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China’s Innovative but Nixes Ideas, Africa’s Millionaires, Who Publishes the Most Books

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ESPN is dead. Maybe not Dickens doorknob dead but at least JK Rowling’s Professor Binns the ghost at Hogwarts dead. We are an NBA fan and as we were about to leave our office earlier this week we glanced at Twitter (the world’s fourth worst invention) and saw the news of the trade of Kyrie Irving to the Boston Celtics. We clicked on a link that brought us to three writers from The Ringer website discussing the trade on Facebook Live. Unlike a couple of years ago, it never occurred to us to turn on ESPN or to even go to their website. There has been lots written over the last year about ESPN’s financial slowdown and now we experienced personally what is happening to the company. Indeed to all television companies. Television is dying too. Ironically this may ultimately mean if not the death of, then a slowdown in professional athletes salaries. Or will sports leagues be able to squeeze out large revenue streams from Facebook and other entities? As we await the answer to that question we inquire into the battle of innovation and censorship in China, answer where the African millionaires are and interrogate who publishes the most books. It’s this week’s International Need to Know, providing international wisdom and data on any medium that will have us.

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

China In With Innovation, Out with Ideas

If China was a romantic relationship, it would be the one you tell your friends is complicated.  The question is can a country with so many contradictions continue its economic success or will it break up in an angry economic divorce? We are no Dr. Phil but early last year we noted that China does not get enough credit for being innovative, that too many people still think China merely copies what others are doing. This week brought more evidence of China’s innovation in an article by the always interesting Connie Chan outlining the 16 ways QR codes are being used in China. The Chinese use QR codes for pet tags, sharing bikes and even providing more information about pandas. QR codes are used far more in China than in the United States. At the same time, however, China’s government continues to crack down on the free flow of ideas. Innovation is built off of ideas and if one does not have access to them, well, then innovation may be in trouble. The most recent example is the attempt to force Cambridge’s China Quarterly to remove 300 articles that the Chinese government deemed offensive. At first, Cambridge caved but then later in the week decided they would not remove the articles. Now China Quarterly is inaccessible in China. An enterprising programmer scanned the articles in question and created the word chart below to give a sense of what China’s government is scared of. 

 
   

Where are the African Millionaires?

Where are the Bruce Waynes of Africa? It is rare to see a story about African millionaires–other stories tend to dominate coverage of that large and diverse continent. But we recently saw a graph of which African countries are home to the most millionaires. Unsurprisingly, South Africa is number one with 40,400 millionaires, followed by Egypt, Nigeria and Kenya. Nigeria, of course, is home not just to millionaires but also to the billionaire Aliko Dangote who is trying to buy the British football club Arsenal so he can fire its coach (sports team buying billionaires no matter the continent have similar personalities). Mauritius, which is classified as Africa although it is 1200 miles off the mainland, last year had the fastest growing rate of millionaires. On the actual mainland, the countries with the largest increase in millionaires in Africa are Ethiopia, Rwanda (bet you didn’t guess that one), Uganda and Kenya. However, last year saw an overall 2 percent decrease of millionaires in Africa. This is a continent in which a bit more income inequality, or at least a larger increase of millionaires, might be seen as a helpful sign for economic growth for Africa as a whole.

Who Publishes the Most Books?

Did you get through your summer reading? Made it through that beach book while relaxing this August (we’re nearly through with Anna Karenina–Russian authors are not a happy lot so thank goodness for summer sunshine to leaven the sadness)? The International Publishers Association (IPA–there should be a book themed beer, it has a hint of mustiness and yellow-sheaved paper) recently released global publishing stats. No surprise that China and the U.S. are the two largest publishers of books in the world as you see in the chart below. They are followed by the UK, France and Germany. China, of course, is a large country so no surprise they would publish lots of books. But perhaps a more interesting insight is books published per capita. In that statistical slice (see chart below), the UK, Iceland and Denmark (the happiest country in the world–coincidence?) rank as the top three. China ranks far down the list, even below Bosnia and Herzegovina.

 


Russian Money, China-India Border Dispute and Cholera in Yemen

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International Need to Know, as the name indicates, is focused on the rest of the world. We leave the United States, including its politics, to other analysts and commentators of which there is no shortage. But when in the course of human events we elect a president doing and saying things that our current one does and says, everyone has an obligation to speak up. Let it be noted that many years ago we worked for a Republican and on any number of issues are still more moderate than the current Democratic party. But, this is not a partisan issue. Our current president is a disgrace and despite his winning the electoral college should be removed from office. He should either be impeached or Article 25 should be invoked. We tend to take a magnanimous view of people. We are not the sum of our faults, and all of us, including, perhaps especially, yours truly, have them. But despite some strenuous attempts, we are unable to find one redeeming feature of the man currently occupying the White House. His long slow dance with racists, Nazis and white nationalists culminating in this week’s kiss on their cheek is inexcusable. His complete inability to study any issue at any depth below a backyard plastic kiddie’s pool is dangerous. His Lynden LaRouche-like supporter on a street corner providing off-the-cuff remarks on various international issues have put America and the world at unnecessary peril. We look forward to his being removed from office as soon as possible. We appreciate your indulgence in our political haranguing and we admit this week’s catastrophic presidential events lead us to a series of not particularly positive stories, but nonetheless we bring information on where Russian money is, inform you of an India-China dispute and raise awareness of the cholera epidemic in Yemen. It’s this week’s International Need to Know, aiming to tear down statues of international ignorance wherever we find them and promising to erect more positive ones next week.

