Archive for year: 2016

Europeans and Diversity, Fewer Japanese & More Robots, and What the World Reads

Last Friday we saw the great Dr. John perform in Tacoma. Tacoma is not far from Seattle as the seagull flies, but with horrible traffic it was a multi-hour drive and it was also a long ways from Seattle culturally. Seattle, like many cities nowadays, prides itself on its sophistication and worldliness. And yet at Peterson’s Brothers in the Hilltop neighborhood where we ate before the concert, we experienced more diversity than in any Seattle joint we’ve been to. We saw more racial and ethnic diversity, age diversity, socio-economic and many other types of diversity all wrapped around a good meal and a beer. Tacoma felt more worldly and sophisticated than the wonder bars of it’s northern uppity cousin. Such a Night. But even as we boogied with the Good Doctor and enjoyed the vibes of Tacoma, we also examined Europeans’ views on diversity, robotic farms in Japan and what are the most popular books in the world. It’s this week’s International Need to Know, providing you what you need to understand around the world sans any locker room talk.

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

Europeans and Diversity

Immigrants are a hot button issue in many places nowadays, including and especially in Europe, which currently has more than its fair share of overly warm knobs. A new Pew Research Center Survey shows that at least in some European countries, non-coincidentally those much affected by the refugee crisis, diversity is not smiled upon. Greece has the least favorable view of diversity with 61% saying it makes a country “a worse place to live.” Italy is not so high on the idea either with 53% unfavorable to diversity. Sweden has the most favorable view of the concept with 36% saying diversity “makes for a better place to live.” Interestingly, the U.S. has far more favorable views of diversity than any of these European countries with 56% of the country stating it “makes for a better place to live.” With a host of upcoming elections in Europe, rhetoric and campaigns will undoubtedly reflect the moods found in these polls.

Fewer Japanese, More Robots

As we’ve noted, there are fewer Japanese today than there were yesterday and there will be fewer yet tomorrow. Japan’s aging population and low fertility rate is emptying the country with the population decreasing by one million people since 2015. With fewer workers, Japan is addressing the situation by turning to robots so we read with interest this Guardian article about a Japanese firm opening the first robot run farm. The Japanese agricultural company, Spread, says that in mid-2017 it will open an indoor farm in which industrial robots will carry out all tasks except for the planting of seeds, Galatians might be surprised that robots will reap what we sow. The company says within five years they will boost production to half a million lettuces. That’s a lot of salad, both for Japanese consumers and for the company. Currently the company supplies 2,100 supermarkets in Japan. The number of farmers in Japan has declined from 2.2 million a decade ago to 1.7 million today. With a smaller population and more people living in the city, you can bet that number will decrease more over the next ten years and the number of robots in Japan will increase. When keeping an eye out for the rise of robots, look to Japan. Its demographics and culture may make it the first of our Asimovian worlds.

What the World Reads

We here at International Need to Know like to read. At any given time we are usually reading at least one novel and one nonfiction book (currently The Singapore Wink by Ross Thomas and The Future of Violence by Benjamin Wittes, plus the new Bruce Springsteen memoir). The other night with Kindle in hand, we wondered what are the bestselling books in the world and what do those books’ popularity say about the world. Wonder no longer, courtesy of the U.K.’s website, here’s the list. We were surprised by a number of the books on the list, including Don Quixote. We have some disagreement about a few of the others’ popularity but that would be tilting at windmills. Draw your own conclusions on the meaning of these books popularity and what it says about our literate world.


Rise of the Global Middle Class, Creative Destruction and Immigrants to the Rescue

In the space of less than 24 hours, we talked with both billionaire Paul Allen and rock icon Bruce Springsteen. We thanked them both for their contributions to our life and to society. A day or so later we talked with a middle-aged woman named Yvonne who has settled in on a corner two blocks from the worldwide INTN headquarters. Her new lodgings are modest with only a large umbrella and some plastic bags to protect her from the elements. We expressed our concern for her and asked if there was anything we could do to help. In perfect Queen’s English and diction out of a PBS Masterpiece Theater show (which threw us for a loop and upended our stereotypes), she informed us her house is up the street but she had settled here because of the people who were encamped at her house waiting to travel to their “destination.” We did not know what to do with this information nor how to help this unfortunate soul. Her problems and challenges are well beyond our expertise and experience. If you have ideas of how we can help, we welcome them. Perhaps she will not end up like Paul Allen and Bruce Springsteen but we would dearly like to get her to somewhere better than her current physical and psychological setting. But billionaires, rock stars and Yvonne did not keep us from applauding the rise of the global middle class, worrying about the lack of new companies and nodding at the role immigrants play in entrepreneurship. It’s this week’s International Need to Know, taking us on an international journey to enlightened destinations.

