Simply Offer the Complexity Index; Deficits, Technology; & Bright Lights, Big City

Back before the current Russian shenanigans, for work we traveled to Russia.* The Russian Far East, to be precise, not too distant from Siberia. In the middle of Winter. It was so cold we were unable to walk outside wearing our then metal-framed glasses because they would stick to our face. But that’s not the coldest we’ve ever been in our life. No, that would be on opening day of the baseball season in Seattle at Safeco Field, back in 2000. Granted we had not dressed adequately for the occasion, but still, it was Russian cold in the stadium that day. So it is with our usual false spring baseball optimism (it’s been 17 years since the Mariners have made the playoffs but this time of spring we pretend this is the year) that we prepare to attend tonight’s opening game of the Mariners, mixed with some practical wisdom of wearing at least four, maybe five, layers. We will enjoy the annual ritual of the players running onto the field, the inspiration of the child suffering a life threatening disease who gets to run around the bases and the well-earned nostalgia of hearing the recorded voice of the late, great Dave Niehaus. But we hope to enjoy it all while not freezing like a Russian winter. Meanwhile, we warm you up with the Complexity Index, throw heat on China trade surpluses and blow up the trend of ever bigger cities. It’s this week’s International Need to Know, never throwing bean balls but sometimes a stray slider of international news and data.

Macklemore and Ryan Lewis – My Oh My (Officia…
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*We are amused we will no longer get to enjoy the 1950s décor and atmosphere of the Russian Consulate in Seattle, where we had a number of memorable meetings. 

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

We Simply Offer the Complexity Index

We’re a sucker for an index, both the kind found at the end of books (how many times was Churchill referenced in that World War I book?) and the economic ones. So we were intrigued when we recently stumbled upon the Economic Complexity Index, which attempts to measure how complex (i.e. diverse) a country’s economy is. It does so by measuring how many different products and services a country exports and comparing that to how many other countries make those particular products and services. Places like Switzerland, Japan and the U.S., which produce a diversity of products and services and export them, are higher up on the Index, while countries such as Zimbabwe, which make very few products, rank low on the index. Below are the top ten countries for 2016. The Harvard Center notes that China has regressed in recent years and India has moved up the rankings, which they believe portends slower growth in China, and increased growth in India. We’ve already noted for other reasons that China’s growth will be slower in the future, whether official statistics show this or not. Here is perhaps more evidence.

Deficits, Technology, Today, Tomorrow, 

We have long called for a Sabermetrics revolution for international trade statistics. Our officials use the equivalent of ERA and batting average to drive trade policy debates (For those not into baseball, those were common, but we now know lousy, measurements of how good a player is). Case in point as Allison Schrager pointed out last week, the China – U.S. trade deficit is really much less than the officially stated $375 billion. Schrager cites the classic example of the iPhone to prove her point. The entire $900 of an iPhone is counted to the trade deficit with China. But, Schrager notes that more than a third of the iPhone’s components are made outside of China in other Asian countries. The real trade deficit with China is similarly probably a third less than advertised. But today is not tomorrow. China is becoming more innovative, creating more technology itself and doing more value added work each year (see the chart below). The biggest challenge with China is not the trade deficit itself but China’s continued protection of domestic markets. Among the reasons Chinese companies dominate in their domestic market is because China continues mercantilist policies. On the other hand, much of the U.S.’s success in innovation is due to immigrants, including and especially those from China. According to Bloomberg, “there are more Chinese engineers working on artificial intelligence at U.S. tech companies than in all of China.”* So America’s trade deficit with China is smaller than official statistics, but the current American animus to immigrants could mean in the future the official trade deficit matches reality. Post-modern politics is constructed with steel ironies and iron fallacies.

*Does that mean America’s intelligence is artificial? No! We’re a nation of immigrants

Bright Lights, Big City, Government Fiat

As you know, as of 2007, more people live in urban areas than rural ones. That trend continues with cities continuing to grow rapidly. So what were the fastest growing cities between 2000 and 2016? According to the Visual Capitalist, in India, “the fastest growing cities are in the south, where there are at least 10 large cities that have roughly doubled in size.” In South America, Bogota, Colombia has grown the fastest. In Africa, Lagos, Nigeria has doubled to nearly 14 million people. And then there’s China. Lots of cities in China’s coastal regions have doubled in size during that time period. Xiamen, where a few years ago we drank too much baiju with the deputy mayor, has tripled in size. Experts predict more and more mega cities emerging over the next 50 years. Are there any technological and cultural events that will reverse that trend? How about government fiat? China is purposefully trying to cap the populations of two of their largest cities, Beijing and Shanghai, according to the Financial Times. And, in fact, Beijing’s population shrank slightly last year. Whether they are successful in that new policy will help determine just how accurate the prediction of larger and larger cities is.