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

From Russia With Love, To the World With Money

What does one say about a country like Russia? I haven’t been there in many years but remember its dysfunction well and even from afar can see it like I’ve got long distance 20-20. It’s a troubled country with unfortunate leadership. A new paper, however, charting Russia’s income inequality (we have issues with that part of their paper) reveals some rather startling statistics. Russians hold more wealth overseas than do those in the country itself. Or as the paper notes, “there is as much financial wealth held by rich Russians abroad–in the United Kingdom, Switzerland, Cyprus, and similar offshore centers–than held by the entire Russian population in Russia itself.” But given the facts on Russia’s ground, why wouldn’t Russians store their wealth outside of the country? This kind of statistic is not surprising when one thinks about it. It’s the kind of problem China is trying to avoid but perhaps drawing the wrong lessons in how to avoid it.

  

Stop Worrying About That, Worry About This

After talking with your friends, family and colleagues, we have determined you need more to worry about. And so we call your attention to a China-India dispute on the Doklam border (What? You don’t know where that is? Nor did we until a few weeks ago). The border stands between Bhutan and China, both of which claim that piece of geography. We almost wrote about this dispute in this space late last month but it was difficult to verify details and some were disputing the severity of the, well, dispute between India and China. But now comes word of apparently yet another incident between India and China. Reuters, for example, reports that “a source in New Delhi, who had been briefed on the military situation on the border, said soldiers foiled a bid by a group of Chinese troops to enter Indian territory in Ladakh, near the Pangong lake.” That’s India’s view, of course. In a description that seems more from a drunken fraternity battle or an early scene from 2001, A Space Odyssey, the article notes “Some of the Chinese soldiers carried iron rods and stones, and troops on both sides suffered minor injuries in the melee.” This is hardly tanks and cruise missiles but the border dispute has plenty of people nervous about whether it could spin out control. As you worry about North Korea and other matters, save some fretting for this geographical dispute as well. You’re welcome.

 


*Disclaimer from our lawyers: Gittes Global Cartography will not be held responsible for any misplaced borders and lousy red graphics

Meanwhile in Yemen

Also speaking of underreported news, according to the World Health Organization, “the total number of suspected cholera cases in Yemen this year hit the half a million mark on Sunday, and nearly 2000 people have died since the outbreak began to spread rapidly at the end of April.” Believe it or not, the news could be worse. Overall cases of cholera have actually declined slightly since July. But, at 5,000 people infected daily, Yemen’s cholera epidemic is currently the worst in the world. The conflict in Yemen is the chief reason for the epidemic. The health system has collapsed because of the conflict preventing access to hospitals and treatments. This is especially tragic because cholera is eminently treatable. WHO reports “More than 99% of people sick with suspected cholera who can access health services are surviving.” BUT, 15 million people are unable to get basic health care. There is certainly more than enough strife in the world. Next week we promise to bring more positive news.

Expensive China, Estonian Autonomous Buses and Cheaters in India

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Last weekend we attended a gathering of Washington, D.C. refugees. That is, a group of us who once worked in Washington, D.C. but now live in the more beautiful, successful Washington in the Pacific Northwest. Just as back when we worked in D.C., the gathering included people from both Republican and Democrat congressional offices. When we worked back in the nation’s capital, the Washington delegation had one congressional softball team comprised of staffers from both Republicans and Democrats. Same deal with our flag football team (which won the championship one year–the older we get the better we used to be). It wasn’t just Washingtonians who hung out together. I remember grabbing a drink at Bullfeathers where often the Republican Minority leader Bob Michel could be seen having a drink and singing by the bar, with various representatives of the two political stripes standing around him. Like wide ties and pastel colors, fashions change, but not always for the better. In as bipartisan a way as possible we analyze just how expensive China is, examine Estonian autonomous buses and consider whether cheaters prefer government work in India. It’s this week’s International Need to Know, the fire and fury of international news and data.

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

Just How Expensive is China

We’ve mentioned this before but China is not as cheap a place to produce things as it once was. In fact, you may be surprised to know that it’s more expensive than markets such as Japan, Mexico and India. According to new research by Oxford Economics, “labor costs adjusted for productivity in China are only 4% cheaper than in the U.S.” Sad to say for our readers down under, Australia has the highest labor costs when including productivity (see chart below). At the same time,Bloomberg reports that total factor productivity in China–“the extra output that the economy produces without additional labor or capital”–has been essentially zero since 2007. Bloomberg contends this is due to the massive stimulus program that has propped up state owned companies (and thus GDP growth) at the expense of private companies: “Today, state companies get almost 30 percent of all loans but contribute less than a tenth of GDP.” All of this may make other countries a more attractive place for manufacturing. Will China be able to avoid this cycle as they continue to transform into services?



Estonian Kool Aid Autonomous Bus

Tallinn, Estonia is one of our favorite towns. Autonomous vehicles are one of our favorite technologies. So when we learned about self driving buses being tested in the Estonian capital, it was like the French apple pie at Ala Mode*, we devoured it right up. As part of  Estonia’s 6-month stint as EU president, they are running these autonomous buses from the city center out to where the EU presidency headquarters are located during Estonia’s half-year term. The buses are only temporary but thus far have apparently worked well with no problems reported. Tallinn is not an easy place to navigate with its old city and tough roads. When we were originally there in 1992, one of our colleagues was badly injured by the Russian mafia while walking back to the hotel from a bar we were at. If only self driving buses existed then. But, the Estonian autonomous bus is more evidence that commercial autonomous vehicles may take off internationally before they do in the U.S.