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

Rise of the Global Middle Class

Even during the height of the global financial crisis, we traveled lots internationally for work. We were struck that planes were full and there were no tables available at the restaurants in the cities we traveled to. Lots of people were and are hurting but large numbers have entered the middle class in recent years and you see them in museums, tourist sites and elsewhere around the world. It is a sign of global progress, even if it has made touring and traveling more challenging. Allianz’s latest Global Wealth Report tells us that “…in recent years, more and more people, almost 600 million in total, have achieved promotion to the middle wealth class.” Of the 50 countries Allianz monitors in North America, Europe, Asia and Latin America, the middle wealth class share of the overall population climbed from 10% to about 20%. Further, “the proportion of global assets held by this wealth class has also grown significantly, rising to 18% at the end of 2015, almost three times the amount seen at the start of the millennium. So the global middle class has not only been getting bigger in terms of the number of people who belong to it, it has also been getting increasingly richer.”  As you can see in Allianz’s bubble chart below, Asia (not including Japan) has been the fastest growing region and responsible for much of the increase in the global middle class. In fact, it is rapidly catching up to Europe in terms of financial assets. One possible reason for dissatisfaction among the masses in Europe and America is that even though things are slowly getting better, in comparison to other regions of the world, we feel we are falling behind. It’s an Einsteinian economic relativity problem. We talked of fear last week. Be forewarned!  We will dive further into this data in the future with that powerful, incentivizing, sometimes damaging emotion on our mind.

Creative Destruction?

We all fetishize the entrepreneur and the creation of new businesses. And yet, the West has sucked (to use a high falutin economic term) at enterprise creation since the Great Recession. New business creation since 2007 in both the United States and Europe has been like a Japanese child birth ward–not nearly enough babies to fill the place. In fact, the U.S., allegedly the home of the brave and the land of the free, has been particularly bad at new business creation. But, the OECD’s Entrepreneurship at a Glance report gives some measure of hope. So far 2016 is seeing an increase in enterprise creation across a number of OECD countries. This is happening especially in Europe: “The report shows that post-crisis growth in Europe has been more dependent on small and medium-sized enterprises (SMEs) as drivers of economic growth than in the United States.” There is, however, a long ways to go to get to where we were pre-financial crisis. As the OECD notes, “Trend start-ups remain below pre-crisis rates in most OECD economies, although in Canada, France, the Netherlands, Norway, Sweden and the United Kingdom rates were higher at the end of 2015 and beginning of 2016 than before the crisis.” One of the big policy debates we should be having is how policy increasingly places small companies at a disadvantage to big business. I have a feeling, however, through November we will talk of other things instead.

Immigrants to the Rescue

When I was in Silicon Valley a few years ago, the local boosters noted that 50% of the CEOs in the valley were foreign born. It’s both a startling and unsurprising number at the same time. More than any other attribute, the relative success in absorbing immigrants distinguishes the U.S. from the rest of the world. The Harvard Business Review (HBR) provides more data on the importance of immigrants to entrepreneurship and new business creation. According to HBR, “Immigrants constitute 15% of the general U.S. workforce, but they account for around a quarter of U.S. entrepreneurs.” The research also points out that immigrants account for about 25% of U.S. inventors. In fact, nearly 40% of new firms have at least one immigrant as one of its founders. Immigrants are one salve for the lack of new business creation in recent years we discuss above. Changes in policy are needed to make up the rest.


Europe’s Electric Slide, Top Airports and Where Women Rule

With the political landscape looking Dune-like to many and as we here at INTN increasingly worry that we will not witness the Seattle Mariners in the World Series in our lifetime (a certain shortstop and first baseman are on our list–that list is long and extensive with not nearly enough repercussions), it is always helpful to step back and get a little perspective about our world. Our species has been around for but a blink of an eye as illustrated nicely by the blogger, Jason Kottke, who publicized the concept of The Great Span. This is the idea that it is easy to connect two historical events or figures across large swathes of history, illustrating just how short human history is. For example, “two empires [Roman & Ottoman] spanned the entire gap from Jesus to Babe Ruth. Three civil war widows were alive in the 2000s. President John Tyler’s grandson is still alive.” So worry not too much about current events, today is but a flash in the expanse of time and space. Nonetheless, the brevity of human existence leads us to delve into how to power electric vehicles in Europe, discover where the largest airports are and gape in astonishment at where women executives rule. It’s this week’s International Need to Know, remembering that Vin Scully was announcing when Connie Mack was still manager, even as we pass on international wisdom in nanoseconds (relatively speaking) of time.

