Weekend reading links

1. Fascinating tweet thread by Ed Conway about the Bretton Woods System that pegged the exchange rates of 44 countries with the IMF entrusted the responsibility of managing it. This graphic illustrates the remarkable currency stability among these countries in the 29 years of its existence.

This currency stability combined with a few other things resulted in a period of remarkable economic prosperity. This is a striking graphic about productivity and compensation in the US.

2. Good article that evaluates the semiconductor chips making in India, specifically the partnership between Tata Electronics and PSMC, one of the smaller Taiwanese chip manufacturing companies.

This is unlike the venture the other big player, Taiwan SemiconductorManufacturing Company (TSMC), is undertaking abroad – the company’s new fab in the Japanese city of Kumamoto, two $40 billion facilities in Phoenix, Arizona, and a commitment to invest nearly $4 billion to build a fab in Dresden, Germany. In these new fabs, apart from significant equity investment, TSMC, the ninth-most valuable business in the world, is an equity partner, and has invested in the ecosystem; it has taken along its key vendor base of some 25-30 companies to each of these locations, and is also undertaking large-scale training of manpower on the nuances of chip fabrication, a high tech-intensive job. In the Tata-PSMC venture, much of the heavy lifting is done by the Tatas, who have no real experience in chip manufacturing so far... The fact is, for TSMC to be successful outside Taiwan, it takes more than just its expertise. It takes its suppliers along so that an ecosystem develops locally for the construction expertise, material supplies, and equipment deliveries. For instance, TSMC has moved around 40 Taiwanese companies to Japan (for the new plant in Kumamoto), and taken around 30 of them to Arizona for the new plants.

3. NYT has an interview with Robert Putnam.

We looked at long-run trends in connectedness, trends in loneliness, that sort of thing, over the last 125 years. And the short version is, it’s an upside-down U curve. We were socially isolated and distrustful in the early 1900s, but then there was a turning point, and then we had a long upswing from roughly 1900 or 1910 till roughly 1965, and that was the peak of our social capital. People were more trusting then, they were more connected then, they were more likely to be married then, they were more likely to join clubs then, etc. And then for the next 50 years, that trend turned around...

That trend in political depolarization follows the same pattern exactly that the trends in social connectedness follow: low in the beginning of the 20th century, high in the ’60s and then plunging to where we are now. So now we have a very politically polarized country, just as we did 125 years ago. The next dimension is inequality. America was very unequal in what was called the Gilded Age, in the 1890s and 1900s, but then that turned around, and the level of equality in America went up until the middle ’60s. In the middle ’60s, America was more equal economically than socialist Sweden! And then beginning in 1965, that turns around and we plunge and now we’re back down to where we were. We’re in a second Gilded Age. And the third variable that we look at is harder to discuss and measure, but it’s sort of culture. To what extent do we think that we’re all in this together, or it’s every man for himself, or every man or woman? And that has exactly the same trend.

He makes the distinction between bonding and bridging social capital.

Ties that link you to people like yourself are called bonding social capital. So, my ties to other elderly, male, white, Jewish professors — that’s my bonding social capital. And bridging social capital is your ties to people unlike yourself. So my ties to people of a different generation or a different gender or a different religion or a different politic or whatever, that’s my bridging social capital. I’m not saying “bridging good, bonding bad,” because if you get sick, the people who bring you chicken soup are likely to reflect your bonding social capital. But I am saying that in a diverse society like ours, we need a lot of bridging social capital. And some forms of bonding social capital are really awful. The K.K.K. is pure social capital — bonding social capital can be very useful, but it can also be extremely dangerous. So far, so good, except that bridging social capital is harder to build than bonding social capital. That’s the challenge, as I see it, of America today.

4. In an interesting reversal of fortunes, developing countries have become more fiscally prudent compared to their developed counterparts, and central banks across developing countries are exhibiting greater responsibility and independence. Sample this from Gavekal.

Across the emerging markets, political leaders with populist leanings are calling for looser fiscal policy. Many are also berating local central banks for failing to do more to support growth, and leaning on them to loosen monetary policy. For the most part, central bankers, jealous of their independence, are pushing back and keeping monetary conditions relatively tight to counter inflation. This raises the prospect of loose fiscal, tight monetary policy settings in a number of key emerging markets, argues Udith Sikand. It also throws the contrast between emerging and developed market central banks into sharp relief. Arguably, developed market central banks have caved in to fiscal dominance, keeping real rates for the most part low or negative over recent years to prevent public debt burdens from becoming unsustainable. By contrast, emerging market central banks are likely to maintain positive real rates in order to attract funding to cover growing fiscal deficits. The bottom line is that this sets up conditions for a potential triple merit scenario in emerging markets over the coming years, with local risk assets and currencies rising strongly.

5. India's long tail of corporate tax distribution

A total of 353 companies earning above Rs 500 crore accounted for 55.7 per cent of the Rs 14.7 trillion in gross total income recorded by all companies in 2018-19. A total of 842 companies made more than Rs 500 crore in 2023-24 and accounted for 62 per cent of the Rs 34.6 trillion in gross total income recorded by all companies.

6. India's textile industry facts of the day

India's textile industry, valued at USD 250 billion, provides jobs to 50 million people. The sector is divided into three broad categories - Textiles (fibre, yarn, and fabrics); Garments and; Made-ups (Bed sheets, curtains etc.). India is present across all parts of the value chain. In 2023, China exported USD 114 billion worth of garments, followed by the EU (USD 94.4 billion), Vietnam (USD 81.6 billion), Bangladesh (USD 43.8 billion), and India with just USD 14.5 billion. From 2013 to 2023, Bangladesh's garment exports grew by 69.6 per cent, Vietnam's by 81.6 per cent, and India's by only 4.6 per cent. "As a result, India's global market share in garment trade has declined from 2015 to 2022. The share of knitted apparel dropped from 3.85 per cent to 3.10 per cent, and the share of non-knitted apparel decreased from 4.6 per cent to 3.7 per cent," GTRI founder Ajay Srivastava said. He said that the garment imports too surged by 47.90 per cent, from USD 1.06 billion in 2018 to USD 1.56 billion in 2023. Textile imports also saw a notable increase of 20.86 per cent, from USD 5.77 billion to USD 6.97 billion. 

7.  A new NBER working paper points to more evidence of price markups in the US economy. It uses data on price data from more than 100 distinct product categories in the US in the 2008-19 period. 

We estimate demand with flexible consumer preferences and recover time-varying markups for individual products under the assumption of profit maximization. Our results indicate that markups increased by about 30 percent during our sample period. This reflects within-product changes and is primarily due to reductions in marginal costs, rather than increases in (real) prices. Changes in marginal costs, along with declining consumer price sensitivity, account for the vast majority of the time series variation in aggregate markup changes between 2006 and 2019. Our model indicates that consumer surplus has increased despite rising markups, though the increases are concentrated among higher-income consumers.

8. Interesting snippet about the Bill and Melinda Gates Foundation

Between 2006 and 2023, Mr. Buffett had given more than $39 billion to the Gates Foundation. By comparison, Mr. Gates and Ms. French Gates gave $39 billion between 1994 and 2022, including $22 billion to get the foundation going in 2000. In some years, the former couple gave less than half a billion. In 2021, they pledged $15 billion to the foundation’s endowment, and the following year, they transferred that money, as well as another $5 billion Mr. Gates had contributed.

