Unproductive World, Is China Smaller than we Think and Forest Bathing

Nostalgia, memory and quests are funny, tricky, even occasionally dangerous things. Years ago when we were but a teenager, we read a science fiction novel called Space for Hire, which at that age we loved. It was about a hardboiled detective named Sam Space (no relation) and in some ways foreshadowed the Star Wars movies. A sequel to the novel existed but was out of print and extremely difficult to find. A friend and I searched in used book stores but in our small town the sequel proved elusive. Years later we found it in a used book store on the east coast. We eagerly read the book and…it was terrible. A huge let down. In fact, when we re-read the original Space for Hire years later, we discovered to our shock and dismay, that it was not only not very good but also full of racism and misogyny. The quest for the book was far more enjoyable and edifying than the books themselves. Of course, today such quests don’t really even exist with Amazon and the Internet putting everything at our fingertips, eyes and ears instantly and continuously. It is a better world because of these technological developments but as with everything there is a trade-off. Something is lost in not being able to hunt for today’s equivalent of Space for Hire, and in confronting our nostalgia and memories we found our innocence lost as well. But neither technological advances nor nostalgia pry us from continued worries about productivity, the mystery of the missing 90 million in China and the scientific validity of Japanese Forest Bathing (a sentence we could type over and over again).  It’s this week’s International Need to Know your hardboiled look at our increasingly soft boiled world.

Without further ado, here’s what you need to know.

Our Continued Unproductivity

May you live in interesting times is the alleged curse. More apt, we believe, is may you live in unproductive times, which indeed we are. Last year we warned about the near worldwide slowdown in productivity. The OECD recently published a report adding more fuel to our concern fire. The report, entitled, Compendium of Productivity Indicators (has there ever been a sexier title?), details the productivity slowdown and notes that the UK and Japan are particular laggers in productivity. In addition, “among OECD countries, labour productivity in manufacturing slowed most markedly in recent years in the Czech Republic, Finland and Korea. In business sector services, the slowdown was most notable in Estonia, Greece, Latvia and, to a lesser extent, the United Kingdom.”  Small businesses are seeing greater productivity gains than large companies. And yet large companies are dominating economies more and more (hmm, policy makers might want to think about why this is). Remember that GDP grows two ways–an increase in the working age population (which as we have documented is down in most countries except India and Africa) and rising productivity, which is not rising much at all currently. That means economic growth will continue to be slow around the world with all the consequences that come with it.

Is China Smaller Than We Think?

China is big. Enormous really. But perhaps it is not as large as advertised. Yi Fuxian, a researcher at the University of Wisconsin-Madison, recently reported on his research that claims “China’s real population may have been about 1.29 billion last year, 90 million fewer people than the official figure released by the National Bureau of Statistics.” Yi’s research finds that there were 377.6 million births between 1991 and 2016 rather than the official figure of 464.6 million. Now 377 million is still a big figure, larger than the population of the United States, but Yi’s contention is that 90 million fewer people is a big deal. For instance, it would mean China’s aging demographics are worse than we thought. A small working age population without continued large gains in productivity means slower economic growth as we noted in the first story this week. So it’s a 90 million question of whether Yi’s data analysis is correct, and if so, what that will mean for China’s family planning and economic policies going forward. BTW, China’s yield curve inverted this month. Inverted yield curves often predict a recession. More on this soon.

Forest Bathing

In these tumultuous times, let’s slow down a moment and contemplate something soothing. In this case, the Japanese practice of forest bathing and recent scientific studies showing it is good for your health. Yes, forest bathing, which Japan instituted as part of a national public health program back in 1982 is “basically being in the presence of trees.” Japan not only included it as part of their health program but examined the impact of tree bathing in a study from 2004 to 2012. They studied volunteers who went into a forest and then into a controlled environment and concluded, “Forest environments promote lower concentrations of cortisol, lower pulse rate, lower blood pressure, greater parasympathetic nerve activity, and lower sympathetic nerve activity than do city environments.” This is apparently due to “various essential oils, generally called phytoncide, found in wood, plants, and some fruit and vegetables, which trees emit to protect themselves from germs and insects.” We’re feeling calmer and stronger just writing about it. Have a good Memorial Day Weekend and find some time to hang out among the trees, or since our world is more and more urbanized, at least in the Land of the Glass Pinecones.  Their seeds are made of rhinestones.*

 
What is Japanese FOREST BATHING by World Econ…
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*There was a time, long ago, when we were obsessed with this song. We are still proud of this.

