Weekend reading links

1. Samsung's spectacular turnaround, from being in the doldrums as late as in 2024.

This month its market value, which has soared by 400% in the past year, hit $1trn for the first time, propelled by furious spending on artificial-intelligence infrastructure. In the first quarter of 2026 its operating profit rose to 57trn won ($38bn), more than eight times as much as a year before. Analysts expect profits to keep rising at a blistering pace, thanks in particular to the seemingly insatiable demand for its advanced memory chips... Semiconductors accounted for 61% of sales and 94% of operating profits in the first quarter. It is one of just three firms capable of making at scale the memory chips needed for ai, alongside SK Hynix, a South Korean rival, and Micron, an American one. The number of memory chips Samsung sold in the first quarter was up by about 20% on the preceding three months, but the average selling price rose by 90%.

2. The Economist argues that the calm in global oil markets despite a supply shock of some 14 mb per day can be traced to the 4 mbpd of increased exports by the US and the 4.5 mbpd of reduction in Chinese imports, coupled with rationing across countries. 

3. As the rise of AI threatens white-collar jobs and increases the returns to capital, The Economist proposes some measures to redistribute the gains. 

If employment falls, income that once went to workers is likely to show up as high profits in AI firms, chipmakers, data centres or elsewhere in the supply chain. Clever tax reforms, such as levies on corporate profits that are above a normal return on capital, on land and on natural resources, could capture these rents. The case for inheritance taxes to prevent the entrenchment of a capital-owning elite looks even stronger than before. At the same time governments could help workers adjust. Public wage-insurance, which smooths out falls in income after job losses, can help workers find better opportunities (and so can eventually pay for itself). Denmark’s active labour-market policies, in which the state helps people find and train for new occupations, have been proved to cut spells in unemployment... 

A last set of radical ideas, such as the partial nationalisation of ai firms. This week a South Korean presidential adviser floated a citizens’ “dividend” from AI businesses, sending the local stockmarket down by 5%, before backtracking. In America politicians murmur about giving citizens shares in AI companies via “Trump accounts”. In economic terms there is little difference between a well-designed tax system and a government stake in the private sector—and countries without AI giants will have to rely on taxes rather than seizing shares in foreign companies. But America may find that some public ownership is the best way to make the social upside from the technology transparent.

4. The changing face of Reliance Industries.

5. America's remarkable productivity growth miracle since the pandemic (it predates the AI boom).

Now with AI coming of age, the productivity spurt is likely to continue. 

6. Egypt may well be the leader in land monetisation to promote economic growth in any substantial form.  (HT: Adam Tooze)

Since 2015, Egypt has increasingly contributed public land as equity, while foreign investors provide capital, development expertise, and project execution. Once a project is completed, revenues are shared according to pre-agreed division... in 2023, Egypt appointed the bank’s International Finance Corporation as its advisor for the asset monetization program, leveraging its experience supporting emerging markets. While land monetization has been tried elsewhere, Egypt’s projects are among the largest... For the Ras el-Hekma development on the country’s North Coast, Egypt contributed approximately 40,600 acres of state-owned land along the Mediterranean. The UAE (via its ADQ sovereign wealth fund) committed roughly $35 billion, the largest foreign direct investment in Egyptian history. Egypt received immediate foreign currency inflowsfor the land, a 35 percent stake in the project, and long-term profit participation... A similar project, also on the North Coast, is Alam el-Aroum/Samla near Marsa Matrouh. The Qatar Investment Authority-linked Qatari Diar is investing almost $30 billion, which includes a $3.5 billion upfront land payment for some 20 million square meters and $26 billion in development investments. A revenue share for Egypt (15 percent after cost recovery) is part of the deal.

Another arrangement is in place for Egypt’s New Administrative Capital (NAC). About thirty miles east of Cairo, the NAC is designed as the government seat and a commercial hub; reports estimate total development costs of up to $58 billion, including infrastructure and governmental, commercial, and residential districts. Foreign direct investment plays a role in specific sub‑components like the Central Business District (CBD) and future free-trade‑zone ventures. Chinese banks led by the Industrial and Commercial Bank of China provided 85 percent of funding for twenty towers in the CBD. The China State Construction Engineering Corporation developed the CBD; Gulf investors (such as the United Arab Emirates’ DP World) developed commercial parcels. The state monetized land incrementally for the NAC, and parcel sales financed development, without increasing Egypt’s debt.

All this appears very impressive. While the article paints a picture of success, it would be interesting to peel layers and scrutinise this. 

7. This is anecdotal, but tells a lot about why India lags in manufacturing.

8. Spain is undertaking an ambitious experiment in immigration.

Since 2022, Spain’s foreign-born population has surged by an annual average of 665,000, the equivalent of adding a city the size of Málaga each year. Last year the country accounted for roughly one-third of the total increase in the EU’s immigrant population, according to the Rockwool Foundation, a Berlin think-tank. Supporters say the influx has given Spain’s ageing society a much-needed burst of economic vigour. Critics call it a poorly planned strategy that is straining the country’s infrastructure and creating new social tensions... In less than a quarter of a century, Spain’s foreign-born population has gone from one in 20 residents to almost one in five, a higher proportion than even the US... Last month the Spanish government’s most contentious immigration move to date took effect — a sweeping amnesty giving at least half a million people the chance to gain residency and work permits and move out of the shadow economy... applicants must prove he was in Spain before January 1 this year and has been there for five consecutive months.

The country is already experiencing an acute housing shortage, has among the highest youth unemployment rates at over 10%, and the anti-immigrant Vox party is running third. The final outcome on the rapid rise in immigration is yet to be known. 

9. Ruchir Sharma points to an area where China trails badly behind the US, the negligible role of the renminbi as an international currency. 

With a 17 per cent share of global GDP, but only 2 per cent of central bank reserves, China is trailing 30 to 40 years behind previous superpowers at a similar stage of their ascents... Britain at its peak accounted for 40 per cent of trade, but 60 per cent of trade payments were in sterling. China by contrast has a leading 15 per cent share of global trade, but only 2 per cent of trade bills are invoiced in renminbi...

China will remain an incomplete superpower until it can match this financial firepower. For decades, it has kept its financial system more tightly sealed than any other major nation. It now ranks in the bottom fifth of nations by international investment position, which captures the level of foreign ownership in the domestic market. Foreigners own less than 5 per cent of the stocks and bonds in China, one-fifth the level in the US. Its home market is something of a local prison. Beijing has generated economic growth with heavy infusions of government money, corralled at home by capital controls. Its money supply has multiplied sixfold since 1980 to 230 per cent of GDP, among the highest in the world. This liquidity sloshes around inside the walled economy, much of it in the domestic debt market, battered lately by a property bust. Beijing is wary of easing controls, lest it unleash capital flight.

10. The US has been the biggest oil export beneficiary of the Iran war.

11. The booming market for whey protein.

Prices for whey protein isolate have soared fivefold to €28,000 a tonne since 2023, outstripping cheese and butter prices by more than four times as producers struggle to keep pace with a booming protein market... Thirty years ago whey was primarily used in animal feed or spread on farmland as a fertiliser. Whey is the liquid separated from curds during the cheesemaking process. Now, dairy groups upgrade the liquid by filtration to produce whey protein isolate, a valuable ingredient for use in sports supplements as well as groceries such as yoghurt, bread and fizzy drinks, as weight-loss drugs and the protein megatrend propel demand. “This is reshaping the economics of dairy,” said Jose Saiz, analyst at Expana, a commodity market information service. “It used to be a product with no value . . . now cheese could become the byproduct of whey production.”