9. Important point made by Richard Rorty (HT: Rana Faroohar)

National pride is to countries what self-respect is to individuals: a necessary condition for self-improvement. Too much national pride can produce bellicosity and imperi­alism, just as excessive self-respect can produce arrogance. But just as too little self-respect makes it difficult for a person to display moral courage, so insufficient national pride makes energetic and effective debate about national policy unlikely.

10. An important trend to be kept in mind as we follow China, the sharply increasing Chinese emmigration.

The number of Chinese citizens living in Malaysia has almost doubled over the past three years, driven by a jump in students and new investors, according to government officials, academics, schools, and business and community associations... China’s slowing economic growth as well as a more heavy-handed approach to business have driven more of its citizens to seek new lives abroad. Wealthy Chinese citizens have flocked to destinations such as Singapore and Malta where they have acquired citizenship through investment, and they make up the largest source of golden visa applicants in Portugal and Greece. Chinese citizens also form one of the largest groups of illegal migrants attempting to enter the US from Latin America...

Malaysia... is home to a centuries-old Chinese diaspora that makes up about 23 per cent of its 34mn citizens. Most new Chinese arrivals are middle-class families who see south-east Asia as a more affordable destination, or students shying away from anti-China sentiment in the west, making Chinese people the largest group of foreign students and long-stay residents in Malaysia. Universities and international schools in Malaysia are reporting soaring demand. The nation’s higher education institutions had 44,043 Chinese students enrolled last year, up 35 per cent from 2021, according to the education ministry... the number of Chinese pupils in international schools more than doubled in the same timeframe from 2021 to 2023. More than 56,000 Chinese immigrants now hold Malaysia My Second Home long-stay visas, more than double last year’s number. Chinese investors are also contributing to the boom in expatriate numbers. There are about 45,000 owners, managers and workers of Chinese companies in Malaysia, up from an estimated 10,000 in 2021, according to a Chinese trade official... The rise in Chinese residents mirrors an earlier trend in Thailand. Sivarin Lertpusit at Thammasat University in Bangkok said the number of new Chinese immigrants in Thailand was “rapidly increasing”, reaching 110,000-130,000 living in the country in 2022, most of them entrepreneurs, employees, students and their family members as well as lifestyle migrants.

11. The week saw a US federal judge ruling on a DoJ suit that Google spent billions of dollars on exclusive deals to maintain an illegal monopoly on search, a sector where it handles more than 90% of online queries. The judge, Amit Mehta, of the US District Court for the District of Columbia, said, "Google is a monopolist, and it has acted as one to maintain its monopoly."

The DoJ argued the search giant paid tens of billions of dollars a year for anti-competitive deals with wireless carriers, browser developers and device manufacturers — and in particular Apple. These payments, which cemented Google as the default search engine, totalled more than $26bn in 2021, according to the decision... The proceedings will now enter a second phase in which the court will determine what remedies Google needs to take. The DoJ has not yet indicated what penalties it would seek, but it may focus on curbing Google’s ability to strike the deals at issue in the case. The decision is the biggest win against Big Tech by US antitrust enforcers in decades... the DoJ’s antitrust division, led by Kanter, has sued Apple and has a second case pending against Google, accusing it of allegedly exercising monopolistic control of the digital advertising market. The second Google trial is set to begin next month. The Federal Trade Commission, chaired by Big Tech critic Lina Khan, has also filed lawsuits against Amazon and Meta. 

Google’s years-long agreement with Apple to make it the default search engine on the iPhone’s Safari browser has long drawn scrutiny. Unsealed court documents showed that Google paid Apple $20bn in 2022 alone. This would amount to a substantial portion of Apple’s $85bn-a-year services business, which includes its App Store and Apple Pay... Also at issue in the case were contracts the tech giant reached over the years with browser developer Mozilla, Android smartphone makers Samsung, Motorola and Sony, and wireless carriers AT&T, Verizon and T-Mobile... The ruling strikes at the heart of Google’s most prominent business. The company made $175bn in revenue from its search-based advertising last year, more than half its $307bn of total revenue... Google’s “distribution agreements foreclose a substantial portion of the general search services market and impair rivals’ opportunities to compete”, Mehta said in the ruling. “Google has not offered valid pro-competitive justifications for those agreements.” The deals deny competitors “scale”, he said, which is “the essential raw material for building, improving, and sustaining” a general search engine. Google benefits from a “feedback loop” in which parties “routinely renew” exclusive distribution deals with the company, Mehta added. “That is the antithesis of a competitive market.”

Judge Mehta pointed to three ways in which Google distorted competition

The company’s grip over 90 per cent of the search market enabled it to make super-profits from advertisers. Its business model, based on surveillance advertising, compromised user privacy, which rival search engines might otherwise prioritise. And its massive payments to Apple, and other tech companies, for default distribution of Google search on their devices and services in effect buy off potential competitors, stifling innovation.

This about the extent of Google's dominance

According to Mehta’s decision, nearly 90 per cent of US search queries flowed through Google in 2020, and 95 per cent for mobile. It has no serious rivals — the next closest, Microsoft’s Bing, accounted for just 6 per cent. The advertising business Google has built around its search business generates enormous revenue: $175bn last year, more than half its $307bn total. It has spent lavishly to protect its cash cow: Google’s total payments to the likes of Apple and Mozilla to make it their default search engine reached more than $26bn in 2021 alone, Mehta said.

This is a summary of the cases against the other Big Tech companies. 

12. This blog has long held that India's objective should be to grow at 6% for the next 30 years, and use the occasional tailwinds to opportunistically engage for episodes of slightly higher rates. TT Rammohan points to the WDR 2024 and makes this important point.

The WDR 2024 report complements the findings of a study carried out by the World Bank in 2008 under the leadership of Nobel Laureate Michael Spence. That study showed that growth of over 7 per cent for over 25 years from any starting point, not just from a MIC starting point, is a tall order — only 13 economies had been able to do so. Of these, nearly half were small economies. The economies that had grown rapidly had had the benefit of a post-World War II world environment that was substantially open to free trade.

M Govinda Rao points to the accounting challenges with India's growth aspirations

According to the World Bank’s definition, a developed country in fiscal 2025 has a per capita gross national income (GNI) of $14,005. India’s GNI is estimated at $2,600, implying that to leapfrog into the developed country club, India must multiply its per capita GNI by 5.3 times. This translates into an average annual growth of about 7.5 per cent in per capita GNI or about 9 per cent per year in overall GNI for the next 23 years... Accelerating growth requires the economy to enhance both investments and productivity. At the present incremental capital-output ratio of 5, the investment rate must increase to 40 per cent of gross domestic product (GDP) from the prevailing 34 per cent. Any shortfall will have to be compensated by increasing productivity.

13. Some striking numbers about the role of state in today's capitalist society.

Sovereign Wealth Funds (SWFs) controlled more than $11.8 trillion in 2023, beating hedge funds and private equity firms combined, up from $1 trillion in 2000. State-owned enterprises (SOEs) had assets worth $45 trillion in 2020, the equivalent of half of global gross domestic product, up from $13 trillion in 2000. The Organization for Economic Cooperation and Development calculates that half of the world’s 10 biggest companies and 132 of its 500 biggest are SOEs...