  

*Like Agent Cooper, we are a pie aficionado so can responsibly report that Ala Mode Pies in Seattle bakes the best pies in the world

Are Cheaters Attracted to Indian Civil Service?

We are no strangers to soul sucking bureaucracies. We once wrote a feature length screenplay inspired by a three-hour experience at the Washington, D.C. Department of Motor Vehicles. The civil service is not like the D.C. DMV (which would be a great handle for a MC, btw). It is not even of the same magnitude of existential horror. But its reputation is also not sterling. A new paper from researchers at Harvard and U Penn may provide an answer as to why. Their paper claims that “Students in India who cheat on a simple laboratory task are more likely to prefer public sector jobs. This paper shows that cheating on this task predicts corrupt behavior by civil servants, implying that it is a meaningful predictor of future corruption.” They used a variety of methods to test individuals tolerance for corruption but the most interesting one is where they asked them to roll a die 42 times. Each time they rolled a 1, they were paid a certain amount of money. Students who were more likely to lie about the number of times they rolled a 1, were more likely to get a job in public service. There are, of course, many ways to interpret how such people might function as government employees in India. Nonetheless, when working with the Indian bureaucracy, you may be rolling the dice more than you realize.

  

Do exports limit food poisoning, an Oily World and What People Worry About

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Seattle is hot this week. Not Seattle-hot where Seattleites complain it’s 80 degrees and the rest of the country snickers. No, it’s in the mid to high 90s and may reach triple digits. A legitimate heatwave. Making it more difficult, most people do not have air conditioning. Making it personally difficult, the International Need to Know Spouse (INTNS) has been angling for central air conditioning for many months which we have resisted by arguing we would only use it a few days each year. This week’s heatwave has caused some additional heat in our household and led us to jerry-rig an air conditioner into one of the bedroom’s sliding windows, restoring temporary peace into the world. If only peace were so easily achieved around the rest of the globe. But as we sip a cold beverage we take a cool look at how exports are making food safer in China, examine why oil prices will remain lukewarm and turn up the heat on which countries are worried about which threats. It’s this week’s International Need to Know, enjoying the dog days of August by casting eagle eyes around the globe.

Exports Limit Food Poisoning?

The other day we ate some cherries that had been sitting out at the market for quite some time. Not only did we not get sick but they were quite tasty, more than likely because they were world renowned Washington State cherries. People have not had such confidence in Chinese food and you’ve probably seen news stories documenting food safety problems there. It turns out, according to Food Navigator Asia, that food exports from China are safer than food sold domestically in China. This makes sense, if these exporters are to compete in markets internationally, they would have to match standards in those countries. China is taking that basic fact and using it to make domestic food production safer. China’s Certification and Accreditation Administration launched a program last year to encourage Chinese food companies “to bring the same production processes used for exporter goods to those sold locally.” The program has attracted more than 1,500 brands and resulted in US$1.4 billion worth of export-quality food products being sold domestically in China, at least according to the CAA. That’s a start. More than 20,000 companies in China export food and agricultural products to more than 180 countries. We always assumed the food safety issue in China would be solved. If you think we’re worried about eating Chinese imports, think about the Chinese who have to deal with the problem every day.

An Oily World

As we predicted over a year ago (we just sprained our hand patting our own back), oil prices have remained moderate. We still assume, though there could be fluctuations in the short to mid-term, that oil prices long-term are on a steady downward slope. That’s partly because of increasing use of substitutes (i.e. electric vehicles) over the coming years but also because of new technology that has allowed new production of oil to come online (which may, in the short run, dampen the substitutes). As you see in the chart below, world crude oil reserves have been going up since 2004. Investment in new oil and gas activity fell in 2016 as prices fell so perhaps there will be a tightening of supply and demand, but supply seems to be coming online in shorter cycles than in the past so a large increase in oil prices, absent some large external event, still seems unlikely. Enjoy your cheap drives this summer and prepare for cheaper, cleaner drives five to ten years from now.

Flight or Fight Depending Where You Live

We are a world of worrywarts. But we don’t all worry about the same things and our worries, like our tastes in music and movies, evolve over time. What we were worried about twenty years ago is different than what we worry about today. 100 years ago, people tracked wolf attacks in France (big wolf data of its time), which back then were not uncommon and quite worrisome. Today, although there are certainly wolves in sheep’s clothing, we aren’t so concerned about bites. A new Pew Global poll shows that instead the world’s top worries are ISIS, cyberattacks and climate change. But who worries most about these things depends on who you are. Parts of Europe, the Middle East and the U.S. view ISIS as the top threat. In Latin America and Africa, they are more likely to view climate change as the top threat. Cyberattacks are the number one concern in Japan. The poll also delved into worries about the influence of China, Russia and the U.S. Around a third of people view these countries with alarm. The Asia Pacific region is most concerned about China, the Middle East about the U.S. and Europe about Russia. For those who are concerned most about the global economy, it is mainly countries whose economies are in distress such as Venezuela and Greece. Where you live determines what you fear, for better or worse.

