What Year in History? A Fun Way to Understand Development in India

Ajay Shah, Renuka Sane and Ananya Goyal have a very interesting blogpost out, the title of which is “What year in the history of an advanced economy is like India today?”

India has been stepping out from poverty into middle income. It is estimated that the proportion of persons below the PPP$1.90 poverty line has dropped to an estimated 87 million in 2020. In thinking about India’s journey, it is interesting to ask: In the historical journey of advanced economies, What year in the history of the US or UK roughly corresponds to India of 2021? This is a good way to obtain intuition on where India is, in the development journey.

https://blog.theleapjournal.org/2021/08/what-year-in-history-of-advanced.html

It’s a good blogpost, and the section before they get to comparisons about GDP is worth reading in full, because they come up with a good set of warnings about overdoing analysis like this. Read it, but we’ll get down to the fun part right away. As they mention in the blogpost, India today is at about 6800 dollars per person in terms of GDP, adjusted for PPP and inflation. When in its history was the UK at this point? What about the US? Well, the blogpost gives the answers, but I prefer to show you screenshots of my favorite software, Gapminder:

And I won’t show you the United States here, but it’s around the same point – the late 1800’s, in effect. Or put another way, if you want to use a this very simple way of asking how long to go before we reach the same level of per capita GDP as the United States, we have about 140 years to go.


And Gapminder, of course, has the ability to allow you to do this for every single metric that is available on the software. The blogpost written by Ajay Shah, Renuka Sane and Ananya Goyal speaks about asset ownership and women’s labor participation as other things to compare India’s current level of development with America’s past – but you can, of course, take a look at whichever metric you want.

This blogpost reminded me of a chart that The Economist had come up with earlier:

https://www.economist.com/graphic-detail/2011/10/03/chasing-the-dragon

As with many charts from The Economist, it takes a while to get what is going on, but the chart is worth that effort. Here’s a quick explanation to get you started: life expectancy at birth for China is 73. India is at 65. And China was at 65 36 years ago. Once you get this, the other rows in the chart become easy to interpret. Note that this chart was published by The Economist a decade ago.


These sort of analyses are fun, but of course one shouldn’t take them too seriously. There are other things that are at play beyond the data points that are worth taking into account, but are difficult to quantify. And most notable among these is culture.

That is, sure, China was at 65 in terms of life expectancy 36 years ago, but that doesn’t necessarily mean that we will take even approximately the same amount of time to reach 73. Could be lesser, could be more – and that because of changing technology, different culture, different political structures, different – well, a whole host of things.

But this much is true: both the blogpost that I cited and the chart above shows that we have, as the poet put it, miles to go before we sleep.


By the way, a fun exercise if you are a student today is to see if you can recreate The Economist’s chart updated with today’s numbers. Give it a shot, why don’t you?

The Rules of The Game

A fascinating, thought-provoking thread on the recent Chinese crackdown on tech. We covered this earlier this week, but the thread is worth reading and reflecting upon. Also note Lillian Li‘s background, if you are a student of economics. Studying development economics is not “cool”, got “nothing to do with finance”? Think again. Or, at the risk of being a little meta, ask yourselves about the rules of the game.

The Chinese Tech Crackdown, Take 2

On Tuesday, I ended my post with this:

At the moment, and that as a consequence of having written all of this out, this is where I find myself:
China is optimizing for power, and is willing to give up on innovation in the consumer internet space. America is optimizing for innovation in the consumer internet space, and is willing to cede power to big tech in terms of shaping up what society looks like in the near future.
Have I framed this correctly? If yes, what are the potential ramifications in China, the US and the rest of the world? What ought to be the follow-up questions? Why? Who else should I be following and reading to learn more about these issues?

https://econforeverybody.com/2021/07/27/the-three-article-problem/

How might I have been wrong? V Ananta Nageswaran and Nitin Pai wrote posts recently that helped me learn about some answers to at least the first of my questions above.

Let’s find out how I might have been wrong!


Noah Smith had hypothesized that the tech crackdown is because China’s goals are about asserting its power internationally. And not soft power, but the tanks and boots on the ground type power.