 

Latest on Electric Car Sales, Fight for Your Right to Parties & Tagging Grafitti

In our ever expanding department of unpopular opinions, we finally saw the mega-hit movie Black Panther last week and while entertained, we also had some reservations. The movie was visually stunning, had more interesting moral quandaries and intellectual arguments than your average superhero movie and was overall more entertaining than most Marvel movies. But the film also creates a dubious world that is vulnerable to accusations of racism against American blacks as this review eloquently details, as well as is vulnerable to charges of sexism. When watching the movie, for the life of us we couldn’t understand why T’Challa should be ruler of the fictional African country of Wakanda when clearly both his humanist girlfriend and scientist sister were far more qualified. Of course, why a country so successful and technologically advanced as Wakanda would be ruled by a monarch, an apparently patriarchal one, is also a good question. The answer, of course, is Black Panther was originally a comic book, a medium that once was the realm of the six-to-ten-year-old set but in today’s stunted society, has been made respectable for adults without leaving behind any of its juvenile intellectual trappings. I suppose we should be glad we were entertained for two hours instead of bored stiff as we were by Captain America and Wonder Woman (speaking of unpopular opinions). But we aim to entertain and inform you with stories of electric cars, captivate you with the apparent importance of political parties and then take a pause for graffiti. It’s this week’s International Need to Know, the vibranium of international information and data.Without further ado, here’s what you need to know.

The Latest on Electric Car Sales

At our brother’s wedding reception last month, the DJ played, and people danced to, the Electric Slide. That’s now a standard phenomenon at many weddings but electric vehicles are not yet standard. And unlike at a wedding reception, in the car market there is no bar serving up rum and cokes to impel people to buy an electric vehicle (and if there was, they shouldn’t be driving). Nonetheless, a new Electrification Index by the consulting firm, Alix Partners, shows though overall market share is still small around the world, electric car sales are rapidly increasing. From 2013 to 2017 the use of electric cars on the road increased six fold but still account for only one-half of one percent of all car sales. The two stars of electric car vehicle sales are a really big country, China, and a really small one, Norway. China accounted for 45 percent of all EV sales in 2017. That’s heartening but our arteries harden when we remember how much of China’s electricity is powered by coal. And we make an appointment for an angioplasty when we read that coal output in China is up this year. Meanwhile, in Norway, recent monthly sales figures showed EV sales accounted for 27 percent (!) of all new car sales. That’s because Norway aims to have zero emissions from cars just seven years from now in 2025 and so offers strong incentives and subsidies to buy such cars. And even better, most of Norway’s electricity is hydro generated. The Alix Electrification Index will be updated quarterly. We will be interested to track progress (and regress) in the coming months and years.

You’ve Got to Fight for Your Right to Parties

Last week in exploring Chinese ideological beliefs we found a correlation of how old someone is and their desire for political liberalization. When one looks globally there are some other interesting correlations. Pew Global analyzed its survey of political beliefs and found that “In countries where more people are unaffiliated with any political party, popular support for representative democracy is also lower.” They cite Chile as an example where 78 percent of the population does not identify with any political party and at the same time 35 percent of Chileans oppose representative democracy. This level of opposition is far above the global median opposition to representative democracy of 17 percent.  This is apparently true of much of Latin America where 33 percent say representative democracy is a “bad way to govern a country” and where half the people are not affiliated with a political party. In countries with high political party affiliation, support for representative democracy is high. Pew provides the examples of India and Israel where only 3 percent of the population are unaffiliated, and only 10 percent hold a negative view of representative democracy. Of course, political parties may only be a manifestation of civil development. It may not be the parties themselves but the civil society development that led to the parties which is important. Nonetheless, we note, somewhat alarmed, that in our country of residence, the U.S., political party affiliation is much lower than it was two decades ago.