12. The UK's experience of small altnets driving broadband expansion and lowering prices has come with excesses. 

Over the past decade, more than £31bn has been raised to roll out full fibre broadband across the UK, with private equity giants, including Macquarie and KKR, backing upstart challengers — or “altnets” — in the sector. Yet despite the initial investor optimism that the “altnets” could snatch customers away from industry leaders, the firms have been dogged by high build costs, lower-than-expected customer uptake and a sharp response from the country’s largest provider — BT’s Openreach — to deploy its own fibre infrastructure. The destruction of shareholder value has been brutal. At the last count, the “altnets” posted losses of more than £1.5bn in 2024, according to Enders Analysis. After accumulating some £9bn of net debt as of 2025, some companies have already been placed into administration, while others have fallen into the hands of lenders... 

Prior to the “altnet boom”, which accelerated from 2021 onwards, only 24 per cent of Britons had access to full fibre internet, according to Ofcom. Fast forward five years, that number is now more than 78 per cent, with altnets serving almost 20mn homes with full fibre, according to Assembly Research. By next year, Ofcom estimates 95 per cent of UK homes will have full fibre, putting it in line with Europe’s leaders, including Spain and Luxembourg, where regulators encouraged full fibre rollout earlier than the UK. The “altnets” have also forced BT’s telecoms infrastructure provider Openreach and Virgin Media O2 to expand their own fibre networks, giving consumers a choice between providers who are now forced to think faster and harder about how to up their game. This added competition has meant prices have fallen, with the average monthly real-terms list price of UK full fibre broadband falling from £62.38 in September 2021 to £43.46 in September 2025, a drop of 30 per cent... altnets are taking close to 1mn [customer] lines from BT annually.

13. Alan Beattie argues that EU has initiatied several trade measures against China, though their implementation has been weak, primarily due to internal opposition within the bloc. 

One of the recent instruments with a bit more bite is the Foreign Subsidies Regulation (FSR), launched in 2023 and designed to level the playing field against state-backed Chinese companies bidding for contracts or producing and selling in the EU. It’s notable that it gives a lot of investigatory and decision-making powers to the Commission, specifically to the internal market and competition directorates, which are used to having autonomous powers. By starting investigations into their operations, the FSR has managed to get some Chinese companies to pull out of public procurement bids. But when the EU tries to use its internal market powers to investigate supposedly subsidised Chinese businesses trading in the single market, it becomes clear just how strongly Beijing is willing to resist. Last week, in an investigation dating to 2024 into the Chinese cargo scanner company Nuctech, Beijing cited new supply chain security laws to forbid Chinese companies to comply with requests for information, saying Brussels’ extraterritorial reach was illegitimate.

14. Arvind Subramanian and Devesh Kapur on the contrasting tales of India and China in monetisation of lands by urban local bodies. 

China’s land revenues increased from less than 1 per cent of GDP to more than 10 per cent at its peak. In contrast, India’s revenues have stagnated at about 1 per cent of GDP through the entire growth phase. Put differently, the Chinese government’s collections from land revenue for every urban resident that was available for spending were about 15 times more than India’s in 1999; at its peak in 2020, this multiple increased to 225.

15. As AI capex surges, there are growing doubts about whether it will generate the returns required to justify it.

For each of these hyperscalers, I collected the consensus estimates of analysts for the capital expenditures and revenues between 2025 and 2030. In these five years, capital investments are expected to rise by 20 per cent a year, a growth rate never seen before in this industry. Meanwhile, revenues are expected to grow 15 per cent annually. If we make the heroic assumption that there are no costs, then the additional revenue is the profit these companies are expected to make from their additional investments in AI data centres. Yet, even under these extremely optimistic assumptions, I calculate the implied return on investment is highly negative for all of them except Amazon. These numbers show that if the hyperscalers continue on the current trajectory, the AI boom will become a story of one of the largest destructions of shareholder value in history... If the hyperscalers want to generate, say, a 10 per cent return on investment, they would have to find an additional $2tn to $5tn in revenue a year. A tall order for a group of companies that currently generates revenues of just $1.5tn per year.

See this comparison with the technology, media and telecom (TMT) bubbles of the late nineties.

In 2025, US businesses invested almost $1.5tn in IT equipment and software. At the peak of the TMT bubble, it was $466bn or $829bn when adjusted for inflation. Indeed, the US economy is growing solely because of the tech boom. I calculate that over the past four quarters, 93 per cent of US GDP growth was explained by tech investments. Even at the peak of the TMT bubble, it barely reached 60 per cent.

16. Tim Harford points to evidence that retailers jack up prices in response to shocks much faster than they bring prices down, and that retailers make their money not so much during the upcycle than in the downward phase.

Johannes Brinkmann and Nikhil Datta of the University of Warwick recently published an analysis of the impact on petrol and diesel prices of the oil price shock in 2022, following Russia’s onslaught in Ukraine. They found that in the UK, retailer margins compressed: the wholesale price of diesel rose by 39 pence per litre, while retail prices only rose 16 pence. This is the opposite behaviour to that predicted by the greedflation hypothesis. A natural explanation of this price compression is that retailers feel under more intense scrutiny when prices are rising. Brinkmann and Datta show that searches on the petrolprices.com website increased dramatically when prices did — and that areas where such searches were more common were also areas where the price compression was more intense. 

Brinkmann and Datta’s analysis is merely the latest in a long tradition of research describing “rocket and feather” pricing at the pump — capturing the idea that pump prices neither faithfully track the ups and downs of the crude oil market, nor exaggerate them — instead, they shoot up like a rocket but drift down again like a feather. What is more, the quick surge upward reaches prices less lofty than one would expect; it is during the slow descent that retailers make their money. Fifteen years ago, Matthew S Lewis and Howard Marvel noted that customers spent more effort searching when prices were rising, even though there was little benefit to that search, since most retailers were charging similar prices. When pump prices were falling, there was more variability from forecourt to forecourt and a higher return to shopping around, but most customers did not bother, feeling content that prices were moving in the right direction.

17.  Preference shares are a complicated instrument.

The “preference” investors receive — usually a slightly higher dividend — comes at the expense of voting rights. Preference shares therefore arguably resemble the worst of both worlds of debt and equity. Like bonds, they do not offer any influence over the company’s decision-making. Like ordinary shares, they do not come with a contractual claim to annual payouts as dividends are subject to management discretion. Such non-voting shares have been a prominent feature in corporate Germany. Four of the 40 blue-chips in the Dax have used them to establish substantive two-tier share structures for years: Volkswagen, Porsche and BMW, the three auto giants, and glue and detergent maker Henkel. All are dominated by controlling families who hold a tight grip over the firm. 

Two further Dax companies — Merck and Fresenius — are listed as “partnerships limited by shares”, a German legal structure known by its acronym KGaA, that makes some shareholders more equal than others through other means. Deutsche Bank listed its asset management arm DWS as a KGaA in 2018, too, warning at the time that this structure could dent its valuation. Yet the club of German blue-chips with differential voting rights will soon become smaller after BMW shareholders voted to abolish preference shares last week at its annual meeting. The group’s 54.7mn preference shares, representing 10 per cent of BMW’s equity, will soon be swapped into ordinary shares with voting rights... In the US, dual-class share structures have become increasingly popular as fast-growing tech groups want to tap public markets while keeping outsized voting power for insiders. Elon Musk’s SpaceX even wants to grant its CEO 10 times as much voting power as external investors.