  

Meet the New Boss, Electrifying World, Risk Game Board Changes

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The most independent we ever felt was in our early, early twenties walking home from our job in Washington, D.C. to our new apartment, picking up a beer, crackers and cheese log. We sat on the floor of our apartment (we hadn’t yet purchased furniture), drank the beer and dipped the crackers into the cheese log while reading The Washington Post. The next night community inserted itself when we went to the old Hawk and Dove bar on Pennsylvania Avenue to watch the late and dearly missed Seattle Sonics play the Los Angeles Lakers in a playoff game (we had not yet bought a TV, the eventual purchase of which is a story in its own right) We got there early and found a seat at the bar. When the game started, the place was packed and we were literally the only person there rooting for the Sonics. The bartender took pity on us and gave us free drinks and food throughout the game. The Lakers fans gave us good natured hell. The Sonics lost but it was still a memorable night. Community and independence are like all things, a constant push and pull, each playing their part in the universe. This week we push you into the year’s most surprising statistic about China, pull you into world electricity data and wonder about community and independence when it comes to the number of countries in the world. It’s this week’s International Need to Know, the summer barbecue of international information, grilled to perfection with tasty side dishes.

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

Meet the New Boss

Surprise is an underrated reaction. It is more often than not an edifying emotion and yet so often in today’s world we all want to pretend like we know everything and are never surprised by any news, development or event. This fall, the 19th National Congress of the Communist Party of China takes place in Beijing. China watchers everywhere have been keeping a close eye on events leading up to the meetings to get a sense of what’s going on behind the scenes of China’s leadership. We are too, but looking at the bigger picture just how important is any of this? We ask because we were surprised by a statistic in reading an interview this week with Professor David Goodman at the University of Sydney about how little things change despite seemingly cataclysmic events. Dr. Goodman’s research shows that 84% of today’s elite in China are descendants of the elite from pre-1949. In other words, the Cultural Revolution, 70 years of communism, Deng Xiaoping’s reforms, the last 20 years of economic leaps forward–despite all of these seemingly huge changes, the usual suspects are still in charge. How does this happen? As Dr. Goodman notes, “strategies for self-preservation run deep…Imagine you were a local elite family in 1948. Wouldn’t you suggest that one son join the CCP and the other the Nationalist Party? If by chance you had no CCP links, wouldn’t you marry off your beautiful daughter to one of the incoming soldiers?” Perhaps the composition of the elite is fairly stable in most countries, though maybe the mechanisms for maintaining elite status are different. Nonetheless, Goodman’s was the most startling statistic we read this week and that’s in the midst of a rather startling seven days.

Electrifying World

One of the challenges of confronting climate change is that the world is not static. Even as more and more renewables come on line, more and more electricity is being used.  That’s partly because there are still lots of people in the world without electricity (see pie chart 1 below) but that number is falling (see chart 2 below). The number of people in South Asia without electricity has fallen from 581 million twenty years ago to 328 million today.  Worrisomely, sub-Saharan Africa actually has more people without electricity today than in 1994. But worldwide more and more people can now use electric toothbrushes. India has the most people without electricity followed by Nigeria, Ethiopia and Bangladesh. Take care of those four countries and half the problem is solved. Take care of those four countries by using coal, however, and we’ve got another problem. Fortunately, India is engaged in a robust solar energy program. “The cost of electricity from solar photovoltaic (PV) is currently a quarter of what it was in 2009 and is set to fall another 66% by 2040. That means, a dollar will buy 2.3 times as much solar energy in 2040 than it does today.” There’s your ray of sunshine for the day.

The Risk Game Board Changes

There are just over 190 countries in the world today. It may seem there have always been so many countries but not that long ago there were far fewer as we were reminded by this economic paper in VoxEU. In 1820, you would have found 125 countries comprising a Risk game board had it already been invented. That number fell to 54 at the outset of World War I in 1914, increasing to 76 by 1949. And then countries proliferated to the nearly 200 we have today. The paper argues this is related to globalization, trade and pressures these two trends created. We’re all for crediting globalization and trade for all kinds of phenomena but these economists are neglecting a whole raft of political events, including decolonization, the end of empires and other trends and events that probably had more to do with the increase in countries than trade and globalization. Nonetheless, it’s important to remember that the world, including the number of countries, is likely to look different tomorrow. Of course, the elites will still be the same but they may live in fewer countries.

 

Anti-Corruption in China, ASEAN Low Debt, Walking and Talking

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Our cat’s allergies remind us this week what a strange and unfair universe we live in. Putter would very much like to go outside on a frequent basis. But it turns out he has allergies to innumerable plants and grass. When he goes out he becomes very sick and unhappy. But to remain inside makes him very sad. In this universe of ours, so much that is pleasurable is bad for you. I would like to think in some parallel universe dessert is healthy, whiskey makes you smarter and laying around on the couch watching sports is better for you than going to the gym. Alas we must play with the cards we are dealt (wait, gambling is bad for you too–perhaps this is related to Einstein and dice? Maybe at the quantum level eating French apple pie each morning for breakfast is good for you?). But we pleasurably inform you of the effects of China’s anti-corruption campaign, present the low debt of ASEAN countries and tell the tale of where people walk the most. It’s this week’s International Need to Know, the tasty, good for you dose of world knowledge.

