Weekend reading links

1. Kyle Chan proposes taking a leaf out of China's playbook to catalyse EV manufacturing in India. He argues that GoI should adopt a carrot-and-stick policy of offering incentives and playing off foreign companies against each other to strike favourable deals going forward. 

He overlooks an important difference between China and India. The latter does not have anywhere even remotely close to the domestic demand for EVs as in China. For example.

Before the Shanghai Gigafactory, Tesla was already selling close to 15,000 cars in China, making up 17% of Tesla’s 2017 revenue.

Tesla and other foreign manufacturers have now realised that India does not have anywhere near the same domestic demand that merited their investments in China. It's therefore natural for them to hedge their bets and wait out.

2. David Leonhardt writes that a "new centrism" of bipartisanship may be emerging in US politics amidst the deepening political polarisation.

During the Covid pandemic, Democrats and Republicans in Congress came together to pass emergency responses. Under President Biden, bipartisan majorities have passed major laws on infrastructure and semiconductor chips, as well as laws on veterans’ health, gun violence, the Postal Service, the aviation system, same-sex marriage, anti-Asian hate crimes and the electoral process. On trade, the Biden administration has kept some of the Trump administration’s signature policies and even expanded them. The trend has continued over the past month, first with the passage of a bipartisan bill to aid Ukraine and other allies and to force a sale of TikTok by its Chinese owner...Last week, the House advanced another bipartisan bill, on disaster relief, using a rare procedural technique to get around party-line votes...

The new centrism is a response to these developments. It is a recognition that neoliberalism failed to deliver... In its place has risen a new worldview. Call it neopopulism. Both Democrats and Republicans have grown skeptical of free trade; on Tuesday, Biden announced increased tariffs on several Chinese-made goods, in response to Beijing’s subsidies. Democrats and a slice of Republicans have also come to support industrial policy, in which the government tries to address the market’s shortcomings. The infrastructure and semiconductor laws are examples. These policies feel more consistent with the presidencies of Dwight Eisenhower or Franklin Roosevelt than those of Ronald Reagan or Bill Clinton. The term neopopulism is apt partly because polls show these new policies to be more popular than the planks of the Washington Consensus ever were.

China and the emerging Cold War has become a glue that binds the new bipartisanship. In any case, this new centrism also marks the end of Reaganism. Ironically, the rise of Donald Trump may have played a role in bringing the curtain down on Reaganism.

The ascent of Trump changed this dynamic. He won the Republican nomination in 2016 while discarding key parts of Reaganism... he did move his party toward the middle on several big economic issues. Unlike the Reaganites, Trump criticized free trade and praised government programs like Medicare. He once described himself as “a popularist.” To the shock of other Republicans, his rejection of free-market economics did not hurt him politically. It helped him win the nomination, and in the general election he won working-class voters who had previously backed Obama. Trump’s victory made both parties recognize that the Washington Consensus was less popular than they had thought. “Donald Trump has widened the aperture for policy discussions in the United States,” Neera Tanden, then the president of the Center for American Progress, a liberal think tank, and now Biden’s domestic policy adviser, said in 2018...Trump’s heresy on trade and government intervention has made it easier for other Republicans to moderate their own positions.

Leonhardt also pays tribute to President Biden

Whatever Biden’s weaknesses as president, his record of signing bipartisan legislation exceeds that of any recent predecessor... When he entered the White House vowing to pass bipartisan legislation, many political analysts scoffed. The country, they said, was too polarized. But Biden persisted, often working in the background. A bill’s chance of passage was higher, he believed, if he could avoid becoming the face of the bill.

Finally, Leonhardt points to the diverging dominant popular perspectives on the economy and society.

Americans lean left on economic policy. Polls show that they support restrictions on trade, higher taxes on the wealthy and a strong safety net. Most Americans are not socialists, but they do favor policies to hold down the cost of living and create good-paying jobs... The story is different on social and cultural issues. Americans lean right on many of those issues, polls show (albeit not as far right as the Republican Party has moved on abortion)... The clearest example in the Biden era is immigration. A core tenet of neoliberalism, once supported by both parties, is high immigration. Along with the freer movement of goods and capital, neoliberalism calls for the freer movement of people. Most voters, especially working-class voters, feel differently. The soaring level of immigration during Biden’s presidency, much of it illegal, has become a political liability, and it nearly led to another piece of neopopulist legislation this year. Senate Democrats and Republicans put together a plan to strengthen border security. It was the mirror image of Republicans’ agreeing to support the semiconductor and infrastructure bills: This time, some Democrats abandoned a policy stance that was out of step with public opinion.

