China quietly taking the lead in climate diplomacy – Asia Times

Seven centuries seems a career in politics. Donald Trump, president, announced in 2017 that the United States may retreat from the Paris Agreement. In order to restate their political responsibility to international climate action, Canada, China, and the European Union convened an urgent appointment.

The powerful meet turned into a year-long event that took place in Wuhan, China, this week as a chance for a second Trump presidency looms large.

At the invitation-only gathering of environment ministers and senior representatives from nearly 30 nations, Australia’s Climate Change and Energy Minister Chris Bowen represented Australia.

The group gathered to progress global climate negotiations in the lead-up to the next United Nations climate conference ( COP29 ) in Baku, Azerbaijan. Stronger pollution reduction goals may send strong signals to purchase, which has been slow in Australia but not in China.

China is making notable improvement in moving from fossil fuels to clean energy. In addition to a surge in the production of low-carbon systems, including batteries and electric vehicles, analysts have observed record progress in solar and wind, which have reduced energy’s discuss in electricity generation.

All of this indicates that China’s greenhouse gas emissions does had reached a peak, which would be good for the world. Australia also needs to move quickly if it wants to become a powerhouse in solar energy.

China obviously wants to take a greater share of the global lead in the change of electricity, but it also wants to put pressure on its own businesses and industries to take action. China’s choice to host this year’s gathering, and others, reflects this goal.

Earlier this month, China hosted a five-day gathering of “like-minded developing places” in Shandong. Then there was a “BASIC” ministerial conference on climate actions with Brazil, India and South Africa next trip.

The 8th Ministerial on Climate Action was officially known as the big conference this year. In addition to boosting global cooperation, it also involved in-depth discussions on issues relating to COP29 and COP30, as well as promoting the transition to power.

UN Climate Change Executive Secretary Simon Stiell called for bolder weather action from all countries, particularly the wealthy G20, at the conference. Every country is required to submit fresh national climate plans and goals by February of next year in accordance with the Paris Agreement. As Stiell says:

Done properly, these programs are the key to stronger economic expansion, more jobs and success, much less waste and better wellbeing.

The transition to a low-carbon society requires architectural adjustments that are both socially challenging and time-consuming. However, as I’ve mentioned below, China’s efforts to develop the technologies for the trend of solar power are beginning to bear fruit.

Electricity

About 40 % of China’s CO₂ emissions come from power generation, mainly fuel, but the share of renewable energy is growing.

Wind capacity expanded from 61 gigawatts ( GW ) in 2012 to 441GW in 2023, while solar capacity rose from 3.4GW in 2013 to 610GW.

X Screenshot

Coal-fired power plants are being built also, though at a much slower rate. Hydrodropower went through many droughts in a row.

The rapid development of solar and wind is being managed by developing new storage methods. These include waters pump store, chemical store, compressed-air storage, and digital power plants. Long-distance transmission systems will help better use of biofuels.

China is even conducting climate legislation experiments, including carbon trading and offsets. Because the state wants to concentrate on fossil fuel use, a two system that has existed for almost 30 years is being redesigned.

The strategy is to remove strong fuel burning with light, coal with natural gas, and combustion turbines with electric automobiles.

Transport

In 2023, international electronic vehicle sales exceeded 13 million. With more than 7 million sold, or a third of auto sales, China has the largest private electric car market.

In contrast, China exported 1.2 million electrical vehicles in 2023. This was 80 % more than the previous month.

Because they have quite a large market share, energy vehicles are already less expensive than those with internal combustion engines in China. Local carmakers now offer roughly 50 various small, affordable electric models.

Screenshot

Steel

China made the announcement in April that it would start extending emissions trading to the metal sector. This business is the government’s second-largest CO₂ emission, behind power.

Emissions investing is a market-based view to controlling waste. The federal grants allows that allow a certain amount of CO2 to be released over a predetermined amount of time. These grants can be purchased, traded, or both.

China accounts for more than half of the country’s steel manufacturing. Because metal is used in renewable energy production and the manufacture of electric vehicles, the economy even supports the energy transition. Nearly 70 % of the world’s main wind turbine components and 80 % of solar panel components are produced in China.

