Archive for category: Uncategorized

Venezuela, Smart Companies and Cheap Places to Drink Beer

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Over three thousand years ago, ancient Babylonian shippers paid an additional fee to merchants so that they would be compensated should their shipment be stolen or lost at sea. and thus, insurance was created. An ancient papyrus scroll was recently discovered detailing a shipper’s complaint about the merchant’s stinginess in providing said compensation. Today, in the 21st century, International Need to Know is learning the same painful lesson that the insurance industry is not our planet’s most helpful, honest or fair business sector as we continue to deal with the aftermath of a human driver (we need self-driving cars!) running a red light and totaling our internal combustion steed. A certain insurance company should really replace their gecko logo with a snake. But we move forward nonetheless, whether by foot, pen, bike or pixel to explain oil is not the problem in Venezuela, explore where the smart companies are and tell you where you can find a cheap beer in this world. It’s this week’s International Need to Know, like an ancient Babylonian exploring the uncharted seas of world

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

Oil is Not the Lubricant for Venezuela’s Problems

Here at International Need to Know’s worldwide headquarters, our house is not made of glass.  So we do not mean to pick on anyone, but when we keep reading that Venezuela’s problems are due to continuing low oil prices, we can’t help but grab a small stone from our analytical quarry and at least lightly toss it at those making such misleading claims. The Skimm, a fine and enjoyable read, is but one example of those making this misleading assertion. In their daily email update they write that low oil prices are “good for your gas bill, very bad for Venezuela’s economy.” Yes, the decline in the price of oil certainly affected Venezuela’s economy. But the fall in the price of black gold affects all oil producers, from Saudi Arabia to Nigeria to Norway. However, only one oil producing country has completely empty shelves, the looming threat of starvation, power outages, deteriorating water conditions and the specter of chaos–Venezuela. The reason Venezuela is in these straits is not because of oil but because of misguided economic policies. From a convoluted currency system meant to encourage food imports but accomplishing the exact opposite, to instituting price controls to the government taking control over everything from soda making to supermarkets to food production, they have distorted and screwed up their economy. Venezuela’s current catastrophe is rooted in these and other misguided policies, not in low oil prices. The lower price of oil opened a view into the empty shelves of Venezuelan government thinking but it is not the cause of the country’s problems.

Where are the Smart Companies?

Not too long ago, we worried about the slow down in productivity growth all over the world. MIT’s Technology Review is also concerned, so much so that they went in search of the “smartest companies” in the world, compiling a list of the 50 smartest of the smart (see list below). By “smart,” MIT means companies that combine “innovative technology with an effective business model.” For our purposes we note that 64% of the companies on MIT’s list are based in the United States. In examining the smaller list of international businesses, we see that China has five companies on the list, validating our assertion that China does not get the credit it deserves for being innovative.* It’s slim pickings after China with both the UK and Japan having 3 companies on the list and Israel with 2.

*Though we admit that all five of the Chinese companies are businesses that took ideas from U.S. companies (Google, Amazon, etc) and recreated them in China with all the government protection that entails.

Most Expensive Cities for Expats

Not too long ago we spoke with a CEO of a Canadian company who complained about Americans saying they were going to flee to Canada if a certain one of our presidential candidates somehow was elected. The CEO’s complaint was that Americans felt they could just waltz into Canada as if we owned the place without worrying about Canadian immigration laws. For those Americans wishing to leave their country for reasons political or otherwise, they may want to study the chart below showing the most expensive cities in the world for expats. The actuarial/benefits company, Mercer, priced 200 items in 375 cities and determined that Hong Kong is the most expensive city in the world for expats. Illustrating how the world has changed over the last two decades, Asian cities dominate the top ten. We’re not sure what it says about INTN, but we have spent time in many of the 10 cheapest cities for expats, and wager we know how to find a cheap beer in cities expensive, cheap or otherwise.

Most and Least Expensive Cities for Expats

  

China Bears, Brexit and Positive Workers

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International Need to Know recently stated to someone that by the time we need to purchase a new car, self-driving vehicles will be ubiquitous and with the rise of car sharing platforms we may never need to buy an automobile again. But, the future has a way of making fun of us, and certainly the driver who ran the red light on Sunday and barreled right into our car, mocked our visions of the future. But not even being slightly wounded by a reckless driver nor the trials and tribulations of buying a new car and dealing with insurance companies keep us from fending off Chinese bears, worrying about Brexits and examining where the happy workers are. It’s this week’s International Need to Know, your fully autonomous purveyor of crucial international information.

