Weekend reading links

1. On the politics of congestion pricing,

The state of New Jersey has sued to suspend the rollout of the first congestion charge in the US, planned for cars driving through central Manhattan, saying that such a scheme would divert pollution to neighbouring areas and impose an unfair cost on commuters crossing the Hudson river. In a complaint filed in federal court on Friday, New Jersey accused government agencies of turning “a blind eye” to the environmental effects of the charge on the Garden State when agreeing to approve the scheme last month, and administrators in New York of failing to distribute the proceeds of such a scheme fairly across the broader metropolitan region. The intervention by New Jersey comes just hours after Britain’s Conservative party narrowly hung on to a seat previously held by Boris Johnson on the outskirts of London, in a victory widely attributed to anger at the expansion of the city’s Ultra Low Emission Zone...

Last month, the Federal Highway Administration approved the proposed scheme, which aims to generate $15bn in revenue for the MTA, New York’s perennially cash-strapped public transport body, by charging drivers to enter Manhattan below 60th Street. The precise charge has not been established but is reported to be as high as $23 a day for some drivers. New Jersey’s governor Phil Murphy has long condemned the scheme as unfair to the 400,000 residents of the state who commute to Manhattan daily, and vowed to explore all legal options to frustrate its implementation. His state has passed legislation that gives tax incentives to businesses in a retaliatory attempt to lure them away from New York. This year, New Jersey also rolled out billboard advertisements across New York, with slogans such as “Paying a congestion tax to sit in NYC traffic? Get outta here” — and a call for passers-by to consider relocating to New Jersey. “We can’t fix a broken MTA in New York City on the back of New Jersey commuters,” Murphy said this month. “It’s a huge tax on them, and frankly, it challenges our environment because of all the rerouting of traffic.”

2. Scott Galloway points to how government actions were central to the post-war economic growth. Not only did these actions quickly shift the economy away from war production (in 1945, 40% of GDP went to the war effort, compared to 3% today, and jobs had to be found for 10 million youth leaving military service). 

Underlying this prosperity was robust state support. The G.I. Bill funded college for 2 million soldiers and home loans and small business loans for hundreds of thousands more. Truman’s housing legislation expanded the government’s role in building homes and financing home ownership. Eisenhower launched a 40-year project to build a national highway system, at a cost of over $500 billion in today’s dollars. Income taxes were progressive — the top rate was 91% — and the wealth of the biggest earners was redistributed through social programs and investments in infrastructure, education, and science. The greatest innovation in the history of the West, the American middle class, was the product of intentional and sustained public investment. Our retreat from that vision has led to decades of prosperity, but little progress. We’ve slid into a cascading pattern of failure — to rear, educate, and employ young men. Returning to our tradition of investment could rebuild the engine of capitalism and reverse the slide in their fortunes.

3. Excellent NYT visualisation story on how private developers who got additional floor-space and other building concessions in return for developing and maintaining public spaces in their properties have reneged on their commitments. Building regulation violations are universal, only their nature varies across countries.  

The plaza at 325 Fifth Avenue is just one example of a privately owned public space, commonly known as a POPS, that has not been maintained according to the developer’s agreement with the city. These agreements allow developers to build larger towers and earn more revenue in exchange for providing public spaces. In December, the Department of Buildings completed its three-year inspection cycle and found that about one in five of the properties violated the terms of their agreements. The lack of compliance with the law has been a problem for years. The city’s inspectors have issued violations to half of the 392 buildings with such spaces since 2011, according to a Department of Buildings dataset. The standard penalty for a violation is $5,000, which is a fraction of the value of the bonus space developers receive from the agreements. For example, the owners of 325 Fifth Avenue have been assessed a total of $54,000 in penalties since 2015. By contrast, the bonus floor area that the developers gained could be worth approximately $80 million if used for residential space, based on 2022 sales prices provided by Jonathan J. Miller, a New York City real estate appraiser.

4. On labour rights suppression at Starbucks,

The hectic, high-risk pandemic shifts had racked up record profits for Starbucks, but left many of the baristas exhausted and embittered. Workers at one cafe after the next were voting to unionize — more than 330 of its thousands of locations so far. Their demands include better pay ($20 an hour minimum for baristas, with annual raises), fair and consistent scheduling and easier access to the benefits that Starbucks executives were always touting... a sobering picture of employee rights casually crushed and labor laws too weak to help. Starbucks continues to fight and appeal the many labor complaints pending against it and maintains that the company has done nothing wrong.

But these professions of innocence are countered by piles of testimony from workers and National Labor Relations Board findings suggesting that Starbucks has indeed illegally repressed employees’ rights. The company has so far racked up a staggering number of complaints from the agency. In 100 cases, many of which consolidate a number of incidents, regional N.L.R.B. offices have decided there is sufficient evidence to pursue litigation against Starbucks. That includes a nationwide complaint, consolidating 32 charges across 28 states, alleging that Starbucks failed or refused to bargain with union representatives from 163 cafes... as strikes and union drives erupt across the economy, the coffee workers’ struggle illuminates the stark and sometimes insurmountable challenges confronted by ordinary American workers who try to exercise their right to organize.