Tagging Graffiti

Every once in a while it’s good to hit pause for a moment. But sometimes we are so charmed by something the pause button lightly paws us as it did when we came across the charming photo below of Afghan graffiti in the streets of Kabul. We Bing’d for more information and learned the art was created by the Afghan female painter, Shamsia Hassani, an art professor at Kabul University. But she is not a “those who can’t, teach” professor, she is also a graffiti artist herself. In an interview two years ago in the LA Times she was asked how dangerous it is to be a female graffiti artist in Kabul. She replies, “…I’m scared because of the bad situation, because of facing closed-minded people who might harass me. If I was a boy, maybe I’d be more OK with painting in the street. Because no one would tell me anything if I was a boy. But because I’m a girl, even if I don’t do art, if I just walk in the street, I will hear a lot of words. And if I do art, then they will come to harass me.” That there is still so much danger for women in our world gives us pause too, in a less satisfying way.

China’s Ideological Prism, Keeping Company of Women, Pesticides and Suicide

Obviously given this newsletter’s content, we have an interest in international. We are indeed keenly interested in our world. How could one not be in this rotating, orbiting globe chock full of so many interesting characters, events and mysteries? And as you’ve probably noticed, we are also a fan of both music and New Orleans (much of the former would not be possible without the latter). So when an effort comes along that combines all three, you know we’re all in. Playing for Changerecords musicians “performing in their natural environments and combines their talents and cultural power in innovative videos they call Songs Around The World.” What the organization is trying to change we have no idea but we do enjoy their music video collaborations. Their most recent song, Everlasting Arms, features Dr. John, Luke Winslow-King and Washboard Chaz, all from New Orleans. But also playing on the song are musicians from Argentina, Italy, Anguilla and that most exotic of all places, Mississippi. As we discuss the world this week, the song seems an appropriate accompaniment to China’s ideological prism. It harmonizes well with data on women and business and it certainly adds a back beat to surprising news about pesticides and suicide. It’s this week’s International Need to Know, singing about all the important news of our world, even as we wish our name was as cool as “Washboard Chaz.”

Everlasting Arms featuring Dr. John | Playing…
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Without further ado, here’s what you need to know.

China’s Ideological Prism

Now that China has officially altered their constitution to eliminate term limits for presidents, perhaps it’s an apt time to consider the trajectory of politics in China. Fortunately a new academic paper, China’s Ideological Spectrum, provides some insights on this issue. Written by researchers at Stanford and the University of California, the paper studied ideology in China through a large scale online survey.” In fact, nearly half a million respondents filled in the survey between 2012 and 2014. The paper reports the results show “Those who prefer authoritarian rule are more likely to support nationalism, state intervention in the economy, and traditional social values; those who prefer democratic institutions and values are more likely to support market reforms but less likely to be nationalistic and less likely to support traditional social values.” Interestingly and perhaps not surprisingly, there is a big difference in ideological perspectives between the young and the old in China. “In terms of age, the survey shows that conservative and antimarket/traditional preferences increase with age for those ages 35 and over.” Will this young generation, even as they age, want more reforms? Will they get them? China’s rulers must navigate tricky ideological waters in the coming years, which we observe after reading that in Beijing this week during the Communist Party Congress, the government is restricting the number of foreigners allowed in university area bars and pubs. Drinks over security, we say.

Keeping Company of Women

We’re a week late celebrating International Women’s Day but we’re often late for holidays so why should this one be any different?  For the holiday and otherwise we point to the latest data on which region’s companies have the most women managers and CEOs. East Asia and the Pacific lead the way with 33 percent of their companies having women CEOs or the highest-level manager. The Middle East and North Africa take up the rear. Interestingly, according to the World Bank data, Thailand and Cambodia are the only two countries where the data show more women running companies than men. In a related data point, start-up companies in Africa do better than the global average for having women founders with 30 percent of such companies founded by women. And yet also related, we point you to an OECD study showing that women “around the world spend two to ten times more time on unpaid work than men,” i.e. taking care of children, elderly relatives, cleaning, cooking and other such activities. Mexico tops the list with women working more than six hours each day on average on unpaid activities. In no country do men work more on unpaid activities than women, but in Sweden women spend the least amount of time on such work. We now go vacuum our Ikea furniture.