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

Shooh, bears, shooh

Okay everybody, gather around the campfire–we’re going to tell you a story about…wait, get out of here China bears. Come on, get away from our garbage–Well, I guess we’re going to have to address these rude China bears who came crashing into International Need to Know’s pristine global campground. They are definitely out there spewing out various troubling data about China’s economy. Even the IMF has gotten into the act with concerns about the level of corporate debt in China, which is now 145% of GDP, a very high level indeed. The IMF’s first deputy managing director (just how many deputy managers are there at the IMF? We’re angling for the fourth deputy assistant managing director position) David Lipton said in a speech in Shenzhen earlier this week that corporate debt “…is a key fault line in the Chinese economy . . . And it is important that China tackles it soon.” Lipton notes that this is mostly a state-owned enterprise (SOE) problem with SOE’s accounting for 55 percent of corporate debt, far greater than their 22 percent share of economic output. He further notes that these SOE’s “are also far less profitable than private enterprises.” But it’s not just corporate debt that has the bears riled up. As you see below, China is facing its worst job outlook since the Manpower Group began its surveys in 2005. The China Bears also point out that private investment is now below 4 percent (see 2nd chart below). Of course, public investment has spiked in recent months, but this has the bears worried too since they believe China can’t continue to prime the credit pumps to grow GDP as they have in the past. Certainly China continues to pile money into infrastructure, spending more than the U.S. and Europe combined, but that’s partly a function of underinvestment by the U.S. and Europe. And, of course, others probably think this is smart Keynesian policy in times of an economic slowdown. China’s economy has slowed down and is unlikely to grow at its previous rates. But, at least as of yet, it is not crashing and there is still lots of robust economic activity and economic transition occurring along with its deep challenges. So, we welcome bears to our garbage and may even share some of our food and drink, but we’re not prepared to cede the entire campground to them yet.

  

  

Exit Stage…?

A week from today, the good people of the United Kingdom will vote on whether to exit the EU. As we write, the polls show those wanting to leave are in the lead. But we wonder if this will be similar to the Scotland separation election in 2014, where the polls indicated a toss up, but when it came time to pull the lever, voters found it difficult to vote “see ya later”. That being said, there’s a real chance that next week’s INTN will be delivered in a different world, one in which the EU is smaller. An even larger worry than the UK leaving is that their exit could set the stage for additional departures. A new Pew Center poll finds that 61% of the French have a negative view of the EU. That doesn’t mean, of course, that the French will vote to leave the EU. They may just want the EU to be reformed. In fact, one hopes the lesson learned, no matter which way the UK votes, is that the EU needs to reform itself, politically and in how it is structured economically. It is unfortunate that as the world in some ways is becoming more splintered institutionally, we live in an age of more and more transnational issues: climate change, global health challenges like the Zika virus, terrorism, Justin Bieber world tours and more. Perhaps the current institutions and transnational infrastructure are not fit to address these problems. But the answer should be to develop an infrastructure that will, not merely tearing down the ones we have.

    

Happy Workers

If you’re a tyrannical boss looking for where you can have maximum negative impact, move to India and run a company. That’s where we find the most employees who feel positive about their work. In fact, according to Atlas.com, in India 88% of employees feel positive about their work. The other 12% are more than likely customer service representatives for Comcast. Mexico comes in second and the US of A is third in percentage of positive feeling workers. On the other hand, more than half of Japanese employees do not feel positive about their work. While contemplating how you feel about your labors, examine the full list below.

    

India’s Fertility Rates, Trouble for Commodity Exporters and Mean Tourists

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Not too long after eating shrimp and grits this week, we saw that obesity rates are again up in the United States. But bigger news than how large Americans are is that you can now access thearchives of International Need to Know at the Gittes Global website. So skip that donut (beignets are better anyway) and peruse the wit and wisdom of INTN at your leisure. But even the launch of a new website did not prevent us from examining Indian fertility rates, what the fall in commodity prices has done to exporters and where the meanest tourists are. It’s this week’s International Need to Know, providing all the international news that fits in our expanded waist band.