3. Very good set of graphics about the renewable energy transition in 2023 from Ember, via Adam Tooze. 

4. Food safety standards compliance by India's private companies has always been a problem. Livemint has a good long read. It informs that 16% of the 4.3 lakh food samples tested by FSSAI have been found to be unsafe or substandard. 

Unsurprisingly the article blames the regulator and its lack of capabilities and corruption, but does not discuss the central issue - the general norm of non-compliance and cutting corners by India's private companies. Enforcement works only at the margins. If the norm is to deviate, enforcement becomes blunt. 

The masala makers MDH and Everest had turnovers of Rs 1775 Cr in 2022 and Rs 1683 Cr in 2022-23 respectively. These are large listed companies and industry leaders. While they have denied any wrongdoing, it cannot be denied that masala adulteration has been an ongoing concern, there have been lingering doubts about these companies, and two credible foreign regulators have found unacceptable traces of ethylene oxide, a cancer-causing chemical. The Spices Board are now testing samples of the two companies. 

5. Some important data points on the impact of corporate tax reduction from Vivek Kaul

Data of more than 5,000 listed companies from the Centre for Monitoring Indian Economy suggests that from 2018-19 to 2022-23, the net sales of these companies went up 52%, corporate taxes paid went up only 36% and their net profit rose sharply by 187%. In comparison, between 2014-15 and 2018-19, net sales had gone up 30%, corporate taxes by a higher 38% and net profit in 2018-19 was around 90% of the profit in 2014-15. Clearly, among other things, lower taxes have helped spruce up profits of listed companies, pushing up stock prices.

6. Stephen Walt has a very good summary of the critique of Israel's actions in Gaza and makes the realist case against any US support for Israel. 

Realists’ criticisms of the war in Gaza arise in part from their appreciation of the limits of military power and the importance of nationalism. Realists’ criticisms of the war in Gaza arise in part from their appreciation of the limits of military power and the importance of nationalism. They are acutely aware of the difficulties foreign invaders typically face when attempting to dominate or destroy another people with armed force, which is why they concluded that Israel’s attempt to destroy Hamas by bombing and invading Gaza was doomed to fail. It is increasingly clear that Hamas is going to survive Israel’s onslaught, and even if it doesn’t, new resistance organizations are bound to emerge as long as Palestinians are occupied, denied basic political rights, and gradually dispossessed of their lands.

Equally important, realists oppose Israel’s actions (and U.S. complicity in them) because the combination is undermining America’s global position. The war in Gaza has made it clear that America’s commitment to a “rules-based order” is meaningless; it is frankly hard to believe that U.S. officials can still utter that phrase with a straight face... Public opinion polls also suggest U.S. popularity has declined sharply in the Middle East and slightly in Europe, while support for China, Russia, and Iran has risen... Moreover, it seems that Iran has been a major beneficiary of this war... And the war isn’t cheap. The U.S. Congress has authorized billions of dollars of additional aid to help Israel decimate Gaza, along with $320 million for that floating pier the United States had to construct because the “ally” we are backing wouldn’t let relief agencies send trucks in to deliver humanitarian aid. U.S. military forces have been using up expensive missiles and bombs against the Houthis in Yemen, who began to terrorize ships in and around the Red Sea in protest to what Israel is doing... The war is also burning up vast amounts of top officials’ time, energy, and attention... The time U.S. leaders have devoted to a conflict between roughly 15 million people in Israel and Palestine is time that they could not spend visiting key allies elsewhere, devising a better policy in Ukraine, developing an effective economic strategy for Asia, marshaling global support to address climate change, or any number of far more important issues.