Sample this about SpaceX  

Elon Musk's special class of shares currently gives him control of 85 per cent of the voting power at SpaceX.

Weekend reading links

1. From the early evidence, it appears that the New York City congestion charges are a success. 

Several indicators suggest a sustained decrease of traffic into, within and around the congestion zone. MTA data shows a 13 per cent drop in vehicles entering the central business district in March against a historical average, plus faster movement through the bridges and tunnels that are often snarled with traffic. This is supported by data from analytics firm INRIX that also shows minimal changes on Manhattan bridges outside the zone. On the funding side, the $500mn that the MTA anticipates raising this year from securities ahead of a big bond issue has provided investment for projects including signal upgrades, station elevators and a line extension.

This is corroborated by the findings of researchers in a new working paper who used Google Maps Traffic Trends data. They found speed increases for traffic into and inside the zone, without negative effects on local roads (spillover effects). 

This has also meant shorter response times for emergency service vehicles. 

2. Domestic value addition in exports has been declining in the US and India.

The share of domestic content in the output of US-based manufacturers dropped from 65 per cent in 1997 to 52 per cent in 2023. This decline was most pronounced during the period between 1997 and 2008, coinciding with the peak years of globalisation, when offshoring production to lower-cost economies became the dominant corporate strategy... India’s share of domestic value addition in its gross exports of manufactured goods (as a percentage of gross exports) has declined sharply from 88.2 per cent in 1995 to 63.3 per cent in 2012, before rising to 73 per cent in 2020.

3. Private equity distributions decline sharply

According to Bain & Company’s Global Private Equity Report, distributions as a percentage of net asset value have fallen from an average of 29 per cent in the period from 2014 to 2017 to only 11 per cent today. PitchBook estimates there are more than 12,000 US portfolio companies — around seven-to-eight years of inventory at the observed pace of exits. This is much higher than the five-and-a-half-year median exit time they’ve observed across the industry to date.

4. Nigel Farage's right-wing populist Reform Party has emerged as the biggest party in UK's local government elections even as Labour and Tories suffered their worst performance in decades. 

5. Cory Doctrow offers a negotiating strategy for other countries while negotiating with the Trump reciprocal tariffs. He points to the intellectual property law called "anticircumvention", which prohinit tampering with or bypassing software locks that control access to copyrighted works. 

The first of these laws was Section 1201 of America’s Digital Millennium Copyright Act, which Bill Clinton signed in 1998. Under DMCA 1201, it’s a felony (punishable by a five-year sentence or a $500,000 fine) to provide someone with a tool or information to get around a digital lock, even if no copyrights are violated. Anticircumvention laws are the reason no one can sell you a “jailbreaking” tool so your printer is able to recognise and use cheaper, generic ink cartridges. It’s why farmers couldn’t repair their own John Deere tractors until recently and why people who use powered wheelchairs can’t fix their vehicles, even down to minor adjustments like customising the steering handling. These laws were made in the US... The US trade representative has lobbied — overtly in treaty negotiations; covertly as foreign legislatures debated their IP laws — for America’s trading partners to enact their own versions. 

The quid pro quo: countries that passed such laws got tariff-free access to American markets. Canada enacted its anticircumvention law, Bill C-11, in 2012, after the ministers responsible dismissed 6,138 opposing comments on the grounds that they were the “babyish” views of “radical extremists”. Mexico enacted its version in the summer of 2020 in order to fulfil its obligations under the US-Mexico-Canada Agreement... Why should every peso that a Mexican iPhone owner pays to a Mexican app creator make a round trip through California and come home 30 centavos lighter? Why accept that for every 1,000 rupees someone pays in-app to India’s Dainik Bhaskar newspaper, the paper only gets 700 rupees? After all, if an Indian tech company makes its own app store, it could charge competitive fees that lure away all of Apple’s best Indian app maker customers. And why shouldn’t every mechanic in the world offer a one-price unlock of all the subscription features and software upgrades for every Tesla model... Monopolistic US companies have spent the first quarter of this century extracting trillions of dollars from consumers all over the world, insulated from competition by anticircumvention laws that they lobby to maintain. From printer ink to ventilator repairs, they have been able to pursue monopoly pricing, secure in the knowledge that no one would undercut them with cheaper and/or better add-ons, marketplaces, software, consumables and service offerings.  

6. Fascinating story about Disco Corp, a 87-year-old Japanese company with 7000 employees and $20.8 bn revenues that makes about three-fourths of all machinese used globally to cut, ground and dice semiconductors and has been run on pure free market pricinples. 

Disco is a business unlike any other. Since 2011, it has conducted a radical experiment to operate a blue-chip company on purely free-market principles. Nobody has a boss. Superiors cannot tell juniors what to do. Each day, employees choose whatever tasks they want. They can quit or join a different team at their own volition. Within this state of perfect freedom, most of their decisions will be guided by Will, as Disco’s internal currency is known. Employees earn Will by doing tasks. They barter and compete at auction with their colleagues for the right to do those tasks. They are fined Will for actions that might cost the company, or compromise their productivity. Their Will balance determines the size of their bonus paid every three months. The Will system, as it functions today, is the brainchild of Disco’s chief executive, 59-year-old Kazuma Sekiya, who sees his unorthodox management plan as fundamental to the company’s culture and success...

The Will system works like this. Sales of Disco’s machines generate Will. For each ¥1bn (£5.2mn) of revenue Disco accrues, approximately 400mn Will is typically generated for the sales staff to channel down through the company. They use that Will to reward or incentivise other employees to do tasks that support them. For example, they might pay Will to the manufacturing team to produce new machines for them to sell, pass on a stream of royalties in Will to the research team, or offer a tributary gift to their colleagues in HR for paying their salaries (in yen). Further down the food chain, the exchange of Will can be negotiated informally between employees in return for other tasks, paid for upfront, after completion or however the two parties agree is best. Disco also has an auction system for tasks, which works by dynamic pricing. The fewer people able or willing to do a task, the more Will has to be offered. If someone is desperate to do a certain job, or learn skills from a particular virtuoso, they might offer to pay Will for the privilege. Disco now has a team of eight employees who manage the Will system. They oversee a framework of 772 penalty and 337 reward items. About 187 of these payments and rewards are used regularly. 

The purchasing department fines people who write the wrong address on letters and packages, for example. The communications team has Will subtracted for negative articles that are published about the company. For Disco employees, Will dictates almost everything they do. Each member of staff starts the month with a negative Will balance, which they must strive to get above zero — an “existence cost”, so to speak. The system assumes employees are an inherent drag on the company until they prove otherwise. And the more senior you get at Disco, the greater your cost to the company is assumed to be.

7. Which developed country has had the most impressive economy since 1990?

This performance has helped the country maintain a AAA rating since 2003. The article is a good long read and examines the reasons for this economic perfornance. 

