Archive for month: October, 2019

The Geopolitics of Business, The Unseen Dead and Heavy Concerns on Plastic

Listening to the first episode of the podcast Dolly Parton’s America (brought to you by the geniuses of Radiolab) reminded us of the book* we would like to write about how all music is connected, which is to say that we are all connected. Dolly is a woman of the mountains as is her music but of course early on such music was informed by the banjo, an instrument brought to America from Africa. The trumpet, a foundational instrument of jazz, that great American art form originated by blacks in New Orleans, is as old as Ancient Egypt but became a truly musical instrument (rather than a mere war horn blown in battle) in Europe in the late Middle Ages and early Renaissance. The predominant current musical genre, rap, has sampled everything from R&B to classic rock and roll to other genres. New Orleans Hot 8 Brass Band who we saw perform at the Crocodile Cafe last week did a cover of Love Will Tear Us Apart by Joy Division, a post-punk, gothic rock British group. One of our favorite Dolly Parton songs is a cover of The Grass is Blue by Norah Jones, the daughter of an Indian sitar player and American record producer, with a voice as sultry as an August evening and as gentle as a lake’s lapping shores. It’s all connected as are the geopolitics of business, decisions on Fukushima and how plastic flows into our oceans. It’s this week’s International Need to Know, handing out mounds bars of international data, candy nuggets of global wisdom.

Italy and Vietnam’s Futures, Ents to the Rescue and Dying Indian Coal

As we gazed with wonder at Gian Lorenzo Bernini’s sculpture depicting Apollo consumed with desire chasing after the unreachable Daphne in Rome’s Borghese Gallery, we came to realize we must make an apology for our most recent edition of INTN. We regret any offense we may have caused for claiming China’s economy has slowed down. Similarly, we were out of line to imply that other countries are taking actions to counter China’s Belt and Road Initiative. Clearly we were uneducated and misinformed. We apologize profusely for implying the Belt and Road is not embraced at all times everywhere. And we lie prostrate begging for forgiveness for touching the third rail of politics in talking about the separatists in Hong Kong, Taiwan and Xinjiang. We recognize, as President Xi said in Nepal this week, that rightfully “anyone attempting to split China in any part of the country will end in crushed bodies and shattered bones.” We did not intend for the October 3rd issue to cause any offense to INTN fans and friends of ours in China. We were merely voicing one thought, based on one interpretation, of one complicated event. We have had a lot of opportunity since to hear and consider other perspectives. But we don’t apologize for comparing Italy and Vietnam, how Ents may rescue us from climate change and how coal is losing in India. It’s this week’s International Need to Know, willing to serve on Ukrainian gas company boards in return for good international information and data.

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

Italy and Vietnam’s Futures

We enjoyed tremendously, as we always do, our trip to Italy last week. We ate delicious meals, saw amazing sights and generally drank up both Italian culture and its wine. And yet it was striking to see both Italy and Vietnam in a month’s time. Italy’s GDP per capita is ten times higher than Vietnam’s, but in many ways feels more like a developing country than Vietnam, or at least Ho Chi Minh City. Crumbling infrastructure, inefficient bureaucracies, laundry hanging from windows, dodging Vespas instead of Ho Chi Minh City’s Honda scooters—Italy’s future worries us. Don’t get us wrong, by almost any economic measure Italy is still far above Vietnam, but one country’s line is sloped upwards and the other’s is at best flat. We have traveled to both countries for over 20 years and wonder whether Vietnam will surpass Italy before our travels are done. Of course, that is only if Vietnam continues to liberalize, one of the world’s six most important pivot points.

Ents to the Rescue

While you despair at mitigating the worst consequences of climate change, we turn to Treebeard for hope. We noted recently that Ethiopia planted 350 million trees to reforest the country and combat climate change. Now comes a study from the Crowther Lab of ETH Zurich, which investigates nature-based solutions to climate change, that shows how much land in the world is suitable for reforestation and where. According to the study, 2.2 billion acres could be reforested that would “ultimately capture two-thirds of human-made carbon emissions.” But we need to act quickly since the forests need to grow for two decades to reach their full carbon capture potential. Below you see the countries with the most suitable land. Trudeau, if he can stop partying in brown face for a moment, should make this a major policy priority, given his vocal support for climate change initiatives. Similarly, President Xi could take a break from hectoring basketball executives and make a big contribution to climate change. The U.S. has major potential but we’re curious how much of this could be done federally and how much must be done by states. Check out their interactive map and list of reforestation organizations to think through how you can help.