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

The Electric Slide

For ten years, from 1989 to 1999, the Electric Slide was the number one dance in the world. If more evidence is needed for both the agony and the ecstasy of the 90s, you will not get it here. We dance our own electric slide examining a new report from the European Environment Agency (EEA) about the rise of electric cars and the new infrastructure required to support them. The EEA examines two scenarios for the year 2050, one in which half of cars in the EU are electric and one in which 80% are electric. Either scenario should be good news, right? But the agency rightly points out that an increase in the use of electric cars does not help the environment unless that electricity is generated by renewable resources. Under Europe’s current energy infrastructure, there would be a net reduction of CO2 emissions (see chart below) and for some other pollutants. But, because cars emit very little sulphur dioxide, there would actually be a net increase in 2050 of this pollutant unless the electricity for the vehicles is not generated by fossil fuels. Fortunately, as we’ve pointed out previously, thanks to advances in solar power generation and storage, we are likely to no longer need fossil fuels to a large degree long before 2050 (probably by 2030).  It’s electric, boogie woogie woogie.


Come Fly With Me

There’s a reason why Boeing and Airbus eye China and the rest of the Asia Pacific region like a seven-footer seated in coach greedily eyes first class. Thar’s gold in them there skies. Airports Council International released their latest data on who and what is flying from where. The Asia Pacific region continues to be the largest air passenger market with 2.46 billion passengers, an 8.6% increase over the previous year. But as fast as the Asia Pacific traveling market is growing, the Middle East is actually the fastest growing region with a 9.6% increase (though far few passengers overall–334 million). Of course, the Middle East market is benefitting from Emirates Airlines efforts to successfully make Dubai an international airport hub–Dubai is now the second-largest international airport as measured by international passenger traffic. One worrisome sign in the data is the relatively modest growth in air cargo (2.6%), another sign of the slowdown in international trade we noted earlier this year. 

Where the Women Executives are

The United States may, or may not, elect a woman president this year. If we do, we’d be catching up to other countries, many of which have long ago elected female leaders. The United States is not only behind other parts of the world in electing a woman president but is also lagging behind some countries on the number of women business executives. You may be surprised to learn that Russia leads the world in the percentage of women in senior roles in business, coming in at 45 percent. In fact, Eastern Europe as a whole does well with 35% of senior roles held by women. In the United States, 23% of women hold senior roles in business. China is at 30%. Maybe in the future a crazy, loud-mouthed businesswoman can run for president.


Refugees, Quantum Computers and China’s Box Office

We were knee deep in research for a client this week and chuckling at the fact that the most clicked link this year in one of our posts was for the inflatable Irish pub when red alerts started flashing here at the INTN worldwide headquarters about the great, sudden and unexpectedBrangelexit. We, of course, dropped everything at the news and even wondered whether we would need to cancel this week’s edition of INTN. But calmer heads prevailed allowing us to still dive into the state of the world refugee problem, examine one possible savior of Moore’s Law and speculate about China’s box office. It’s this week’s International Need to Know, paying no attention to the rumor that Angelina Jolie left Brad Pitt for Mr. Brexit, former British Prime Minister David Cameron while we bring you the world’s laundry, dirty and clean, but certainly folded and ironed for your reading pleasure.

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

Refugees from Reason

One of the more tragic, complicated and perhaps misunderstood stories of the last few years has been that of refugees. The huge increase of refugees has stressed national and international political systems. Which countries have taken in the most refugees? Germany takes the top spot. Perhaps consequently, Angela Merkel’s party did the worst it’s ever done in the Berlin state elections earlier this week. Sweden has taken in the most refugees per a percentage of its population. Perhaps also consequently, the ruling party is at its lowest rating in the history of Swedish polls. This is another example of a transnational challenge taking place at a time when people, whether here in the United States or in other countries, are losing their faith in existing institutions. We discussed the loss of confidence in institutions during the Brexit vote, and the subject is likely to come up often in the future. This all takes place even as in many ways the world is more peaceful and prosperous than ever. But perhaps people anticipate a future with different challenges that will require different structures. Or maybe they’re just scared. We have theories about fear and will delve into the emotion and its affect on the world as we go forward, but one of the grand challenges of our time is to refine current and perhaps develop new global structures that people will trust.


Moore’s Law Slowing, Quantum to the Rescue?

It’s not been talked about loudly but Moore’s Law is slowing. Instead of computer chips doubling in transistors every two years, it has slowed down to every two and a half years. Intel admittedearlier this year this trend may continue and worsen. There are a number of mid-term solutions in the works to keep Mr. Moore and his law happily churning away but we stop for a moment to consider the long-term solution, the paradigm shifting possibility of quantum computers. Such machine beasts could ” take advantage of odd subatomic interactions to solve certain problems far faster than a conventional machine could.”  So who is working on this technology? Lots of people. But Europe leads the way. The European Union outspends in research and funding and has more published research on quantum computers than both the U.S. and China. Moore’s Law may be slowing down but the globalization of innovation is not.