For the most part, these SOEs are different from the state-owned bureaucracies of old. The state acts as a passive shareholder (sometimes with a majority but often with a minority share) rather than as a hands-on owner. The chief executives tend to have MBAs from fashionable schools and, in many cases, experience in the private sector. And the companies participate fully in global markets rather than, like old fashioned state-owned companies, hiding behind national walls... Big European SOEs have been buying up smaller private companies across Europe: France’s SNCF and Deutsche Bahn AG have purchased British railway companies, creating the oddity of foreign state companies running Britain’s privatized railways, while Spain’s Telefonica SA has expanded across Europe and the Americas. The Norwegian sovereign wealth fund is so big, controlling more than $1.7 trillion in assets, that it owns almost 1.5 per cent of the shares in all the world’s listed companies.

14. Some interesting snippets about China's priortisation of science education and applied research in areas close to the country's strategic priorities. 

A majority of undergraduates in China major in math, science, engineering or agriculture, according to the Education Ministry. And three-quarters of China’s doctoral students do so. By comparison, only a fifth of American undergraduates and half of doctoral students are in these categories, although American data defines these majors a little more narrowly... China’s lead is particularly wide in batteries. According to the Australian Strategic Policy Institute, 65.5 percent of widely cited technical papers on battery technology come from researchers in China, compared with 12 percent from the United States. Both of the world’s two largest makers of electric car batteries, CATL and BYD, are Chinese. China has close to 50 graduate programs that focus on either battery chemistry or the closely related subject of battery metallurgy. By contrast, only a handful of professors in the United States are working on batteries...

The roots of China’s battery successes are visible at Central South University in Changsha, a city in south-central China and a longtime hub of China’s chemicals industry. Central South University has nearly 60,000 undergraduate and graduate students on an extensive, modern campus. Its chemistry department, once in a small brick building, has moved to a six-story concrete building with labyrinths of labs and classrooms. In one lab, which is filled with glowing red lights, hundreds of batteries with new chemistries are tested at the same time. Electron microscopes and other advanced equipment occupy other rooms... Peng Wenjie, a professor, has set up a battery research company nearby that employs more than 100 recent doctoral and master’s program graduates and over 200 assistants. The assistants work in relays for each researcher so that the testing of new chemistries and designs continues 24 hours a day... Building and equipping an electric-car battery factory in the United States costs six times as much as in China, said Robin Zeng, the chairman and founder of CATL. The work is also slow — “three times longer,” he said in an interview.

It would be useful to go back and check on similar articles that compared the scientific research focus in the Soviet Union and its comparison with the US. The Communist Party recognised the importance of higher education and research, and the USSR was a leader in basic sciences education and in applied research, competing on level terms in many of the cutting-edge areas of technology. We now know that it didn't go much far. 

Not saying that the same fate awaits China. But it's useful to keep history in mind and judge such trends with some perspective, and not in any absolute terms. 

Family is destiny - evidence from college admissions in the US

I have blogged many times on the ovarian lottery, the disproportionate importance of family connections in determining life outcomes. Family is destiny.

Raj Chetty, David Deming, and John Friedman have just released a new Opportunity Insights study (pdf here and NYT illustration here) using college admissions data from 1999 to 2015 from 12 elite colleges (Ivy League, MIT, Duke, U Chicago, and Stanford) that illustrate the outsized nature of preferential treatment that children of alumni (legacy applicants) enjoy in Ivy League undergraduate admissions. The authors used detailed anonymised internal admissions assessments data, SAT and ACT scores, and incomes of parents and post-graduation incomes of students. A summary of their findings

Children from families in the top 1% are more than twice as likely to attend an Ivy-Plus college as those from middle-class families with comparable SAT/ACT scores. Two-thirds of this gap is due to higher admissions rates for students with comparable test scores from high-income families; the remaining third is due to differences in rates of application and matriculation. In contrast, children from high-income families have no admissions advantage at flagship public colleges. 

The high-income admissions advantage at private colleges is driven by three factors: (1) preferences for children of alumni, (2) weight placed on non-academic credentials, which tend to be stronger for students applying from private high schools that have affluent student bodies, and (3) recruitment of athletes, who tend to come from higher-income families... we show that attending an Ivy-Plus college instead of the average highly selective public flagship institution increases students’ chances of reaching the top 1% of the earnings distribution by 60%, nearly doubles their chances of attending an elite graduate school, and triples their chances of working at a prestigious firm. Ivy-Plus colleges have much smaller causal effects on average earnings... Adjusting for the value-added of the colleges that students attend, the three key factors that give children from high-income families an admissions advantage are uncorrelated or negatively correlated with post-college outcomes, whereas SAT/ACT scores and academic credentials are highly predictive of post-college success. 

We conclude that... highly selective private colleges serve as gateways to the upper echelons of society in the United States. Because these colleges currently admit students from high-income families at substantially higher rates than students from lower-income families with comparable academic credentials, they perpetuate privilege across generations.

The graphic below captures the admissions advantage enjoyed by legacy students

That the legacy status is large is borne out by the finding that the legacy advantage enjoyed over other non-legacy applicants is much higher than the same students' admission prospects in other elite colleges 

They also compared legacies’ chance of admission at the colleges their parents attended versus similarly elite schools. They found that they were slightly more likely to get in to the other colleges than applicants with the same test scores. But that was dwarfed by the advantage they got at the school their parents attended.

The study goes further and examined the income tax records of graduates of these colleges and analysed their post-college outcomes. 

They estimated that legacy students were no more likely than other graduates to make it into the top 1 percent of earners, attend an elite graduate school or work at a prestigious firm. If anything, they were slightly less likely to do so.

Needless to say, legacy students are more likely to be white and more likely to come from rich families. The study found that even among the legacies, the richest had an advantage. One in six Ivy League students has parents in the top 1%.

The legacy status builds on an already entrenched advantage arising from these students having access to much superior schooling, tuition, coaching, exposure and so on. Unsurprisingly, the study finds that even without legacy status, these students would still be about 33% more likely to be admitted than applicants with the same test scores, based on all their other qualifications. In fact, even without legacy, family wealth already has a stunning relationship with elite college admissions.  

The study looks at the non-academic credentials like extracurricular activities, internships, volunteering, recommendations etc of students admitted to these colleges.

The academic ratings of richer students didn’t vary much from other students with the same test scores. But richer students were vastly more likely to earn high marks on nonacademic measures like extracurricular activities and recommendation letters... At one of the colleges that shared admissions data, students from the top 0.1 percent were 1.5 times as likely to have high nonacademic ratings as those from the middle class... The biggest contributor was that admissions committees gave higher scores to students from private, nonreligious high schools. They were twice as likely to be admitted as similar students — those with the same SAT scores, race, gender and parental income — from public schools in high-income neighborhoods. A major factor was recommendations from guidance counselors and teachers at private high schools... Recommendation letters from private school counselors are notoriously flowery... and the counselors call admissions officers about certain students... Nobody’s calling on behalf of a middle- or lower-income student. Most of the public school counselors don’t even know these calls exist.

Even after adjusting for higher SAT scores, finely honed resumes, higher application rates etc, they were still over-represented. 