Mining grew to become one of the country’s largest exports, accounting for 12.2 per cent of GDP in 2024, according to Australia’s central bank. For the past three decades, Chinese demand for iron ore and copper, and Japan and South Korea’s hunger for natural gas and coal, have been the key drivers of economic growth... Australia’s lopsided economy, says Chris Bradley, director of the McKinsey Global Institute. The effects of what he calls a “productivity crisis” have been partly masked by the mining boom, high levels of immigration and increased state expenditure, according to a report he co-authored and published in December... “There is no greater beneficiary of the rise in China than Australia,” says Richardson... Whereas average productivity grew more than 1.5 per cent annually between 1993 and 2016, it has not grown since and has been falling since 2022. GDP per capita is down from 2.5 per cent between 1993 and 2007 to negative 1 per cent in the past two years.

8. Huawei has done several extraordinary things. But what it's attempting to do now is even more so and these efforts have accelerated since the US imposed sanctions in 2019. 

Huawei is involved in projects that aim to develop alternatives to technology from chip designer Nvidia, equipment maker ASML, memory-chip maker SK Hynix, and contract manufacturer Taiwan Semiconductor Manufacturing Company.

9. Fascinating description of the importance of the charkha by Mahatma Gandhi

“The spinning wheel represents to me the hope of the masses. The masses lost their freedom, such as it was, with the loss of the charkha. The charkha supplemented the agriculture of the villagers and gave it dignity. It was the friend and the solace of the widow. It kept the villagers from idleness. The charkha included all the anterior and posterior industries — ginning, carding, warping, sizing, dyeing, and weaving. These, in their turn, kept the village carpenter and the blacksmith busy. The charkha enabled the seven hundred thousand villages to become self-contained. With the exit of the charkha went the other village industries, such as the oil press. Nothing took the place of these industries. Therefore, the villagers were drained of their varied occupations, creative talent, and what little wealth they brought them.”

10. Akash Prakash makes an important point about how bringing back manufacturing to the US will be counterproductive for US companies.

Outsourcing has been led by US corporations; they are the masters of moving the capital-intensive manufacturing piece overseas to China and white-collar services to India. The only reason to offshore is to lower costs. Given a choice, it is always easier to have your employees and manufacturing next to you. Offshoring brings complexity to supply chains and is only done if costs can be brought down by 15-20 per cent at a minimum. If the endgame of these tariffs is to bring more manufacturing back to the US, it will affect corporate margins, as it is more expensive to do the job in the US — the reason it was offshored in the first place. Every company cannot pass on the higher costs. US corporate margins are near all-time highs, with return on equity above 16 per cent; both will go lower in the coming years.

This reduction in corporate margins can be seen in two related perspectives. In the first place, these inflated margins were the result of externalisation of the costs of supply chain resilience and national security. The tariffs and trade war with China is now forcing an internalisation of these costs. And that's a good thing. 

11. DOGE may have failed, and Musk may be on his way out, but he may have clinched Starlink's biggest business opportunity.

Trump’s “Golden Dome”, which aims to replicate Israel’s “Iron Dome” for all of the US, could be one of the biggest taxpayer outlays since Ronald Reagan’s strategic defence initiative, better known as “Star Wars”. In dollar terms Trump’s dome may even rival Nasa’s Project Apollo, which cost $280bn in today’s money. Since the missile shield would need to rely on swarms of satellites, Musk’s SpaceX would be the largest beneficiary. The company has formed a Golden Dome consortium with Palantir and Anduril, which are run by his Big Tech friends. Musk’s lasting impact on Washington may thus be to divert a big chunk of US taxpayer money to his empire. As leaving gifts go, this one would be very nice. Whether it would enhance US national security is someone else’s problem. Ditto on whether Golden Dome contracts qualify as waste, fraud or abuse. When only one company can fulfil the project’s biggest functions, there is little prospect of an open bidding process.

12. The definitive graphic on China's continuously rising trade dominance.

This is staggering

“China has surpluses, not just with the US, not just with Europe, but with 172 economies in the world,” Bert Hofman, a former Beijing-based country director for China at the World Bank, told a meeting of the Foreign Correspondents’ Club of China. “And if you have surpluses with 172 economies in the world, that’s not a great soft power position.”

As also this

China was the subject of 198 trade investigations by WTO members over alleged dumping or illegal subsidies last year, double the tally of the previous year and accounting for nearly half of all measures reported to the global trade body, according to research by Peking University economics professor Lu Feng. More than half of the trade cases against China last year were initiated by developing countries, including India, Brazil and Turkey. Even close partner Russia has pushed back on China’s car exports.

13. One area where China is chronically dependent on US suppliers is in the aeroplane manufacturing industry.  

Beijing had been hoping that Comac C919, its domestic aeroplane, would challenge Airbus and Boeing.

With China’s three big state-owned airlines already flying 17 C919s and Comac expecting to build at least 30 more of the single-aisle aircraft this year, the tensions between Washington and Beijing are highlighting how Chinese companies can be heavily dependent on US companies in their supply chains. The C919, which made its maiden commercial flight in China in 2023, has 48 major suppliers from the US, 26 from Europe and 14 from China, according to Bank of America analyst Ron Epstein...

For most western aircraft components for the jet, there are no domestic alternatives readily available, analysts say, meaning the US “can [halt] Comac in its tracks anytime it wants”, said Richard Aboulafia, managing director of AeroDynamic Advisory. One of the most crucial parts of the C919, its LEAP-1C engine, is built by CFM International, a joint venture between the US group GE Aerospace and French manufacturer Safran. While China has been developing a domestic alternative, the CJ-1000A, it is still being tested and is “not ready yet”, said Dan Taylor, head of consulting at aviation consultancy IBA... But if the US, at some point, decides to restrict exports of key components to China and “if China stops buying aircraft components from the US, the C919 programme is halted or dead”, Epstein said.

14. In an important event, Foxconn has struck a deal to manufacture electric vehicles for Mitsubishi Motors of Japan. Foxtron, its EV subsidiary, will develop and produce a Mitsubishi vehicle for Australian and New Zealand markets. In an industry where in-house manufacturing has been the norm, this outsourcing model is a potential turning point for the industry. 

15. Alaska Sovereign Wealth Fund

In 1980, Alaskan leaders created the Alaska Permanent Fund to invest 25 per cent of the state’s revenue from North Slope oil. Each year the fund, which began with less than $1mn and now has around $80bn of assets, pays out a dividend to every Alaskan resident.

16. Agencies have sprung up offering "place-of-origin-washing" services to Chinese exporters by routing their exports to the US through third countries. 

17. Zara's remarakable supply chain integration that changed clothing retail.

In the old days, retailers released just two main collections a year, Spring/Summer and Autumn/Winter. For decades, most chains have outsourced manufacturing to lower-cost factories in the far east with the clothes arriving up to six months later. Zara went against conventional wisdom by sourcing a lot of its clothes closer to home and changing products much more frequently. That meant it could respond much faster to the latest trends and drop new items into stores every week. Just over half of its clothes are made in Spain, Portugal, Morocco and Turkey. There's a factory doing small production runs on site at HQ, with another seven nearby, which it also owns. As a result, it can turn around products in a matter of weeks. More basic fashion staples are produced with longer lead times in countries like Vietnam and Bangladesh... Every piece of clothing is packaged and despatched from its distribution centres in Spain, as well as one in the Netherlands...

CEO Mr Maceiras says, "It's something that allows us to make the right decision in the last possible minute, in order to assess properly the appetite from our customers, in order to adapt our fashion proposition to the profile of our customers in different locations." In other words, getting the right products to the right shops. At HQ, product managers then receive real-time data on how clothes are selling in stores worldwide, and – crucially – feedback from customers, which is then shared with designers and buyers, who can adjust the ranges along the season according to demand. Unlike some other High Street rivals, it only discounts when it stages its twice-yearly sales.