Bombing China Box Office

In our continuing quest to figure out what is really going on in China we turn to the movies. Specifically the box office numbers for China. In either a worrisome sign for China’s economy or for the state of the movie business nowadays, we see that box office receipts in China are down 18% percent year over year. Some of the decrease apparently is due to online ticket vendors no longer providing discounts in an attempt to gain market share for their businesses. But even so, that’s a huge drop and can’t be blamed only on horrible Hollywood blockbusters since the government limits the number of foreign films shown in China. No, more than likely this is another sign the Chinese economy is not as robust as portrayed in official economic numbers, combined with unsuccessful movies and the rise of other entertainment for our eyeballs and wallets. But what the heck, let’s blame the lame Suicide Squad anyway.

More Evidence of Peak Oil Usage, Who is Retiring and what is the most popular liquor

Humans are a remarkable species. We have transformed from simple cave painters to creating masterpieces on the ceiling of the Sistine Chapel. We have discovered prime numbers, built machines that can fly, developed self-driving cars and created a computer network through which all the world can communicate. It’s a remarkable development for any universe. But perhaps the species has peaked with the invention of the inflatable Irish pub. Yes, two Irish immigrants now living in Boston (see, immigration is good for America), have developed what they call the Paddy Wagon Inflatable Pub. So, even as we pour a Guinness and order one of these pubs online, we find more evidence for the coming of peak oil usage, discover where young people are retiring (not just in Portland, Oregon) and most appropriately find out what the most popular liquor in the world is. It’s this week’s International Need to Know, trying not to grow faint at the American presidential race as we deliver healthy and sane doses of the world to your inbox.

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

More on Peak Oil Usage

Keen INTN readers will recall that earlier this year we speculated on peak oil usage coming to a world near you and noted that while oil prices may rise in the mid-term, in the long term they would stay low as other energy sources increasingly power the world. This week brought two bits of news increasing the likelihood of this scenario.  First, the International Energy Agency (IEA) reported that oil consumption growth is below their projections, growing at only 1.3 thousand barrels per day. Yes, oil consumption continues to grow worldwide but at a slower rate than previously and below expected growth rates. The IEA believes slowdowns in China and India is one reason for the slower growth in world oil consumption. If so, perhaps this is more evidence that China is not growing as fast as advertised. But slow economic growth leading to slower growth in oil consumption is a bridge, perhaps over troubled economic waters, to other future factors that will slow the growth in oil and eventually lead to decreasing consumption. General Motors announced this week that they are releasing a Tesla before Tesla. Their new Chevy Bolt that will be released later this year will have a range of 238 miles, slightly more than Tesla’s Model 3 coming next year. Analysts believe the 200-mile range is the tipping point for making electric cars viable. The Bolt will cost a somewhat reasonable $30,000 (after a $7,500 federal rebate). In addition, new non-electric cars have much better gas mileage than their predecessors. Our new Subaru gets about 20% better gas mileage than the 2007 Subaru we owned previously (by quota, 47% of all Seattle citizens must own a Subaru). Gas mileage is mandated in the U.S. to become even more fuel efficient in the future. More people around the world will be driving (though the advent of self-driving cars will change that) but the amount of oil used to power those cars will decrease. Peak oil usage is not here yet but it’s coming sooner than people realize with all the benefits and economic disruption that will entail. 



Living Longer, Retiring Earlier

Life spans are increasing all over the world as health and nutrition improves. Perhaps surprisingly, people are also retiring at a younger age. The OECD (Organization for Economic Cooperation and Development) informs us that, “In almost all OECD countries, the effective retirement age has declined substantially since 1970.” The OECD defines “effective retirement age” as “the average age of exit from the labour force during a 5-year period.” In most OECD countries, the effective retirement age is now below the age when citizens receive retirement benefits (what the OECD terms the “normal” retirement age). Japan and Korea are the exceptions where men on average retire at age 70 despite the “normal” retirement age being age 60. Perhaps not surprisingly given challenges in OECD economies, the trend of retiring at a younger age has abated or in some cases reversed in the last decade. But, even so, people still retire at a younger age than in 1970. Below is a list of retirement age changes for men for a variety of countries in 1970 compared with today. Women on average retire two years younger than men. 

The Most Popular Liquor in the World

Like most who have traveled overseas often for work, we have sampled a wide range of tasty and on occasion dubious liquors. In Korea, of course, we drank soju, an alcohol made out of rice, barley and increasingly today from potatoes and sweet potatoes. Koreans drink soju in large quantities but we were surprised to learn this week that it is the most consumed liquor in the world (and even more surprised to learn of this through the sports and pop culture website, The Ringer). Much as we have been impressed by Koreans drinking ability, obviously this is an indication that soju is popular throughout Asia (and now there is a big push of it into America). This is perhaps appropriate since soju’s origins date to the Mongol invasion of Korea in the 1300s. History, as always, circles around itself (or stumbles drunkenly as may be the case). According to IWSR (which tracks such things), soju dominates the top spirits sold around the world, claiming three of the top ten spots. In second is India’s Allied Blender & Distiller’s whiskey, Officer’s Choice. Smirnoff’s takes fifth place. The top ten below is full of surprises, at least for this internationally traveling imbiber.