That Starbucks is carrying on this campaign in plain sight may be the most damning aspect: Union busting is illegal, but consequences are inconsequential. The Starbucks case demonstrates that a large corporation can effectively bust a union with time, by dithering over details and exhausting legal appeals. According to national labor laws, an employer “must bargain in good faith.” But that is a squishy and essentially unenforceable rule. Starbucks may yet succeed in smothering one of the most energized labor movements of our time... The company has been accused of deploying familiar anti-labor tactics, such as the shuttering of some union stronghold cafes... Union activists reported being spied upon, harassed or fired on flimsy pretexts, complaints that Starbucks disputes. But Starbucks has also done a lot of nothing — time-buying, morale-eroding, innocent-seeming nothing.

And this

Howard Schultz, a steely eyed, self-made former Starbucks chief executive, has told his story all over the country: the impoverished childhood in shoddy housing; the disabled and mistreated father; final vindication through the achievement of theAmerican dream, a phrase he likes to use. It’s a good story, and we bought it — we bought his coffee at a premium price, and we bought him, too. Hillary Clinton, by many accounts, planned to nominate Mr. Schultz for labor secretary if she’d won the presidential election in 2016. Mr. Schultz himself has toyed with the idea of running for president. Mr. Schultz frequently lectures people about having built a “different kind of company” that respects the rights of employees, whom he calls partners. An empty chair gapes at every board meeting in a symbolic nod to the partners, who may or may not feel gratified at being represented by a piece of furniture. 

When the recent wave of labor organizing first started to foment among Starbucks workers in Buffalo, Mr. Schultz was one of the corporate luminaries who jetted into town to discourage the union. It didn’t work, though — in 2021, a Buffalo Starbucks became the first company-owned cafe to unionize, and other stores quickly followed. Mr. Schultz greeted the union with an indignation that has yet to fade. He has flouted an N.L.R.B. order to apologize to his workers and to film and distribute a video explaining his employees’ rights.

This a teachable example about the problem with today's centre-left politics. A liberal newspaper like NYT highlights the cause of workers at Starbucks and liberal intellectuals and politicians passionately argue in favour of worker protections and rail against corporate high-handedness. Most of these liberals also wear their ideologies on their sleeves and embrace them in their personal lives (energy and water conservation, organic and local food, environmental protection etc).

The only problem is that this embrace is only when it's convenient. How many liberals are willing to boycott Starbucks and walk the talk on their pro-labour and pro-union professions? I would not be surprised if the article itself was written and edited while sipping Starbucks! But it's encouraging that the Times is exposing such practices among very high profile abusers. 

This hypocrisy is widespread. The liberals are deeply enmeshed with Big Tech and Wall Street firms whose activities engender some of the most damaging social problems and economic perversions. You can't be a honest protagonist against these problems (and the firms creating them) when you also benefit from the same companies. 

5. Simon Kuper asks whether we are at overtourism or peak tourism, given the sharp increase in tourist traffic, and points to governments now taking action to reverse tourism.

The official number of international tourist arrivals doubled from 1998 through 2019, to 2.4bn a year... In Barcelona, to cite an extreme case, the number of tourists staying in hotels jumped from 1.7mn in 1990 to 9.5mn in 2019 — a number that excludes the city’s Airbnbs, some of them entire buildings that have been removed from the local housing market and essentially offshored. Barcelona is one of several places that risk becoming a Venice: a former city that turned into a museum-cum-fun park. Venice now has around as many beds for visitors as for inhabitants: about 49,000 each. And the thinning ranks of residents tend to be older people who moved in decades ago when the city was still affordable. 

More ominously for cities, official tourist totals are probably understatements. In particular, they rarely capture visitors who stay with friends or family, or swap homes, or just drive in for the day and don’t stay overnight... A paper by Jacques Lévy of the École Polytechnique Fédérale de Lausanne and others, using phone data, finds a “big surprise”: on average, there were about 5mn customers of non-French phone operators in France in 2022-23, compared with just under 2mn foreign visitors measured by “official data”. In some neighbourhoods of Paris, the paper says, the number of foreign visitors per sq km exceeded 100,000. For comparison: Paris’s 20,000 inhabitants per sq km already make it Europe’s densest city. Here’s a painful paradox of urban tourism: the cities that attract most visitors are cramped, ancient places that lack space even for residents. You don’t get much tourism in the Houston exurbs.

6. Good FT long read on the challenge facing Leag, a coal mining and thermal power generation company headquartered at Cottbus in the Lusitz area of Eastern Germany and which is the second largest electricity producer behind RWE and employs 7000 workers in a town with a population of 100,000. With Germany mandating the closure of all coal-powered power plants to shut down by 2038, Leag is planning to shift away from coal and thermal power to solar and wind power generation.

The incremental capacity addition in Germany since the turn of the millennium has been completely renewables based. 