China may simply see things differently. It’s possible that the Chinese government has decided that the profits of companies like Alibaba and Tencent come more from rents than from actual value added — that they’re simply squatting on unproductive digital land, by exploiting first-mover advantage to capture strong network effects, or that the IP system is biased to favor these companies, or something like that. There are certainly those in America who believe that Facebook and Google produce little of value relative to the profit they rake in; maybe China’s leaders, for reasons that will remain forever opaque to us, have simply reached the same conclusion.

https://noahpinion.substack.com/p/why-is-china-smashing-its-tech-industry

Nitin Pai disagrees:

Now, it’s unclear if the opportunity costs of talent are so stark in China that the government must crack down on consumer internet companies in order to incentivise people to get into hardware. But Smith’s explanation is consistent with the popular view that China’s leaders are astute and inscrutable strategists who think really long term.
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My answer is simple: it’s about political power. In fact, if we frame the question differently, the answer becomes readily apparent: “Why is the autocratic leader of the Chinese Communist Party attacking media companies that directly reach almost everyone in the country?” Because size, reach and control of consumer data gives them narrative power comparable to what the Party has. Further, the ability to tap foreign capital gives them more freedom, albeit of the kind with Chinese characteristics. The Party doesn’t like that. And Xi likes it even less. That is why he moved aggressively to pre-empt a challenge to the Party’s narrative dominance and preserve its monopoly on power.

https://www.nitinpai.in/2021/07/27/why-china-is-attacking-its-consumer-internet-companies

Another way to think about it: it is about soft power, but the soft power that the CCP would like to project to its own people. There is only one storyteller that shapes the societal narrative in China, and anybody else who wants to play is going to be cut down to size. Ruthlessly.

(Of course, it is not just about soft power being projected to its own people. But nobody in China is crazy enough to want to play the hard power game with the CCP. That’s a well established monopoly. But Nitin is saying that the CCP wants all aspects of power to be within its complete control, soft and hard.)

As he puts it towards the end of his post:

It’s consistent with what it has been doing since Mao Zedong’s time: ruthlessly cutting down challenges to its hold on Chinese minds.
That’s it, folks. Nothing more to see here.

https://www.nitinpai.in/2021/07/27/why-china-is-attacking-its-consumer-internet-companies

Ananta Nageswaran also blogged about this yesterday:

In the meantime, a blog post by Noah Smith, an economics teacher and a (former?) columnist for Bloomberg wrote that China’s crackdown on consumer-internet companies was to ensure that China’s financial and intellectual resources were not diverted for creating low value addition. It did not strike him that such an explanation – if it were true – did not do any credit to China. It reeks of central planning and omniscience. Two, even if it were true and even if it was meant to be a benign explanation, malign explanations cannot be ruled and need not be ruled out.
Mutually exclusive explanations help keep the narrative simple and, two, it helps make the narrator appear smart because he/she has figured out the ultimate explanation. More often that not, reality is grey. Or, it has many shades.

https://thegoldstandardsite.wordpress.com/2021/07/28/fintech-edtech-and-china/

In other words, he’s saying that even if what Noah is saying makes sense, there is more to it than that. It’s not just the opportunity cost of having some of the best minds in China work on consumer tech. What else might it be? Ananta Nageswaran finds himself in agreement with Nitin Pai:

I agree. It is political power and the interpretation (of Xi and correctly so) that information (Nitin calls it mindshare) about people’s behaviour that these companies have give them the ability (and the chance) to set the narrative later, in Xi’s thinking, seizing it from the CCP.

https://thegoldstandardsite.wordpress.com/2021/07/28/fintech-edtech-and-china/

A minor point I would like to make here: I don’t think information and mindshare are the same thing, though they certainly are related. The information that tech firms have allows them to shape (sometimes in entirely unexpected ways!) the narrative, and therefore influence mindshare. Information is the tool and mindshare is the outcome – or at least, that is how I see it.

Please read Sanjay Anandram’s quotes from that blogpost too. I learnt about (and am going to shamelessly borrow) the RFRE principle.


So is it Noah’s story, or Nitin and Ananta Nageswaran’s? Regular readers know what’s coming next: the truth lies somewhere in the middle! Or at least, that’s my take, and it seems to be Ananta Nageswaran’s as well:

Of the three explanations that have been on offer, Noah Smith’s is the least persuasive. In some respects, Nitin and Sanjay are aligned and they diverge in some other aspects.
As always, the real motivation behind some of the recent decisions of the government in China will have elements of all three and more.

https://thegoldstandardsite.wordpress.com/2021/07/28/fintech-edtech-and-china/

To a student reading this: spectrum based thinking is a gift. Reasonable people can and should argue about where the truth lies, but always think intervals, never point estimates.

And having read all of the pieces that I have linked to across these two posts, I find myself in the same space on the spectrum as Ananta Nageswaran. That is, it’s not just the Noah Smith/Dan Wang argument at play (regarding which, Noah has updates. Scroll to the bottom of the post where he links to pieces that bolster his argument). But it is more about the CCP asserting its power.

Ananta Nagewaran ends with a Bruno Maçães quote: “the main players compete not under a common set of rules but in order to define what the rules are”.