Asia’s Rise, More on Chinese SOE’s and Decreasing Chinese Productivity

Here at INTN worldwide headquarters, we romanticize beginnings. The evolution of jazz in early 20th century New Orleans is an almost mythical time for us, as are the Sun Studio recordings of the early 1950s. So it is not a surprise that we are a big fan of The Get Down, the new Netflix show that fancifully tells the story of the beginnings of hip hop in 1970s NYC. One of our fondest memories as a youngster is visiting our grandparents on the lower eastside of Manhattan and being allowed at the end of the day to pull the security gate down on their children’s shoe store. The five boroughs back then also had a mythical feel, full of noise, grime, crime, fantastical creatures and above all, creativity. New York is safer and cleaner nowadays but not nearly as interesting. Even as we speculate that somewhere, someplace a new musical or cultural moment is being born today (probably either in an impoverished city overseas or in a down and out suburb of America) we ponder on Asia’s recent rise out of poverty, gaze again at China’s state owned enterprises and at the same time worry about Chinese productivity.  It’s this week’s International Need to Know, using our digital crayon to find the get down on international happenings.

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

Asia’s Rise Out of Poverty…

Via Ian Bremmer, we recently saw the graph below from the Harvard Business Review(HBR) showing the amazing income gains of the Asian middle class. As Branko Milonovic of HBR notes, “The ‘winners’ were the middle and upper classes of the relatively poor Asian countries and the global top 1%.” But the relative “losers”, at least for the years 1998-2011, were lower and middle income percentiles in the already rich countries. The researchers also note that, “It’s also the first time that global inequality has declined in the past two hundred years.” They calculate that the global Gini number (a measure of inequality—in our estimation a very crude measure) decreased to 64 from 69 (but not 867-5309–wait, Gini, not Jenny). This is an underreported phenomenon: income inequality has gone up within many countries but for the world as a whole, income inequality is down. But, the Harvard Business Review takes this one step further, believing increases in Asian incomes must occur at the expense of Western incomes: “If we then visualize the world over the next 30-50 years, in which other, even poorer countries, become the ‘new Chinas,’ the stagnation of middle-class incomes in the rich countries may continue.” But there are many roads, highways and even back alleys to prosperity. Most need not be lined with western stagnation. Today’s future has very different starting conditions than the last two decades and so the path forward will lead in a different direction. As the investment advisors say, even while selling swampland in Florida (or southern China), past performance is not an indicator of future results.


More on China’s SOE’s

No sooner do we write last week that China’s corporate debt is in many ways government debt because state owned enterprises account for more than 50% of such liabilities, than Fortunemagazine comes out with their list of the 500 largest companies (ranked by revenue) and lo and behold it trumpets that China now has more than 100 companies on the list. Three of these are in the top ten and every single one of them is a SOE—China National Petroleum, State Grid and Sinopec Group. I expect this top ten list to be volatile, partly because the Fortune 500 is volatile(the Global 500 likely even more so) and partly because China is changing so quickly that so too will its companies on this list. We live in a Ferris Bueller world, if you don’t stop and look around every once in a while, you’ll miss it. Many of the companies on this list will disappear soon like Cameron’s father’s Ferrari.

The World is Doing Nothing

A number of months ago we noted the worldwide decrease in productivity. The chart we posted showed slowdowns in productivity around the world but did not include China. However, China’s productivity growth, while still above Europe’s, Japan’s, Korea’s and the U.S., is also steadily decreasing, now down to 6.6%. It peaked at 13% growth in 2007 and has gone down ever since. Are Chinese workers just as susceptible to cat videos on the Internet as the rest of us? As we noted in the previous post, the worldwide decrease in productivity is worrisome for the prospects of future GDP growth. GDP can only grow through increased productivity or working age population growth (the latter is decreasing in most countries save Africa and India). More worrisome for China, though their productivity and economic growth has been extraordinary the last 25 years, they have still not caught up to developed countries (see second chart below) or even to the world average. Each Chinese worker is producing far less than a Japanese, European or American, even as the costs of Chinese labor rises, leading to more automation. As we saw above, the Harvard Business Review is worried about Asian workers’ gains causing western income stagnation. The story is likely to be more complicated than that. As always, we await the next chapter eagerly but also with a bit of trepidation.



Autonomous Ships, China’s Corporate Debt and Cities Domination of Economies

Late Monday night we stumbled upon a story that implied that the organization, Search for Extraterrestrial Intelligence (SETI), believed we have found signs of life on a planet only 95 light years away. A signal detected by some Russian scientists exhibited signs of being transmitted intentionally and SETI is now monitoring the planet. Our immediate thought was, wow, this is the biggest news of the century. Then we thought, crap, now we’re going to have to build a wall around earth to keep out the illegal aliens. But upon further reading, and fortunately for interstellar defense budgets, it is extremely unlikely that this relatively nearby planet contains life. So we remain focused for the moment on the strange life forms of our own planet, particularly the advent of autonomous ships, China’s so-called corporate debt and the outsized effect cities have on countries’ economies. It’s this week’s International Need to Know, miraculously pulling relevant information out of the black hole that is our data rich world.