For applicants with the same SAT or ACT score, children from families in the top 1 percent were 34 percent more likely to be admitted than the average applicant, and those from the top 0.1 percent were more than twice as likely to get in.

The new data shows that among students with the same test scores, the colleges gave preference to the children of alumni and to recruited athletes, and gave children from private schools higher nonacademic ratings. The result is the clearest picture yet of how America’s elite colleges perpetuate the intergenerational transfer of wealth and opportunity... In effect, the study shows, these policies amounted to affirmative action for the children of the 1 percent, whose parents earn more than $611,000 a year.

The study finds that the elite nine flagship public universities were much more equitable. 

At places like the University of Texas at Austin and the University of Virginia, applicants with high-income parents were no more likely to be admitted than lower-income applicants with comparable scores.

The paper points to the share of individuals who attended Ivy-Plus colleges in leadership positions across different realms. Though these twelve colleges made up less than 1% of all college admissions in the US, their dominance is widely present across leadership positions.

The striking statistic is the dominance of Ivy graduates in public service leadership positions. About three in four US Supreme Court judges graduated from Ivy Pls colleges! In simple terms, the influential positions that inform public issues have vastly disproportionate representation of Ivy-plus graduates. 

One of the authors, Raj Chetty, captured the findings best

“Are these highly selective private colleges in America taking kids from very high-income, influential families and basically channeling them to remain at the top in the next generation? Flipping that question on its head, could we potentially diversify who’s in a position of leadership in our society by changing who is admitted?”

This Mathew Effect has two implications - wealth begets wealth, and also wealth shuts out the rest. To borrow Peter Turchin's framework in his latest book, End Times, the former leads to elite overproduction and the latter leads to mass immiseration. At a macro-level, the former is a dynamic of capitalism, especially the modern globalised economy with its economies of scale and knowledge-based sectors with their network effects. And the latter is accentuated by the elite capture of the establishment and the rules -making process. As I have blogged on several occasions, it's this latter dynamic that's the most disturbing aspect of modern capitalism - Big Tech and Wall Street invariably end up capturing the rules-making process and corroding the social contract. 

Most of the disturbing economic, social and political trends we see today across the world have these two factors as important contributors. The rise of populism and widening inequality threatens to destroy the social fabric and usher in the crisis that the likes of Turchin and Neil Howe write about. 

Instead of their mindless and almost unconstrained pursuit of market capitalisation, executive compensation, profits maximisation, tax reduction and avoidance, deregulation, efficiency maximisation, automation, technology led lifestyles, union busting, etc elites need to realise that the ship is entering very stormy waters and could sink. Karl Marx may turn out to have the last laugh, if only a few decades late. 

Update 1 (05.08.2023)

From David Brooks

A 2018 study found that more than 50 percent of the staff writers at the beloved New York Times and The Wall Street Journal attended one of the 29 most elite universities in the nation.

Weekend reading links

1. The pace of diffusion of ChatGPT

Artificial intelligence chatbot ChatGPT has become speedily popular, amassing 1mn users within five days of its launch according to the company itself. A UBS study found that two months after its launch, ChatGPT had reached 100mn active users.

2. FT points to a big concern with the transition from IC engine to EVs, job losses.

Though built in England, the petrol engine of a Mini is a map of Europe: engineered in Germany, containing an alternator from France, an ignition coil from Italy and a coolant pump from Austria. Each step in this process involves a person, if not several. Yet not one of them will be required in as little as seven years when the brand goes fully electric. The same is true of those who supply engines for Volvo Cars, Mercedes-Benz, Jaguar, Ford or any of the brands that have set end dates for engine-car sales in Europe. That electric vehicles take fewer people to make and design is well documented... Ford this month announced plans to cut 40 per cent of its entire European engineering team... Today, Europe’s auto industry employs 3.5mn people directly in manufacturing. Ford chief executive Jim Farley estimates that EVs require 40 per cent fewer people to make — the equivalent of 1.4mn jobs if applied across the industry. These are high-skilled, high-productivity, well-paid positions that are often in geographic areas that would otherwise be economic backwaters. Just look at Nissan’s Sunderland plant or in Slovakia, which has four plants that turn out one car for every five people living in the country annually.

3. Singapore is benefiting from Hong Kong's inward turn

... though much catch remains to be done.

4. The rise and rise of Indian Americans,

In 2013, the House of Representatives had a single Indian American member. Fewer than 10 Indian Americans were serving in state legislatures. None had been elected to the Senate... Ten years later, the Congress sworn in last month includes five Indian Americans. Nearly 50 are in state legislatures. The vice president is Indian American. Nikki Haley’s campaign announcement this month makes 2024 the third consecutive cycle in which an Indian American has run for president, and Vivek Ramaswamy’s newly announced candidacy makes it the first cycle with two... By and large, Indian Americans have been elected on the Democratic side of the aisle. All five Indian Americans in Congress, and almost all state legislators, are Democrats... Indian American voters are overwhelmingly Democratic: 74 percent voted for Joseph R. Biden Jr. in the 2020 presidential race, more than voters of other Asian backgrounds, according to a survey by AAPI Data, APIAVote and Asian Americans Advancing Justice.

5. The changing contributors to inflation in the US (HT: Adam Tooze)

As the supply shocks have eased, the demand side pressures have been rising. 

This on the different contributors to inflation in the US and Europe, 

The inflation problems facing the Fed and ECB are different, however. In the US, inflation has been driven chiefly by a stimulus-fuelled surge in demand after the end of lockdowns and the question for policymakers is whether higher wages can be justified by improved productivity. In the eurozone and UK, the dominant issue is the energy price shock caused by Russia’s invasion of Ukraine. Dramatically higher spending on energy has made societies poorer overall, and the question is how that cost is shared between companies, workers and taxpayers. In this context, even if wages lag behind inflation, they could still be too high for companies to bear without raising prices further.

Wage growth in the US has been declining.

6. Just 25 million of Nigeria's population of 220 million voted in the just concluded Presidential elections, a voter turnout of just 27%. The winner, Bola Tinbu of the ruling party won with 8.8 million votes. 

7. China's health insurance explained,

China has two main kinds of health insurance: employee hospitalization insurance and so-called residents insurance. The employee hospitalization insurance is the better of the two and used by a quarter of the country’s population. It covers the urban employees and retirees of state-owned enterprises, as well as the current employees of some private-sector businesses. In contrast to the United States, employee insurance in China is not managed by companies. Instead, a municipal government typically forms an employee insurance pool to cover hospitalization and a few outpatient expenses. Companies typically contribute to the pools an amount equal to as much as 9.8 percent of a worker’s salary. Employees do not contribute to the insurance pools themselves.

In addition, those who qualify for employee plans typically have what are called personal health accounts. The money in them can be spent on medicine and further outpatient treatments. The employee insurance pools currently forward about a third of the money they receive from employers to personal health accounts, and spend the remaining two-thirds on hospitalizations and other expenses. Employees also put about 2 percent of their paychecks into their health accounts until they retire.

The less fortunate three-quarters of China’s 1.4 billion people have urban or rural residents insurance. Residents insurance is for farmers and migrant workers, as well as for children, who are seldom covered by their parents’ health insurance plans. It is also for the many workers whose private-sector employers are not making contributions for them... People with residents insurance generally do not get personal health accounts. Less than 4 percent of China’s population has no health insurance at all. This portion tends to be migrant gig workers who live at the fringes of society... Chinese health insurance plans have narrow restrictions on what is covered, high co-payments and very low coverage maximums... Chinese law says that when a municipality’s pooled employee insurance fund runs a deficit, the city government has to cover the shortfall... 