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

Eeyore, Piglet and China’s Anti-Corruption Campaign

One of the many great unanswered questions about China while we await the fate of Winnie the Pooh, is whether President Xi’s anti-corruption campaign is about cracking down on corruption or consolidating power. For example, last week it was revealed that Sun Zhengcai, the former Communist Party chief of Chongqing, is under investigation. He was considered a rising star so perhaps (or perhaps not) he was a threat to President Xi’s power. Or maybe he was corrupt, or maybe both. Regardless of the whys of the anti-corruption program, what has been the effect on China’s economy from the anti-corruption crackdown? A new paper suggests it has lowered economic output. Two researchers examined a data set of visits to cities and provinces by the Provincial Committee of Discipline Inspection (PCDI–only a government, an ostensibly communist government, could come up with such names). The researchers looked at a bunch of different places the PCDI went to and instituted corruption crackdowns and then looked at corresponding car sales in those provinces: “We find that PCDI visits cause car sales to drop by 3.4% at the county level. The effect is surprisingly uniformly distributed across different price tiers. Luxury brands exhibit similar drops as domestic brands, suggesting corruption’s impact permeates a wide income spectrum. Over time, the effect is strengthening: We observe a 2% drop in the first three months of a PCDI visit, and a 10% drop one year afterwards.” So apparently the current corruption campaign is having negative effects on the economy. Who knows what banning Winnie the Pooh will do to the market?

ASEAN Countries Low Debt

We have remarked in the past on the high level of corporate debt in China, which given the outsized impact of state owned enterprises in China, is really government debt. Putting aside how much risk there is to the large levels of debt, we recently came across an article in Brink describing the low level of debt by comparison to countries in the Association of Southeast Asian Nations (ASEAN). “From the debt perspective, ASEAN corporate leverage is still very low, not only compared to China but to the rest of the world. Average corporate debt for the six largest ASEAN economies (Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam) is barely 100 percent in terms of total liabilities-to-equity (versus 177 percent in China and 176 percent globally).” In terms of low level of debt, Thailand comes out best in the ASEAN countries while Vietnam ranks last. Of course, there are more factors than debt to consider when pondering a country’s economy and where to invest, export to or import from. Vietnam is in many ways a more dynamic economy than most. But if debt is your thing to worry about, than perhaps you head to Thailand.

Walking and Talking

One of the six largest letdowns of my lifetime was when the amazing new secret invention that was going to change our whole world turned out to be the Segway. You do remember the hype of this secret invention back in the late 1990s? When I see tourists wheeling around a city on a Segway, I wonder why they don’t just walk. So we read with interest an article in Nature about some enterprising Stanford researchers who used the accelerometers embedded in most cell phones to gain and analyze data on who is walking the most around the world. The researchers “analyzed the habits of 717,000 men and women from 111 countries, whose steps were studied for an average of 95 days.” Apparently 5.3 million people die from causes associated with physical inactivity each year (we type this sentence while sitting at a computer). The researchers are hoping to use the data to improve public health efforts by determining where inactivity is greatest, both in countries and cities. As it turns out, Hong Kong people walk the most. Indonesia is at the bottom of the rankings. Follow Aaron Sorkin’s example and walk and talk. 

1/2 Century of Growth, World’s Third-Most Important Question, Moving to Japan

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Perhaps you’ve noticed the news is often dispiriting these days. We are hammered by the bad, the corrupt, the idiotic and the just malevolently silly on a daily basis. This makes it easy to forget the good, courageous people all around us and we had the joy of hanging with a few of them this week. You may remember our seven-year-old friend, mighty Maya, who courageously has been fighting cancer the last year. Throughout her battle, Maya and her amazing family–Pete, Jackie, Jerren and Brayden–have displayed courage, fortitude and joy of life. And now Maya has finished her radiation and chemotherapy and is cancer free. During Maya’s journey she was aided by the nonprofit, Melodic Caring Project, founded and run by Levi and Stephanie Ware. Melodic Caring Project streams live, personal concerts to kids in hospitals, bringing them much joy, love and encouragement when they most need it. MCP arranged for singer songwriter Amos Lee to perform for Maya and a variety of other patients. Amos and Maya hit it off and became friends and Maya often listened to his songs during difficult nights after chemo treatments. Earlier this week he invited Maya and her family (and we tagged along) to his concert at Benayora Hall in Seattle. In front of a large, enthusiastic crowd, Amos played a song he’d written for her. There was not a dry eye in our part of the house. So, we hope you’ll take a moment and consider making a donation to Melodic Caring Project, even as we sing the praises of 60 years of growth, rap about the world’s third-most important question and hum to Japan’s new immigrants. It’s this week’s International Need to Know, staying in tune to the most important happenings in our world.
Amos Lee performs for Melodic Caring Project

Amos Lee- Bottom Of The Barrel
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Without further ado, here’s what you need to know.