18. Amidst all the talk of the impact of the tariffs on the world economy, here's the impact of GFC and Covid 19 for perspective.

The GFC caused world economic growth to fall from 2.7 per cent in 2008 to minus 0.4 per cent in 2009, a decline of 3.1 percentage points. The Covid crisis saw global growth fall from 2.9 per cent in 2019 to minus 2.7 per cent in 2020, a drop of 5.6 percentage points... The International Monetary Fund (IMF) sees global economic growth slowing from 3.3 per cent last year to 2.8 per cent this year — a deceleration of 0.5 percentage points... The drop in global growth of 0.5 percentage points projected on account of the tariff shock seems piffling in comparison.

19. Muted salary and wage growth of India Inc's 457 listed companies that have declared their results for Q4  FY25

The combined salary & wage expenses of the country’s listed companies grew just 4.8 per cent in the January-March quarter of 2025 (Q4FY25) over a year earlier — in single digits for a fifth straight quarter, and the slowest rate in at least 17 quarters. For comparison, these companies’ combined salary & wage expenses had increased 6.1 per cent year-on-year in the same quarter of FY24 and 5.1 per cent in Q3FY25... The share of salary & wage expenses in Indian companies’ net sales declined to 12 per cent in Q4FY25 — against 12.14 per cent last year, and a five-year average of 12.6 per cent...

The combined net sales (gross interest income in case of lenders) of the 457 companies in our sample was up 6.4 per cent Y-o-Y in Q4FY25 — the slowest growth rate in six quarters. Their revenue is now set to grow at a single-digit rate for an eighth consecutive quarter —since the quarter ended June 2023. These companies’ combined net profit (adjusted for exceptional gains & losses) were up 6.7 per cent Y-o-Y at around ₹2.24 trillion in Q4FY25 — a decline from 7.1 per cent in Q3FY25, but an improvement from 6.4 per cent in Q4FY24... A slowdown in India Inc’s salary & wage expenses was led in the past by IT services companies like Tata Consultancy Services, Infosys and Wipro, the current round of rationalisation is led by BFSI, which has faced a slowdown in growth and margin pressures in recent quarters. Companies in the IT services and BFSI sectors are the biggest employers in the listed space, accounting for 48 per cent and around 30 per cent of the salary & wage expenses of all companies in our sample.

Weekend reading links

1. Interesting points about the speed and scale at which the US national security state emerged.

The political unity and speed with which the postwar security state was constructed remains breathtaking. The US army in mid-1939 was smaller than Portugal’s; by the end of the second world war it was among the largest. In 1929, Henry Stimson, the US secretary of state, disbanded the US military cryptology agency with the endearingly optimistic assertion that “gentlemen do not read each other’s mail”, a sentiment resoundingly rejected with the creation of the CIA in 1947 and the National Security Agency in 1952.

2. Example of the deep dissonance between economists and how the economy functions.

In a 2016 survey of academic economists, not a single respondent said putting tariffs on China to encourage domestic production would be a good idea.

This was even as Donald Trump was about to start his war on Chinese imports, which has now become the norm through a bipartisan consensus.

3. Microsoft and other Big Tech chasing Nvidia.

Nvidia is now planning to announce the launch of its serverless API, Nvidia Cloud Functions, at its GPU Technology Conference to be held in San Jose in March, The Ken has learnt. In other words, Nvidia’s GPU users will no longer have to go through a third party’s middle layer of software—such as Azure’s development environment—to access cloud functions... cloud-service providers like Azure and AWS who derive quite a bit of their revenues from providing this layer.

4. The amount of VC funding aimed at semiconductor chip design in India is a tiny fraction of the total technology sector funding.

5. Important anecdote about the intergenerational disparity facing current generation of workforce entrants.

His paycheque of Rs 2 lakh a month is much more than what his father earned back in the day in real terms (assuming 6% average inflation over the years). His father, a banker then, had managed to feed a family of six for over three decades, educate his children, buy two plots of land, and hold a grand wedding for his daughter... Every morning, 31 year old Rajeev Sinha gets ready by 8, packs his suitcase, and heads for his clinic at Patel Nagar, a popular locality, in an auto-rickshaw. Later in the day, Sinha, a gastroenterologist, attends a few patients at nearby hospitals. He packs up by 8 p.m., and takes an auto-rickshaw to the upmarket locality, Boring Road, where his father runs a clinic. They then drive back home in his father’s car. “My parents were 30 by the time they had me. We had a car, too, by then. My mother’s a homemaker; so the house ran on my father’s income,” Sinha told The Ken over a phone call. “Today, I don’t have liquid savings worth even Rs 10 lakh. My investments are also not enough to get married.”

This is a sobering reminder about the housing affordability crisis.

Typically, personal-finance experts advise not to pay more than 20% of one’s monthly income as EMIs... If Goyal were to go by that, he should’ve ideally restricted his EMI to Rs 40,000. That would mean a maximum loan of nearly Rs 55 lakh, assuming an 8.5% interest rate for 30 years. Add to it the Rs 20 lakh he has saved up for the downpayment and the cost of the property shouldn’t be more than Rs 75 lakh. Surprise, surprise. “Finding a new three-bedroom flat in Hyderabad for Rs 75 lakh is almost impossible,” said Govinda Bhul, a real-estate broker in the city. “Some projects in the outskirts may have [such properties] but only if the construction is yet to begin. Prices shoot up as construction progresses.” Forget buying a new house. Finding even second-hand apartments for that budget is a tough task, said Bhul who’s been in business for a decade...

Brokers across Mumbai, Gurugram, Delhi, and Noida would probably scoff at the idea of buying a three-bedroom flat for Rs 75 lakh. But just 10 years ago, one could find such properties in certain pockets of Mumbai, the country’s most expensive real-estate market. India’s nominal GDP has grown by 80% and nominal income by nearly 130% in the period since, but that hasn’t been enough to keep up with the real-estate run. Now, you can either live in expensive, high-rise societies or be relatively unsatisfied with your home “because you can’t afford what you really want,” said Jayati Ghosh, former economics professor at Delhi’s Jawaharlal Nehru University... the average residential rents in India’s top eight cities—Delhi NCR, Bengaluru, Mumbai metropolitan region, Hyderabad, Ahmedabad, Pune, Chennai, and Kolkata—have gone up by nearly 30% in the last two years... And Noida, Greater Noida, and Bengaluru have seen rents rise by over 40%.

So what's driving the price increases?

“With the entire ‘luxury’ tag, investors believe everything will be sold, no matter the price. So, when a project is announced, they buy it to eventually sell at higher prices,” said a senior executive at JLL India, a real-estate-services firm. “They believe that the top 1% will buy everything, and so, they don’t want to lower the prices.” Rising land and construction costs are equally to blame, it seems. The profit margin of a three-bedroom flat is nearly 30% more than that of a two-bedroom one, according to a Gurugram-based developer. “It keeps going up as the size [of the property] increases. So it makes business sense, too.”

6. Adam Tooze points to the spectacular surge in Big Tech capex.

7. Stunning graphic on the secular decline in US manufacturing employment from a paper by Michael Strain (HT: Adam Tooze).