While the pooled employee funds in many cities are depleted, personal health accounts across China have accumulated more than $130 billion. So the central government wants municipalities to put less money into personal health accounts and redirect some of that money to hospitalization funds. At the same time, the employee pooled hospitalization plans are taking responsibility for more outpatient expenses for serious illnesses and covering more purchases of medicine.

The three year of zero-covid have depleted the employee insurance pool and left the municipalities with growing liabilities. 

Demographic changes in China have complicated the task. The number of births each year has dropped by nearly two-thirds since the late 1980s. Fewer young workers support more and more retirees who require ever more health care. Cities are now cutting how much money their hospitalization plans transfer to the personal health accounts of retirees. Wuhan’s reduction of transfer amounts by a little more than two-thirds is particularly steep. Local governments are also introducing or increasing deductibles. Wuhan has begun requiring retirees to pay the first $75 of expenses each year and current workers to pay the first $100.

8. Manufacturing's share of value add has been declining in India and that too from a low base, in contrast to the trends in other major peer competitors.

When China and Vietnam began their textiles and clothing export booms, respectively in the mid-1990s and the mid-2010s, foreign inputs made up more than 40 per cent of their exports. For India in 2015 the equivalent number was just 16 per cent.

An example of the challenge faced,

At a casings factory in Hosur run by Indian conglomerate Tata, one of Apple’s suppliers, just about one out of every two components coming off the production line is in good enough shape to eventually be sent to Foxconn, Apple’s assembly partner for building iPhones, according to a person familiar with the matter. This 50 per cent “yield” fares badly compared with Apple’s goal for zero defects. Two people that have worked in Apple’s offshore operations said the factory is on a plan towards improving proficiency but the road ahead is long.

9. Good graphic on the prices of Starbucks Tall Latte across different countries

10. This from an article about the recent high-profile jury conviction of Alex Murdaugh for the murder of his wife and son in Hampton County in South Carolina's Lowcountry, does not seem out of place for several parts of India or other developing countries.

They have enormous sway because, it turns out, the Murdaughs are like royalty in Hampton. For nearly a century, a Murdaugh has been the chief criminal prosecutor for the surrounding district. At the same time, the family has operated Hampton’s biggest civil law firm. In essence, the Murdaughs are the law in Hampton. They are also fantastically wealthy, with multiple homes, boats, their own 1,700-acre hunting estate, an arsenal of guns, and other baubles.

11. Finally, from an Indian Express investigation on the forest produce certification system in India about green-washing of such certifications

Forest certification is a sunrise industry, driven by a growing preference to avoid any product that can be linked to deforestation or illegal logging. In India, the forest certification industry is growing at 8 to 10 per cent every year, mainly catering to exporters wanting to tap the US and European markets that have strict regulations to ensure the legality of wood products coming in. Only processed wood is allowed to be exported from India, not raw wood... The investigation revealed that certifications in India were mainly a tool to bypass regulatory requirements in Europe and the US, where India’s forest-based products have an export market worth Rs 4,000 to Rs 5,000 crore every year. “It is easy to obtain forest certifications in India, if you are willing to pay the fees. There are several unscrupulous operators who are willing to make a quick buck. In fact, because of the intense competition amongst certification bodies, it is largely a buyers’ market. If you negotiate hard enough, you can drive down the costs of certification considerably,” said an executive of the India-based office of a foreign certification body... 

The main seekers of certifications have been exporters of wood products and other forest-based goods... Forty per cent of all certificates issued in India by two of the largest global certification systems – FSC or Forest Stewardship Council, and PEFC or Programme for Endorsement of Forest Certifications – have not been renewed... FSC and PEFC, and others like them, are developers and owners of certification standards, much like the International Organisation of Standardisation (ISO) or the Bureau of Indian Standards (BIS). The actual work of evaluation, recommendation of certifications, and monitoring of compliance is carried out by certification bodies and their subcontracted auditors.

This is a good reminder about the limitations of industry self-regulation. 

Ambition and achievement in perspective

Lucy Kellaway has a brilliant article about her impressions of relocating to the poor North East of England  from London (HT: Ananth). It will count as one of my reads of the year. 

This contrast between the students in her schools in Hackney and up North East is fascinating, 

The first difference is that in my last school barely 2 per cent were white; in this one it is about 90 per cent. The second is that they have lived in the same place for generations. One day I was talking about structural unemployment and giving an example of the region’s defunct coal mines, shipyards and steel plants. On a whim, I asked them if all four grandparents were born nearby — almost three-quarters of the class raised their hands. I remembered a related question being put to my Hackney school where an assembly hall of students were asked if both parents were born in London. Out of 200, barely 10 put up their hands, most of them of African-Caribbean heritage... According to the University of Essex’s Understanding Society study, the North East is the least mobile place in the country, with 55 per cent of survey respondents living within 15 miles of their mother — more than three times as many as in the capital... It seems to me that London’s extreme mobility and the North East’s lack of it explain so much about the differences between the two places and the best and the worst things about each.

She writes about its consequences,

This stability cuts across everything. It may account for the lack of curiosity. It may also lead to insularity and innocence in how they view the world. All London schoolchildren know a lot about different cultures; my students know only their own. When last year their beloved Newcastle United football club was bought by the Saudis, in a surge of joyous exuberance some of them took to the streets wearing tea towels on their heads. They were baffled when the club put out an announcement telling supporters to leave all tea towels at home. Any London teenager could tell them about cultural appropriation, but when I tried to explain, one shook his head in disbelief: “Miss, we were showing respect! We were saying thank you for buying our club.” A bigger difference concerns competition. In London every day 9 mn people fight it out for scarce resources: for a seat on the Tube, a flat to rent, success, jobs, money or fame. Everyone is striving for something — and immigration intensifies this. When families travel thousands of miles from their homes to make a better life for their children, they don’t let them sit around doing the minimum. 

The Hackney schools I taught in were monuments to striving and, as a result, the children did very well indeed. Last month, I did a Zoom call with some of my most driven students and heard how they were applying to Oxbridge and the London School of Economics and Russell Group universities. I felt a sudden pang for my current students who, despite going to one of the best schools in the area, have few such ambitions. They mostly do the work I set them and mostly do it more or less adequately. But, for most of them, that’s as far as it goes. Early on, in a bid to change this, I told my Year 12s that to do well at A-level they would need to do six hours’ independent work a week per subject. The class gawped in disbelief. Patiently, one explained he couldn’t do that because he worked weekends in a restaurant in the Metro Centre and needed to see his mates and watch football. I replied that, in that case, the best grade he’d get would be a C — or maybe a B if he was very lucky. “What’s wrong with a B?” he said. “I’d much rather get that than spend six hours every week on business studies.”

