Weekend reading links

1. Paul Krugman has a nice oped on Taylor Swift's concerts. She makes around $11-12 million from her concert ticket sales, and even in this age of digital streaming concert tours are the major source of revenues for music artists.  

2. Interesting channel of discontent with monetary policy in UK

One of the most direct ways that monetary policy affects demand is through the rates people pay on their mortgages. But unlike in the late 1980s, when about 40 per cent of all households in England had mortgages, by 2021/22 the proportion was just 30 per cent. Meanwhile, the number of people who own their homes outright has climbed sharply as baby boomers have retired, from about 26 per cent in the late 80s to 35 per cent by 2021/22... people may begin to see this tightening cycle as uneven and unfair. The pain of sharply higher mortgage rates is falling on the shoulders of fewer people this time around — and mortgage-holders are overwhelmingly working people, which means they are more exposed to any Bank of England-induced downturn in the labour market too. In contrast, two-thirds of those who own their homes outright are retired. It is easy to see how this could reignite intergenerational resentments. In the decade of super-loose monetary policy, young people lost out because house prices moved further out of reach, while delivering rising levels of wealth for older homeowners. In this new era of sharply rising rates, younger working people with mortgages may come to feel that they are once again absorbing the pain on behalf of society as a whole.

3. President Biden gave a speech last week at Chicago that unveiled a new economic policy making paradigm, Bidenomics.

The economic vision for this country: the economy that grows the economy from the middle out and the bottom up instead of just the top down. When that happens, everybody does well. The wealthy still do — (applause) — everybody does well. The poor have a ladder up, and the wealthy still do well. We all do well. 

This vision is a fundamental break from the economic theory that has failed America’s middle class for decades now. It’s called trickle-down economics — fundamental economics, trickle-down. The idea was — it’s the belief that we should cut taxes for the wealthy and big corporations... I’m tired of waiting for the trickle-down. It doesn’t come very quickly. Not much trickled down on my dad’s kitchen table growing up. And it’s a belief that we should shrink public investment in infrastructure and public education — shrink it; that we should let good jobs get shipped overseas. And we actually have a tax policy that encourages them to go overseas to save money. We should let big corporations amass more power while making it harder to join a union... Under trickle-down economics, it didn’t matter where you made things, as long as you helped the company’s bottom line, even if that meant seeing jobs and industries go overseas for cheaper labor... Trickle-down also meant slashing public investment on things that helped drive long-term growth and helped America lead the world in innovation...

Bidenomics is about building an economy from the middle out and the bottom up, not the top down. And there are three fundamental changes that we decided to make with the help of Congress and been able to do it: first, making smart investments in America; second, educating and empowering American workers to grow the middle class; and third, promoting competition to lower costs to help small businesses... We’re supporting targeted investments. We’re strengthening America’s economic security, our national security, our energy security, and our climate security... We’re now investing in key industries of the future, making targeted investments to promote domestic production of semiconductors, batteries, electric cars, clean energy... Biden economics means the industries of the future are going to grow right here at home... addressing the 40-year decline in unionization by supporting project labor agreements, collective bargaining, prevailing wage laws, that’s the reason today Americans’ support of unions is higher than it’s been in 60 years.

Manufacturing investments have taken off, almost doubling in the last two years.

4. India labour market facts of the day,

Roughly half a million young people took the annual preliminary test for the Bihar Public Services Commission in February, for a total of 281 jobs. For every batch of 2,000 hopefuls, 1,999 will walk away with nothing. The odds are nearly as bad on the national level. From 2014 to 2022, Indians filed more than 220 million job applications with the central government. Of those, just 720,000 — less than one-third of 1 percent — were successful, a government minister told Parliament.