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

If I Had a Boat

Now that autonomous cars are so old-hat that even Pittsburgh has them, we turn, as so many old men* have before, to the sea. Across the pond we discover that Rolls Royce is working with universities and other companies to develop an autonomous cargo ship. A press release from Rolls Royce announces that the company “is testing sensor arrays in a range of operating and climatic conditions in Finland and has created a simulated autonomous ship control system.” Like self-driving cars, these ships would be equipped with infrared detectors, high-resolution cameras and laser sensors. Rolls Royce will begin with remote controlled ships, claiming “We will see a remote controlled ship in commercial use by the end of the decade.” From there, they will develop completely self-driving boats. The big challenge for autonomous ships has been lack of high speed bandwidth to transmit the massive amounts of data needed to guide the ships. But, new satellite technology is making fast affordable bandwidth possible. Rolls Royce believes autonomous ships could reduce costs by 22%. So all the cargo on the ships can be sold at a much lower cost to customers who won’t have any money to buy these goods because they lost their jobs to autonomous cars, boats and other vehicles.

*Not that we’re copping to being old, mind you.       

China’s So-Called Corporate Debt

Ahh, China. Complicated, large, ever changing. We have seen a number of people recently ringing alarms over China’s corporate debt. We like to clang that bell of worry as much as the next person and will even note that China’s corporate debt is now 145% of GDP. But, Chinese corporate debt isn’t your average country’s corporate debt. More than half (55%) is attributable to state-owned enterprises so in a sense this is government debt not corporate debt. David Lipton of the IMF notes that SOE’s only account for 22% of economic output. For the most part, these SOEs represent the “old” Chinese economy. China is attempting to transition from a manufacturing export economy to a more high tech, services economy. But it also wants to maintain high rates of growth (China continues to claim a 6.7% growth rate this year). To do that they are pumping credit into the economy and propping up the SOEs to prevent massive job losses. The worry is that more credit is now needed to achieve the same levels of GDP growth. And, of course, they are doing this partly by preserving inefficient, large companies. Yesterday, China announced the latest Purchasing Manager Index (PMI) figures (see chart below). The index rose for large companies (many of which are SOEs) but for small and medium size companies, it decreased. Where this credit pumping, SOE backing will ultimately lead, no one knows, probably not even those in charge of China. But, the rest of us can humbly speculate.


When the City is the Economy

We are in the midst of the great urbanization of our world. For the first time in history, more humans live in cities than in rural areas. Studies have shown that the United States economy is organized around metro regions. But in a few countries, the largest cities are essentially the economies of the country. Oslo, for example, accounted for nearly 90% of Norway’s GDP growth from 2000 to 2013. Copenhagen was responsible for three-fourths of the economic growth in Denmark and Santiago drove half the growth in Chile. These are all relatively smaller population countries where a large share of the people have congregated in these large urban areas. But even though these urban areas make up between 22% and 36% of their countries’ respective populations, their economic impact is still outsized. Tokyo, which believe it or not, is home to 25% of the Japanese population, accounted for 38% of Japan’s economic growth. This is still out of proportion to the size of its population but not to the extent of these other cities. At any rate, for the foreseeable future, cities rule.


Automation’s Effect on Developing Countries, Dementia around the World and where the Millionaires are

We read earlier this week that seeing live music reduces your stress levels. That’s according to a new study from the Imperial College of London. Levels of the stress hormones cortisol and cortisone both decreased in the volunteers who attended concerts as part of the research. The study also says, “It is of note that none of these biological changes were associated with age, musical experience or familiarity with the music being performed.” Apparently the study only had volunteers attend classical musical concerts so no word on whether seeing Metallica, Jurassic 5 orHardwell will calm our savage beasts. But even as we stationed a classical cellist near our keyboards, we still became stressed at the effect automation may be having on developing countries, worry about where dementia is most prevalent but we remain calm, cool and collected about where in the wild millionaires are to be found. It’s this week’s International Need to Know, keeping a constant drum beat on the strange rhythms of a complicated world.