And the toll associated with pursuit of ambition and achievement,

In my current school the teachers seem happy and have no plans to quit. Many have taught there for 20 or 30 years and educated the parents of the current students. Indeed, teacher turnover is so low that I very nearly didn’t get a job. When I started looking last spring, there were 120 vacancies for business studies and economics teachers in London; in the whole of the North East there were only three. In the highest-achieving London academies a quarter of the staff quit every year — not just because they can’t afford flats but because they are wrung out by the scale of the work. This is the trade-off: this sort of system gets the best possible GCSE results, but the teachers, and sometimes the students, get burnt out achieving it.

The dynamics and structures of free market capitalism elevate the unbridled pursuit of ambition, efficiency, incomes/profits, and wealth. There is an increasing monotonicity associated with these pursuits. This, in turn, is fuelled primarily by excessive individualism. 

The problem with all these four pursuits is that apart from their increasing monotonicity, they are almost unconstrained. The extant norms are self-reinforcing. Prevailing management theories and econometric models are primed to maximise efficiency, incomes, wealth etc. Resilience, sustainability, social stability, and other qualitative considerations of human well-being are absent in these narratives. 

Weekend reading links

1. Definitive signature of greening nature of global economic growth

In 2007, when China’s economy was roughly as big as India’s is today, it emitted around twice as much carbon dioxide. India and Vietnam are still powered by coal. The difference is they are making much more efficient use of it.

2. Wind power fact of the day,

One turn of an “SG 8.0-167 DD” turbine generates enough electricity to run a British home for a day and a night. SG stands for Siemens Gamesa, a subsidiary of the German industrial giant, which makes the machines in Hull. The 8.0 is the turbine’s maximum output in megawatts (MW). The 167 is the diameter of its rotor in metres: it sweeps out in a circle equivalent in area to about three football pitches. And the DD stands for direct drive, an electricity-generation technology with no fiddly gears to wear out. At Hornsea 2, a wind farm located off the Yorkshire coast, 165 of these vast turbines form a field of steel stretching farther than the eye can see. Hornsea 2, which became fully functional in August, is now the largest wind farm in the world. When the wind really blows it can power 1.4m homes... By 2010 there were 1.3 gigawatts (GW) of wind power in British waters. Today there are 14 GW... About 36% of British electricity now comes from wind, the majority of it offshore... In the process, the cost has fallen sharply. In 2015 new offshore wind cost £120 ($155) per megawatt hour; today it costs well below £40.

3. Rana Faroohar has a perceptive guide on the deglobalisng world.

After decades of a “winner take all” trend, in which the majority of prosperity has been located in a handful of cities and companies, look for business and policymakers to be more focused on ensuring that wealth and place are re-moored. This will come with costs — such as inflation. The old “efficiency” models, which assumed that people, goods and capital would move seamlessly to wherever they were needed, were cheap. Creating more opportunity at home, while still remaining connected to the global economy, will require building more resilient models — that involves better education, infrastructure, higher local wages, and less focus on the short-term bottom line. Efficiency was cheap. Resiliency will cost more. Who pays for it is up for grabs...

But as Harvard academic Gordon Hanson, one of the figures within this movement to reimagine free-market capitalism, puts it: “When workers without a college degree lose their jobs, few choose to move elsewhere, even when local market conditions are poor.” One reason for that is that they depend on the family and community ties of place to buffer them in difficult times. Hanson and his colleagues are building new, highly localised models of how economic growth happens in different areas.

About the costs of reshoring and localisation of supply chains, 

While some worry the shift would be too costly, a 2021 BCG analysis found that more localised production networks would add only a 2 per cent mark-up on a $35,000 car, a 1 per cent increase in the price of a smartphone, or 3 per cent more for a $200,000 home. This, coupled with precision data technologies that allow for extremely precise tracking within supply chains (a textile retailer can now identify the provenance of cotton down to a particular farm or field), and a younger consumer geared towards buying fewer things of better quality, will both encourage more localisation and help the planet.

4. Marianna Mazuccato has four requirements for industrial strategy involving procurements, grants, loans, and tax incentives,

Where affordable and equitable access is a policy priority, products and services with public funding should be priced accordingly. For example, the AstraZeneca Covid-19 vaccine, developed with the help of government investments in R&D, manufacturing, and advance sales, included provisions to keep prices low, limit profits during Covid and ensure knowledge-sharing for public health... Conditions can also shape the goals — or “missions” — behind investment and impose standards on companies. Decarbonising existing industries and expanding green innovation and growth is a priority... Conditions associated with a just green transition should cut across all industrial strategy investments: for example, requiring new manufacturing capacity to minimise carbon emissions and create jobs that meet labour standards. 

In addition, receipt of public funds should be conditional on sharing a proportion of royalties, equity or intellectual property with the government. This would enable the state to take a portfolio approach to investments, knowing some will succeed and some fail... Last, governments can prompt companies to channel their own investments into productive activities. Biden’s Chips and Science Act, which seeks to boost US semiconductor innovation and manufacturing, includes “guardrail” provisions that prohibit funds from being used for share buybacks. It does not yet, however, prohibit companies that receive chips act funding from engaging in such buybacks — a loophole that has led to calls for tougher rules.

5. India's labour cost and size advantage

6. The sheer scale and nature of corporate governance breakdown at FTX is staggering. FT has a good article. 

... an environment where employees’ every need was catered for, and where a circle of senior executives in their late twenties and early thirties splashed millions of dollars on everything from travel to sport sponsorship deals and luxury homes. A lack of internal controls that are typical of large financial companies meant FTX’s spending went largely unchecked, according to former employees and filings in the group’s Delaware bankruptcy case. “[It was] kids leading kids,” said one former employee. “The entire operation was idiotically inefficient, but equally mesmerising,” they added. “I had never witnessed so much money in my life. I don’t think anybody had, including SBF.”... Concerns about value for money from employees with marketing experience were brushed off by Bankman-Fried and the company’s top executives, this person said. Bankman-Fried or one of two other executives signed off hundreds of millions in spending on sponsorship deals. “It just kinda went crazy,” the employee said. “If Sam said OK, it was good to go. Regardless of the amount.” John Ray, the new FTX chief executive leading the exchange through the bankruptcy, said he had never seen “such a complete failure of corporate controls”.

Some should surely attract criminal liabilities

“The [company] did not have the type of disbursement controls that I believe are appropriate for a business enterprise,” he said in filings, adding that company money was spent on buying homes and personal items for FTX employees and advisers. “There does not appear to be documentation for certain of these transactions . . . and certain real estate was recorded in the personal name of these employees and advisers,” Ray added... Bankman-Fried’s companies also extended loans to executives, bankruptcy filings show. His trading firm Alameda Research loaned $1bn to Bankman-Fried himself, $543mn to head of engineering Nishad Singh and $55mn to Ryan Salame, co-chief executive of FTX Digital Markets, its entity in the Bahamas.

Sample this about poor quality of due diligence by venture capital investors,

The boring process of checking that potential investments can live up to their promises has fallen completely by the wayside. Due diligence once meant sending bankers to check that a mining company really had a working gold mine, hiring accountants to scour the books and asking lawyers to identify contracts that could prove troublesome in a bankruptcy. These days, it is hard to know what due diligence actually means. Ontario Teachers’ Pension Plan, which put $95mn into FTX, insists that its professionals “conduct robust due diligence on all private investments”. Tiger Global, which tossed in $38mn, pays outside consultants including Bain & Co to do the work. Yet both missed what FTX’s new chief has described as a “complete failure of corporate controls”. Sequoia Capital, which handed FTX founder Sam Bankman-Fried $214mn even though he played video games during his pitch to them, has walked a fine line... Veteran Silicon Valley dealmakers say there has been a gradual erosion of standards, as venture capitalists stopped trying to select and nurture the smartest entrepreneurs and started spraying cash around... decades of easy money and a lack of decent yields from safer alternatives mean this approach has spread from early investment rounds involving a few million dollars to gigantic deals involving billions.