It is a weird coincidence, but I just introduced some students to Frederich List yesterday. The more things change…

Taiwan, China and TSMC

Let’s say you knew nothing about Taiwan, China and TSMC. Where to start?

You don’t really hear about Taiwanese pop music, TV, or other pop culture. Taiwanese food exists, but except possibly for bubble tea, most Americans probably wouldn’t recognize it.
This seems like something that ought to change. Most importantly, because Taiwan seems really cool. But also because it’s geopolitically important, because it’s probably the most likely flashpoint for great-power war.

https://noahpinion.substack.com/p/taiwan-is-a-civilization

Flashpoint for a great power war? Unfortunately, yes:

Taiwanese President Tsai Ing-wen’s election in January 2016 upended Beijing’s plans for reconciliation with the Nationalists. Tsai, whose Democratic Progressive Party was founded on the promise of independence, refused to accept Ma’s position that both sides belong to “One China.” Beijing responded by cutting off communication, curbing travel and resuming efforts to lure away Taiwan’s few remaining diplomatic partners. Beijing has also withdrawn its support for Taipei’s participation in global bodies such as the World Health Assembly and pressured airlines, retailers and other multinationals to revise policies that treat Taiwan as a country. More recently, the People’s Liberation Army has stepped up exercises around the island, including “encirclement patrols” and incursions into Taiwan’s air defense identification zone.

https://www.bloomberg.com/news/articles/2021-01-27/why-taiwan-is-the-biggest-risk-for-a-u-s-china-clash-quicktake

Ok, so that would be worrying, but a great power war? Because of chips. Microchips, to be more precise. And manufactured by a firm that you may not have read of: TSMC. Don’t blame yourself if you haven’t heard of it – and even if you have heard of it, this chart will still be informative:

Original Article in The Economist is here.

I don’t know about you, but I was amazed by that chart.

From that same article, here is additional information about the firm:

The most important firm in this critical business is Taiwan Semiconductor Manufacturing Company (TSMC). It controls 84% of the market of chips with the smallest, most efficient circuits on which the world’s biggest technology brands, from Apple in America to Alibaba in China, rely to make their snazzy products and services possible. As demand for the most sophisticated chips surges thanks to the expansion of fast communication networks and cloud computing, TSMC is pouring vast additional sums of money into expanding its dominance of the cutting edge.

https://www.economist.com/business/2021/04/26/how-tsmc-has-mastered-the-geopolitics-of-chipmaking

By the way, the story of the founder is fascinating in its own right:

Read the whole thread, of course, but also note that you should also really read… and stop me if you have heard this from me before… How Asia Works by Joe Studwell.

Now, about China and the TSMC:

First, read this article for some useful background. Second:

Some experts claim that China now has the military capacity to quickly overwhelm Taiwan. Even if this is correct, invasion remains a high-risk endeavor that, even if successful, would still entail major negative ramifications for China. It can be expected only in conditions under which China’s leaders see the immediate political stakes outweighing the military risks, implying a narrow range of scenarios.

https://thediplomat.com/2020/12/would-china-invade-taiwan-for-tsmc/

The rest of the article goes on to explain the supply chain considerations in light of a war. And they’re very real indeed!

On January 13th Honda, a Japanese carmaker, said it had to shut its factory in Swindon, a town in southern England, for a while. Not because of Brexit, or workers sick with covid-19. The reason was a shortage of microchips. Other car firms are suffering, too. Volkswagen, which produces more vehicles than any other firm, has said it will make 100,000 fewer this quarter as a result. Like just about everything else these days—from banks to combine harvesters—cars cannot run without computers.

https://www.economist.com/business/2021/01/23/chipmaking-is-being-redesigned-effects-will-be-far-reaching

Finally, read this for further details. (Long, but very detailed, and therefore very interesting)

If you are a student of economics in 2021, this is one story you want to keep an eye on, apart from the other, obvious ones.

As Studwell Puts It, Chinese Medicine

I end every single class that I teach with a request to my students: ask me five random questions. The topic can be anything under the sun, but please get into the habit of asking me (and indeed everybody else!) questions.

One question that usually pops up in the course of a semester is this one: “If you could recommend only one book that all of us should read, which would it be?”

It is impossible to answer a question like this, of course. But still, it is a fun game to play. And if the class comprises of an Indian audience (which is usually the case), my answer almost always is How Asia Works, by Joe Studwell. It is an eye-opener of a book about growth in North-Eastern Asia (Japan, Taiwan and South Korea) during the latter half of the twentieth century, and I cannot recommend it strongly enough. I’m not the only one to be head over heels in love with that book – here’s exhibits A, B and C.

But the reason I bring up Joe Studwell today isn’t such a happy one. He also writes a blog1 – updated only sporadically, it is true – and the blog is full of useful articles to read about topics that he is interested in. And today’s post is about a New Yorker piece about Xingjiang that he shared the other day.