To reduce pollutants, the government is urging economy to collaborate with universities and research institutes. It will not be quick, and it will be expensive.

China is the world’s largest hydrogen producer, but 80 % comes from fossil fuels. Green gas research and development is getting more and more money, with some companies determined to take the result. If steel-making may become powered by natural gas, it would be a key milestone.

A glimpse of the future

Given the confusion surrounding the US election in November, China’s constant hands in climate politics is welcome.

China is even demonstrating what is feasible if the energy transition is transformed into a source of development option for Australia and other countries. The size of China’s rollout of solar energy is astounding, but so is the pace of development of new technologies to support renewable energy, including the efficient storage of wind and solar power to provide electricity on demand.

More than two-thirds of the world’s greenhouse gas decline may be supported by the technology also in growth, according to the International Energy Agency in 2020. China wants to dominate the market and dominate it initially. And there’s every sign it will flourish.

Xu Yi-chong is Professor of Governance and Public Policy, Griffith University

This content was republished from The Conversation under a Creative Commons license. Read the original post.

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India-China warming pops US pipe dream – Asia Times

Nirmala Sitharaman, India’s finance minister, endorsed her financial advisor’s proposal on July 25 to open the nation to direct Chinese investment, which has been successfully stagnant since the 2020 Sino-Indian border clashes.

According to a report from Reuters earlier this week,” India’s Chief Economic Adviser V Anantha Nageswaran said… that New Delhi can either integrate into China’s supply chain or encourage foreign direct investment ( FDI) from China.

According to Nageswaran, focusing on FDI from China appears more likely to boost India’s imports to the US than it did earlier, according to Reuters.

Following Russian President Vladimir Putin’s earlier this month visit to New Delhi, the proposed starting to China is intended as a rebuke to American diplomatic conduct there.

According to Global Risk-Reward Monitor, the Asia Times ‘ email,” On July 11, Modi asked Putin to assist India in resolving its long-standing border dispute with China.” Given that it pits the state’s two largest nations against one another, this is the most significant military discord in Asia. Russian mediation, but informal, may entail a political revolution, and make a mockery of America’s hope of uniting Eastern countries against China.”

In 2022, I argued that a statistical imperative—the declining inhabitants of non-Muslim parts of Asia versus the development of Muslim populations—would drive India, Russia and China toward a proper reconciliation.

These potential competitors have been pushed together by the conflict in Ukraine. India’s deep hunger for subsidized Russian oil increased its imports from Russia to US$ 67 billion in 2023 from$ 8.7 billion in 2022. India, also, acts as Russia’s supply broker, re-selling Russian oil and distillates to second countries.

Notable is the fact that, despite India and China having a border disagreement, India has not joined the US and its supporters in condemning China’s treatment of its Uyghur Muslim community. However, India has been accused of violating the rights of its Muslim majority in the United States.

We often engage with our American companions in these shared values ( of human rights ), according to US Secretary of State Anthony Blinken, who stated in 2022.” We are monitoring some new concerning developments in India, including a rise in human rights abuses by some state, officers, and prison officials,” said Blinken.

S. Jaishankar, India’s foreign secretary, responded that India may say something about human rights violations in the US.

China’s growing business with the International South, somewhat including India, has advanced the leads for reconciliation between the country’s two largest countries.

India depends on Taiwanese supply chains to grow its trade sector. It imports pieces and investment goods from China and gathers finished goods for developed markets, as do Mexico, Vietnam, Indonesia and other Chinese trading partners.

Since the Covid illness, India’s imports from China have more than doubled, with the majority of China’s trade deal moving away from the US and Europe toward the World South.

Origin: Asia Times

India’s export to the US have risen in lockstep with its imports from China, as Nageswaran indicated. The two set are represented by the following chart in US dollars per month in thousands.

Origin: Asia Times

Physical and psychological investment of India are both constrained by. Although the two nations have comparable groups, India’s per head GDP is roughly a fifth of China’s in terms of purchasing power parity.

Origin: Asia Times

China is the nation’s expert in equipment. India faces a$ 1.7 trillion deficit in basic infrastructure, including roads, railways, water and broadband.