8. Changes in the occupational structure of the US labour market over the last century and a half (HT: Adam Tooze)

9. The application of weight-loss drugs creates another market.

... many dermatologists report that patients are seeking out treatment for so-called “Ozempic face” in regions where there is a higher penetration of drugs using GLP-1s such as the Middle East and North America. “If they lose eight to 10 kilos or more, they start showing facial sagging,” said Ørnskov. “There, people will need to use a filler.” Galderma’s most popular filler for weight loss drug users is a product called Sculptra, which was initially developed for HIV patients who experienced rapid weight loss, he added. At its initial public offering in March last year, Galderma raised approximately SFr2.3bn ($2.7bn) at a price of SFr53 a share. Shares in the company have more than doubled to SFr108.50 a share. Galderma’s net sales grew 9.2 per cent to $3.2bn in the nine months to September 2024, driven by its two largest divisions, dermatological skincare — which includes everyday skincare brands like Cetaphil — and aesthetic injectables. Its third prescription treatment division, has lagged behind, with sales growing 2.9 per cent in the period.

10. Excellent article with very good suggestions to reform excise taxes on alcohol.

In most parts of the world, especially in the richer and more developed OECD countries, policy levers like excise tax rates and controls on availability and marketing are adjusted according to beverage type and strength, to promote the production and consumption of lower alcohol-strength beverages, which in turn helps reduce alcohol-related harm at the population level. Such differentiation has been used to regulate alcohol around the world for centuries, including in the UK since the 18th century, Denmark since 1918, the United States since 1933, and in all EFTA Members, and all EU Members. Alcoholic beverages contain alcohol and water in different proportions, but people buy an alcoholic beverage for the alcohol it contains and not the water. If the taxes are on the basis of value or volume of the beverage, then in effect the consumers are paying tax not only on alcohol but also on water which, in the case of beer, is 93-95 per cent of the liquid in the bottle. That surely does not make sense. The UK reformed its alcohol tax structure in 2023 to make it simpler and more economically rational. Under the new system, all categories are taxed based on alcohol strength, so the higher alcohol by volume (ABV) products pay more tax per unit of alcohol than lower ABV products...

The state governments in India need to create clear daylight between excise policies for products with high alcohol content like liquor and that for milder options like wine and beer on taxation, availability and licensing. Taxation on an alcoholic beverage needs to be linked directly with the amount of alcohol it contains in as simple a manner as so many Rs per ml of actual alcohol content (Rs per ABV). Further, beer and wine licences should be liberalised to make these products far more easily accessible to consumers than hard liquor. To protect existing excise revenues, a good starting point would be a tax neutral position for liquor and then recasting of tax rates for wine and beer. This would deliver the ‘revenue positive substitution’ of harmful alcohol with less harmful alcoholic options, thus delivering both revenues and public health outcomes.

10. Content deluge in the media world

India now has over 900 channels, thousands of newspapers, and over 860 radio channels. We make more than 1,600 films in a normal year. Then streaming took off in 2018. The deluge became a flood. With more than 60 video streaming apps and a dozen music streaming ones, there is now an obscenely rich spread on tap... YouTube alone uploads 500 hours of video every minute.

And what does this mean and the challenge it poses?

One piece of research says that heavy screen users have an attention span of 8 seconds. That is less than that of a goldfish, which is famous for its 9-second attention span. How could you possibly tell any story or sell any product to this consumer?

11. Impressive numbers from Tata Electronics

Tata Electronics — which acquired Wistron’s iPhone facility in Narsapura, Karnataka, for $125 million in October 2023 — has significantly ramped up operations since mid-2024. The plant’s annual production soared to over Rs 40,000 crore during the January–December 2024 period — a 180 per cent surge compared to Rs 14,300 crore in the previous year. This performance positions the Tatas as responsible for 26 per cent of the total iPhone production in India, where Apple’s other vendors include Foxconn and Pegatron. During the year, Tata Electronics recorded a 63 per cent increase in direct employment at its iPhone assembly operations, with the workforce expanding to 31,000 from 19,000 in 2023. This growth elevated its factory to the position of India’s second-largest iPhone manufacturing facility in terms of direct job creation...

The factory now accounted for 17 per cent of the total direct employment generated across Apple’s iPhone ecosystem in India (185,000 workers as of 2024), which encompasses assemblers and component suppliers. By comparison, the largest factory, operated by Apple vendor Foxconn in Tamil Nadu, employed over 42,000 workers at its peak. Exports also surged, with over 77 per cent of the factory’s output shipped overseas in 2024. The export value for the year exceeded Rs 31,000 crore, up 125 per cent from Rs 13,751 crore in 2023. Tata’s contribution accounted for 29 per cent of India’s total iPhone exports in 2024... Of 31,000 workers directly employed by the Karnataka facility, 22,000 are women, most of whom are first-time job seekers aged 19–24. Over the past four years, the factory has consistently expanded its employee base; the previous year, it was in the 17,000–19,000 range.

12. Ruchir Sharma spots an important difference between politics in the developed and developing countries. 

Last year, incumbent parties lost 85 per cent of the elections in developed countries, up from 25 per cent on average in the early 2000s. In developing countries, the mood shifted the other way. Incumbents lost around 25 per cent of the elections in 2024, down from 50 per cent in the early 2000s. Opinion polls tell the same story: the share of respondents who approve of their leader has fallen to near 30 per cent in developed countries, while holding steady above 50 per cent in developing countries.

There are important departures in areas like inflation, immigration, inequality etc., between the two parts of the world.

By 2024 in the US the price of eggs, for example, was still 200 per cent higher than before the pandemic — compared with about 50 per cent higher in India and Indonesia. Even after adjusting for that broader surge in inflation, home prices were up 17 per cent in developed countries, versus just 3 per cent in developing ones, which helps explain why unaffordable housing is stoking strong anti-incumbent sentiment in the US and UK. Meanwhile, the surge in immigration had become a burning election issue in the west but not in developing countries, which are largely departure points rather than destinations for immigrants... Since 1980, the income share of the top 1 per cent has more than doubled in the US to 21 per cent, while inching up just 3 points to 18 per cent on average in the major developing economies. Most strikingly, Mexico is one of the few countries where the income share of the 1 per cent is falling... only about 20 per cent of Americans express trust in government, down from a peak above 70 per cent in the 1960s. In developing nations, trust is ticking up on average, lifted in the past decade by huge gains in nations where incumbents won last year. Nearly 50 per cent of Mexicans and over 70 per cent of Indians and Indonesians now express trust in their government.

13. Strongman leader, President Nayib Bukele of El Salvador. Now on his second five year tenure after a landslide win, he's among the most popular leaders in the world after almost eliminating violent crime, investing heavily in infrastructure, and generally boosting economic growth by promoting the likes of surfing tourism. These successes appear to have come at a cost, with 107,000 Salvadoreans among a population of just 6.3 million being in prisons. His support for bitcoins, which the country adopted as legal tender and made part of reserves in 2021, has made him a darling for western conservatives who see El Salvador as a model for emulation. 

14. Is India's tech sector undergoing a revival?

15. Initial results from New York's congestion pricing scheme are hugely encouraging.

Morning rush-hour speed from New Jersey through the Holland Tunnel, a main route under the Hudson River into Manhattan, has almost doubled to 28mph compared with a year earlier. Evening speed over the Manhattan Bridge to Brooklyn has increased from 13mph to 23mph... Most passenger cars entering the zone now pay a $9 toll, while trucks pay $14.40 and motorcycles, $4.50. Some autos, including emergency vehicles, are exempt. The scheme means New York joins London, Milan, Singapore and Stockholm in a small club of big cities with congestion pricing. Traffic in London, which introduced its programme in 2003, dropped by 14 per cent in its zone in the first year. Other cities experienced drops of more than 20 per cent... Of eight bridges and tunnels examined, seven experienced significant acceleration in at least one rush hour. Three bridges into Manhattan that are not connected to the congestion zone did not experience similar speed increases.