Dying Indian Coal

India is one of the five most important countries in the world, partly because of its impact, one way or another, on climate change. Currently, coal supplies 80 percent of India’s power but that is likely to change significantly over the next ten years. This is because new renewable energy “is now 20 percent cheaper than existing coal-fired generation’s average wholesale power price” and “65 percent of India’s coal power generation is being sold at higher rates than new renewable energy bids.” Renewable energy is not only cheaper than coal nowadays, it is, of course, cleaner. And that will drive the change from coal but not necessarily over concerns for climate change but instead because of pollution. Remember that India has eight of the ten most polluted cities in the world. “Coal is responsible for 80% of India’s mercury pollution, 60% of airborne particulate matter, 45% of Sulphur dioxide emissions, and 30% of nitrogen oxide levels.” People don’t clamor about climate change but they do about air pollution which they can see and taste. Air pollution is being cleaned up in China and other places due to these complaints and the same too will happen in India.


We Want a Good Economy, World’s a Stage of Hams, and Acting Good is Not Bad

In the era of continual accusations of fake news, sometimes we wonder if we understand what is really news at all, at least in America. Last week, when newscasters were literally breathless about impeachment proceedings (I was worried Mara Liasson might actually be having coronary problems), we read about Google’s apparent breakthrough in Quantum computing. As important as impeachment is, we wonder 100 years from now what has more ramifications for human kind? In fact, we speculate, as others have, that history focuses too much on political figures and not nearly enough on inventors, business people and even certain cultural personalities. Was not Steve Jobs more important than Bill Clinton? Tarana Burke more than Mike Pompeo? Jawed Karim more than Barack Obama?8 But our news media is fixated on politics. Impeachment is, as our spouse noted, the Super Bowl for journalists. But that begs the question of whether our journalists are playing the right sport (we’re an NBA and MLB fan ourselves). Perhaps the problem is most journalists in America are located in Washington, D.C. and New York and believe they are at the physical center of what is important. They are not. We need a national newspaper headquartered in Oakland, a radio show in Seattle, TV news in Atlanta…oh, wait a minute. We need to think this through some more and will next week during a trip to Italy. But before we leave, and as China celebrates the 70th anniversary of the founding of the People’s Republic of China—not quite old enough to qualify as a U.S. Presidential candidate—we focus on the Middle Kingdom: the yin and yangs of its economy, the recalibration of the world to China’s new assertiveness and China’s continued repressive policies. It’s this week’s International Need to Know, the Three Body problem of international information and data.

*I’ll bet most of you don’t know who two of these three non-politicians are? QED

As noted above, next week we’ll be sipping Montepulciano while gazing on the ruins of Pompeii and the splendor of the Vatican. INTN will make its drammatico return on Thursday, October 17th.

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

We Want a Good Economy

For forty years, China has been an economic marvel, achieving high levels of economic growth and not coincidentally pulling hundreds of millions of women, men and children out of abject poverty, something of which they should be proud and that is worth celebrating. But its economy has slowed and in recent months wearisomely so. This is not due to the U.S. – China trade war, or at least not mostly. China’s imports have slowed considerably but that is not the case for the U.S., which means China’s slow down is more than just a trade war problem. Something is happening with China’s economy in particular. As we’ve noted before, for demographic reasons, China will no longer experience rapid GDP growth. This is challenging because China may grow gray before it becomes rich. Remember that China’s per capita GDP is still below the world average. Yes, there are millions of successful households in Shanghai, Beijing, Shenzhen and other Chinese cities, but China is a country of 1.3 billion with hundreds of millions of Chinese still not sharing in prosperity. And, there are other worrying signs. China’s real estate development market will likely continue to be a positive driver for the economy but even here there are concerns with Alicia Garcia Herrero noting, “…the leverage of Chinese developers is almost four times higher than global peers, and this gap continues to widen.” Meanwhile, both household and corporate debt have risen significantly. To counter the economic slow down, China will presumably insert both fiscal credit and monetary easing into the economy, but increasingly China has to inject more Yuan to achieve more GDP. China continues to be a marvel of innovation and economic dynamism, but it is hitting headwinds. I know some people view the Chinese and U.S. economies as in competition and some in America root for China to lose. But remember that the world economy is a bakery, not a pie with a finite number of pieces. The more bakers, the more treats–if China loses, the world economy loses.