Drones Gone Wild, One Belt One Road and Who Votes

Our favorite current TV show is Better Call Saul, a kind of prequel to Breaking Bad. We in fact prefer it to its antecedent. Its quietness, more sophisticated character study, more complicated moral compass we find far more intriguing. The main character, Saul/Jimmy, is at odds with his brother, Chuck, who spends considerable time trying to harm Saul. Chuck is mentally ill, manifesting itself in an irrational fear of electricity. In the most recent episode, Saul wins a minor victory over his brother which leaves Chuck holed up alone in his house, apparently in the depths of despair. A character sympathetic to Chuck asks Saul to talk to his brother. He refuses–after so many years of turmoil with his brother, he turns his back on him in perhaps his brother’s greatest time of need. The character sympathetic to Chuck says to Saul, “Chuck was right about you all along. He’s mentally ill, what’s your excuse?” She finishes her rejoinder to Saul, who is sipping a celebratory drink, by saying “Enjoy the champagne.” It is a devastating moment. Our sympathies are with Saul but the show reminds us that no battle, especially those involving mental illness, is won without loss. So far, society and science have proven themselves inadequate to the challenge of dealing with mental illness. Mental illness does not discriminate–it afflicts every race, every gender, the poor and rich alike, the downtrodden and even the most powerful. So as we watch rapid fire events in this world, we will remind ourselves of the devastating rejoinder, enjoy the champagne. Our glass is neither half full or half empty but Waterford crystal clear as we examine drones gone wild, the shifting political alliances with China and who votes the most (no not Chicago graveyards). It’s this week’s International Need to Know providing sunshine on happenings around the world even under continuous gray skies (c’mon Seattle, where’s spring?).

Without further ado, here’s what you need to know.

Drones Gone Wild

One of our earliest posts on this platform was about drones and how the U.S. needs to remember that we will not have a monopoly on them forever. We noted that many other countries now have drones. Turns out nowadays criminals do too. So much so that The Telegraph reports “a British prison has become the world’s first to use a new system designed to stop drones flying over perimeter walls to drop contraband into jails.” The prison is creating a drone shield consisting of sensors that can jam drones and prevent them from delivering drugs, weapons, cell phones and other items the jailers don’t want their prisoners to have access to. The name of the system, created by the UK companies, Drone Defence and Eclipse Digital Solutions, is Sky Fence, a science fiction overlord type of name which invokes as much fear in us as the prisoners do in the jailers. We live in interesting times.

Who are you With?

The world is changing in ways that can seem uncomfortable to many. China’s growing importance in the world, coupled with political turmoil in the United States and Europe, is informing how the world interacts with China. We offer two recent examples. First, at the One Belt One Road summit (see our post last week about it), a number of final communiques were released. But EU members did not sign onto a trade statement “because a series of concerns they had raised with the Chinese government were not incorporated into the draft text.” These concerns focused on a lack of environmental protections and an unfair tendering process. The EU has been increasingly concerned about China’s closed markets. In fact, the EU recently imposed anti-dumping duties on steel and other products from China. China and the EU’s relationship will continue to evolve. At the same time, China’s relationship with North Korea also appears to be changing. China apparently prevented North Korea from conducting a nuclear test on April 20th. This is the first time China has exerted such pressure on North Korea. Experts note it is difficult to take action against North Korea because they could easily attack South Korea with nuclear weapons in a matter of moments. Less noted is that China is also vulnerable to such attacks. So their willingness to take action is notable. As China strides larger across the world stage, they will find the same challenges and complications that confronted other world powers throughout history. There is no free or easy ride.

Who Votes?

There have been a number of high stakes elections over the last year, some of them with surprising results. They have been influenced by everything from worries about transformative technology, concerns about immigrants, reactions to income stagnation and even by Russian interference. The political pros will tell you (often for a hefty price) that voter turnout is a big factor in who wins elections. They break down turnout in a myriad of ways, from income and education levels to race and gender. But overall in which countries is there the highest voter turnout? Belgium comes in first according to the Pew Research Center which is ironic given complaints that the European Union (EU) is not a very democratic entity and Brussels is home to the EU.  Belgium is followed by Sweden, South Korea, Denmark and Australia. In this Pew list, Turkey brings up the rear although given recent events in that country those poor voters may not matter at all (and could be viciously attacked in Washington D.C.)