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

The Turning of the Indian Screw

India is large. It is the second most populous nation in the world, trailing China by only 40 million people. We’ve pointed out that the world’s working-age population is getting smaller except in Africa and India. But things are changing in India. The total fertility rate (TFR) is now atreplacement level of 2.3 (in developed countries replacement level is 2.1 but India’s higher infant mortality rate and skewed gender ratio makes 2.3 replacement level).  In rural areas TFR is 2.5 but in the urban parts of India, TFR is down to 1.8.  Since India continues to urbanize, it is likely that soon India will be below replacement level which means over time we will see the graying of India just as Grecian Formula is being dabbed on so many other parts of the world. This won’t happen for a few years but when it does it will have the same slowing impact on GDP as it has in other parts of the world. It likely also implies that the world’s population, which the UN currently predicts to peak at 11.2 billion by the end of the century (how many sentient robots will there be by then? Will the UN keep track of robotic demographics? Will they have a seat at the Security Council table?), will peak at a lower level. For the next 25 years or so India’s population will continue to grow because death rates are falling which compensates for falling birth rates, but that larger population will skew older. This will be beneficial in some ways and present challenges in others. Demography is, if not destiny, certainly a helpful, enlightening guide.

Commodities and Exports

The drop in commodity prices has affected economies all over the world, but its most devastating effects have been on large commodity exporters. As you see in the chart below, commodity exporters’ GDP growth rates have trended down the last two years right in line with the decline in commodity prices. This has led to credit growth in commodity exporting markets. According to the World Bank, “…credit growth in commodity-exporting EMDE (EMDE is World Bank speak for “emerging markets and developing economies”) has been rapid, near the pace and levels of credit-to-GDP ratios associated with past credit booms.” The implication is that this credit boom could lead to a credit bust if credit growth continues unabated.  All of this, of course, is connected to decreasing demand in China. China’s economic transition and whether other emerging markets pick up the growth slack, will have profound impacts on other countries’ economies. Will the policy reactions to decreased commodity prices lead to financial crisis in a host of commodity exporting countries? We ponder the question while enjoying a cheap bowl of Cheerios.

  

Mean Tourists

We all know ugly tourists. In the 1950s Americans were accused of being ugly tourists, later it was Germans and then Japanese and recently it is the Chinese being so accused. It comes with the territory of becoming a prosperous country whose citizens start traveling the world, bringing their cultural peccadillos with them.  But who are the meanest tourists? Priceonomics.com dives into the data to tell us that Koreans are. South, not North (presumably North Koreans are not doing too much touring). The good folks at Priceonomics looked at data of online reviews of tourism and travel activities and found Koreans were more likely than other nationalities to post bad reviews. Of course, even Koreans were fairly positive overall with only 18% of their reviews of tourism activities being unfavorable. If you have an Airbnb rental, run a museum or some other tourist attraction, lure in the apparently easy-to-please Czechs, they give the most favorable reviews.

  

China’s Clean Energy Strides, Lazy Workers (?) and Where Smoking is Hot

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This week International Need to Know attended a discussion regarding International Conflict on a Cyber Battlefield featuring the author Adam Segal. There was much angst expressed in the audience at the vulnerabilities in our computer systems and how at risk we are to being hacked. We would give you more details but it was an off-the record discussion. Of course, our smartphones were probably hacked and the discussion immediately leaked to Gawker.com. But even as we madly strengthen our passwords and ponder how to convince Peter Thiel to fund our lawsuit against David Stern, we still examine clean energy strides in China, worry about why people don’t get anything done at work anymore, and eye where cigarette smoking is hot. It’s this week’s International Need to Know, the weekly newsletter that knocks down three pointers on important information around the world.

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

China Carbon Dating

China bears continue to circle our campsite but we ward them off for at least one more week as we look at CO2 emissions in China, with the caveat that there is a bear component to it. You may remember, if you pay attention to such things (which is our job here at INTN) that back in 2014, China announced “ambitious” carbon emission reduction targets. In fact, their aim was to limit coal growth use to 3% per year. They so far are easily achieving that goal with coal use actually decreasing in the last year. Now we can definitely view this as another underlying sign that China’s economy is slowing down and not growing at the alleged 6.7% growth rate (back bears, back!). But, there are also signs that growth in renewable energy is also playing a big part. In the graph below you can see non-fossil fuel energy sources (solar and wind mostly) are growing. You won’t be surprised that we believe the dotted projection line is underestimating the future growth of these energy sources as solar installations are growing at an exponential rate. The current total installed capacity of wind and solar reached 180GW in 2015 (the target was 140GW) .Even current installation rates mean that the existing 2020 target of 300GW will be reached by mid-2018, and you can bet that installation rates will increase over the next two years (go ahead, book your flight to Vegas). China also aims to have coal’s share of energy use fall to 62% by 2020. It’s already down to 63%, falling 1% every year since 2010, so the 62% target is likely to be reached before the 2020 goal. The energy world is changing faster than most realize, including in the world’s largest polluter.