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

Automating Against Development

As we are fond to point out, the last forty years have been remarkably good for we humans. More people have risen out of poverty during that time period than at any other time in history, both in raw numbers and in percentage of the population. The rapid development of South Korea, Taiwan, Singapore, China and India has alleviated poverty and pain for hundreds of millions of people. The hope is additional countries will follow suit. But will automation make that more difficult to do in the future?  A new study by the International Labor Organization (ILO) paints some red-alarm shades of worry on the matter. The ILO analyzed five ASEAN countries–Cambodia, Indonesia, the Philippines, Thailand and Vietnam–which account for 80% of the ASEAN countries workforce, to determine which sectors are most at risk for automation. They found that “approximately 56 per cent of all employment in the ASEAN-5 is at high risk of displacement due to technology over the next decade or two.” For Cambodia, which because of China’s rising labor rates, has become a large textile hub, the ILO already sees automation endangering jobs: “…close to half a million sewing machine operators face a high automation risk.” As Tyler Cowen points out in a new eBook, “At a growth rate of five percent per annum, it takes just over eighty years for a country to move from a per capita income of $500 to a per capita income of $25,000.” We need additional countries to achieve the rapid growth that led to the large alleviation of poverty the last 30 years. But will automation make that more difficult? While we wait to find out, check out Asian country labor costs below:



Live Long and Don’t Get Dementia

We were perusing data on which countries have the highest rates of dementia (What? What do you do for fun and recreation?). They are unsurprisingly all highly developed countries whose populations have lengthy life spans. But, they do not correlate completely with life expectancy. As you can see below, only three countries (those shaded in yellow) are in the top ten for both dementia rates and life expectancy. Of course, all of the countries with the top ten highest dementia rates are in the top 40 of countries with the highest life expectancy–the United States is the lowest, ranked 31st for life expectancy. Also of somewhat interest, all the countries in the top ten rates of dementia, save the geographically diverse United States, are countries located fairly far north. Not until Cuba, which has the 15th highest rate of dementia, do we find a country that is not fairly far north. Chile and Uruguay are 16th and 17th but they are somewhat south though not as far south as the top ten are north (in Chile’s case it is north and south but the main population center is about mid-way). Thus ends our unscientific meanderings into world health. We await our NIH grant where we can control for diet, genetic diversity and other factors.

Who Wants to be a Millionaire?

Many months ago we pointed out where the billionaires are. But that is a particularly rare species, surviving in the wild through luck, circumstances and, of course, often hard work and a good idea. But where are the millionaires? No surprise, the U.S. is home to the largest percentage of the world’s millionaires with a whopping 46%. Next up is the UK, Japan, France, Germany and then comes China. A pretty remarkable feat for China, all accomplished in the last 35 years. Scan the list below with whatever greed and envy you care to bring to the table, er, pie chart.


Voting Against Democracy, Good News and Diversifying Genomes

Life rhymes in coincidences, hums in ironies and occasionally crashes the hi-hat cymbal with karma. We were well aware of this yesterday while driving and listening to the radio news tell us of Ford’s announcement that they will release a fully driverless car without a steering wheel or pedals in five years for use in ride sharing fleets. Even as we listened and noted that Delphi will beat Ford to the punch in Singapore in 2019, a taxi in front of us careened across two lanes in order to make a sudden right turn. We have great empathy for the millions who will be put out of work by this rapidly advancing technology but will gladly see that particular taxi driver off the road. Even so, we would swerve across a busy six-lane highway to tell you about democracy’s difficulty in getting a date, remind you even so that the world is getting better and examine whose genomes are being sequenced. It’s this week’s International Need to Know, striving to be the Michael Phelps/Katie Ledecky of international information.

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

Voting Against Democracy

The slow arc of history towards liberalized democracies seems to have taken an unfortunate bend in recent years. Twenty years ago, it seemed inevitable that we were moving towards a world full of such political systems. But a coup in Turkey, the rise of authoritarian parties in a number of countries and the slow pace of democratic reform in others, has led a number of people to express concern about the path of our world. So we were curious what people think about democracy nowadays and it turns out there are indeed some worrying trends in people’s attitudes. Via Timothy Taylor we were pointed to The Democratic Disconnect which looks at surveys over the years of people’s views on democracy. Fewer people today in Europe (and the U.S.) have a positive view of what Churchill called the worst political system save all others. And it’s younger folks and rich people who most skew against democracy. In the Netherlands for example, “Only one in three Dutch millennials accords maximal importance to living in a democracy.” And it’s not just that a rising number of people are dismissive of democracy but also that growing numbers of people favor authoritarian rule: “In Europe in 1995, 6 percent of high-income earners born since 1970 favored the possibility of “army rule”; today, 17 percent of young upper-income Europeans favor it*.” So I guess young, rich people are our most likely future brown shirts. Obviously we need an AI to rule over us all and tell us to be democratic. Er, uh, or something like that.


*I’m still diving into the data for countries like China and India. More, perhaps, on those later.

And Now for Some Good News
Perhaps we should leaven the news of people’s increasing appetite for authoritarianism with a longer view of how well the world is doing over all. The Human Development Index (HDI) measures key dimensions of human progress over time. It includes life expectancy, health outcomes, literacy rates and access to education and GDP growth. The better a country does at these things the higher their HDI score. It purposely looks not just at economic growth but at a variety of factors that make people healthy, wealthy and wise. As you can see in the chart below, the trend for all regions is up and has been since 1870 (a very good year for wine and human development which may not be a coincidence). The only blip during that time period is Eastern Europe and Russia from about 1970 to 2000. But even they are up in the last 15 years. This two century good trend is something we may want to remind all those wanting to tear apart our world and its institutions.