A 2022 World Bank report reckoned that” India will need to invest$ 840 billion over the next 15 years—or an average of$ 55 billion per annum—into urban infrastructure if it is to effectively meet the needs of its fast-growing urban population. ” The government spends just$ 16 billion a year on urban infrastructure.

India’s dilapidated bridge program, left over from the English Raj, adds only 4 kilometers of track per day. 6 kilometers of track was laid daily on the country’s first sea-crossing high-speed bridge range between Fuzhou and the port town of Xiamen in China. Foreign track-laying machines can put down 8 kilometers of tracks on average each day.

By way of example: China’s high-speed road covers the 2, 300 meters between Beijing and Guangzhou in nine hours. Four times as long is a significantly shorter flight from New Delhi to Bangalore.

China is among the best 20 countries in value of feeding, according to the World Hunger Index, while India ranks 111 out of 125 places.

China and India have roughly the same population size but China’s tertiary education rate reached 72 % in 2022, versus 31 % in India, according to the World Bank. China’s second-tier universities, also, train skilled engineers, while India’s executive education outside the renowned Technical Institutes is less dependable.

India has n’t participated in the PISA tests of student competence since 2009, when it ranked number 72 out of 73 countries. China ranks number 2, after Singapore.

Origin: Asia Times

Investment and transfer of technology are the things India most needs.

In the optimistic conceits of American experts, India will act as a counterweight to China’s influence in Asia.

Walter Russell Mead, a Wall Street Journal columnist and author, stated at the National Conservatism Conference on July 9 that” the rise of India has the potential to lead to the kind of Asia Americans have always desired to see.” China, which has grown so quickly, seems to have the notion that it can rule all of Asia and establish a new order in it. The economic development of India’s full potential will end that conceit in China, which will be accompanied by Vietnam, Indonesia, and many other Asian states. As India develops, it demonstrates to China that its road to hegemony is closed.”

Contrary to Mead’s wishful thinking, China’s export prowess is a magnet that realigns all of Asia’s economies around its economic sphere. Contrary to Mead, China does not want to “impose an order” on Asia because it is corrupt about how its neighbors operate, but it does want to reshape the region in its wider economic context.

The Modi government is considering a reconciliation with its northern neighbor in addition to that.

I wrote in 2022 that the humiliating abandonment of Afghanistan by America created a puddle of instability in central Asia. The American invasion aimed to end the Taliban, but it ultimately ended with its restoration, giving at least a starting point for Islamist radicals in neighboring nations like China, Pakistan, as well as Turkmenistan and Uzbekistan. For China, Russia, and India, this presents a first-class strategic challenge. All three countries have significant Muslim minorities.”

What has changed since 2022 is China’s economic footprint in Central Asia. In the last four years, China’s exports to Turkey and Central Asia have tripled.

Origin: Asia Times

China is investing in developing nations that might represent a potential future source of instability and is helping America’s mess in the region after the collapse of Afghanistan by building railways, roads, and broadband.

India’s biggest internal problem remains restive pockets in its 14 % Muslim population. Russia, India, and China all have a shared desire to stabilize the Muslim populations of Asia. Only China has the resources to accomplish this through economic growth.

Spengler is channeled by David P. Goldman. Follow him on X at @davidpgoldman

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Typhoon Gaemi displaces nearly 300,000 in eastern China

” Big Floods” Officials in China were alerted that Typhoon Gaemi was bringing with it heavy storms that might cause flooding. They have relocated more than 290, 000 people in Fujian and locked down public transportation, offices, schools and businesses in some places. In the neighboring Zhejiang province, film airedContinue Reading

Why Singapore firms are entering the German market, and how Enterprise Singapore is helping them

SPIKE IN COUNTRIES EXPLORING EUROPE&nbsp,

Business Singapore, which champions internationalisation, said it has seen a rise in firms exploring options in Europe post-pandemic. &nbsp,

In 2023, EnterpriseSG supported 220 organizations to observe a wide range of areas in Europe, including Belgium, France and Germany. This was 20 per cent higher than in 2022, and nearly 50 per cent more than that in 2019, pre-COVID-19. &nbsp, &nbsp,