 

Fast & Furious, China Belt with Indian Suspenders and where CO2 Emissions are Decreasing

This week we head to Canada. In fact, we leave for the border shortly and plan on remembering our passport unlike a trip we took to Vancouver BC a few years ago for our wedding anniversary. On that trip, we remembered five minutes from the border that we had left our passport at home. We explained to the Canadian border guard that we were coming to celebrate our wedding anniversary and asked if was there any chance he would let us in without my passport. The guard good naturedly quizzed me on what year we were married . When I hesitated trying to remember when we were wed and our wife made a face at our hesitation the guard laughed and said it was obvious we were married and he would let us into Canada but he couldn’t guarantee what our country would do when we tried to return. Sure enough when re-entering America we were lectured sternly by the American border guard and told we were being put on a list; there was none of the joviality and accommodation of the Canadian guard. But for good or bad for America and for us, after a long lecture, we were permitted to reenter the country. So as we double check our passport is in hand, we examine the Fast and the Furious, catch up on China’s One Belt Initiative and ponder whether countries have made any progress on greenhouse gas emissions. It’s this week’s International Need to Know, providing comity, not Comey, on international affairs.

Without further ado, here’s what you need to know.

Movies Moving Fast & Furiously Overseas<

The closest we have come to seeing a Fast and Furious movie is when someone ran a red light and totaled our car last summer. But we could not resist the chart below showing the overseas revenue for each of the Fast and Furious movies since 2001. The chart is essentially shorthand for globalism. In 2001, overseas revenue accounted for 30 percent of the first movie’s overall take but for this year’s eighth(?!!) installment in the series, overseas revenue is so far accounting for 81.8 percent. The importance of international revenue has been cited for the dumbing down of Hollywood movies (Hollywood believes you can’t have complicated dialogue, plots or character development when it is being translated into many languages and cultures). Fortunately, Amazon, Netflix and other streaming services are catering to more niche markets allowing for films of a different bent than F&F and at budgets more manageable. But for big tent pole pictures–the superhero movies, the F&F franchises–the kind of big budget spectacle Hollywood specializes in, movie goers overseas are more important than American movie lovers. This will be increasingly the case in other areas of commerce and culture going forward.

One Belt, But Indian Suspenders

Last year we brought you news of China’s One Belt Initiative, an ambitious project of the Chinese government to further trade and economic integration across Asia, Europe, and Africa. As Sarah Zheng writes in the South China Morning Post, “The strategy uses free-trade agreements and infrastructure projects – including roads, ports and railways – to create a modern Silk Road spanning some 65 countries, which have a combined gross domestic product of US$21 trillion.” The One Belt initiative really consists of two belts–an economic “land belt through Eurasia, and a maritime belt that connects coastal Chinese cities to Africa and the Mediterranean.” A major summit takes place next week in Beijing at which 28 heads of state of the countries making up the notches of the belt will attend. But, one prominent notch, India, refuses to attend. Among the reasons for India’s absence is the One Belt Initiative includes a China-Pakistan Economic Corridor which India is not keen on. India is also concerned about the security implications of the One Belt initiative and its potential to align economic standards around a Chinese model. The battle to fill the vacuum we referred to last week Hoovers on.


 

Update!!!: Just as we were about to hit “send” on this week’s missive, we came across the video below produced by China promoting the One Belt One Road Initiative. It’s our favorite video of 2017 so far! And, the rap towards the end of the video proves utterly and convincingly that rap, like rock before it, is dead. Enjoy!

Lies, Damned Lies and Charts

A new New York Times columnist who has caused much consternation for his dismissiveness of climate change in his debut columns posted this chart of Germany’s greenhouse gas emissions since 2009 in his most recent column. His point is that Germany has made no progress on lowering emissions since the 2016 level is essentially the same as the 2009 level.

Music Video: The Belt and Road is How

Kevin Drum and others point out that the columnist was able to make Germany look like it has accomplished little in lowering greenhouse gas emissions by cherry picking the starting date of his chart. Here’s a chart Drum drums up for emissions going back to 1990 which shows Germany having pretty good success in lowing greenhouse gas emissions.

We are not wading into this fight but it got us to wondering how other countries have done in lowering emissions during that time period. The OECD gives us the answers. China’s emissions have, of course, gone up. But, France, the U.K. and the U.S. have all seen their emissions decrease as have a number of other developed countries (you can choose countries and adjust dates at the link). The OECD as a whole is slightly down since 1990, the G20 slightly up. We await our op-ed contract from the New York Times.