Stop Looking at Facebook and WeChat

There are two ways to increase GDP. One is for your working-age population to increase so there are more people working and producing more goods and services. The second is for those workers to produce more than they previously did thanks to improved technology and business processes. As we noted in this space last month, for most countries, other than Africa and India, the working age population is decreasing or about to decrease. So that leaves increasing productivity as the way our world will boost GDP growth rates. Unfortunately, productivity growth rates are increasing at a much smaller rate than usual. There’s been lots of talk lately about U.S. productivity rates lagging but it’s not just in America. The whole world is experiencing a productivity slowdown. As you see in the OECD chart below, productivity is increasing at a slower rate in Japan, Korea, Germany and the UK, not just in the United States.  Automation may change that in future years, with good consequences for GDP but perhaps bad consequences otherwise, at least in the short run.  But the question is what has been going on the last decade that has so reduced productivity gains? Have the technology advances in recent years been ones that do not boost productivity unlike in previous decades?  If economists weren’t so busy watching cat videos on the Internet maybe we’d know the answer.

Where is Smoking Hot?

One of modern’s life’s great pleasures is being able to go to a bar or a concert and not have to come home smelling like cigarette smoke. I once half-joked during the anti-smoking law debates that I’d rather the person at the table next to me in a restaurant was shooting up heroin rather than smoking a cigarette–the former doesn’t particularly affect me but the latter’s second hand smoke certainly does. But, there are still more than 1 billion smokers in the world, the majority of them men.  And, in 27 countries, smoking is actually on the increase. They are mostly countries in the Middle East and Africa. Take a deep, clean breath and see the full list below.

African Lions, Vietnam Loves Trade & The Straddle Bus

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In 1977, when International Need to Know was but a mere lad, we attended the first Seattle Mariners baseball game ever in the concrete confines of the Kingdome. The Mariners lost that night and for much of the last 40 years have continued to lose in ways both conventional and confounding. So we are unaccustomed to the flurry of success in the first fourth of this season, including the barrage of runs last night and the walk-off home run the night before. But even adrift in a sea of victory, we still have enough wits about us to anticipate the roar of African Lions, chuckle at Donald Trump and Bernie Sanders’ worst nightmare and gaze with wonder at the latest innovation coming out of China. It’s this week’s International Need to Know, the weekly newsletter that even while looking in its basement for stray millennials, provides key information about the world for people of all ages.

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

African Lions

We recently wondered in this space about Africa becoming a prime location for textiles.  Africa is generally ignored in the news unless the subject is disease, corruption or war.  And yet, Africa is large and diverse. And it’s been growing. After East Asia, it is the second-fastest growing economic region in the world.  On current trends, Africa will grow 3.7% this year. The African Development Bank tells us that growth rates in Africa rose on average by 2% during the 1980-90s but by 5% in 2001-14.The growth rate has slowed a bit in the last year and a half due to commodity-reliant African countries being hit by the fall in commodity prices, but the growth rate is still above other regions. The growth is highest in East Africa followed by West Africa and Central Africa. We all know about the urbanization taking place in China and other parts of Asia, but the same thing is happening in Africa, only faster (but so far without the robust infrastructure). Since 1995, the population living in cities in Africa has doubled. African countries have lots of challenges going forward but those that build out infrastructure, institute economic reforms and provide strong education, could become African Lions like the Asian Tigers of yesteryear.

Trump and Sanders Worst Nightmare

Everyone knows the quote about history repeating itself (or if you don’t, you’re doomed to hear it again). Far less known is the notion that history likes to paint mustaches on us when we’re asleep.*  And, Vietnam offers a great example of it. President Obama is in Vietnam as we write, 40 years or so after America exited a war to stop Communism from spreading across southeast Asia. But, look at the poll below. Over 90 percent of Vietnamese say “most people are better off in a free market economy.” An equal number say trade is good. And 75 percent of the population have favorable views of the United States. Of course, the vast majority of Vietnamese were born after the U.S.-Vietnam war ended (go to Vietnam and ask about the war and they will ask, “which one?” There have been a number before and since the U.S. war). Nearly 70 percent of Vietnamese are under the age of 35. And with low labor costs, Vietnam stands to gain in world trade. When I was last in Vietnam, it was remarkable how many of the business people were counting on the Trans Pacific Partnership trade agreement to improve their economy. So, there’s reasons why Vietnamese are so market, trade and American friendly. Even so, the poll results are interesting and perhaps not so predictable from an Embassy rooftop in 1975.  