A Half Century of Growth

This week we step back and consider the big picture for a moment. Over the last half century, the world economy has grown every single year except for a 12-month stretch during the Great Recession. That’s pretty impressive. But as you see in the first table below, our current turbulent decade is on pace to be the slowest ten years of economic growth since 1961. This data point may help explain many of today’s events, issues and worries. Even so, this decade is still on pace to be better than most decades of the first half of the 20th Century. What about geography? Beginning in the mid-1990s, Asia claimed the largest share of world GDP (see graph below). Both the Americas and Europe share of GDP has steadily decreased. Africa’s share remains stubbornly, consistently low. Of course, size of population has much to do with Asia’s ascent (as does strong economies). As World Economics (where we got much of this data) notes, “Although the Asian region has grown much more rapidly than Europe or the Americas, as over the past 55 years, Asian GDP per capita is still on average 22.0% of the levels of Europe and the Americas, and African GDP per capita remains about 18% of the size of Europe and the Americas.” It’s been a relatively good 60 years for the world. Let’s try not to screw it up–which brings us to our next story below.

 

The World’s Third Most Important Question?

President Barack Obama was fond of the Martin Luther King, Jr,. quote* that the “arc of the moral universe is long but it bends towards justice.” Is the world, in fact, slowly but surely moving towards a better place or does it continually circle back around in ironic, cruel rhymes? Europe advances and then falls back into the dark ages, has a renaissance and then darkens into the Holocaust. China steps forward through the Han Dynasty, falls apart, re-emerges, dives into the abyss of the cultural revolution and strides proudly again. We simplify history but you get the point. Is the world continually progressing or do we make progress only to fall back in a never ending cycle? We have mostly sided with the optimists but we have on occasion presented evidence of humans’ capacity to be utter and complete fools. Today we offer one of those. A new Pew Global survey of Russiansfinds a majority miss the Soviet Union. This is not so surprising given how things have gone in Russia since the USSR’s dissolution. Even though we think nostalgia for a totalitarian state is misguided, we’re willing to be magnanimous given the past 25 years. But then the Pew poll tells us that “…in Russia, 58% of adults see Stalin’s historical role in either a ‘very’ or ‘mostly’ positive light.” That’s a two bottle vodka opinion, or at least should be. Couple that with a poll from a couple years back where 78.3% of Chinese agreed that “Mao’s achievements outweighed his mistakes” and it makes us want to have a frank discussion with Martin Luther King, Jr. As we have seen in many countries over the past year, including our own, we stand in a unique era in history when information is more abundant than ever but, as George Orwell noted, “to see what is in front of one’s nose needs a constant struggle.”

*King’s quote is a quote of someone else apparently. The arc of quotations is built on the curved shoulders of others.

Moving to Japan?

Japan, as we have written about before, is losing population at an amazingly rapid pace. And unlike other countries facing demographic declines, Japan has traditionally been unwilling to solve the problem through immigration. But perhaps that is changing. Bloomberg tells us that “There are now 2.3 million foreigners resident in Japan. And their numbers grew by almost 150,000 last year.” Unsurprisingly, many of the new foreigners in Japan reside in Tokyo. In fact, foreign residents now account for 4% of Tokyo’s population, up from 3% four years ago. The largest group of foreigners living in Japan are Chinese, which is a data point we could add to last week’s musings about China’s increasing influence in the world. Japan’s overall population continues to decrease but the uptick in immigration is both surprising and encouraging. The arc perhaps is bending. 

Maya and Amos Lee 

Maya and Stephanie and Levi Ware, Melodic Caring Project

 

Stop blaming trade, Chinese Influence and Happiness or Success?

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On the second afternoon of the Directed Energy Conference we attended last week in Washington, DC, we kept an eye on an old man wearing a seersucker jacket. The day before he had been dressed equally nattily and somewhat extravagantly. But it wasn’t his sartorial style that caught our attention, it was his nametag informing us and anyone else who looked that he was with the NSA that had us curious. Why was a near-80-year old man working for NSA and why was he publicly acknowledging what was once known as “No Such Agency” it was so secret? We, of course, struck up a conversation with him. It turns out he’s retired but still acts as historian for the agency, chronicling the super secret organization’s activities, technologies and efforts from the 1960s, 70s and 80s, all recorded, we hope, as stylishly as he is dressed. But we are unlikely to ever find out since even information from so long ago is still classified and likely to remain so beyond our lifetimes he informed us. But we keep no secrets about international trade being unfairly maligned, the growing influence of China and whether to choose happiness or success. It’s this week’s International Need to Know, presenting seersucker suits of information in an often button downed world.

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

Stop Blaming Trade

Ironies are in full bloom in the world today, watering our eyes and causing us to sneeze in amusement. One is that though the political world is perhaps more divided than ever, the two sides are united in blaming international trade for why we have arrived at this point in history. It is the reason Trump was elected we are often told, or why Brexit happened or for any number of other problems plaguing our world–the suffering of the middle class is due to trade between nations, or at least that is the theory.  But much like the love of the recent Star Wars movie or the sudden emergence of rosé as the hip new drink, the masses often make mistakes. We cannot arrest today’s global problems when we are chasing the wrong suspect. Additional evidence that the policy detectives have mis-fingered trade as the culprit arrive in a new report by the Bank of Settlements (although this report is unlikely to settle the argument about trade). The report notes that “in practice, trade and financial openness appear to have made only a fairly small contribution to the increase in income inequality (see the right most graph below). Rather, technology appears to have been the dominant factor: the returns to skilled labour, which uses technology more intensely, have increased substantially.” This makes sense when one steps back and thinks about it clearly without ideology or preconceived notions clouding the mind. Trade adds value, it does not subtract. Give a class of 25 students each a bag of candy  and ask them to trade the candy in their bags. When they are finished, 99 percent will put a value on their new bag of candy higher than the pre-trade bag.* Once we stop blaming trade perhaps we can get on with concentrating on the real challenges that are harming middle classes around the world. 