     

Pesticides and Suicide

A friend of ours recently wrote an oral history of M*A*S*H for The Hollywood Reporter. You may remember the theme song for the movie and TV show is called “Suicide is Painless,” which we were reminded of when reading about the great strides Sri Lanka has made in curbing suicide rates. Suicides increased dramatically in that country in the 1960s. In the 1980s, a pesticide registrar, Michael Eddleston, noticed the correlation between increased suicide rates and the large-scale introduction of pesticides in the 1960s.”The suicide rate increased from five per 100,000 people to 24 per 100,000 people in 1976, and then peaked at 57 incidences for 100,000 people in 1995.”  When people who were prone to commit suicide had at the ready a handy poison, more people successfully killed themselves. So Eddleston began working with Sri Lanka to ban the most poisonous of pesticides. Consequently, suicide mortality rates plummeted: “from 57 instances to a 100,000 population in ’95, it has dropped now to 17.” This is a 70 percent decrease accomplished not by improved mental health programs but by eliminating the easiest tool for suicide in that country. According to the article,”Research suggests most people who try to kill themselves with pesticides reflect on the decision for less than 30 minutes, and that less than 10% of those who don’t die the first time around will try again.” The tools used to commit suicide vary greatly by country. In Hong Kong, where there are lots of tall buildings, jumping to one’s death is prevalent. No surprise that in the United States, guns play a large role in suicides. Gun control, alas, is not painless.

Remember the Good News, China and Commodities & Changes in the Middle East

The great baseball player Ichiro and I share the same birthday and we–well, that’s in fact the only thing we share. With Ichiro returning to the Seattle Mariners this week we were reminded of our trip to Spring Training the first year Ichiro played for the Mariners way back in 2001. We were walking from the main stadium to a side field when we spotted Ichiro walking maybe twenty feet in front of us. Before we could enjoy our brush with soon to be baseball greatness, we heard a clamor behind us and were nearly trampled by a herd of Japanese media who also suddenly realized Ichiro was just in front of us and desperately wanted to capture the moment. That’s when we understood just how big a phenomenon Ichiro was in his home country–and how unimportant our health and safety was to their media. And yet when we read the extraordinary article on ESPN this week detailing the circumstances, traits and tragedy that made Ichiro great, we are now glad a birthday is the only thing we share. The article is a profound examination of obsession, loneliness and child abuse. We have always rooted for Ichiro and will continue to do so this spring though not just for him to get hits, but also to someday find peace. And we find peace in the fact of good news in our world, make a pitch for this whole China and commodities business and cheer on changes in the Middle East. It’s this week’s International Need to Know going to bat for important international information and data. 

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

Remember the Good News

You, dear readers, probably feel you are being inundated with bad news these days.Turn on the TV, pick up your tablet, listen to the radio and you’ll see and hear it. But we have experienced just the opposite. In the past week we have learned of two new books and one graphic quantifying how good we have it. We read a long review of Steven Pinker’s new book, Enlightenment Now, which spends many pages explaining how the world has gotten better and likely will get better yet (though apparently Pinker gets wrong why the world has gotten better–the Enlightenment is not the answer, or at least not all of it). We listened to an interview with Gregg Easterbrook whose new book, It’s Better Than It Looks: Reasons for Optimism in an Age of Fear, which as the title indicates, is also about how things are getting better. And we stumbled across the graphic below, which in six graphs shows how our crazy world has improved. And indeed we have many times tried to convince you of the same thing in this space. However, that there has been lots of progress in the past does not mean bad news is not coming. In fact, the worry is that over the last few years there are signs we are regressing, that perhaps we have reached an inflection point, where the world is taking a turn for the worse, and this could be the start of a long term bad trend. Perhaps. But ones hopes not and even if so one should fight against the possible trend.  And in the meantime recognize we live in the most prosperous, peaceful time in human history and let’s work to make it more prosperous and peaceful for even more people.

China and Commodities

For some reason steel has been in the news recently, something to do with tariffs some old man wants to impose. Forgetting for the moment that the said tariffs, for mysterious reasons, are more targeted at Canada, it seems a good week to remember the large effect China has on the commodity market. And fortunately the Visual Capitalist provides a nice graphic (see below) to capture this outsize influence. China is home to 19% of the world’s population and its economy accounts for 15 percent of the global economy. But because of its massive infrastructure build up, China is responsible for 50 percent of world steel demand, 59 percent of cement, 50 percent of copper and 56 percent of nickel. A few years ago when China’s economic growth slowed, commodity prices dove. If China slacks off again, be prepared for the same result. The U.S. great leader’s tariff tantrum is silly and counterproductive (though not unprecedented, George W Bush did something similar), but ultimately the steel story will be told by China’s policies, economy and politics, not by one country’s tariffs.

