When I saw the story that Japan was going to switch to wooden beer bottles and paper straws, I was reminded of this story and this story. I hope it is not a case of ‘from the frying pan to the fire’. The difference is that paper is biodegradable and that trees can be grown. We need to be sensible about these things and not dogmatic or religious. Being religious about many things, including being irreligious, can be harmful.
My friend and co-author Gulzar Natarajan pointed me to an article by Gillian Tett in FT on how private equity has grown over the years when public markets and public listing were the fashion since the Eighties. I then caught up with a few others of hers. One of them was on what it costs humans to be able to use their modern technological gadgets and devices that are founded on ‘artificial intelligence’.
That article had a link to this one: ‘Anatomy of an AI system’. It could be one of the most important articles you would read in 2019.
To me, the article underscores, for the umpteenth time, the fact that humans are incapable of grasping (let alone comprehending) what they unleash. They wade into waters that they can scarcely fathom and the splash and the spillovers are something that they cannot ever hope to get a grip on or control. Sample this:
it took Intel more than four years to understand its supply line well enough to ensure that no tantalum from the Congo was in its microprocessor products. As a semiconductor chip manufacturer, Intel supplies Apple with processors. In order to do so, Intel has its own multi-tiered supply chain of more than 19,000 suppliers in over 100 countries providing direct materials for their production processes, tools and machines for their factories, and logistics and packaging services. 20 That it took over four years for a leading technology company just to understand its own supply chain, reveals just how hard this process can be to grasp from the inside, let alone for external researchers, journalists and academics.
We are doomed not because we have damaged the environment, not becasue we are running out of water; not because we have run up too much debt; not because we have accumulated too much wealth in too few hands but because we know not and refuse to admit we know not.
Is a case for ‘social cohesion’ racism? If comments by some of the readers are anything to go by, then the answer seems to be ‘yes’. But, this blogger is not clear that it is. It should be possible to have constructive debates in families, in societies and in nations on limits to charity.
Nations created out of communities which, in turn, were created out of tribes or groups have their own character. It is natural to want to preserve that. Within that framework, one can be generous and accommodate strangers, the persecuted, the able, the skilled and the rest. But, when the latter threatens to overwhelm the former or when the former feels threatened, it is time to have a discussion on limits.
In short, there has been and there has to be a core for each society or nation. Otherwise, societies and countries will become the equivalent of ‘travellers’ bungalows’. That will be an existential crisis for societies.
The article in FT on the tough stance adopted by the Centre-Left Social Democrats in Denmark is an important read. Indeed, one can have a seminar for a day or two on that. The Centre-Left immigration spokesperson is the son of an immigrant himself – Ethiopian father and Danish mother.
These remarks of his are central to the entire article:
The areas where the migrants are moving to are classically Social Democrat areas. So typically it will be Social Democrat voters who will have kids in schools that will have problems, typically skilled and unskilled workers who will have new colleagues. This is challenging the social cohesion in the welfare state,” he said [Link]
The conflicts and the challenges faced by open-ended immigration are borne by the poor and the marginalised in those nations that have had a history of being open to immigration and asylum seekers.
That these nations too have their poor and marginalised- even if only in relative terms – is, in turn, a problem of the model of economic organisations that countries have adopted or have been forced to adopt – capitalism without social characteristics.
One can discuss the multiple strands of implications that the article throws up. It is not just about Denmark. That is the ‘beauty’ of the article/story.
Finally, one commentator captured the problem in public debates on these issues:
So, unless you’re an open-borders fanatic, you’re a Nazi? No wonder the votes are migrating to so-called populists.
This is the mistake that the so-called ‘do-gooders’ are making. Their readiness to paint all those who do not agree with their positions as dangerous demagogues or right-wing populists shuts out adult-like discussion on important matters. That is the toxic strawman that the so-called Liberals set up to shut all necessary discussions on the topic.
In doing so, they give rise to the ‘populism-nationalism’ that they claim to abhor or detest. That seems rather daft to me.
It is important to recognise that these are not just issues of budgets or economic viability alone. These are legitimate existential questions for ordinary people.
Postscript: Over the weekend, my friend Srinivas Thiruvadanthai had shared an article by Reihan Salam of the Manhattan Institute on India, written for ‘The Atlantic’. Mr. Salam has an interesting book, ‘Melting pot or Civil War’. Sounds interesting. I have just ordered it.
As India’s new cabinet was sworn in on May 30 and the portfolios announced on May 31, one of the surprises was the appointment of Dr. S. Jaishankar as the new External Affairs Minister. His speech after his appointment as Ambassador to the United States in January 2014, delivered at Carnegie Endowment for International Peace was rather brilliant.
Apart from that, this post is about advice many have given the new government. TCA Srinivasa Raghavan tells Modi to embrace capitalism.
Srivatsa Krishna packs a lot into one column in THE HINDU. His final point that this was not a mandate for incrementalism is correct.