And it is not, to say the least, pleasant reading.

Usually, I would have excerpted from it and added my own takes, but not today. Please, go ahead and read the whole thing.

Speaking of those random questions, “Why can’t we be more like China?” is also usually one of them. My usual answer is to say “be careful what you wish for”. The New Yorker article only serves to reinforce that point.

Again, please. Read the whole thing.

  1. the intro to the blog is exemplary writing. And what is it with economists and homes in Italy? First Mundell, now Studwell.[]

Notes on “Re-aligning global value chains” Part II

Yesterday, we took a look at how China makes it difficult for supply chains to move away from that country. That happens through a combination of mind-boggling scale and efficiency, coupled with astute moves up the ladder in terms of no longer dealing with just cheap manufacturing. Think robotics, app development, advanced and skilled manufacturing units. After that, the gravity model takes over, and well, good luck moving out of China.

Today, we ask the following question: let’s assume that all that is somehow put to the side, and a country is looking to move out of China. What are the chances this firm will come to India?

Again, we’ll use Gulzar Natarajan’s excellent article as the basis of our discussion, and foray into other parts of the internet. Let’s begin:

First, a quote from within Gulzar Natarajan’s post:

“Nomura Group Study found that in 2019, out of the fifty-six companies which shifted their production out of China, only three of these invested in India; while 26 went to Vietnam, 11 to Taiwan, and 08 to Thailand. In April 2020, Nikkei noted that out of the 1,000 firms which were planning to leave China and invest in Asian countries, only 300 of them were seriously thinking of investing in India.”

300 out of 1000 isn’t great, you might think, but it’s not bad, surely. Well, read again: it’s “seriously thinking”, not actually relocated. If you want to take a look at action, not thoughts, it is 3 out of 56. About 5%.

Why?

Let’s begin with this tweet:

And here’s (to my mind) the most interesting quote from within the editorial:

“The situation is far worse when it comes to comparisons with China in the EoDB. It takes double the time to start a business in India as compared to China, around six times as much to register property and double the time—and also in terms of the value of the contract—to enforce a contract. And, this is without even looking at the policy flip-flops that this newspaper catalogues diligently.”

The real measure of success when it comes to the Ease of Doing Business ranking is not how far we’ve come, but far we have to go. And it’s going to be a long haul.

This article, which I got from reading Gulzar Natarajan’s post, is instructive in this regard.

Sample this:

““Navigating labour laws is a total mine-field because interpretation is left to the courts and the officers and can be done in more than one way and removing an incompetent worker is not easy,” Gopal said. “I can get a divorce faster than removing a factory worker for non-performance.” In Karnataka, an employer would have to give three warning letters, a show-cause notice, have two inquiries — one external and one internal, and then terminate an employee only if the charges are proved to be serious. “Theft is considered serious but if an employee is lazy and doesn’t perform, that may not be taken as serious,” Gopal says. “In one’s own company, one cannot hire and fire.””

This article is just about furniture, but there are similar problems in every single sector in India.

To which, usually, there are two responses:

  1. Yes, but we have to start somewhere, don’t we?
  2. Yes, but we’re so much better than we were before!

Yes, sure, in response to both of these statements. But keep in mind that firms who are looking to move here are not going to ask if we’re better than we were before. They’re going to ask if we’re better than our competition today. Are we better than Vietnam, for example? What about Bangladesh? And if the answer is no, why should firms come here?

For our domestic market isn’t (yet) a good enough answer, unfortunately.

Our domestic consumption wasn’t large enough or lucrative enough for firms to locate themselves here before the pandemic – it’s obviously reduced since then.

And bureaucracy (not to mention bureaucracy-speak!) has gone up:

“On Sunday, for instance, the home ministry issued a clarification intended perhaps to limit the numbers of those who would be allowed to travel to their villages to a category called ‘genuine’ stranded migrants. The letter from the Centre to chief secretaries in the state administrations reads: “The facilitation envisaged in the aforesaid orders is meant for such distressed persons, but does not extend to those categories of persons, who are otherwise residing normally at places, other than the native places for purposes of work, etc. and who wish to visit their native places in normal course.”

I think I am reasonably good at English, but I still don’t know what this means. Even if I were to understand it, I do not know how I would go about implementing it! And that’s me, a guy who teaches using the English language for a living, and writes a blog in the English language. What chance does a manufacturer have? What chance does a non-Indian manufacturer have?

Government, in plain simple terms, has to get out of the way. Unfortunately, we seem to be heading in the opposite direction.