Contrast this scramble for government jobs with jobs remaining unfilled in manufacturing,

If the government has far more potential workers than it needs, Mr. Ramesh has far too few. To make complicated aluminum castings that perform precisely at 200 miles per hour, he needs workers who are willing to stay put, learn and earn. But he says he cannot find enough who are capable and reliable, from the country’s more impoverished north or anywhere else. So he was a week away from partially automating his plant — turning to machines in the hope of employing fewer humans... Mr. Ramesh, the managing director at Alphacraft, the auto parts manufacturer, is optimistic about almost every aspect of his business. Orders are going up and shipping costs are being streamlined, and he sees growth prospects on three continents. His only problem: a work force he cannot count on “because they are all coming from distant parts of the country.”

There's also the wage problem - people looking for jobs, but unwilling to work at the wage being offered, especially if it's a factory floor job.

5. Being obese is a sign of credit-worthiness in Uganda

Elisa Macchi, an assistant professor of economics at Brown University, conducted tests with 238 loan officers at 146 financial institutions in the capital city, Kampala. She asked them to review applications from fictionalized potential borrowers whose accompanying photographs were manipulated so they appeared thin or fat. It is not uncommon in Uganda for people to include a photo of themselves when submitting a loan application, and it can be one nugget of information that a loan officer uses to decide whether to even grant an applicant a first interview, Ms. Macchi said. She discovered that loan officers were more likely to rate the applicants as more creditworthy and more financially sound when the obese version of the photograph was attached. “The obesity premium is large, equivalent to the effect of a 60 percent increase in borrower self-reported income in the experiment,” or an additional asset like ownership of a car, the study concluded.

6. Martin Wolf examines the new industrial policy of the US Government. The share of manufacturing and industry in the labour force has declined by more than half since 1970. 

China has rapidly overtaken US as the manufacturing superpower of the world.

7. More evidence that price markups are a major driving factor behind the current inflation, this time from the IMF research (paper here) on Eurozone area. 

The higher inflation so far mainly reflects higher profits and import prices, with profits accounting for 45 percent of price rises since the start of 2022. That’s according to our new paper, which breaks down inflation, as measured by the consumption deflator, into labor costs, import costs, taxes, and profits. Import costs accounted for about 40 percent of inflation, while labor costs accounted for 25 percent. Taxes had a slightly deflationary impact. In other words, Europe’s businesses have so far been shielded more than workers from the adverse cost shock. Profits (adjusted for inflation) were about 1 percent above their pre-pandemic level in the first quarter of this year. Meanwhile, compensation of employees (also adjusted) was about 2 percent below trend.

8. Simon Kuper looks at the changes to global tourism map,

Some beach destinations — the Maldives and bits of the Caribbean — will vanish beneath the waves. In the Med too, especially on the African coast, the rising sea is eroding beaches. It’s also becoming unbearably hot... summer will linfllose its place as peak tourist season. First, it will increasingly be too hot to travel for pleasure. Second, a growing number of childless people aren’t bound by the long school summer holidays. Third, as tourism booms, popular destinations are running out of space in peak season. Expect beach resorts to refocus on spring, when they can offer northerners their first soft rays of the year... Winter skiing holidays will start to die out. Forty per cent of the world’s skiing visits are now to the Alps, where lack of snow is one of the main reasons hundreds of resorts have closed. Almost all Alpine glaciers could disappear this century. In the US, across a number of resorts, the skiing season contracted by an average of 34 days between 1982 and 2016, write Xubin Zeng of the University of Arizona and others. Ski towns have begun trying to remake themselves as summer hiking and cycling destinations.

9. Foreign car makers are a declining presence in China.

And the Chinese EV makers led by BYD threaten to become important sellers in Europe. 

In the first five months of the year, BYD alone sold nearly 1mn of its battery and plug-in hybrid vehicles in China, accounting for 38 per cent of the country’s new energy vehicle market, according to data from Automobility, a Shanghai consultancy. By contrast, Volkswagen, one of the first European companies to enter the Chinese market in the late 1980s, had just 2 per cent of EV sales.

10.  The Indian software firms have missed all the major opportunities to move up the value chain - IoT, big data, and cloud computing. And now they look set to miss the Generative AI wave.