Welcome! The articles below caught my attention this week. What are intended to be relatively objective “briefs” are preceded by dashes (——–), whereas additional material or relatively subjective comments are preceded by asterisks (********). Article titles preceded by [SR] require a subscription.
(23 July 2019): “Globalization Isn’t Dying, It’s Just Evolving” Bloomberg.com
——–“U.S. President Donald Trump’s populist assault on globalization has provoked fears of the death—or the slowing—of the economic force that has arguably done more than any other to shape how we live today. Yet those fears ignore what globalization really is, and how it is evolving.” Globalization “isn’t a static force. We associate globalization today with the shipping container, the 1950s invention that increased the efficiency and lowered the cost of the global trade in goods. Or with the outsourcing of jobs in advanced economies and the rebirth of great trading economies like China’s. But we are entering a new era in which data is the new shipping container and there are far more disruptive forces at work in the world economy than Trump’s tariffs.”
********The mention of shipping container is an allusion to The Box, by Marc Levinson, a very engaging book. I thought the mention of data as the new storage container to be a useful point. The article goes on to mention that international trade is increasingly being composed of trade of services, not goods, i.e., in the immaterial rather than the material. In this way international trade is going the way of domestic production in that services (immaterial) continue to grow in importance relative to goods (material). In this vein, in terms of measuring globalization, cross-border data flows, which continue to grow without bounds, are a better measure than changes in trade volume. The article is sure to stimulate thought.
(31 July 2019): “California farmers are planting solar panels as water supplies dry up” The Los Angeles Times
——–“Solar energy projects could replace some of the jobs and tax revenues that may be lost as constrained water supplies force California’s agriculture industry to scale back. In the San Joaquin Valley alone, farmers may need to take more than half a million acres out of production to comply with the Sustainable Groundwater Management Act, which will ultimately put restrictions on pumping. Converting farmland to solar farms also could be key to meeting California’s climate change targets. That’s according to a new report from the Nature Conservancy . . . The report lays out possible answers to one of the big questions facing renewable energy: Which areas should be dedicated to solar panels and wind turbines, and which areas should be protected for the sake of wildlife, outdoor recreation, farming and grazing?”
********As the article continues, “One takeaway from the report, released this week: California will need hundreds or maybe thousands of square miles of solar power production in the coming decades—and it would make sense to build one-third to one-half of that solar capacity on agricultural lands, mostly within the state.” As it turns out, the Central Valley of California where much of U.S. food is grown, “is more ecologically degraded than California’s inland deserts, where bighorn sheep, desert tortoises and golden eagles still roam across vast stretches of largely intact wilderness. The San Joaquin Valley is home to two dozen threatened and endangered species, but the landscape was almost totally reshaped by agriculture long ago.” In short, the “best use” of agricultural land, now degraded, might be best use to produce power.
********The energy grid is being reconfigured and solar is playing a larger role. An interesting, related article discusses cars and car batteries as the electric car inches toward mainstream. Car batteries will be able to buy (charge) and sell (discharge) electricity dependent on the time of day and, of course, one’s utility. The article is ”A Deluge of Batteries Is About to Rewire the Power Grid” Bloomberg.com. Especially noteworthy is this statement:
Mainstream adoption of electric cars is the third great stage in the transformation of the global energy sector—a natural outgrowth of the first two: the spread of cheaper renewable energy and the evolution of batteries, says Marcus Fendt, a managing director at Mobility House GmbH, a tech company in Munich.
(31 July 2019): “To Fix Its Housing Crunch, One U.S. City [Minneapolis] Takes Aim at the Single-Family Home” Bloomberg Businessweek
********Affordable housing is an issue in virtually every metropolitan area, including Minneapolis. One reason for it is “a history of segregation reinforced by federal, state, and local housing laws.” The large variety of such laws is examined in The Color of Law: A Forgotten History of How Our Government Segregated America, by Richard Rothstein. But Minneapolis is trying to do something about it by rezoning traditional single-family areas to allow duplexes and triplexes. Although this will not, by any means, solve the affordable housing problem, it will moderate it. “What’s needed are big and midsize apartment building. Minneapolis officials know this, which is why the 2040 plan [that describes rezoning efforts] allows for larger developments around transit hubs and select other areas.” Unsurprisingly, the rezoning efforts have faced strong opposition. Retired city council member Lisa McDonald notes: “My husband and I were pretty poor when we started out . . . We basically scrabbled, renovated houses ourselves, until we were able to live where we live now . . . Should we be penalized for that?” It appears that such zoning requirements affect economic growth. In a recent paper Chang-Tai Hsieh and Enrico Moretti “argued that barriers to building more homes in New York, San Francisco, and San Jose lowered U.S. economic growth by 36% from 1964 to 2009.” Their very technical results can be read here.