R Jagannathan writes in the Livemint:

“Companies compete, while governments can only enable. Governments cannot create global champions, though mercantilist countries like Japan, South Korea and China did do so at one point. What governments can do is create an enabling policy and regulatory environment that fosters economic growth and lets companies scale up. Airtel and Reliance Jio did not emerge as India’s two big telecom survivors because the government anointed them as winners. Nor did TCS, Infosys and Wipro become global outsourcing giants because of the government. They became global biggies because the policy environment for their growth was positive both in India and abroad.”

I might wish to disagree with parts of that excerpt (Studwell alert!), but I am in complete agreement with the broad message:

“The government holds the lock but not the keys to Atmanirbhar Bharat. As long as the lock is well oiled, companies will find the keys on their own.”

As of now, though, the lock is far too rusty, far too old and far too much like a pre-1991 model.

Notes on “Re-aligning global value chains”

There is a danger that this may well end up becoming a habit, I publishing notes on an article written by Gulzar Natarajan, but well, it’ll be a worthwhile habit.

Here’s the one sentence take-away: “Good luck trying to move these chains away from China. Especially India.”

Ok, two sentences. My blog, my rules.

The article begins on a fairly upbeat note, if you think that a re-balancing of these chains away from China is a good idea. Japan has been mulling on this idea for a while, and the trend has only accelerated since the pandemic struck.

It goes on to speak about how the USA, and ‘like-minded’ nations such as Australia, India and Japan have also been considering walking down this path.

But then we enter into problematic territory:

  1. The pandemic has only accelerated this trend, as we already mentioned.
  2. Good luck.

Gulzar Natarajan pulls an extensive quote by Tim Cook from Inc. A part of it is quoted below:

“And the part that’s the most unknown is there’s almost two million application developers in China that write apps for the iOS App Store. These are some of the most innovative mobile apps in the world, and the entrepreneurs that run them are some of the most inspiring and entrepreneurial in the world. Those are sold not only here but exported around the world… China has moved into very advanced manufacturing, so you find in China the intersection of craftsman kind of skill, and sophisticated robotics and the computer science world.”

Tim Ferris had a useful insight that is relevant in this context. I’m paraphrasing here, but my takeaway is that it is perhaps better to be very good at a few things than be perfect at one and abysmal at everything else.

China is very good at a few things, and that makes it difficult to shift away from that country. It’s not enough, any longer, to be very good at cheap manufacturing. Not if you want to compete with China, because they’re still very good at that – and so much more.

And speaking of being very good at manufacturing:

“She is just one of dozens of workers we see at sewing machines and assembly tables at this umbrella factory. The factory tells us each worker will sew 40 umbrellas an hour, 1,600 a week. By year’s end, that’s 80,000 umbrellas a year from each worker like Chang. More than half those umbrellas will be sold in the United States. The factory chairman Lu Xinmiao reveals to us one of their biggest clients is Costco.”

And, from the same article…

“The head of the factory, Zhejiang Qingyi Knitting Company, tells us that if they could, they would hire 200 more workers today. He tells us that there is now more competition for workers. Some estimate it will take another 45 million workers from rural China within the next five years just to keep up with the demand for product. Here in Datang, Lu Xinmiao has given his employees 20 percent raises to make sure they stay. Cheng now makes 2,500 yuan a month, equal to $357.”

The article I quoted from speaks about umbrellas. Gulzar Natarajan speaks about coffins and bras.

Sample this, from The Economist:

“In this “Town of Underwear”, as the local government likes to call it, there are thousands of similar factories. Gurao produces 350m bras and 430m vests and pairs of knickers a year for sale at home and abroad. Undies account for 80% of its industrial output.”

But we can go on and on – specialized manufacturing that is still relatively cheap, especially when you take into account scale and (at least adjusted for the price that you’re paying) quality, means that China is still – even now! – a world beater in the manufacture of almost anything.

And the days of the bottom of the “manufacturing smile” are long since past for China as a whole:

“China now ranks second only to the United States in terms of start-up investment. From 2014 through 2016, China provided just under 20 percent of the world’s venture capital.”

That is from a McKinsey report titled Asia’s Future is Now. Left unsaid in the title is the fact that this is so because China would want it to be so.

In tomorrow’s essay, we’ll take a (big picture only) overview of how much of this cheap manufacturing shift away from China – to the extent that it happens at all – will actually come to India.

Notes on “Why Tech Didn’t Save Us From Covid-19”

The MIT Technology Review recently published an interesting, thought-provoking article with the title in quotes above. It was also a little bit one-sided, but we’ll get to that later.