7. The Indian IT majors face a reckoning. Apart from the Y2K, they've failed to capitalise as would have been expected every opportunity that has come up in the last two decades - IoT, data analytics, cloud computing etc. Now the new big thing AI beckons. And the underlying trends don't look good this time too.  

8. Ishan Bakshi has some interesting statistics that point to relatively large high income pockets in India,

India’s per capita income is just under Rs 2 lakh or around $2,400. But this statistic conceals more than it illuminates. Delhi’s per capita income, for instance, is estimated at Rs 4.4 lakh ($5,475), Gautam Buddha Nagar at Rs 5.41 lakh ($7,261), Mumbai city and suburban at Rs 3.4 lakh ($4,390), Bengaluru urban at Rs 6.2 lakh ($8,006), Dakshina Kannada at Rs 4.43 lakh ($5,721), Hyderabadat Rs 3.5 lakh ($4,715) and Rangareddy at Rs 6.69 lakh ($8,980). There are also others like Gurugram, Ahmedabad, Chennai and Kolkata. (Years for the income estimates vary from 2020-21 to 2022-23)... The overall size of the market in these cities could well rival other geographies — the Philippines has a per capita income of $3,499, Vietnam $4,164...

For the assessment year 2018-19, around 1.5 crore individuals had gross total incomes of Rs 5-10 lakh ($7,100-$14,203, at the exchange rates). Another 52 lakh had incomes between Rs 10-50 lakh ($14,203- $71,013), while three lakh had an income of more than Rs 50 lakh (above $71,013). Five years later, in the filings for the ongoing assessment year 2023-24, the number of individuals in these categories is likely to be significantly more — they had doubled between 2014-15 and 2018-19... these numbers... are gross underestimates... they rival other markets — Croatia, with a population of 38.5 lakh, has an income of $18,413, while Lithuania has a population of 28.3 lakh and an income of $24,827.

This translates into a fairly big consumption base,

As per NFHS 2019-21, 7.5 per cent of households own a car. That roughly translates to 8 per cent of the population having some spending capacity. But, while sales of entry-level cars have slowed down, suggesting low upward mobility, there are also indications of growing spending ability in other cohorts. In 2021-22, 7.78 lakh cars sold were priced above Rs 10 lakh (more than $12,000) as per CRISIL Market Intelligence and Analytics. In 2022-23, that rose to 10.36 lakh. And this is when the tax incidence ranges from 30 to 50 per cent...

As per JLL, the houses sold in the Rs 1.5 crore plus category now account for roughly a fifth of all sales in the top seven cities. As per CBRE, projects with a quoted value of Rs 2 crore and above (more than $2,50,000) have increased by twice in comparison to pre-pandemic levels. Similarly, sales of high-end luxury cars (Mercedes, BMW, Jaguar, Porsche, Lamborghini, Bentley and Rolls Royce) rose to 27,910 in 2022-23, up from 22,166 the year before as per data from FADA. Add the others and sales surpass 35,000. The luxury watch market (Rs 1 lakh and above) is also seeing strong numbers. In 2019-20, the size of the market was estimated at Rs 3,240 crore ($450 million at the exchange rates). By the end of next year, it is likely to touch Rs 5,940 crore ($740 million) as per Ethos’s annual report. In the case of the art market, an even more rarified segment, sale of 3,833 artworks fetched Rs 1,145 crore ($144 million) in 2022-23 as per Indian Art Investor’s art market report.

This is a point that I've made in several posts on the Indian economy. It's growing high consumption class, while small compared to its own population is as big as some countries, and could contribute significantly to sustain high growth. This is the idea of a long-term K-shaped growth trajectory. 

9. Some very interesting data on the flight of white students away from schools with greater number of Asian students, the "white flight". Gillian Tett points to a new paper by Leah Platt Boustan, Christine Cai and Tammy Tseng that use population, economic and school enrolment data in high socio-economic status Californian suburbs between 2000 and 2016

They argue that the arrival of each new Asian student was correlated with the departure of 0.6 white students. And when adjusted for demographic factors, “on average, the arrival of one Asian student in a suburban school district leads to the departure of 1.5 white students”. They note that this “rate of white flight that is somewhat lower but not too dissimilar from flight from black/Hispanic populations documented in different settings”... But the factors that sparked “white flight” from African-American and Hispanic incomers — namely racism, crime and house prices — do not seem to be to blame. 

High socio-economic status (SES) areas have low crime and high house prices. And while separate research by experimental psychologists suggests that white families do sometimes see Asian-Americans as “a foreign cultural threat” in other US locations, the economists see little evidence of overt hostility in Cupertino. Instead, they point to education as a possible reason for the flight: white parents wanted to use public schools in other districts, where their children could come top of the class, and thus have more chance of entering California universities, which emphasise class order in admissions. “Asian arrivals lead to test score gains for the full student body in these high-SES districts, but do not boost most measures of test scores for white students,” the authors note. “The learning of white students appears unaffected [by immigration] but the relative performance in the class for the average white student would fall with Asian entry . . . raising parental concerns about competition.”