Diversifying Genomes

The cost to sequence genomes has come down dramatically in the last decade, falling to around US$1000. In fact, we expect over the next five years, it will become affordable for most Americans and other high income countries’ populations to have their genomes sequenced. A prediction far more reliable than an American swimmer’s story of being robbed in Rio. Putting aside for the moment how useful it is to sequence genomes to improve health outcomes, we should note that in many parts of the world it is not affordable. As you can see in the chart below, by far Africa has the least number of genome sequencing centers. The United States, China, and parts of Europe lead the way. Given the seeming importance in diversity of samples, developing more genomic efforts in under-utilized countries will be important. And if costs keep coming down dramatically as expected, affordable. 


Brazil’s Dirty Water, China’s Grand Ambitions and Who is Using the Internet

Recently International Need to Know had the occasion to test out a virtual reality device and coincidentally shortly thereafter we met with the head of a virtual reality company. We’ve been curious about this technology but skeptical of just how earth shattering some claim it will be. But, when we tried out the technology not only were we impressed we immediately imagined dozens of applications for its practical use–from real estate to training to therapeutic uses. Of course, the head of the company has many more ideas in more depth than ours. We are living in a sci-fi world, or at least on the brink of it. But when we took off the goggles, removed the headphones and set down the controllers, we gazed steely-eyed at the reality of Brazil’s water issues, wondered at the expansive imagination of China’s government, and considered where the largest number of Internet users are.  It’s this week’s International Need to Know, augmenting reality with facts, analysis and critical information.

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

Thirsty Brazilians

Almost as much attention has been focused on Brazil’s water as on gold medals at the Olympic Games this week. What with blue water turning to a suspicious green and athletes told to keep their mouths shut (always good advice for the finally retiring athlete that was Alex Rodriguez), Brazil’s polluted water is much in the news. But did you know that Brazil has more water than any other country, controlling 20% of the world’s water supply? And yet, Brazil has water shortages. Their problem is not quantity, it’s quality. Or even more accurately, policies and practices affecting water management. About 62% of Brazil’s energy comes from hydropower. But the real water hog in Brazil is agriculture. Irrigation for agriculture consumes 72% of Brazil’s water. Of course, the fact that so much of Brazil’s water is polluted is a problem as well. Only 43% of Brazil’s toilets are connected to a networked sewage system. The good news is that is up from 33% in 2004 so progress is being made. Brazil has the water they need (it is a resource rich country after all) but it is in desperate need of reforms to have clean abundant water. Like the movie, Chinatown, water is a metaphor for the corruption and stasis that plague Brazil as a whole.

China’s Marshall Plan?

When people discuss China’s external activities most of the focus is on their shenanigans* in the South China Sea or on its large infrastructure investments in Africa. But we’ve been tracking what is being called “One Belt, One Road”, a plan to build infrastructure as China works to create a modern day Silk Road. The plan would build highways, rail, ports and more stretching from Moscow to Jakarta (see Bloomberg map below). Essentially One Belt, One Road (a great title for an old country western song, btw), would connect China to the west by a land route through Central Asia and via maritime routes to the south through Southeast Asia, South Asia, Africa, and Europe. Estimates are that China will spend $1.4 trillion on this effort over the next 30-40 years, which one analyst notes is more in real dollars than the U.S. spent on the Marshall Plan after World War II. China trade with the countries affected by One Belt, One Road is already worth $1 trillion. If this ambitious new infrastructure effort creates economic development in these countries, China’s economy stands to reap the benefits. A Bloomberg article notes the ”soft power” that China wields with this plan. And certainly so. But, will China be able to continue such spending with slower economic growth? And how much mal-investment will take place in such a grand scale endeavor? In fact, China’s large investments in Africa have suffered from backlash and misallocation of resources and we should expect more of the same with One Belt, One Road. Nonetheless, such a grand undertaking affecting such a large chunk of the world economy deserves our continued attention.

 *A technical term that Foreign Policy Magazine should use more often

Internet Users Around the World

The Internet feels ubiquitous nowadays but there are still large swathes of people without access to the medium that provides essential viewing of cat videos. Which countries are the top users of the Internet? Scale matters so China is number one even though only just over half the country has Internet access. Still that means 721 million Chinese use the Internet and with a 2.2% growth rate, millions more are coming online in the future. Only a third of India has access to the Internet but that country’s large population means despite low rates of usage, it is still in second place with 462 million Internet users. And, India has a remarkable 30% growth rate so that low rate of Internet usage is transforming quickly. Iceland has the highest percentage of its population using the Internet–100%.  Every single person in the country uses the Internet. I would have thought that grandma Bjarkardóttir was disconnected but apparently not. The top ten list for your perusal below.