This is an interesting behavioural response.

Lewis Lehe, an assistant professor of civil engineering at the University of Illinois Urbana-Champaign, has found that drivers in other cities with congestion pricing respond more dramatically to the introduction of a toll than to later price increases — an idea he refers to as “large elasticity at introduction”.

Congestion pricing has already triggered market responses, nowhere more striking than in the restaurant industry which is one of Manhattan's great attractions. 

Jae Jung, the owner of Kjun in Murray Hill, said Friday that her produce, meat and fish vendors had announced new surcharges on each delivery. Because her restaurant is small and has limited storage space, she said, she receives deliveries three or four times a week, and will try to consolidate those into one or two... Several restaurateurs have jumped at the chance to appease and attract customers, offering rebates and discounts. Le Jardin Bistro, on the Lower East Side, Mr. Mehta’s restaurants and the Sushi by Bou omakase chain are offering a $9 discount on each check to customers who have paid the driving charge.

Weekend reading links

1. Robin Harding writes that AI advances may not help much in the development of humanoid robots.

The obstacles to making an economically viable robot that can cook dinner and clean the toilets are a matter of hardware, not just software, and AI does not in itself address, let alone resolve them. These physical challenges are many and difficult. For example, a human arm or leg is moved by muscles, whereas a robotic limb must be actuated by motors. Each axis of motion through which the limb must move requires more motors. All of this is doable, as the robotic arms in factories demonstrate, but the high-performance motors, gears and transmissions involved create bulk, cost, power requirements and multiple components that can and will break down. After creating the desired motion, there is the challenge of sensing and feedback. If you pick up a piece of fruit, for example, then the human nerves in your hand will tell you how soft it feels and how hard you can afford to squeeze it. 

You can taste whether food is cooked and smell whether it is burning. None of those senses is easy to provide for a robot, and to the extent they are possible, they add more cost. Machine vision and AI may compensate, by observing whether the fruit is squashed or the food in the pan has gone the right colour, but they are an imperfect substitute. Then there is the issue of power. Any autonomous machine needs its own energy source. The robot arms in factories are plugged into the mains. They cannot move around. A humanoid robot is most likely to use a battery, but then there are trade-offs with bulk, power, strength, flexibility, operating time, usable life and cost. These are just some of the problems.

2. Nvidia does not seem to agree as it bets on robotocs as its next big growth driver. 

Nvidia... is set to launch its latest generation of compact computers for humanoid robots — dubbed Jetson Thor — in the first half of 2025. Nvidia is positioning itself to be the leading platform for what the tech group believes is an imminent robotics revolution. The company sells a “full stack” solution, from the layers of software for training AI-powered robots to the chips that go into them... The push into robotics comes as Nvidia is experiencing more competition for its powerful AI chips from rival chipmakers such as AMD, as well as cloud computing groups such as Amazon, Microsoft and Google that are looking to reduce their dependence on the US semiconductor group... a shift in the robotics market is being driven by two technological breakthroughs: the explosion of generative AI models and the ability to train robots on these foundational models using simulated environments. The latter has been a particularly significant development as it helps solve what roboticists call the “Sim-to-Real gap”, ensuring robots trained in virtual environments can operate effectively in the real world, he said... Nvidia offers tools at three stages of robotics development: software for training foundational models, which comes from Nvidia’s “DGX” system; simulations of real-world environments in its “Omniverse” platform; and the hardware to go inside the robots as its “brain”.

3. Pakistan drastically reduces pension benefits of retired civil and armed forces personnel to reduce its growing pension bill, the fourth largest expenditure in the budget. 

The Ministry of Finance on Wednesday issued three separate notifications to discontinue multiple pensions, reducing both the first home take pension and also lowering the base for determining future increases in pensions... According to the Ministry of Finance’s notification, on the recommendations of the Pay and Pension Commission of 2020, “it has been decided that henceforth, in an event where a person becomes entitled to more than one pension, such person shall only be authorised to opt to draw one of the pensions”... Instead of taking a pension on the basis of the last drawn salary, the new pensioner will get a pension based on the average salary of the last two years... It also ended the annual compounding of the pension and any increase would be treated separately from the base pension, a concept that is similar to the ad-hoc salary increase that is not made part of the basic salary to avoid compounding. The changes will take effect from January 1 and will be applicable to both retired civil and military personnel. Many serving federal government employees, who are taking salary and pension, would also be affected by the changes. The finance ministry’s notifications stated that the changes in the pension rules have been made on the basis of recommendations given by a commission constituted by the government of former prime minister Imran Khan in 2020.

4. A good description of how Chinese exporters are responding to US tariffs.

In industry after industry, Chinese companies have found footholds abroad that allow them to bypass trade barriers with the United States. After the United States put hefty tariffs on Chinese solar panels, for example, many Chinese companies opened solar factories in Southeast Asia... U.S. efforts to block critical minerals and electric vehicle batteries from China from receiving government subsidies have also pushed Chinese companies to set up battery-making subsidiaries in Morocco and Singapore... In some cases, global companies have also used accounting and tax tricks to make it appear that their shipments from China are lower, and thus pay fewer tariffs, without making major changes to their supply chains... For example, an electronics company might move one important stage of its supply chain out of China and into Vietnam. That could allow the company to report to U.S. customs agents that the export came from Vietnam, even if the good is still finished in China and exported from China to the United States. Another lever companies could play with, Ms. Brown said, is valuation. They can officially lower the value of the import by stripping out certain “intangible” costs, like payments for intellectual property, royalties, brand or research and development, and recording those to other global subsidiaries. By lowering the value of the import, they then pay a lower tariff.

5. Important point about the origins of uncertainty and risks in the global order today.

According to John Ikenberry of Princeton University, a leading theorist of international relations, “a revisionist state has arrived on the scene to contest the liberal international order . . . it is the United States... Trump is poised to contest almost every element of the liberal international order — trade, alliances, migration, multilateralism, solidarity between democracies, human rights”. As a result, rather than supporting the international status quo, the US is poised to become the leading disrupter. “Every talk I’ve ever given on the geopolitical risks that we face in the world started with China and Russia,” says Ivo Daalder of the Chicago Council on Global Affairs. “But the biggest risk is us. It’s America.” America’s traditional allies are among the countries that feel most threatened by a change in the way that the US exercises its power. Middle-power democracies such as the UK, Japan, Canada, South Korea, Germany and the entire EU have got used to a world in which American markets are open — and the US provides a security guarantee against threatening authoritarian powers... The question of whether and how to respond to Trump tariffs is exercising diplomatic minds across the western world. Finding an answer is all the more difficult because Trump’s true intentions remain unclear.

6. Interesting inequality trends

So we have seen no increase in aggregate inequality. The story for the lowest-paid is unambiguously good but for the bulk of people who sit somewhere in the middle, it could be argued that the two divergent trends combine for a decidedly uncomfortable situation. If the middle class looks upwards, the rich are pulling further away. A top-tier life feels further out of reach than ever. But look down, and the floor is coming up fast. This simultaneous rise of resentment and precarity is a dangerous cocktail, and could certainly have fed into recent political undercurrents.