*We have done this exercise a number of times in real classrooms as have others. The result is always the same, the vast majority of students benefit from trade with there being but a few losers.

China’s Increasing Influence

China is increasingly influential in culture, the economy and in many other ways. They are not yet the world’s largest economy and it will likely be a while before they are. They can’t lead on free trade issues as some think since they have one of the world’s most closed economies. But they are big. Darn big. And China increasingly exerts itself around the world in many spheres.  For example, China now has the world’s fastest super computer (and second and third as well). They are making a huge push into esports with their largest ICT company leading the way: “entertainment giant Tencent has accelerated its e-sports expansion with the unveiling of a new five-year plan…The plan is based on Tencent’s expectations that China is set to become the world’s largest e-sports market. Tencent predicted there will be 220 million e-sports players in China and 335 million globally by the end of this year.” Or look at international students where the U.S. has been dominant. China is now home to more students from Africa than is America. China’s ascent was likely to happen anyway due to their sheer size and growing economy but recent American political events have accelerated the trend. We wonder what the world will be like with the Chinese business culture prevailing in the world rather than America’s?   

Happiness or Success?

In an interesting article on which countries spend the most on education, we came across data on whose parents prefer happiness for their children and whose prefer they have a successful career. As you see in the graph below, French parents by far wish for happiness for their kids and are much less concerned over whether they have a successful career. Of course, does a successful career for Amelie mean she makes lots of money or does it mean she derives happiness from her job? If the latter, maybe Amelie can be happy and have a successful career.  Putting semantics aside, Canada, U.K., Australia and U.S. parents all put a much higher premium on happiness over successful careers. For India and Malaysia, happiness and success are a toss up. We hope you will happily peruse the graph below. 

The Economic Yin, the Three Body Problem Yang and India

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We write this as we prepare to head to Washington, D.C. for both our Uncle’s 80th birthday celebration (happy birthday, John!) and later to attend a conference on Directed Energy Weapons (i.e., really cool ways to blow things up). Many years ago we lived in the nation’s capital at a time when it was one of the crime capitals of the country. We were mugged twice while there, once at gun point (it was a surprisingly polite conversation with the mugger–we even both wished each other a “good evening” at the end of the forced transaction) and once we were jumped over a Kentucky Fried Chicken two-piece dinner (that engagement was not nearly as polite). Back then we even had a friend who was mugged in front of the Supreme Court. Today, although the politics are much more riotous, the city itself, like many big cities, has been gentrified into a fog of calm.The crime rate is not much to worry about, the restaurants are fancier and real estate is far more pricey. We are looking forward to seeing our old haunts, including the venerable Tune-Inn, one of America’s great bars. So we will take next week off in honor of our Uncle and learning about blowing things up with phasers and lasers. But this week neither the White House or Congress dissuade us from bringing you the Yin of China’s economy, accompanied by the Yang of its innovation, finishing with a brief comparison of emerging economies. It’s this week’s International Need to Know, a soft wind of knowledge in the heat and humidity of the East Coast.

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

The Yin

It’s time for another episode of the Yin and Yang of China, everyone’s favorite, large, complicated, nobody-really-knows-what’s going-on country. We start out with the yin–what the heck is going on with China’s economy? We’ve been generally more positive than others about the prospects for China’s continued prosperity. The economy seemed to stabilize this year after worrisome signs in 2016. In fact, the latest China sales index is at a 20-month high, driven mostly by the manufacturing sector. But a few weeks ago we noted in passing that the yield curve had inverted in China. Since then the inversion has become more pronounced (see graph below). Inverted yield curves often predict a recession. Not coincidentally, as Reuter’s notes, China’s central bank has been injecting lots of liquidity into the financial system. In fact, the amount of money sloshing around in the Chinese economy does appear to be leading to an increase in prices. For example, land prices are up 39% year to date (they rose 18% in the moderation of 2016). On the other hand, the South Morning China Post reports that “more than 80 per cent of Beijing owners are reducing their asking prices, while just three months ago, 80 per cent were raising prices, according to property agent Homelink.” That’s a lot of volatility and some of this may be reflecting the difference between official statistics and what is occurring on the ground. What’s happening in China? We’re not sure but we’re keeping an even closer eye than usual–and we may need to see an economic ophthalmologist to get a real clear view.

 

The Yang: Three Body Problem in Real Life

It’s a long story but a meeting with a friend trying to help send people to Mars led to our reading the science fiction novel, The Three Body Problem, by Chinese author Liu Cixin.  The sections of the book we like the best have nothing to do with science fiction but rather depict life during the Cultural Revolution. Nonetheless, the science part of the novel seems to be coming true with news that Chinese scientists beamed back “entangled” photons from space.  The breakthrough is important in its own right, of course, but is also another refutation of those who claim that China does not innovate. There is a tremendous amount of innovation taking place in China. At any rate, the Chinese scientists reported “a successful transmission of entangled photon pairs from space to ground stations separated by 1,200 km, a major technical breakthrough towards quantum communication over great distances.” Previously such transmissions weren’t possible beyond 100 km. This work is continuing to lay the foundation for quantum computing and communications, two new technologies that as we discussed last week could help the world reckon with the end of Moore’s Law.