7. No matter the details, the six year old public procurement website Government eMarketplace (GeM) is an outstanding success 

Prashant Kumar Singh, chief executive officer of GeM, recently said the portal would be the largest e-commerce platform in India by the end of the current financial year, crossing Amazonand Flipkart. Singh pegged the FY23 GMV target for GeM at Rs 2 trillion (around $25 billion). In FY22, GeM recorded a GMV of $14.2 billion, as against Amazon India’s $17 billion and Flipkart’s $23 billion.

8. To say that Morgan Stanley is bullish on India is an understatement

We see over the coming decade to 2031, India’s GDP more than doubling to over $7.5 trillion, the stock market compounding annually at 11 per cent to around $10 trillion, a discretionary consumption boom led by a rise in per capita income from $2,000 to over $5,000 and a quintupling of households earning in excess of $35,000/year to over 25 million, a rise in credit to GDP from 57 per cent to 100 per cent, causing a 17 per cent annual compounding of credit growth, and a doubling of India’s share in global exports.

Let's see how much of this materialises by 2031. 

9. Qatar World Cup 2022 

Since winning the competition to hold the World Cup in 2010, Qatar has spent more than $250 billion on soccer-related development, a figure that dwarfs the estimated $42 billion that China spent on the 2008 Beijing Olympics and the $55 billion that Russia spent on the Winter Olympics in 2014. Ten billion has gone on eight soccer stadiums. The rest was devoted to a wholesale transformation of the country: the complete remodeling of downtown Doha; the construction of nearly a hundred new hotels; the expansion of the port and the airport; a revamped road system; the creation of three metro lines; and a new city with homes for more than a quarter of a million people.

10. Adrian Wooldridge on Sweden

The Swedes combine the best features of German and American capitalism. German-style Swedish companies dominate global niches through a combination of engineering excellence, high-quality training and constant innovation... Swedish society at large is remarkably pro-business. The government allows private companies to run bits of the state such as schools and hospitals. The Swedish stock market is Europe’s largest, with 950 listed companies (mighty Germany comes second with around 800). Half the adult population has savings in the Swedish mutual fund account. Sweden has more venture capital investment as a share of GDP than any other European country, much of it drawn from America, and venture capital-funded investment is thought to have increased GDP by six percentage points since 2005.

11. India has received strident criticism from western politicians and commentators about buying oil from Russia. But contrary to the impression of India's purchases bailing out Russia, even today its purchases are a small share of those by Europeans. 

12. Janan Ganesh has an excellent article that captures the times,

If you tell me what you think about, say, the return of the Benin bronzes, I can infer with some confidence your views on public spending, the EU, rail strikes, immigration, working from home, climate change, Meghan Markle and much else. Nothing connects these subjects. It should be possible to be a small-government Remainer who thinks imperial loot is better off in western museums and who loses sleep to visions of a burning planet. But such a person would stand out now. To take a more concentrated example, lots of people should be anti-lockdown and pro-vaccine mandate. How many do you know?... People do not work out their beliefs and then join the corresponding tribe. They join a tribe and infer their beliefs from it. The sense of belonging, the group membership, is what hooks people, not the thrill of being right or pursuing a thought on its own terms. Politics has become a team sport, goes the line on this.

13. Finally, FT has an article on India's emergence as a major creditor to its neighbours, nearly tripling in value since 2014 to $32.5 bn. 

India’s cumulative “development assistance” since its independence in 1947 has nearly doubled from $55bn to $107bn since 2014, according to the government-backed RIS think-tank. The scale is far below what China is attempting through the BRI launched nine years ago, which the American Enterprise Institute think-tank estimates reached $838bn last year. Yet the foreign ministry said India has extended more than 300 lines of credit for around 600 projects, ranging from a cement factory in Djibouti to the Maldivian bridge. India has also funded everything from training courses to restoring overseas cultural sites such as mosques and temples.

Lending through India’s development partnership administration, by which it offers other governments lines of credit, has nearly tripled in value since Modi came to office in 2014 compared to the previous eight-year period, according to the foreign ministry, totalling $32.5bn.

In contrast with China, as the article points out, Indian credit is concessional and comes in the form of partnerships involving private companies. 

Weekend reading links

1. Interesting graphic which shows that India's current account deficit is now the third highest since 1990!

But while it's far better than 1991, in 2013 the country's external debt situation was about as good as it's now. 

2. New project announcements in India continue their downward trend, both in the government and especially private sectors. 

3. Vietnam is racing ahead of India in attracting manufacturers diversifying under the China-plus-one strategy.  

4. Fascinating infographic that highlights the economics of Costco's rotisserie chicken. Its price has not been raised from $4.99 for 3-lb piece since 2000 and is a loss leader for Costco. However, the company places rotisserie chicken at the back of the store, so that customers have to travel 60% of the store to be able to buy it (thereby increasing the likelihood of other purchases by them). 

5. Notwithstanding the Kwarteng-Truss dissonance, Rana Faroohar says industrial policy is back,

According to a senior administration official I interviewed recently, business leaders are coming to Washington and asking for a signal in the noise of deglobalisation — should they be in Vietnam, Mexico, South Carolina? Should they put investment into clean technology or biotech, or both? They are also looking for increased public support for more domestic production in the wake of the semiconductor industry’s multibillion-dollar boost.

6. AK Bhattacharya makes a point on the rising GST revenues,

Even as total GST in April-September 2022 grew by 31 per cent, the component of integrated GST or IGST levied on imports increased by 44 per cent. In other words, the share of IGST on imports in total GST rose to 27 per cent. This share was 25 per cent in the whole of 2021-22 and even lower at 22 per cent in 2019-20. It is now becoming increasingly clear that rising imports have played a significant role in sustaining the buoyancy in revenues from the GST.

7. Vivek Kaul reinforces the K-shaped recovery argument on Indian economy. 

8. Ruchir Sharma questions the conventional wisdom in the US that a strong dollar is disinflationary,

Imports amount to 12 per cent of gross domestic product in the US, about a third the average for developed countries, and have a minor effect on US prices. More importantly, the dominant dollar is used to price most global goods including 95 per cent of US imports. Thus a change in the value of the dollar does little to change the price Americans pay for these imports. This immunity is rare. Other countries pay more bills in foreign currencies and are more vulnerable to currency swings. When the dollar falls by one per cent, inflation rises in the US by just 0.03 per cent. When other currencies fall that far, inflation rises three times faster in other developed economies, and up to six times faster in emerging economies.