The big winners? Russia and China, of course. For many people around the world—and especially much of the global south—the carnage in Gaza validates Russian President Vladimir Putin and Chinese President Xi Jinping’s recurring charge that global U.S. “leadership” sows conflict and suffering and that the world would be better off in a multipolar order where power was shared more evenly. You may not agree with that argument, but millions of people already do, and our current policy makes it look a lot more credible... Lastly, realists object to what Israel is doing because it brings the United States precisely zero strategic benefits... the Cold War ended more than 30 years ago, and unconditional support for Israel is not making Americans more secure today. Some of Israel’s defenders now claim it is a powerful bulwark against Iran and a valuable partner against terror; what they fail to mention is that our relationship with Israel is one of the reasons the United States has a bad relationship with Iran and one of the reasons that terrorists like al Qaeda decided to attack the United States.

7. Even as the property market enjoys a boom, the sales of affordable housing units (below Rs 40 lakh) have been declining over the past five years in top cities. 

While home sales climbed sharply from 2019 to 2023, the share of affordable housing dropped from 38% to 19% during the period. In January-March of 2024, the sales share stayed flattish, at 20%. Not just sales, budget housing supply or new launches too shrank from 40% to 18% in the same period. The decline of affordable housing became increasingly apparent after the pandemic, as larger, premium homes gained favour... the sales share of luxury homes jumped from 7% in 2019 to 25% in 2023. In January-March 2024, this was at 21%, but it is expected to pick up during the year. Of all the cities, Mumbai Metropolitan Region (MMR) has seen the most traction in this segment.

8. FT long read on the dangers of ultra-processed food items - industrial creations made by breaking down natural food into chemical parts, modifying them and recombining them with flavouring, artificial colours, and other additives. 

When the Brazilian nutritional scientist Carlos Monteiro coined the term “ultra-processed foods” 15 years ago, he established what he calls a “new paradigm” for assessing the impact of diet on health. Monteiro had noticed that although Brazilian households were spending less on sugar and oil, obesity rates were going up. The paradox could be explained by increased consumption of food that had undergone high levels of processing, such as the addition of preservatives and flavourings or the removal or addition of nutrients. But health authorities and food companies resisted the link... Monteiro’s food classification system, “Nova”, assessed not only the nutritional content of foods but also the processes they undergo before reaching our plates. 

The system laid the groundwork for two decades of scientific research linking the consumption of UPFs to obesity, cancer and diabetes. Studies of UPFs show that these processes create the kinds of food — from snack bars to breakfast cereals to ready meals — that encourage overeating but may leave the eater undernourished. A recipe might, for example, contain a level of carbohydrate and fat that triggers the brain’s reward system, meaning you have to consume more to sustain the pleasure of eating it. In 2019, American metabolic scientist Kevin Hall carried out a randomised study comparing people who ate an unprocessed diet with those who followed a UPF diet over two weeks. Hall found that the subjects who ate the ultra-processed diet consumed around 500 more calories per day, more fat and carbohydrates, less protein — and gained weight... Just a handful of countries, including Belgium, Israel and Brazil, currently refer to UPFs in their dietary guidelines. But as the weight of evidence about UPFs grows, public health experts say the only question now is how, if at all, it is translated into regulation.

9. FT visualisation on the five possible battlegrounds that could determine the course of a US-China war on Taiwan.

10. The northern European countries build the most housing among developed countries.

11. It's a sign of the times that the capital of the fossil fuel industry in the US, Texas has overtaken California to become the leading solar generator. 

Besides, it now generates more power from solar than thermal.

What makes the achievement even more significant is the state that Texas pushed into second place: California. A progressive stronghold that has mandated clean energy targets for more than 20 years and built up a dominant lead in utility-scale solar energy, it was outshone by a Republican-led fossil fuel powerhouse, governed by a serial obstructor of clean energy legislation. As recently as five years ago this would have been unthinkable. In 2019, Texas had just over 2GW of large-scale solar plants to California’s 13GW. Since then, however, the Lone Star State has entered into a solar boom. As of this month it has deployed 23.6GW of utility-scale solar to California’s 21.2GW... Texas will have added more solar capacity per capita in a single year than any US state and any country in the world, according to data from energy think-tank Ember. Almost overnight, a state synonymous with dirty fuels has become America’s clean energy giant, and the trend is still accelerating.