India Compares Well

We will be brief as our flight is about to depart, but courtesy of the great Jon Bensky we show you the McKinsey Global Institute’s economic comparison of emerging markets. Jon, who is our go-to person on India (and other international issues for that matter), notes that India comes out well in these comparisons. Its GDP growth rate matches official Chinese numbers and McKinsey’s assessment of their risk is that it is much lower than other emerging markets. India, like China, is a place to always keep your eye on.

 

Mind the Gap, Canadian Cows & Climate Change and the Price of Fun

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Incentives are a funny thing. They drive so much in our world and yet often have unintended consequences. A few years ago, like many in our socio-economic demographic, we bought a Fitbit to measure our exercise, sleep and other such metrics. We lost it fairly quickly but then our wife gave us another one as a gift. We have not lost that one, which speaks to a certain incentive in itself. But the Fitbit has changed our behavior. Where once we would worry about getting the best–read nearest–parking spot, now we park further away just to get more steps recorded on our Fitbit. That is a good thing. On the other hand, we are often less efficient nowadays. Where once we maximized our trips back and forth from our car to our house, carefully carrying many things at once, now we purposefully make many trips between house and car, again in order to record more steps. We do the same kind of thing on house projects, going back and forth to get different tools. Perhaps this is more physically healthy for us and there may even be a Zen-like aspect to it leading to more mindfulness, but by being less efficient we are surely getting less done in life. It occurs to us that the optimal use of a Fitbit is someone who walks in their sleep. But, we don’t recommend taking that step. We do recommend minding the employment gap, examining the case of the Canadian cow and analyzing the cost of fun. It’s this week’s International Need to Know, throwing no-look passes for data and knocking down three pointers of analysis as we try to be the Golden State Warriors of international information.

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

Mind the Gap

Political volatility around the world continues to be high as we saw in the recent UK elections. Some may think voters are making unwise choices but there is a reason for the angst and sturm of the voting class with further evidence coming from an Organization for Economic Cooperation and Development (OECD) study on employment this week. The good news is that in OECD countries the “employed share of the population aged 15 to 74 years rose for the third consecutive year,” finally reaching pre-financial crisis levels. The bad news is that the share of middle-income level jobs has fallen. There are more high income and low income jobs in OECD countries, but the kind of jobs that have been the foundation of liberal democracies are eroding away. This is due mainly to demand for high skill jobs. The OECD reports that “Between 1995 and 2015, the middle-skill share of employment fell by 9.5 percentage points in the OECD area, while the shares of high- and low-skill occupations rose by 7.6 and 1.9 percentage points, respectively.” In the chart below you can see how in every OECD country high skill jobs have increased while middle skill jobs decreased. Low skill jobs increased in all these countries except Hungary and the Czech Republic. We note the UK is home to one of the larger gaps of jobs though not nearly the largest. The world is in the midst of a large economic transition and political volatility is likely to remain high throughout the transition.

 
  

Climate Change & the Case of the Canadian Cow

A new book, Drawdown, lists the top ten solutions for addressing global warming. You are likely to be surprised by the list, as we were, or at least by some of them. We were not surprised by number 4, however–eat a plant rich diet. After all, we are aware that cattle flatulence is a major emitter of global warming gases. In fact, the book notes that “if cattle were their own nation (and what a boring nation it would be, animals standing around eating a lot and farting–wait, there are large swathes of America just like that), they would be the world’s third-largest emitter of greenhouse gases.” Alas, we like BBQ too much and relish our Five Guy burgers (though relish is not one of the condiments we use) to become a vegetarian. But then comes news from Canada of an effort to genetically engineer a cow so it does not pass gas. “The Genome Canada project, led by Filippo Miglior at the University of Guelph and Paul Stothard at the University of Alberta, harnesses labs in the US, UK, Denmark, Australia, and Switzerland to help identify cows that produce fewer greenhouse gases, with the ultimate goal of distributing the responsible genes—conveniently transported in the form of bull semen—to areas that don’t have the resources to develop their own greener cows.” Perhaps someday we will be able to enjoy our beef without there being a beef about what it is doing to the environment.

The Price of Fun

Fun, as that great philosopher Ferris Bueller could tell you, is an underutilized commodity, perhaps more so than ever today. Children, who by all rights should be in their prime for having fun, are instead sent on forced marches of activities organized to the last second and given mounds of homework one would expect in a chemistry PhD, but not for a ten-year-old. And, our politics today are certainly not much fun unless you are of the same bent as the Marques de Sade. So perhaps it is high time to examine the price of fun. No not the metaphorical consequences of having fun you killjoy, but the actual cost. For that we turn to the World Economics Cost of Fun Index which as you see in the first chart below has gone up considerably since 2011. The index “is based on average end-user prices for typical recreational activities and items in national currencies indexed to January 2011 = 100.” When looking at individual countries it should be no surprise that the cost of fun has spiked in Russia in recent years  Does Vladimir Putin look fun? I don’t think so.* Fun is still affordable in China though it has gone up by 13% in the last year. In the last 12 months, fun has become cheaper in Japan and in the U.S. as well. So even as you work at your job this week, take care of your chores this weekend and help out your community in whatever way you see fit, take a moment and have a little fun. You never know, it could be more expensive tomorrow. 

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*though fun in Russia is cheaper in the last year–good times hacking into other countries apparently.

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