All the World’s a Stage…With Lots of Hams

China has become more powerful economically and militarily. The U.S., under the current administration, is not as interested in exercising world leadership. This has made China more assertive on the world stage but other actors want their own lines, taking lessons from Stanislavski. Japan, for example, Brando-style, in its annual defense review now lists China as a bigger threat than North Korea. At the same time, the EU and Japan signed an infrastructure development deal designed in part to combat China’s Belt and Road Initiative. At the signing ceremony, Japan’s Prime Minister Shinzo Abe said, “Whether it be a single road or a single port, when the EU and Japan undertake something, we are able to build sustainable, rules-based connectivity from the Indo-Pacific to the Western Balkans and Africa.” The rest of the world is not content to just let China act like a bull in a China shop (China in a bull shop?) imposing its own plans of how the world should be ordered. Meanwhile, there is beginning to be push back on its Belt and Road initiative from Pakistan, once an ardent supporter. Farooq Tirmizi opines, “because the China Pakistan Economic Corridor is not an investment into Pakistan, it is structured as a resource extraction exercise.” It is easy to be an economic upstart without global ambitions. But once one strides onto the world stage, matters become ever more complicated. As people have noted, it’s easy to be a manager except for the people, or in this case countries.

Acting Good Is Not Bad

And finally, despite China’s remarkable 40-year run of revitalizing their economy and bringing hundreds of millions of people out of poverty, the country remains ruled by an authoritarian government, one which in recent years is embracing its inner Darth Vader. China’s heavy hand of oppression has been noted in Xinjiang, it looms over the freedom protests in Hong Kong and it is an ever gathering shadow over Taiwan. It also has the potential to kill the golden goose. The Asian Swine Flu which some estimate has killed up to 50 percent of pigs in China has spread so wide and deep in part because of lack of transparency in China. A few weeks ago it was reported that in Hangzhou, a major center of China’s tech world, and where Alibaba is headquartered, that the local government is sending representatives into the top 100 companies to “coordinate policy and investigate problems.” And increasingly China is exporting its surveillance technology to other less than savory regimes and interfering in other countries such as Sweden. Can China continue its economic success if it does not reform politically? This is one of the four most important questions in the world today.

Norah Jones – The Grass Is Blue

Watch the Video

*Alas that book awaits our retirement many years from now, but we have a book in the wings that will be of great interest to International Need to Know readers–stay tuned!

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

The Geopolitics of Business

China is more assertive internationally nowadays in a whole host of ways. Case in point is the Chinese video game company NetEase which makes an online role playing game called Onmoyji. We have never played it and bet neither have you, but it is a very popular game. However, NetEase recently introduced an update to the game that did not go down easily in Vietnam. The Chinese company added a map showing the “Nine-Dash Line” that depicts China’s view of borders in the South China Sea. China’s envisioned borders, as you know, are expansive (ruled illegal by an Intl Tribunal btw) and disputed by other countries, including Vietnam. Consequently, Vietnam has shut down Onmoyji. Vietnamese can no longer access the game there. The world rightly worries about China’s growing assertiveness but often China’s aggressiveness backfires. Even in the NBA imbroglio, mostly what China has accomplished so far is to create awareness among millions of NBA fans, who probably never thought about China at all previously, of how un-free, aggressive and silly the Chinese government can be. In the mid to long term their strategy may prove more successful but as we have said before, striding onto the world stage brings many complications for a country.

The Unseen Dead

The Fukushima nuclear accident was tragic. The reaction to it may have been tragic as well. A new paper published in the Institute of Labor Economics found that there were negative consequences to Japan pulling back from nuclear power in the wake of the accident. The paper states, “We estimate that the increase in mortality from higher electricity prices outnumbers the mortality from the accident itself, suggesting the decision to cease nuclear production has contributed to more deaths than the accident itself.” We’ll let that assertion sink in for a moment. Go ahead, think about it. Higher prices led to decreased energy consumption, especially during extreme weather, which led to more deaths during such weather. We are conflicted about nuclear energy. On the one hand, we have never understood how one can guarantee the safety of nuclear waste since it must be stored for such a long time*, long after we and our children and their grandchildren and the grandchildren’s grandchildren are all gone. On the other hand, if the world had been using nuclear energy more the last 30 years, climate change challenges would not be so great, and as this paper shows, there are other risks to not using such energy. Humans continue to not be very good at weighing risk.

*Some of the new nuclear energy technology recycles waste so reduces this challenge to a certain extent

Heavy Concerns on Plastic

Like any dutiful Seattleite, we somewhat carefully divide up our household waste in recycling, yard/food waste and garbage containers (the process for selecting INTN stories is eerily similar). Plastic, of course, goes into recycling and we’ve been limiting our use of plastic to begin with to do our part to prevent the mounds of plastic floating in the ocean. But, it turns out, the U.S, which has 4 percent of the world’s population and 25% of its GDP, is only responsible for one percent of the plastic going into the world’s ocean. So while we need to continue to be vigilant of our plastic use, the real progress must come from the countries listed below who account for most of the ocean polluting plastic. In fact, just eight countries are responsible for 63 percent of plastic disposed into the ocean. China, unsurprisingly is the number one culprit, dunking not only plastic arguments on Daryl Morey but also actual plastic into oceans. Indonesia is second, followed by the Philippines and Vietnam (plastic was a big topic of discussion when we were there last month). As with climate change, the U.S. can and must do more and should be a leader, but real progress will come from other countries.