The Straddle Bus!>

We’ve given China bears lots of space in recent INTN editions but China is complicated and as we noted a number of months ago, it is an innovative place despite stereotypes to the contrary. So we focus this week on one of those cool innovations, the Straddle Bus. The idea was first broached in Shenzhen (one of the most entrepreneurial areas of China) a few years ago and now a Beijing company has picked up the baton and is building a life-sized model for Changzhou. They expect to start testing it this summer. Essentially the straddle bus “will run along a fixed route, and its passenger compartment spans the width of two traffic lanes.” Cars will be able to drive underneath it, thus alleviating traffic congestion. Passengers will load onto the bus at designated elevator stations. It will have a capacity of 1200 passengers, again reminding us of the scale of China. The engineers claim the costs are 16% of the cost of building a subway. Regardless, it’s very cool. Check out the video demonstration.

    

China, Endangered Plants, and Japanese Electrification

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Last night driving back to the worldwide headquarters of International Need to Know, traffic came to a complete halt. This is no longer an uncommon occurrence in this neck of the woods, even though it was after rush hour. We soon learned our delay was caused by a Beyoncé concert. But even Queen Bey was unable to prevent us from turning Lemonades into lemons and worrying about housing prices in China, despairing over endangered flora but ultimately brightening to electrifying news out of Japan. It’s this week’s International Need to Know, not needing to dope up like a Russian athlete to bring you the most important happenings of Beyon–er, our world.

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

Location, Location, Rembrandt

Last week, we were working with some Chinese investors looking for ROI here in the Seattle area. While walking in a residential neighborhood on our way to a meeting, one of the investors asked, “How much does a house cost in Seattle?” It’s a curious question, kind of like asking how much do paintings cost. It depends, of course, on the house–how large, where it’s located, does it have a view, does it have an antique Rembrandt in the attic? Chinese are looking to place their money in “safe” investments overseas now that large returns are no longer guaranteed in-country. China’s economy is definitely slowing, as we’ve pointed out in this space. More evidence of the slowdown came this week when provincial growth rates were reported. Of 31 provinces, 25 reported a slowdown from 2015’s year-on-year growth and 14 are undershooting their expansion targets. And these are the official statistics. What is really going on at the province level may be worse. Housing data is also showing a slowdown, although not in Tier 1 cities, as the chart below shows. Tier 1 cities in China saw huge inflation through 2015. Tier 2 and Tier 3 cities? Not so much. Which brings us back to our Chinese investor’s question. How much does a house cost? Here in Seattle we see housing prices continue to rise. In fact, that worldwide headquarters of INTN that Beyoncé prevented us from reaching in a timely manner? A house kitty-corner from HQ recently sold for about 50% more than its Zillow value. Values here are being driven up by lack of inventory but also by Chinese and other outside investors buying into the market. Seattle is becoming a Tier 1 city. As the world urbanizes, Tier 1 cities around the globe are likely to continue to experience housing inflation…right up ’til the moment they don’t. More on China’s housing situation soon.

Save the Plants

When worried about world encompassing environmental problems, photos of animals–the polar bear, or the Sumatran tiger or some other cute mammal or bird–are often used to make the point of how dire the situation is. But what about the cute fern or lonely lichen or other plants? Because as it turns out, far more plants are endangered than animals in our little world today. In fact, the International Union for Conservation of Nature claims that “there are almost as many threatened species of plants as fish, birds and mammals combined.” The flora may be in more trouble than we fauna which, of course, has implications for we fauna.

Japan is Electrifying

No, not their economy, though Japan’s economy surprisingly expanded by 1.7% in the first quarter, staving off recession worries. What we’re talking about is Japan’s robust electric car infrastructure. Japan now has more car charging stations than gas stations as you can see below courtesy of Forbes. Japan is now the proud home of 40,000 electric vehicle charging stations, more than four times the United States and now outnumbering the 34,000 Japanese gas stations. Nissan, with it’s electric Leaf, is helping to drive this infrastructure build-out. Of course, Japan’s geographic territory is much smaller than the United States, making it easier to develop its electric infrastructure. But this growing and large number of electric charging stations is indicative of the change that is coming to our auto infrastructure. Now the key question is how will Japan generate the electricity to power the cars?