  • The title itself brought to mind Peter Thiel’s quote about being promised flying cars, and being given 140 characters instead. You may want to make a snarky joke about whether 280 characters counts as progress or not, but the point is well taken. And indeed, reinforced by this quote from David Rotman’s article:
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    “In an age of artificial intelligence, genomic medicine, and self-driving cars, our most effective response to the outbreak has been mass quarantines, a public health technique borrowed from the Middle Ages.”
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  • The article then goes on to highlight at least three separate aspects of why tech has failed us: lesser government support for technology and innovation (particularly in the USA), a sclerotic bureaucracy, and policy-making that is not a) proactive enough b) good at managing risks effectively c) far too focused on short-term issues d) aware of the pitfalls of focusing solely on efficiency.
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    Let’s begin with the last of these points:
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  • ““The pandemic has shone a bright light on just how much US manufacturing capabilities have moved offshore,” says Erica Fuchs, a manufacturing expert at Carnegie Mellon University.”
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    I teach courses in international economics at the Gokhale Institute, and one of the fundamental insights that I think students need to walk away with is the concept of a non-zero sum game. Trade makes both parties better off, and therefore more trade is good, is literally the basic starting block of a course on trade. For an excellent summary of this idea, read this article by Paul Krugman, or watch this TED talk by Matt Ridley.
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    But two basic concepts from economics have come to haunt this rather neat idea. One is scale, and the other is the need to diversify. Both are very closely related.
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  • If, conventional theoretical thinking goes, a firm is able to scale up effectively, it will be able to produce more for cheaper. Yes, it is more complicated than that, but that’s the gist of the benefits of scale. Now, think of all countries as firms, and China is the obvious example of a country that scaled more rapidly than other countries, and was able to produce stuff cheaper than almost anywhere else. And that’s how China became the “manufacturing centre of the world”. The more you import from China, the more they scale (and effectively!). The more they scale, they cheaper they can make stuff. The cheaper stuff gets, the more you have an incentive to import from China. And once the loop is up and running, it becomes difficult to stop.
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  • And that’s a simple explanation for how the world ended up putting all of its eggs in one basket. We failed to diversify, because we focused on efficiency, without worrying about risk. What happens if an increasingly efficient global trading order suddenly breaks down? The price of efficiency is two fold: a) a lack of diversification b) not enough risk mitigation measures that allow one to fall back on domestic production. Which is where most of the world finds itself today. Readjusting global supply chains away from China is necessary, but it will not be easy. Especially because most countries will not want to pursue twin objectives: a) diversification away from China into other potential export powerhouses b) some production to be kept at home, especially in crucial sectors such as healthcare.
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    Scale, and a lack of diversification. There’s a lesson in there for us at the individual level as well, of course. A single minded pursuit of some goal (say money, or career growth) at the cost of other things isn’t necessarily a good idea.
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  • “Why couldn’t the US’s dominant tech industry and large biomedical sector provide these things? It’s tempting to simply blame the Trump administration’s inaction.”
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    The truth is always more complicated than you think, and beware simple explanations, but that being said, you might want to read The Fifth Risk. Here’s a slightly tangential review from The Guardian if you are feeling lazy, and a quote from that article follows:
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    “But we’re actually much more likely to die driving to the shops. The fifth risk is something impossible to conceive of in advance, or to prepare for directly. What matters is having a well-organised government in place to respond to these contingencies when they hit – exactly what the Trump administration has failed to do.”
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    No government, or Big Ol’ Central Planner is perfect, of course (and there’s a very readable book about that topic, or here’s a fascinating review of the same book), but Michael Lewis makes the claim that the Trump administration is rather less than perfect even by our less than exacting standards.
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  • “Any country’s capacity to invent and then deploy the technologies it needs is shaped by public funding and government policies. In the US, public investment in manufacturing, new materials, and vaccines and diagnostics has not been a priority, and there is almost no system of government direction, financial backing, or technical support for many critically important new technologies. Without it, the country was caught flat-footed.”
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    The book to read about this topic, if you ask me, is The Entrepreneurial State, by Mariana Mazzucato. Here’s the Wikipedia link about the book. Governments need to play, she says (and I suspect the author of this article would agree), a more active role in fostering the tech ecosystem in a country. Shades of Studwell, perhaps, but I have a counterargument here:
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  • “Incompetence and a sclerotic bureaucracy” is a phrase David Rotman uses early in the article when speaking about the Center for Disease Control in the USA. I find myself in complete agreement with the adjectives used. Why presume, then, that other government departments are likely any better? The truth, as always, lies somewhere in the middle. You can certainly make the case a la Michael Lewis, that the Trump administration took us to one end of the spectrum – but you should beware equally the other end of it!
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  • “Economists like to measure the impact of innovation in terms of productivity growth, particularly “total factor productivity”—the ability to get more output from the same inputs (such as labor and capital). Productivity growth is what makes advanced nations richer and more prosperous over the long run. For the US as well as most other rich countries, this measure of innovation has been dismal for nearly two decades.”
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    Well, yes, sure. And there is more than a grain of truth to the charge laid above, and not just for America. But keep in mind that measuring TFP is really and truly hard, and I am nowhere close to being convinced that we do a good job of it, even for a country like the USA, forget India. I am writing this post while sitting in my bed, using a laptop that allows me to keep multiple tabs (well over 50 right now) open in a modern browser, while being seamlessly connected to an overwhelming variety of news sources. All this while I listen to a Spotify playlist, and sip on excellent coffee that is made using home delivered Arabic beans. I’ll stop channeling my inner Keynes now, but most of this was not possible, especially at these prices, two decades ago.
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    Progress may not be fast enough for our tastes, sure – but it has been taking place. If you would like to read a book with a take contrarian to mine, try this on for size: The Rise and Fall of American Growth, by Robert Gordon.
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  • “The problem with letting private investment alone drive innovation is that the money is skewed toward the most lucrative markets.”
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    Churchill’s quote about democracy comes to mind!
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  • “In a widely circulated blog post, internet pioneer and Silicon Valley icon Marc Andreessen decried the US’s inability to “build” and produce needed supplies like masks, claiming that “we chose not to have the mechanisms, the factories, the systems to make these things.” The accusation resonated with many: the US, where manufacturing has deteriorated, seemed unable to churn out things like masks and ventilators, while countries with strong and innovative manufacturing sectors, such as China, Japan, Taiwan, and Germany, have fared far better.”
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    Here’s is Andreessen’s post, and also, this is your periodic reminder to read How Asia Works. China, Japan, Taiwan and Germany being up there isn’t a coincidence.
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  • ““The great lesson from the pandemic,” says Suzanne Berger, a political scientist at MIT and an expert on advanced manufacturing, is “how we traded resilience for low-cost and just-in-time production.””
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    Options are easy to teach, but difficult to grasp, and even more difficult to implement. See put, long.
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  • “…they are calling for an immediate ramp-up of public investment in technology, but also for a bigger government role in guiding the direction of technologists’ work. The key will be to spend at least some of the cash in the gigantic US fiscal stimulus bills not just on juicing the economy but on reviving innovation in neglected sectors like advanced manufacturing and boosting the development of promising areas like AI. “We’re going to be spending a great deal of money, so can we use this in a productive way? Without diminishing the enormous suffering that has happened, can we use this as a wake-up call?” asks Harvard’s Henderson.”
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    More participation from the government than is currently happening, but throw also into the mix a more venture-capital-ish approach, and don’t forget prizes! In fact, I found myself wishing midway through the article that the author had explored other options, rather than the government-or-markets binary.
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  • I hope I haven’t comes across as overly critical of the article, and my apologies if I have. That has certainly not been my objective. We rely far too much on the private sector now, that is true – and government can and should play a bigger role than is the case currently. But an extreme position, in either direction, always worries me a little!