Instead he points to the economic risks of a strong dollar,

The key point is that the Biden administration could help to weaken the dollar without undermining the Fed’s effort to contain US inflation. In fact, America faces less risk from the dollar’s imaginary impact on US inflation than from its proven impact on the global economy. Before last week the dollar had spiked more than 20 per cent in 12 months, matching or exceeding surges that accompanied the last seven major global financial meltdowns going back to the Latin American debt crisis of the early 1990s, and including the dotcom bust of 2001 and the global financial crisis of 2008. These crises engulfed multiple countries including the US, disproving another piece of received American wisdom — that a strong dollar is a “problem” only for the rest of the world... the dollar remains at irrational highs — by one measure nearly 40 per cent more expensive than at any point since 1980 — and a further rise could trigger a global recession.

He therefore proposes a US-led effort to weaken the dollar,

Since central banks including the Fed cannot — should not — stop raising interest rates until inflation is clearly under control, co-ordinated selling is the only tool left to ease the dollar-induced stresses still visible worldwide, from low-income countries to Europe. US-led efforts to weaken the dollar have generally proved successful in the post-Bretton Woods era, particularly when these conditions are met: the dollar is seriously overvalued; speculators are heavily long the dollar; co-ordinated government intervention hits markets as a surprise; and central banks’ monetary policy is pushing currencies in the same direction. Today chances of success are good.

Not sure whether this will have receptive years in the US Treasury and Fed.

9. The Guardian has a long read on Blackstone and its residential housing investments, and how it met its match in Denmark. The PE firm has a $320 bn real estate portfolio in its total of $881 bn assets under management. It's the largest landlord in several countries, including the US. Its housing investments have been controversial,

After the financial crisis, the industry started eyeing up the places where people lived. In the US, as more and more people found themselves unable to pay their mortgages, thousands of houses became available at discounted prices. In spring 2012, Blackstone dispatched employees to hoover up such properties. It founded a subsidiary, Invitation Homes, to manage its new kingdom of houses, which spanned from Seattle to Atlanta... The firm looked for two- or three-bedroom houses in sunnier climes where an economic recovery seemed more likely. It avoided struggling cities such as Detroit or Cleveland. Invitation Homes hired local agents who knew every detail about the neighbourhood, right down to whether a street had a “weird church” or a rundown shopping parade on it... Some people who lived in Invitation Homes’ properties told journalists that it had hiked rents, seemed to scrimp on maintenance costs and imposed punitive fees on tenants. The company’s business model appeared to depend on maximising rent and fees while reducing the cost of maintenance. In this dispassionate equation, tenants seemed to be the ones who lost out... Blackstone would start to buy housing in “tier-one” cities that were home to the “industries of the future”: science, tech and creative fields.

10. Chris Miller in FT on the reshaping of technology supply chains due to the US sanctions on exports of chip making components to China. 

Previously, almost all of TSMC’s recent investment was in Taiwan or China. Now it is diversifying its fabrication footprint, building a new chip fab in Japan and exploring one in Singapore, too. TSMC’s change in tack is driven by subsidies from these governments as well as political pressure to reduce the concentration of chipmaking along the Taiwan Strait. In corporate boardrooms as well as defence ministries, concern is growing that mutually assured economic destruction may not keep the peace in the Taiwan Strait. Multinational businesses have invested many billions of dollars in both Taiwan and China on the assumption that war is simply too costly... Some foreign chip companies with facilities in China are paying the price for failing to anticipate these new restrictions. SK Hynix, one of South Korea’s two major memory chip producers, is now restricted from upgrading critical lithography equipment in its plant in Wuxi, China, which will prevent it from producing next generation chips there... As the location of semiconductor fabrication shifts, the production of chipmaking materials and supplies will, too... Apple, whose finely tuned supply chains shape how the entire industry sources components, is increasing device assembly in Vietnam and India. The biggest signal is that Apple may use different components for phones intended for Chinese customers than those sold abroad. Apple has told US legislators that it will only use YMTC’s memory chips in phones it sells within China. Operating separate “China” and “non-China” supply chains is the definition of decoupling.

11. Bill Harris, the founding CEO of PayPal, has an oped in FT on the so called fintech revolution,

Moderate and middle-income families — those making $25,000 to $75,000 a year — account for 46mn US households. Two-thirds of these families live pay cheque to pay cheque, and two-thirds report feeling “uneasy” about their financial situation... The explosion of financial products has saddled millions of ordinary Americans with traditional accounts, payment accounts and new or alternative offerings — too many complicated products with hidden fees that can cost hundreds of dollars a year. Many customers in this segment of the market have accounts at both a traditional bank and an online neobank, with multiple debit cards. About 80 per cent have at least one credit card. And too many fall into the trap of expensive overdrafts — 18 per cent of all bank account holders pay 91 per cent of the fees. American households spent close to $11bn on overdraft fees last year. There are a baffling number of ways to make payments — via an automated clearing house, prepaid cards, debit and credit cards and online payment accounts. New ways to pay at ecommerce sites add to the confusion. Half of Americans now use Buy Now Pay Later (BNPL) services like Affirm, Klarna and PayPal Credit. Many use alternative financial products such as payday loans which, in addition to carrying effective interest rates of 400-600 per cent, typically consist of a series of two-week loans over multiple months. Fintechs have brought this “short-term small-dollar” lending online. And some are peddling crypto to those who can least afford it.

His conclusion is sobering, 

The fintech explosion, which was heralded as a solution to the money problems of ordinary Americans, has too often made their difficulties worse. The proliferation of products creates confusion rather than clarity, and people have too many accounts and apps and bits of money strewn across the digital domain. We need fewer, simpler products — single apps that address multiple needs and deliver a straightforward user experience. In other words, to return to the days of offering a central place to manage — and understand — how much you have and how much you owe. 

12. Kanika Datta calls out the European hypocrisy in their condemnation of Qatar's human rights record and calls for various forms of protest during the World Cup football tournament there next month. 

The Lille mayor’s wholesale condemnation of the Qatar World Cup is a little thick considering France’s biggest club, PSG is owned by a prominent Qatari family. Manchester City wins the English Premier League with almost clockwork regularity thanks to the humungous investments by UAE’s Sheikh Mansour. Underwhelming Newcastle United recently became Europe’s richest club after it was acquired by a Saudi Arabia-led consortium, including that country’s sovereign wealth fund... Chelsea became an EPL topper thanks to the colossal amounts of money one of Vladimir Putin’s chief cronies, Roman Abramovich, poured into it for almost a decade. He was ejected only when Mr Putin invaded Ukraine.

13. Sandeep Goyal writes about how Gen Z has come to view full stops as a sign of passive aggression.

Strange as it may seem, millennials and Gen Zhave of late started to have an issue with people finishing text messages with a full stop. Calls are in fact being made for full stops to be made “illegal” at the end of text messages as they are seen to be an act of muted aggression! A recent study by Binghamton University in New York found texts ending with a full stop as being seen as “less sincere” than messages that do not end with a dot... What is wrong with putting a full stop at the end of a sentence? For Gen Z, the full stop seems to mean “mad” or “serious”, or so research shows. The full stop is an “act of aggression”, almost like slamming the door in one’s face. With young people today, sending a message to someone invariably means breaking up one’s thoughts in such a way that each thought is sent out as a new message. The message is all that is relevant; anything additional included in the message can take on an additional interpretation. Gen Z today would have you believe that the problem arises when you have a positive message ending with a full stop. That makes the message serious despite the positivity of the content. It is the juxtaposition of the positivity and the full stop that creates a sense of “passive aggression”.

Another example of woke gone rogue?