Corruption, Renewable Energy Investments & Where People Vacation

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Perhaps it’s no coincidence that in the same week UFO aficionados came out for Hillary Clinton, and in the same year that Mulder and Scully made a triumphant return, NASA announced this week that they have discovered another 1284 planets using the Kepler telescope, more than doubling the number of known planets. Apparently nine of these newly found planets may have the characteristics needed to sustain life, bringing the known total of so-called “Goldilocks” planets to 21. But even as we wondered which presidential candidates we would like to send to one of these 21, it did not distract us from ferreting out corruption around the world, inquiring into who is spending money on renewables and discovering where all the tourists are coming from. It’s this week’s International Need to Know, your Area 51 of unseen information about our own so far habitable planet.

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

The Gift of Trade

We’ve had the occasion to talk with lots of exporters in recent months about their challenges and opportunities in exporting. Many of these companies noted the challenge of Byzantine rules in overseas markets. Regulations in these countries seem to change haphazardly in ways that adversely affect the companies’ ability to do business and often in ways that are beneficial to their domestic competitors. A few companies even touched on the corruption in the markets they sell to, not calling them fantastically corrupt as David Cameron put it to the Queen this week, but just your everyday type of corruption, which is more than enough distortion for your average business to deal with. How pervasive is corruption? The World Bank quantifies the corruption problem in the chart below. In interviews of more than 130,000 firms across 135 economies, the World Bank found that “1 in 3 companies identify corruption as a major constraint to operating their establishments.” Nearly 20 percent of these businesses said they are expected to give gifts to public officials in order to “get things done.” None of this is new, of course. But it is occurring in a world in which trade rules are under attack, especially in the United States. Ironically, we probably need more trade agreements (with real teeth), not less.

Renewing Investments

Show me the money. This week we do so in clean energy. Investments in renewable energy continue to be robust totaling $206 billion in 2015 and for the first time more than half of all new generation capacity came from renewals. Regular readers of INTN will not be surprised given our predictions in this space that solar will dominate energy generation within 20 years. China, the world’s biggest polluter was also the biggest investor in renewables at $103 billion. The U.S., the second-largest polluter, was also the second-largest investor in renewables at $44.1 billion. Ahh, sweet symmetry. The rest of the top investors are displayed below in all their technicolor glory courtesy of the Frankfurt School UNEP Center. But it’s not all rosy for the renewable energy market. The report by the Frankfurt School notes that more than half of the world’s coal-fired power station capacity is less than 23 years old. Since coal plants usually have 40-year lifetimes, and, as Frankfurt notes, “the costs of running them once built is much less than the cost of constructing new fossil fuel or renewable capacity,” we, like bad kids on Christmas, probably have lots of coal burning in our future with all the consequences associated with it.

 

  

Vacation

As Memorial Day looms here in the United States, we’re headed into prime tourism season. Soon swarms of rabid tourists will descend on museums and heritage sites with selfie sticks and phone cameras eagerly at their grasp. A year or so ago, International Need to Know found a ticket booth with no line at the Eifel Tower. When a large group of Chinese tourists saw our discovery, we were nearly stampeded to death. So we are not surprised by the answer to the question of who are the world’s top tourism spenders. It’s not even close. Last year Chinese tourists spent $292 billion, more than twice what American tourists spent and triple the expenditures of German tourists. This large sum is partly because of the number of Chinese tourists and partly because Chinese tourists spend more per trip than other vacationers. The U.S., however, continues to be the largest destination for international tourists. Tourism, by the way, is an export, and an increasingly important one. International tourism now accounts for 7% of total world exports and 30% of service exports. In the future, when robots rule the world, will we all be tourists or will we beWALL-E-style inhabitants of this planet?

Technology Democratization, Dual Citizenship and Where Your Clothes are Made

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The Broadway sensation Hamilton received a record 16 Tony nominations this week leaving the John Jay Society seething in resentment. All of this raises the question of which of today’s current policy and political figures will inspire musical tributes two centuries from now? We’ll take your suggestions even as we try to explain why you may want to hide your face, determine where the global citizens are and discover where your clothes are made. It’s this week’s International Need to Know, providing neither song nor dance as we try to make sense of this stage of a world in which we all play a part.