Professions once considered aspirational are at the sharp end. In Britain, doctors, nurses and police officers have all been slipping down the income rankings in recent years. In the US, the highest-paying jobs are increasingly shared among a handful of ultra-high-status occupations. Tech workers now account for one in six of the top 5 per cent of salaries, up from one in 20 in 1990... In the 1980s, 40 per cent of the highest-paying jobs in America didn’t require a degree. The upper reaches of the income scale included plenty of engineers and doctors, but also senior schoolteachers and the most skilled factory and construction workers. People from all sorts of backgrounds with all sorts of skillsets could dream of making it. Today, the upper part of the scale is dominated by highly skilled tech and healthcare workers. Almost half of the top jobs require an advanced degree. And a huge section of the population knows at a pretty early age they’re not on that path.

7. Some numbers of household savings in India.

Net household financial savings in India rose from 7.7 per cent of gross domestic product (GDP) in 2019-20 to 11.7 per cent in 2020-21, largely because of precautionary and forced savings during the pandemic, but moderated thereafter to a multi-decade low of 5.3 per cent in 2022-23... The share of low-cost current and savings accounts in total deposits has declined the past few years from a peak of 44-45 per cent in recent years to 38-39 per cent. In contrast, mutual funds, especially equity and hybrid schemes, have seen a surge in inflows and have delivered higher returns over the past few years. The share of mutual funds constituted around 6.1 per cent of household savings in 2022-23, with the number of mutual-fund folios jumping from 146 million at the end of 2022-23 to 178 million at the end of 2023-24.

8. Finally, after years of wrangling including several lawsuits, congestion pricing in busy hours goes live in mid-town Manhattan from the morning of 6th January.

Most passenger cars will now have to pay $9 to enter Manhattan south of 60th Street at peak hours, rather than the original $15. Small trucks will have to pay $14.40; large trucks, $21.60. Discounted rates will be offered overnight when there is less traffic. M.T.A. leaders expect the new tolls to help generate $15 billion through bond financing that will pay for a long list of transit repairs and improvements, including modernizing subway signals and stations and expanding the electric bus fleet... State officials said the original plan was expected to reduce the number of vehicles in the congestion zone by roughly 17 percent. They have not specified how the scaled-back program will compare except to say they expect it to cut traffic by at least 10 percent... The tolling plan also does not directly charge drivers and owners of for-hire vehicles, which have exploded on city streets since Uber’s arrival in 2011. Instead, a small per-trip fee — $1.50 for Ubers and Lyfts; 75 cents for taxis — will be added to each fare and paid by passengers... Within the congestion zone, the average travel speed has dropped to under 7 miles an hour for the first time since records were kept in the 1970s, he said. The slowest traffic crawls along at just 4.7 miles per hour in Midtown.

See also this.  

9. As Saudi Arabia wins the bid for the 2034 Football World Cup, FT writes on the country's ongoing boom in infrastructure investments.

Saudi Arabia has launched real estate and infrastructure projects worth $1.3tn since Vision 2030 was unveiled in 2016, according to estimates by consultancy Knight Frank. These projects, such as the Neom linear smart city, include adding more than 362,000 hotel rooms and 7.4mn square metres in retail space. Football has become one of Prince Mohammed’s prime targets for sporting investment. The country’s sovereign wealth fund acquired English Premier League side Newcastle United, while superstars such as Ronaldo and Neymar have been lured to play in the Saudi Pro League. Saudi Arabia’s bid said the 48-team World Cup would be played in 15 stadiums across five cities. Eight stadiums would be in or close to Riyadh, which is already undergoing a construction boom that includes an entertainment zone to the west and a major expansion to the capital’s airport.

10. Adam Tooze points to a UNTD report that highlights the large differences in the cost of debt between Western countries and low-income ones.

11. Doing business, Huawei style.

Huawei’s first business was importing telephone switches before building its own, cheaper versions, copying foreign designs in the process. It later benefited from a government policy to rip out foreign technology in China’s communications network. Huawei developed a reputation for generosity towards government officials and telecoms executives, paying for international travel and hosting lavish banquets at its campus. Dou portrays Ren as an expert networker, including sending birthday cakes to retired telecoms experts who had helped Huawei.

12. Divisions in the Trump coalition that will only grow.

The Maga crowd and the globalists disagree not only on immigration, but on defence, employment and free speech. This is a coalition whose most significant overlap was a desire to take down the previous government. Now that they have, I think it’s unlikely they’ll come together on anything else.

13. Stunning figures about the US economy from Ruchir Sharma

Following the pandemic, government spending rose sharply as a share of GDP. More than 20 per cent of new US jobs are now created by government, up from 1 per cent in the 2010s. Public transfers including Social Security account for more than a quarter of residents’ income in more than 50 per cent of US counties — up from just 10 per cent in 2000.

14. Corporate India's acute deficit of global brands

Many Indian brands have either disappeared or ceded space to foreign competition. Where Onida and Videocon once dominated the domestic market for TVs, washing machines, and household appliances, Japanese, Korean, and, increasingly, Chinese brands now rule the showrooms. In cars, the Premier Padmini and Ambassador vanished when Japan’s Suzuki set up its joint venture to launch the Maruti, an Indian brand only in name. Here, too, it is the Japanese, Koreans, Germans, and Chinese that offer consumer choices, with Tata and Mahindra & Mahindra being the only indigenous exceptions. In fast-moving consumer goods, brands such as Anchor, Nirma, Uncle Chipps, and Binny’s, which once gave multinational players a run for their money, have all vanished or receded to the margins of the market... The abdication of Indian brands to global competition — with many of them converting themselves into contract manufacturers — reflects the lack of long-term thinking and strategic imagination, which are critical to brand-building.

15. This is what US Treasury Secretary-nominee Scott Bessent thinks.

Bessent has also suggested that countries with military protection from America should be forced to buy more dollar debt, as a quid pro quo. “Is there some kind of statecraft to do where you go to [these countries] and say we have these 40- or 50-year military bonds [to buy]?” he said, citing Japan, Nato members and Saudi Arabia.

16. Finally, Tej Parikh presents some facts about European stocks that go against conventional wisdom. Excluding Nvidia, European stocks outperform S&P 500 since the latest bull market started in October 2022!

European stocks are undervalued compared to their American peers.

Tech accounts for around just 8 per cent of the Stoxx Europe 600. AI euphoria has mostly passed the continent by... The Granolas... covers a diverse group of international companies spanning the pharmaceutical, consumer and health sectors. Together, they account for about one-fifth of the Stoxx 600. Their performance against the Magnificent Seven has only recently diverged. The S&P 500 — which has around 70 per cent revenue exposure to the US — got a jolt following the election of Donald Trump... Small listed European businesses also tend to outperform their American counterparts. About 40 per cent of US small caps have negative earnings, compared with just over 10 per cent in Europe. The winner-takes-all dynamic may be stronger in the US, where tech behemoths suck capital and talent away from smaller companies... European corporates also rely more on relationship-based, illiquid funding, unlike in the US, where listed equity dominates. That may encourage longer-term corporate governance in Europe... Regarding the Trump tariff threat, it’s not all disaster for European companies either. Stoxx 600 groups derive only 40 per cent of their revenues from the continent... A stronger dollar would also boost the earnings of European companies with sizeable US sales.