Keep an eye on China stories #1

  1. This one isn’t about China per se, it is about how the corona virus is caused by 5G – but the story does begin with Wuhan:
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    ” Sploshing about this sludge are six main coronavirus conspiracy theories: that 5G is, somehow, dangerous; that 5G worsens the effects of coronavirus by weakening your immune system; that 5G outright causes coronavirus-like symptoms; that the coronavirus lockdown is being used as cover to install 5G networks; that Bill Gates had something to do with it; and, finally, that this is all an Illuminati mass-murder plot. None of these conspiracy theories have a shred of truth in them, while some are outright dangerous.”
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  2. Imagine that you are a Chinese strategist. What course of action would you recommend when you see the level off hatred and venom the world has towards China?
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    “I think that’s exactly right. For years, people who think seriously about China’s political trajectory have said that the biggest risk in the US-China relationship is that there will come a time when China, because of something like an economic depression, would need to rally people around the flag in a particularly acute, brittle, aggressive way. This tool has been built into Chinese politics: When needed, you can direct your animus, your political energy, against a foreign opponent.”
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  3. Ananta Nageswaran on much more than just China bashing:
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    “For two nations to collaborate, both sides have to trust each other and share information. In the case of Covid-19, the People’s Republic of China did not do so. Just to recap, there were three major failures and at least one of them continues to this day:(1) Suppression of the flu outbreak for five to six weeks

    (2) Banning travel from Wuhan only to other parts of China

    (3) Not reporting the true number of infections.