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

The Continued Democratization of Technology

Just last week we remarked on how technology spreads more quickly and is developed in more parts of the world than it was 30 years ago. Fresh evidence of that comes from Russia where big strides in facial recognition were recently made.  A Russian software developer named Andrey Mima claims he was able to use nothing other than photos of two women from 2010 to track them down. He inputted the photos into his perhaps inelegantly yet succinctly named software, Findface, and the software found the two women on Russia’s version of Facebook (calledVkontakte). The face recognizing algorithm was originally developed by a Russian start-up calledNTechLab. This small, new Russian company beat out Google and other big players in theUniversity of Washington’s MegaFace face recognition challenge. Put aside for a moment worries about privacy and the fact that there is a contest called “MegaFace” and understand that innovation and technological development happens all over the world nowadays. Such democratization of technology and its development will have a big impact on the world economy, security issues and poverty, to name just a few. Okay, now you can go back to worrying about the privacy implications (see the linked story for one example) of this particular technology while International Need to Know stays busy deleting all known photos of itself from the Internet.

Dual Citizenship

If our music streaming service is informing us correctly, John Lennon once sang “Imagine there’s no countries, it isn’t hard to do.” For most people, it actually is pretty difficult to imagine. People think of themselves as Americans, or Canadians or Brazilians or any number of other nationalities. But there are indeed many who think of themselves as global citizens first as a new poll by Globescan for the BBC shows in the chart below. The poll was conducted in 18 countries across five continents. The results defy simple stereotypes. More people in China see themselves as global citizens than do Americans, Canadians or British. A few weeks ago, we noted the economic challenges in Spain so perhaps we should not be surprised that 45% of Spanish “strongly agree” that they see themselves more as a global citizen then a citizen of Spain. Of course, ask a Spaniard if they are a part of Real Madrid nation and the chart may blow up entirely.
  

Made in ?

We probably all remember 15 years ago heading to our favorite clothing store and noticing that everything was made in China. Unless you joined a nudist colony, you were wearing clothing made from that ever fascinating, complicated country. Today, China still accounts for 41% of all apparel exports as you see in the chart below from the World Bank’s Stitches to Riches Report (Stiches to Riches sounds like a cleaned up Nicki Minaj lyric). But, as China diversified it’s economy into electronics manufacturing and other industries, apparel now only accounts for seven percent of China’s exports. China’s share of global apparel exports are likely to fall too as labor costs in China rise. The always stylishly attired INTN, is already seeing anecdotal evidence of this. Today, when shopping for new duds, the “Made in China” tag is not nearly as ubiquitous. Instead we see tags indicating Bangladesh, Vietnam and other countries as the source of the clothing. We often wonder if certain African countries may enter the picture in the future. Low labor costs in Africa combined with China’s investments in Africa seem like a winning combination for a future apparel industry.

India, Face Recognition and Part-Time Dutch

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Some weeks the world can be especially disorienting. As we continue to reconcile ourselves to a world without Prince, a fall election featuring Donald Trump and a Seattle Mariners team in first place, we still find time to take a passage to India, wonder about Moore’s Law of Mad Scientists and ponder where the part-time help is located. It’s this week’s International Need to Know, providing a Sign o’ the Times in a purple world of international information.

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

An Economic Passage to India

India has many challenges going forward, including ongoing infrastructure deficits, large environmental challenges and a bureaucracy as skeletal and large as the Tyrannosaurus Rex in the lobby of the Natural History Museum. And yet India has been doing relatively well in recent years. So far in 2016 they have one of the world’s fastest GDP growth rates; last year they were also near the top with GDP growth of 7.6%. And, India is now, as you see in the chart below, the largest recipient of Greenfield investment in terms of total value.* China still has more projects but India pulled in more in value. India is a fascinating place to watch. Twenty years ago, even ten years ago, people would compare China and India and predict which would grow and develop faster. China won that race easily. China might be over investing in infrastructure, but India invested far too little. And, India’s famous bureaucrats have hamstrung growth there for decades. Prime Minister Modi is trying to break the bureaucracy. It’s an intimidating, entangling challenge, but if he can succeed, then India may win the next few decades in a different way from how China won the last two. Even as we continue to eye India’s economy, sometime soon we’ll delve deeper into India’s pollution and environmental challenges.

    

You Have Lost Control

America’s use of drones in Afghanistan have been controversial for a number of reasons. But that has not slowed down the use of them. In fact, last year marked the first time that more weapons were fired from drones than from traditional aircraft. And so far this year, “drone strikes account for 61% of attacks in Afghanistan.” The number was 5% in 2011, a mere five years ago. But we are not here to comment on military strategy, but to note that the world itself has indeed changed lots in the last 5 years. Countries do not have monopolies on advanced technology like they once did. Or at least the monopolies are short-lived nowadays. Five years ago, 11 countries were deploying drones. Today, at least 57 countries have and use drone technology. The spread and adoption of new technologies continues to accelerate.   Access to powerful technology is much more widespread. It reminds me of Moore’s Law of Mad Scientists: “The minimum IQ required to destroy the world drops by one point every 18 months.” Enjoy your afternoon!