It is about NBFCs, credible budget and improving agricultural terms of trade for Sajjid. But, it is mostly high-level stuff.
Neelkanth Mishra highlights four areas: high dependence on imported energy, public sector banking, foreign capital inflows (is he obliquely calling for liberalisation, including of portfolio flows?) and transparent statistics.
Shankkar Aiyar gets high marks (from me) for being very specific and actionable.
My piece in MINT talks about the importance of getting the process of governance right (about administrative reforms and the organisation of the Cabinet, etc.). I doubt if Cabinet formation has taken these on board.
Of course, in February 2019, I had spelt out policy priorities for the new government in ‘Swarajya’. That was neutral.
The draft new education policy has been submitted to the government by a Committee appointed by the government. A news-report is here. Worth going through and commenting.
Very good news on primary education outcomes in Uttar Pradesh (ht Niranjan Rajadhyaksha and Anirudha Dutta)
I stumbled upon the website of CMG and Mr. Steve Blumenthal’s weekly missive called ‘On my radar’. He had penned one of his recent letters based on David Rosenberg’s presentation at the John Mauldin’s Strategic Investment Conference. Must attend one of them soon. At least, an impressive array of speakers.
One thing one has to like, admire and envy about David Rosenberg is that in 2011 or so, he switched to being an equity market bull and rode the wave all the way up to 2018. He has again turned bearish now. Full credit to him for such intellectual openness. It requires a lot of discipline and intellectual integrity to be able to switch.
This is a clear case of seeing things as they are likely to be rather than as what one likes them to be. Not easy at all.
The presentation and the slides are, as usual, very informative and perceptive. I have a minor/major quibble about the causality attributed to Federal Reserve tightening for economic recessions in America. That is a false framework, in my view.
Recessions happen not because the Fed hikes interest rates. The Federal Reserve tightening merely confirms that the cycle had run its course. The Fed’s mistake is not that it overtightens but that it does not tighten enough and early. Indeed, what it does is to tighten too late and even then it does too little only. But, that is enough to topple the apple cart of the economy because, by then, it had accumulated so many excesses that it does not need too many excuses to topple over.
So, who makes recessions in America? It is the Federal Reserve and financial institutions that pay little heed to accumulating risk and passing them on to the rest of the society. The Federal Reserve is still the villain but not with its ‘restrictive’ or ‘normalisation’ stance but with its ‘low and easy for long’ stance.
‘Blaming the Fed’ for recessions plays into the hands of politicians and the financial market types who would prefer a perpetual flow of funds at cheap rates. They can earn the returns and pass on the risks to the broader society and taxpayers.
In response to the criticisms that the Fed tightenened and precipitated a recession, the Federal Reserve eases aggressively and keeps rates too low for too long in the next cyle. That is what the Federal Reserve did in 2001-07. The result was 2008. Again, the Federal Reserve has repeated 2001-07 between 2009 and 2017 and the result is likely far worse.
This long article in Quartz on the closure of branches in rural Scotland by the Royal Bank of Scotland is well worth a read. It is an interesting case study on many things related to business, economics and society.
One of the important take-aways in this is credibiity, trust and integrity. RBS promised that it would not close a branch if theirs was the last branch left standing in a community and proceeded to do exactly the opposite.
This is not how one wins back trust for capitalism.
Incidentally, the article has many useful links.
‘The Economist’ magazine has recently received some flak for listing shrinking imports as one of the reasons for good economic growth in Japan. See here.
But, ‘The Economist’ is almost breaking out into a dance on the jobs boom in OECD nations. Fair enough. It is an important story.
Wondering if it has anything to do with declining global trade? I am being cheeky here, of course, in phrasing it that way. More seriously, the question is whether it is due to the re-shoring of production and decline in export volumes from emerging economies. To be fair, the latter is a hypothesis and I need to check some data. I am just merely writing based on memory from the shrinking trade surplus of China and also shrinking export growth from India.
Of course, China’s export growth might still be good but its second derivative might be negative.
But, ‘tongue-in-cheek’ remarks apart, it is important to see if manufacuring jobs have gone back to the West and if that is part of the jobs boom that ‘The Economist’ is talking about. In that case, this SOS from Michael Bloomberg to stop Trump on trade might be a bit unnecessary.
Manufacturing employment was declining in the US in absolute terms and as % of overall employment. The low was in February 2010 at around 11.45 million jobs and in April 2019, it stood at 12.838 million manufacturing jobs. Since January 2017 – when Trump took office – manufacturing has added some 470,000 jobs.
In contrast, the second Obama Presidency (not the first one – that might be harsh, because of the 2008 crisis) saw 372,000 manufacturing jobs added.
[Postscript: Related and Unrelated news is that self-employment improves mental health both for those switching out of regular jobs and for those who were earlier unemployed. See here.]