(2 August 2019): “Cassettes Are Back, and It’s Not About the Music” Bloomberg.com
——–“One can explain the recent boom in vinyl record sales in terms that make sense to an audiophile; a vinyl record will often sound more nuanced than music in a compressed digital format. But the growing audio cassette sales don’t lend themselves to such technical explanations: They’re about culture and psychology rather than sound. . . . Many people perceive through stories, both personal and invented, but always emotionally resonant. . . . Sometimes the story is attached merely to a piece of music. . . . Sometimes, though, the specific gadget or technology is important, too.”
********The author of this piece, Leonid Bershidsky, has an interesting take on technology: “In the Soviet Union when I grew up, the state record company wouldn’t put out the music we listened to—so bands and underground entrepreneurs distributed them on cassettes.” Audio producer Craig Eley notes in a 2011 essay, “Today’s cassette culture, by eschewing contemporary media forms for more esoteric ones, is building on the older cassette culture tradition of rejecting dominant industry formats.”
********I recently read the delightful and informative Barrel-Aged Stout and Selling Out: Goose Island, Anheuser-Busch, and How Craft Beer Became Big Business, by Chicago Tribune reporter Josh Noel. It uses Chicago’s well-regarded Goose Island brewery and the basis for looking at the rise of craft beer and the inability of mega brewer Anheuser-Busch InBev to understand their acquisition of Goose Island because of its failure to grasp the importance of story in marketing craft beer. If story is important for selling a retro item like cassettes and craft beer, its importance must be general. The interest in the provenance of a good, especially food items, is a good example of how story works. What seems to be the case is that buyers of most product are interested in its physical characteristics and its story, although the extent to which each matters will vary.
********For a good example of a product that has a good story, consider the sparkling water Topo Chico, which has a cult following in Texas, especially in the Austin area. The water “comes from a limestone spring hidden under a mountain in northeastern Mexico.” According to legend, the waters cured an Aztec princess in the 1400s. Will its story travel? Its owner, Coca Cola, is going to find out.
(4 August 2019): “How We Got into This Mess” Economic Principals
********This is the latest post by independent reporter/author David Warsh, who formerly worked for The Boston Globe. It draws attention to the work of economic historian Joel Mokyr, of Northwestern University, in particular his book A Culture of Growth: The Origins of the Modern Economy. Mokyr “is in the vanguard of a movement among economists broadening the concerns of their discipline to include the influence of what we commonly call culture.” Warsh notes that the “wheelhorse chapters in Mokyr’s book are devoted to two carefully defined and described ‘cultural entrepreneurs,’ Francis Bacon and Isaac Newton, followed by accounts of the cultural diffusion of their ideas.” (Check out the definition of wheelhorse here.) In the words of the invisible forces, Mokyr and other members of the vanguard, are drawing attention to the invisible handshake—social and historical forces that affect human behavior. For a brief discussion of Mokyr’s ideas, see The Economist. For a much longer discussion, read the review essay of Mokyr’s book by Enrico Spolaore.
(6 August 2019): “Africa Wants One Trade Deal With the U.S., the U.S. Wants Many” Bloomberg.com
********The title tells the main story of the article. The U.S. favors bilateral, rather than multilateral, trade agreements. Why? Presumably this is a way for the U.S. to use its dominant market power to extract more gain from its trading arrangements with the relatively “small and fragmented” African economies. As African Union Trade and Industry Commissioner Albert Muchanga said, “Bilateral agreements reinforce” market fragmentation. This article appears shortly after the “U.S. and AU signed a joint statement . . . saying they share a goal to enhance the AU’s effort to increase continental trade and investment under the African Continental Free Trade Area. The continent-wide trade agreement, that’s being driven by the AU, aims to create the world’s largest free-trade zone. It officially came into force in May and should be fully in operation by 2030.” You can learn more about the African Union here.
(7 August 2019): “20-Year Mortgages Hit Zero for First Time in Danish Rate History” Bloomberg.com
——–“In Denmark’s $495 billion mortgage-backed covered bond market, another milestone was reached on Wednesday as Nordea Bank Abp said it will start offering 20-year fixed-rate loans that charge no interest. . . . Danes can also now get 30-year mortgages at 0.5%, and Nordea adjusted its prospectus to allow for home loans up to 30 years at negative interest rates.” According to Lise Nytoft Bergmann, of Nordea, “It’s an uncomfortable thought that there are investors who are willing to lend money for 30 years and get just 0.5% in return . . . It shows how scared investors are of the current situation in the financial markets, and that they expect it to take a very long time before things improve.”
********Negative interest rates have been much more common in Europe than in the United States. To learn more negative rates, follow the links at the end of the article. For a very current discussion, with five-minute video, of negative bond yields, read and view “Amount of global debt with negative yields balloons to $15 trillion” CNBC.com.
May you have a good week!