We Missed the Forest, Asian Recession Where Are The Eu’s Unicorns

In the future, instead of 15 minutes of fame, everyone will loudly declare they are morally superior to 15 other people. Of course, there’s no time like the present as Marty McFly would attest, and as the NY Times and a congressional committee proved this week. After someone texted us that the CEO of Boeing Commercial Airlines had resigned. We quickly did an Internet search and saw the New York Times headline, “Boeing Executive to Leave as 737 MAX Crisis Swells.” It was a curious headline for the NYT to write since the crisis “swelled” due to the newspaper and other media mis-reporting that Boeing had hidden texts which revealed the company knew the 737 was unsafe back in 2016. Within days that story was debunked by pilots and aviation experts but not before cementing in public opinion that Boeing was an evil company. After the initial release of the texts, the Chair of the House Transportation Committee Peter DeFazio said, “This exchange is shocking, but disturbingly consistent with what we’ve seen so far in our ongoing investigation of the 737 MAX.” Thus far he has neither amended nor retracted that statement. Now we are not defending Boeing’s behavior throughout the rollout of the 737 MAX–we await the completion of the investigation before making any final judgements on the extent of Boeing’s mistakes and how its organizational structure and/or culture may have contributed. But we do wish a compulsion for truth would outweigh the desire of people to feel morally superior to others. Too often the desire to express moral outrage is what drives people nowadays in news, politics, social media and elsewhere. Everyone craves a Marvel movie-like villain and thought those texts gave them one. Let’s aim for 1970s movie complexity instead. And in such spirit, we admit to overselling reforestation as a solution to climate change, ponder the possibility of an Asian recession and wonder at the absence of EU unicorns.  It’s this week’s International Need to Know, you talking to me, you talking to me…and my international information and data?

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

We Missed the Forest Through the Trees

Last week we pointed to another resource and study on how planting trees can be a contributing solution to climate change. We were a bit too enthusiastic in our Treebeard love it turns out. All this tree planting mania was based on a July Science article claiming reforestation as a climate change champion. But the paper overstated things considerably according to a new paper in Science Magazine criticizing the original July paper. Among the criticisms are that they “inflated soil organic carbon gains, failed to safeguard against warming from trees at high latitudes…and considered afforestation of savannas [etc] to be restoration.” On that last point about savannas, a number of scientists have expressed alarm that planting trees in grasslands and savannas will actually harm the environment. The original paper writers dispute the criticisms. We do not have the science chops to referee this dispute but since the original authors have now changed their paper from claiming “tree reforestation is the most effective climate change solution” to “one of the most carbon drawdown solutions” we’d have to say they oversold reforestation as a solution. To the degree we’ve done the same, we apologize.

Asian Recession?

All the pieces matter, we imagine the Lester Freamon of economists muttering to themselves as they examine a slowing economy. This is especially true in Asia where both the Japanese and Korean economies are slowing down even amidst their own bickering over trade issues. The latest data shows exports from Japan contracted for the 10th straight month in September. According to Ministry of Finance data, “exports in September slumped 5.2% from a year earlier.” Meanwhile in Korea, the economy grew just 1.9 percent in the first half of this year and exports plunged there too, down 19.5 percent so far in October from a year earlier. The biggest culprit for both countries’ economies? China. Exports from both Japan and South Korea to China are way down. China continues to export at a fairly robust pace but its imports are down. If Asian countries were an NBA basketball player, they might be making different statements than LeBron James. Oh, and by the way, this is evidence that China’s GDP is not growing at the 6 percent rate they claim, but probably at a much lower rate. All the pieces matter.

Where are EU’s Unicorns?

We continue to disparage the overuse of the word unicorn in economics and sports but since our eight-year old niece, the cutest little girl in the world, loves them, we turn to a list of all the unicorn companies in the world and discover it tells much about the global economy. Remember that a unicorn company is a private business with a valuation of over $1 billion. The list of unicorns in the world is full of U.S. and Chinese companies which makes sense given they are the world’s two largest economies. This is one reason why so many of us keep a worried eye on the U.S. – China relationship. When one looks at the 50 largest unicorns, we need magical glasses to find EU unicorns. There is one UK company, but of course, the UK may not be long for the EU. Sweden is the only other EU country that is home to a unicorn in the top fifty. Interestingly, Indonesia has two among the top fifty, as many as the EU combined. Indonesia is the fourth-largest country in the world and the possibility of its continuing to develop economically is one of the nine most important economic pivot points of the next decade.