share of both profits and R&D spending. The firms which dominate these seven economies have all been extraordinarily successful in the knowledge economy of the past three decades... For the decade of 2011–2020, these firms have had large shares of cumulative profits both domestically and abroad. It is largely thanks to these profits that these small countries have such a significant share of global profit (larger than their share of global GDP) and, in turn, a relatively high per capita income.
4. Kanika Datta writes about Indian billionaires and their companies,
Of the Big Two Indians at the top end of the rich list only one of them can boast a Global Fortune 500 ranking — Mukesh Ambani’s Reliance Industries — which is based on the hard fact of revenues rather than the ephemerals of market sentiment... Reliance remains outside the top 100 with a rank of 104... Among the Indian private sector companies on the Global 500 list are Tata Motors (370th), Tata Steel (435th) and Rajesh Exports (437th)... there are some 145 Chinese corporations in the Fortune 500 to India’s nine (four of them in the private sector). Though Chinese businesspeople do not feature as high on the global rich lists as Indians do, more of them run corporations that have a global arc...Despite India’s reputation as an IT powerhouse, it is the Chinese technology companies that can claim durable global leadership. The four Indian IT majors mostly predate the Chinese tech giants by a decade or more — Infosys in 1981, TCS 1968, Wipro’s IT services division in 1980 and HCL in 1991. The oldest of the Fortune 500 Chinese tech majors is Hon Hai, started in 1974. But Huawei was founded in 1987, Alibaba in 1999 and Tencent in 1998.
5. R Gopalakrishnan on corporate governance issues in India's private sector
Two major banes found among many Indian corporate groups are (i) too many subsidiaries, accompanied by (ii) related-party transactions.
6. FT points to the story of an abandoned German village of Lutzerath in the country's industrial Rhineland, which has become the ground zero for protests against coal mining and a stern test for the German coalition government which includes the Greens. The energy giant RWE plans to raze the settlement and dig up lignite underneath. Lutzi has both wind turbines and coal-fired power plants, thereby exposing the difficulties and contradictions with a Green climate policy.
RWE has been given permission to mine coal as part of an agreement brokered by the German government to keep two lignite-fired power plants running longer than planned to compensate for the sudden loss of Russian gas after Gazprom slashed supplies.
7. The appreciation of US dollar in the current US rate hike cycle has been the highest in over 40 years, thereby imposing steep debt service costs on dollar debts.
The steep and rapid rate hikes in the US have led to a 17 percentage points rise in spreads on sovereign borrowing in foreign currencies of commodity importing countries with weak credit ratings in 2022, thereby shutting them out of markets.
8. FT has an article which discusses whether China is undertaking a reset on its economic, domestic, and foreign policies to win back friends and shed its recent belligerent and insular image.
As it seeks to repair ties with European powers, Beijing is insisting that its European counterparts agree to repeat a “no decoupling” mantra — marking a clear difference with Washington, which is seeking to limit US commercial ties with China in certain areas, particularly with regard to sensitive technologies. “China has realised that it has antagonised too many countries at the same time, particularly among developed countries which still today are its main trade and economic partners,” says Jean-Pierre Cabestan, a China expert at Hong Kong Baptist University. “So it is trying very hard to reach out to the EU and key European nations — Germany, France, Italy and Spain — as well as America’s Asian allies, such as Japan and South Korea and US partners such as Vietnam.”
It's the relations with Europe that China appears most intent to reset,
China’s desire for a diplomatic reset with Europe appears to be yielding significant results. Visits to Beijing in November by Olaf Scholz, the German chancellor, and Charles Michel, president of the European Council, are set to be followed early this year by French president Emmanuel Macron and Italian prime minister Giorgia Meloni. Macron is expected to follow Scholz in voicing opposition to “decoupling” from China, thereby ceding to Beijing some ground in its long-running strategy to sow division between European powers and the US. Although he has also talked about reducing dependency on China, Scholz made clear during this visit that Berlin not only rejects “decoupling” but also sees China as an “important economic and commercial partner”. “Macron, like Scholz, is opposed to decoupling. He is still promoting engagement,” says Cabestan. “China will try to utilise Macron’s strategic autonomy ambitions to drive a wedge between Europe and America.”
See also Mihir Sharma here.
9. Is Germany at the vanguard of the anti-trust movement?
Regulators in Germany argue that Section 19a of the German Competition Act is years ahead of the EU’s landmark piece of antitrust legislation, the Digital Markets Act, and with the potential to capture even more illegal conduct by being less prescriptive on what constitutes anti-competitive behaviour. The Section 19a law, which came into force in January 2021, places Berlin at the vanguard of Europe’s attempts to clamp down on the power of big tech, where the US and EU have so far failed or are still running behind. Like the DMA, the law gives antitrust authorities in Germany powers to go after so-called gatekeepers such as Meta, Google and Amazon — including the ability to impose sanctions like forced divestments against companies and the possibility to break them up. But while EU regulators are only now working out the details on how the DMA, which became law in November, will be implemented, Berlin has both designated who the gatekeepers are and is already pursuing them.The rules in Brussels are prescriptive and give a list of specific actions that are illegal, including a ban on platforms ranking their own services ahead of rivals. Section 19a does all this but also prohibits conduct in areas where platforms are not yet dominant and leaves the door open to tackling future anti-competitive behaviour that has not yet been identified. If companies are ruled to be of “paramount significance for competition across markets”, then the regulator can prohibit them from ranking their own services ahead of rivals, from denying rivals access to data, and from preventing users from taking their own data to other competing services. Since Section 19a came into effect, Germany’s antitrust watchdog has opened high-profile investigations against the world’s largest tech companies. The Federal Cartel Office’s investigation into whether Facebook grants an unfair advantage to users of its social network platforms on its VR glasses has already brought benefits to consumers, even as it continues. The German watchdog has ensured users can use the headsets without a Facebook or Instagram account. It is also investigating Google Maps over potential anti-competitive restrictions to the detriment of rivals and opened two separate probes into Amazon’s marketplace practices over concerns that the platform is disadvantaging the position of third-party sellers.
10. Livemint has a good infographic which highlights the growth of EV industry in India
The extent of government regulatory engagement in the last couple of years is very impressive. It's a very good example of facilitating market growth through enabling policies.
While four-wheelers are where the action today globally is on the EV industry, it's likely to shift more towards two and three-wheelers in the years ahead.
And it's here that Indian companies are well-placed to assume leadership. Will Ather Energy, for example, emerge as the new Hero Motors?
11. Good set of graphics in Livemint comparing Swiggy and Zomato the duopoly that controls the country's online food delivery market.
12. What does it say about the startup company when some its investors, also globally reputed VCs with some of the biggest risk appetites, are looking for exit, even at steep valuation discounts, and that too in a sector which is considered one of the most promising and that too in one of the world's largest markets?
More on Byju's and some of its investors here.
Exports of garments and textiles exceeded a record $45bn in the 12 months to end of June 2022, more than 85 per cent of total export earnings.
The article is a very good read, pointing to the animosity between President Sheikh Hasina and the founder of Grameen Bank, Mohammed Yunus.
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