    One does not even have to go into the spin on controlling the infection more efficiently than others; ridiculing other nations and even daring to suggest that the virus originated elsewhere.”
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  4. “All Chinese businesses, large and small, have struggled since COVID-19 emerged at the beginning of this year, forcing stores, restaurants, and factories to cut down on hours or completely shutter. While the full economic impact of the outbreak on China’s economy is still uncertain, popular business writer Wú Xiǎobō 吴晓波 detailed in a recent report that about 247,000 Chinese companies declared bankruptcy in the first two months of 2020.”
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    Here we go…(This link is from Mahesh Avasare)
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  5. China, or the USA? The world?

The Chinese Government and the Corona Virus

There’s people, there’s the government that represents said people, and there’s a concept called “nation”.

They’re three separate things.

If you disagree, I submit that people have existed before nations have, and (most) nations have existed for longer than individual governments have. And the reason I bring this up is because I put up a video some while ago, arguing against tribalism, and therefore arguing that blaming the Chinese for the virus didn’t make sense.

Here’s the video:

And I stand by said video: it makes no sense to blame a country, or its people for a virus.

But a government? That’s a separate story, for as I said at the start of this essay, a government is not its people, and vice versa:

Some of the bravest men and women have been the Chinese doctors and nurses on the frontlines of this virus, who were bravely raising alarm, often at the cost of their lives, and suppressed by the most totalitarian and evil great power in the planet.

And the Chinese government can say what it likes, it bungled this up. Fact.

A study published in March indicated that if Chinese authorities had acted three weeks earlier than they did, the number of coronavirus cases could have been reduced by 95% and its geographic spread limited.

As with any quantitative model, treat the number with a pinch of salt, but fewer people would have died had the Chinese government acted faster, and communicated better.

We now know that the opposite happened: local authorities in China suppressed information about the outbreak, even destroying proof of the virus sometime in December. Official censors scrubbed social media posts from medical professionals warning of a new “SARS-like” disease. And as late as mid-January, Chinese authorities denied evidence of any community transmission, allowing the lunar new year celebrations to proceed despite having known about it for at least a month.

Not only is the Chinese government obviously aware of this fact, it is trying – surprise, surprise – to not only hush things up, but warning other countries of ‘adverse’ impacts if the line is not toed, stat.

Once the virus made its inevitable outward march, claiming lives beyond China’s borders, the CPC mounted a major public relations exercise that exploited common human decencies to evade accountability. Criticism of the Chinese government was equated with racist prejudice against ordinary Chinese people. The result: rather than confront China, precious energies were exerted to avoid the trap set by China. In February, the Mayor of Florence launched a campaign encouraging Italians to “hug a Chinese”, describing it as a “fight of solidarity and unity against virus”. The People’s Daily, a mouthpiece of the CPC, applauded young Italians advertising their virtuousness on the Internet with photos of themselves hugging Chinese tourists without mentioning a word about the mortal perils of human contact.

China didn’t owe an apology or an explanation to the world: the world owed China proof of its anti-racism.

China has legal problems on its hands, once the worst of the crisis is behind us:

While China’s intentional conduct is wrongful, is it unlawful? If so, do other states have a legal remedy? Under Article 1 of the International Law Commission’s 2001 Responsibility of States for Internationally Wrongful Acts, states are responsible for their internationally wrongful acts. This commission’s restatement of the law of state responsibility was developed with the input of states to reflect a fundamental principle of international customary law, which binds all nations. “Wrongful acts” are those that are “attributable to the state” and that “constitute a breach of an international obligation” (Article 2). Conduct is attributable to the state when it is an act of state through the executive, legislative, or judicial functions of the central government (Article 4). While China’s failures began at the local level, they quickly spread throughout China’s government, all the way up to Xi Jinping, the general secretary of the Chinese Communist Party. He is now being pilloried by Chinese netizens for his failures of action and inaction. The most prominent critic, Chinese tycoon Ren Zhiqiang, lambasted Xi for his mishandling of the coronavirus, calling him a “power hungry clown.” Ren soon disappeared.

But that also depends on an internationally coordinated response, and that isn’t likely, given current evidence:

In this effort, the third event mentioned above, i.e., Donald Trump’s chaotic management of the spread of the disease in the US, is an asset for Beijing. The US President’s early responses were bumbling, flippant and motivated by narrow domestic political considerations. Trump went from being completely dismissive to eventually declaring a Europe travel ban, a national emergency and a potentially collaborative approach with G7 countries. It’s still early days, but if the US leadership continues to stumble in its efforts to contain the spread of the disease domestically and mismanages ties with international partners, it will work to Beijing’s advantage. In such a scenario, expect the Communist Party to further double down on the effectiveness of its governance system to contain unrest at home and reshape global norms

Demanding clear(er) communication ought to be requirement number one from any government here on in, beginning with the Chinese government. But I wouldn’t hold my breath.