Great Vacuum War, Peace in Trouble?, Poor Middle Class

We find ourselves today ruminating about pancakes, Roger Federer and excellence. We were fortunate, thanks to a friend, to attend a charity exhibition match in Seattle last weekend between perhaps the greatest men’s tennis player in history, Roger Federer, and one of the top ranked players in the world, John Isner. Earlier in the evening these two matched up with Bill Gates and Pearl Jam’s Mike McCready in a doubles match. It was a wonderful evening that featured this amazing shot by Federer (fourth video on the page). Federer has lots of talent, of course, but he worked hard mentally and physically to become one of the greats. Before we were married, most Sunday mornings we would make pancakes while listening to Johnny Cash. We still cook pancakes today though not as often as in our weekly bachelor days. And yet, despite our many hours practicing our pancake skills, we cannot claim we are the Roger Federer of pancake makers. We do not know if we have spent Malcolm Gladwell’s 10,000 hours making pancakes but one would think we should be pretty darn good by now. But instead we research pancake schools on the Internet as we serve hot off the griddle more evidence of China trying to fill a vacuum, some worrisome signs about peace in our world and just how global the fall of the middle class is. It’s this week’s International Need to Know, the French Toast of international news, data and information.

Without further ado, here’s what you need to know.

The Great Vacuum War of 2017*

We talked a few weeks ago about the world’s leadership vacuum. China is continuing to try to fill it. For example, last week China demanded that it be the sole source of financing for a major logistics railway in Pakistan, and the Pakistan government agreed to the demand. Originally, both China and the Asian Development Bank (ADB) were to finance the railway. The ADB is a multilateral development bank funded by both Western and Asian countries. The bank is often involved in projects like the Pakistan railway. However, Pakistani newspaper The Dawn (it’s always reddest before the dawn) reports that the Minister for Planning and Development Ahsan Iqbal said in a news conference, “China strongly argued that two-sourced financing would create problems and the project would suffer.” Originally the ADB was going to provide $3.5 billion for the 1,700 kilometer rail line which is “considered the backbone of the country’s logistics, connecting two major ports with the rest of the country for transporting goods and passengers.” Even before political changes in the United States, China was playing a larger role in world events, including in development. In fact, in 2015 it created an Asian Infrastructure Investment Bank (AIIB) to rival the ADB. The AIIB recently received a big endorsement from Bank of Japan Governor Haruhiko Karoda, “Infrastructure needs are huge and it’s simply not possible for the Asian Development Bank and the World Bank to fill the gap completely,” said Kuroda. Space is full of vacuums. China is trying to fill ours.

*A title that only Charlie Mitchell will fully appreciate

All We Are Saying

While listening to the remarkable Louis Armstrong cover of Give Peace a Chance (no, really, check it out—peace has never swung so hard) and reading about political protests by both the left and the right, it occurred to us that what is missing from today’s protestors as opposed to those from years gone by is optimism. There was an optimistic bent to long ago protests fueled perhaps by a belief that their agitation would lead to a better world. Today’s protesters fill the optimism void with anger.*  Perhaps this is because although we live in the most peaceful and prosperous time in human history, there are worrisome signs of regress. The last couple years of trouble are either a hiccup or perhaps this long virtuous cycle of peace and prosperity is turning towards something darker. Take peace, for example–the last few years have seen peace take a beating. Looking at one measure—The Global Peace Index—there are now fewer countries in the “more peaceful” part of the spectrum as you can see in the maps below. Much of this is due to increased terrorism:. According to the Peace Index, “Deaths from terrorism increased by 80 per cent from last year’s report with only 69 countries not recording a terrorist incident.” Internal conflicts leading to more displaced people also led to the peace index achieving its lowest score since 2008. Whether this negative data is a short term blip or we are in for a trend of trouble is, of course, one of the more important questions of our time. 

2016 Peace Index

 

 

2011 Peace Index

*Or maybe it is anger that is causing the regress.

The Poor Middle Class

There has been much debate about the difficulties that America’s middle class is experiencing but like most trends, including the decline in manufacturing jobs (not unrelated to the fate of the middle class!) this is a global trend. In fact, Thomas Piketty, who authored the famous book,  Capital in the Twenty-First Century, three years ago, recently published new research showing China’s middle class is suffering too. In the chart below, Piketty shows the income share of the middle 40% of the U.S., China and France, all of which are lower than they were a few decades ago. Piketty, in his new paper, writes, “China’s inequality levels used to be close to Nordic countries and are now approaching U.S. levels.” Clearly this is because of NAFTA…wait, maybe these issues are more complicated than those attacking trade deals realize.