Who is Working Part Time

The workforce is changing in recent years we’re told. There’s the so-called Gig economy full of Uber drivers, freelancers for hire and others. In addition, during and after the Great Recession data pointed to lots of underemployment. People who lost their jobs couldn’t find the same level of employment or in some cases had to rely on part-time work. In other cases, part-time work is just what people wanted. Which countries have the largest percentage of part-time workers? The Netherlands, by far, especially for women. Labor participation rates in the Netherlands are very different than in the E.U. as a whole, with 26.8% of Dutch men and 76.6% of Dutch women working less than 36 hours per week (which many in workaholic America would consider part time) as opposed to 8.7% of men and 32.2% of women in the E.U. as a whole working part-time. The full list is below for your pleasure and study when you’re not working full time.

 

Confusing China, Peak Oil (Usage), Where are the Cynics

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Many years ago I was traveling to Melbourne, Australia for work and brought gifts for some of the people we would be meeting with. Unbeknownst to me, the gifts–glass art work made by local artists–contained plants pressed between the glass. Australia is very rigid about plants and animals coming into their isolated continent and my gifts were confiscated at the airport. I was a very unwise man bringing neither frankincense nor myrrh. So I had some sympathy and certainly nostalgia when viewing Johnny Depp and Amber Heard’s dog video released this week. But even tough-minded customs officials can’t stop us from discussing the always confusing China, presenting more evidence of peak oil usage and showing where in this great big world of ours the optimists can be found. It’s this week’s International Need to Know, your neither optimistic nor pessimistic but merely clear eyed if somewhat amused look at what’s important in the world.

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

The Ever Confusing China

Surprisingly*, last week China announced that GDP growth rates for the first quarter were right in line with expectations–an annualized 6.7% growth rate. Others pointed out this growth was built on a shiny new skyscraper of credit. In fact, as you see in the chart below, China’s first quarter financing was as large as entire countries economies such as Indonesia and the Netherlands. That’s misleading a bit, of course, since China’s scale makes most things seem small in comparison (though Indonesia is the world’s 4th largest by population). Nonetheless, total credit in China in the first quarter was CNY7.5 trillion, up 58% year over year. That’s about 46% of nominal GDP, a record level for China. Maybe GDP growth really is at 6.7% (some independent experts estimated 4%) but if so more and more credit is needed to achieve that growth rate. GDP growth appears to be driven by government spending and bank loans (ahh, the dark deep waters of China’s banks that we will continue to explore) with government spending rising 16.9% in the first quarter. Of course, this may be smart Keynesian policy in an economic downturn. But for how long can GDP growth be propped up with credit?  Time, that rascally ever marching dimension, as always, will tell.

More Signs Peak Oil Usage is Coming

We noted in this sacred space a few months ago that we are nearing peak oil consumption (not production). Today comes more evidence for this with the news that, “Saudi Arabia is raising $10B from a consortium of international banks as it embarks on its first global debt issuance in 25 years.” For the first time, Saudi Arabia is becoming dependent on foreign capital. At the same time, the country is building a sovereign wealth fund using $108 billion from its investments in local companies. The idea apparently is to start investing around the world through the sovereign wealth fund and use the returns as revenue for the state budget, a budget that increasingly has less oil money to spend. Saudi Arabia is becoming like a public pension fund. Other oil countries are also now borrowing on the world market, including Oman and Qatar. The changing nature of the oil markets (there may be short and even mid-term price spikes but as we noted last month, oil prices in the long term will stay low), is forcing changed interactions between oil producing states and the rest of the world.

Where the Cynics Aren’t

In the throes of a political campaign and on the washed up shores of cynicism, we hear lots of pessimism out there nowadays. In the midst of rapid technological change, environmental concerns and terrorism threats, lots of people think the world is getting worse, not better. But someone out there must be optimistic, right?  Below is a poll showing the share of the population who think the world is getting better. China tops the list. For hundreds of millions of Chinese, the world is indeed better than it was thirty years ago. Whatever the trade-offs that came with that, it is a good thing these hundreds of millions are doing better and rose out of poverty.

*Someone needs to create a sarcasm emoji**

**  

RIP

 

–Note some design changes to INTN.  More to come soon, including a website where you can find INTN archives–

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