Changes in the Middle East

Bad news is loud and brash and stomps all over the place which is why the quiet, demure, small steps of progress that have taken place in the Middle East recently may have gone unnoticed. Earlier in the year to great note, Saudi Arabia announced women could start driving. But recently Saudi women also gained other basic freedoms, including serving as soldiers, expanding the number of types of jobs they can work at (sales most prominently) and being allowed to attend soccer matches. Small steps as we noted but at the moment at least the country, under the heavy handed consolidated ruler Prince Mohammed bin Salman, seems to be walking down a more liberal path. And it’s not just Saudi Arabia. Iran recently told the soccer governing body FIFA they will soon also allow women to attend soccer matches. Let’s hope the good news keeps coming.

Chinese Fertility, Missing Indian Salaried Workers, Where Ex-Pats Should Live

We apologize for not delivering key international information and data to your digital doorstep last week. Our knee, which was recently replaced, was in need of additional medical procedures, as pain and stiffness broke through established term limits like a Chinese president. Combine that with our brother’s wedding (congrats Joe and Linda!), and we found ourselves unable to make our usual weekly delivery. But we are still more reliable than the person who delivers, or rather doesn’t deliver, our daily local newspaper. It is a rare morning when the paper is at our house on time and too often it is not delivered at all. We have often reported these delivery mishaps but nothing seems to change. You are probably asking yourself why we still take the physical paper. We can offer no particular good reason other than old habits die hard and we like to read the physical paper while we eat our morning Cheerios (we are receiving no payments from General Mills for that statement though would gladly accept their sponsorship since we are even more addicted to Cheerios than we are to the physical newspaper). We figure our habit will forcibly end sometime in the next ten years when the delivery of physical newspapers will go the way of VCRs, cassette tapes and DJ Khaled (okay, this last is aspirational–please, please make this annoying man go away). While our newspaper delivery person starts looking for other positions where she doesn’t do her job, we spill the beans on Chinese fertility, solve the case of the missing salaried worker and determine where expats should live. It’s this week’s International Need to Know…

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

China Fertility

We admit to being a bit obsessed with demographics. Although almost all events and phenomena have a complicated set of causes, we think demographics is often not given a large enough slice of the explanatory pie (delicious when served with rationalization ice cream). So we read with interest a Bloomberg article detailing the continued fall in China’s fertility rate. After a brief spike following the relaxation of the one-child policy in 2015, the number of births in China fell 3.5 percent last year. That trend is likely to continue and China’s working age population—currently 902 million—will continue to decrease. In fact, China’s working age population has been decreasing since 2012. That means China’s GDP will stop increasing at such a high rate (remember GDP increases only through larger working age populations and increases in productivity), whether official statistics reveal this or not. And, as the Bloomberg article points out, China’s aging demographics could lead to a slow down in innovation. “Not only will there be fewer young people, who tend to have a higher appetite for risk than their elders, but they’ll be a minority in the work world.” Analysts will examine President Xi’s policies, U.S. trade policy and a host of other factors, as they should, but we wonder if China’s demographics will be more important than any of these other factors to the long-term trajectory of its economy.

The Case of the Missing Indian Salaried Worker

We are more dubious than some regarding the rise of the relative importance of large companies. Nonetheless, we do believe they should be a healthy part of the mix and in economies where rules, regulations and culture make life too difficult for the formation and growth of formal companies, people suffer. The India business publication LiveMint points out this is a problem for India where among developing countries, salaried employment, i.e., those working for companies rather than self-employed, is very low. In fact, India salaried employment is below 20 percent as you see in the graph below. At the other end, China has the highest percentage of salaried jobs, followed by South Africa, Malaysia and Brazil, all countries which have climbed up to the World Bank’s “middle income” category from “low middle income,” where India continues to reside. Many of the other countries with low levels of salaried employment are also struggling to achieve the middle income category. Self-starters are great, but companies are necessary for a successful economy.

Where Expats Should Live

It’s common nowadays to hear people threaten to leave their country if one political outcome or another occurs. But where should they move? The ability to make money is certainly one factor. So in what cities do expats command the greatest salary? HSBC Expat provides the answer as reported by Bloomberg, and surprisingly, to us at least, it is Mumbai. Foreigners living in the Indian mega city earned on average $217,165, “more than double the global expat average of $99,903.” Why do expat jobs command such a high salary there? According to Dan Blackburn, head of HSBC Expat, the answer is high employment and experience levels and because a large percentage of the jobs are in engineering. We’re not sure we’re satisfied with that answer. The top four cities after Mumbai, as you see in the list below, are all high cost cities. In fact, other than Jakarta, all the cities near the top of the list have high costs of living. While we puzzle this out we suggest you request a transfer to Mumbai on the double.