European businesses, in particular, are eager to companion, or touch merger and acquisition opportunities with Singapore firms, said Mr Alan Yeo, chairman of Europe at EnterpriseSG. &nbsp,

Many small- and medium-size enterprises ( SMEs ) in Germany, have faced challenges in growing due to the limited size and market size in Germany, and want to venture out, but they have limited opportunities, he said. &nbsp,

They even find succession planning for their mainly niche and technology-based companies challenging, he added. &nbsp,

They are looking for companions to expand in terms of various businesses, particularly those in Southeast Asia and Asia, and some of them are open to joint ventures and mergers and acquisitions, he said. &nbsp,

GROWING TECH PARTNERS&nbsp,

With Singapore and Germany sharing some economical concern regions, it continues to be room for start-ups to click options. EnterpriseSG is looking to expand its network of colleagues in the technology industry as part of an action called the Global Innovation Programme. &nbsp,

Companies like TeleMedC, which uses what may go off as a regular eye test to find diseases like diabetes, have benefitted from the program. &nbsp,

The company aimed to exit Asia in 2021 and enter Europe via Germany with its artificial intelligence software. &nbsp,

But, success was out of sight first. Speech was a great barrier, said the agency’s CEO Para Segaram. &nbsp,

” None of us spoke German, so it was very difficult going to a country where you do n’t even know the language. The whole company do is all in German, so it’s very challenging”, he said. &nbsp,

He added that the business was unsure of how to enter the European market. Through the program, he was able to link up with various participants. &nbsp,

According to its assistant managing director of advancement Emily Liew, EnterpriseSG appoints a network of companions to speed up businesses’ journeys by familiarizing them with a business, helping them strategize, and building contacts. &nbsp,

” We will connect them to investors, reference clients or another co-innovators, if you know they need to enhance their product for the business further”, she said. &nbsp,

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Why the ‘Trump trade’ has Asia in a panic – Asia Times

TOKYO — Suffice to say, 2024 has n’t turned out the way Japanese Prime Minister Fumio Kishida expected.

Rather than being a superstar in Asia, Japan’s economy is skirting crisis. The&nbsp, Bank of Japan&nbsp, still has n’t hiked interest rates, though Tokyo had fully expected a tightening move or two by now.

Instead of coasting to win in September’s Liberal Democratic Party vote, Kishida’s approval rating is stuck in the small 20s. China, which suffers from a deflation, is more of a development drag on Asia than it does a growth engine.

The biggest punch to Kishida’s belief that he knew anything about 2024 is that he is coming from Washington.

Joe Biden’s devastating political discussion with Donald Trump on June 27 was the first. Therefore, Biden’s decision not to work for re-election, leaving Tokyo to know which of its officials may have &nbsp, Kamala Harris‘s telephone number.

As the chances of a Trump-friendly White House rise and drew nearer to the Northern Asian economic perspective, China, South Korea, and Taiwan also face political whims.

In Beijing, Xi Jinping’s government abruptly sees the risk of 60 % across-the-board taxes as a clear and present danger as Trump’s political prospects rise to once-unthinkable rates.

The People’s Bank of China announced a surprise rate cut on Thursday ( July 25 ) amid concerns about slowing growth. The PBOC cut the medium-term lending facility&nbsp, by 20 basis points to 2.3 %.

As Trump attempts to restart trade wars, President Yoon Suk-yeol’s troubled administration in Seoul is immediately playing out losses. Additionally, North Korean authorities may develop emergency plans for Trump to deepen his crazy relationship with Kim Jong Un’s violent regime.

Taiwan, however, senses a&nbsp, great bullseye&nbsp, on its market. Lately, Trump accused Taipei of stealing America’s market share in the US$ 500 billion business of making computer chips. In a Bloomberg interview, &nbsp, the Republican candidate&nbsp, said Taiwan snatched “almost 100 %” of the business. ” We should have never permit that happen”, Trump complained.

Wedbush Securities researcher Dan Ives says that” we have seen a terrible software sell-off post Trump responses to the press.” about enforcing stronger Chinese taxes and protecting Taiwan from China, which caused the Street’s Ban on Semis, AI Revolution labels, and Big Tech.

For today, though, authorities in Tokyo are perhaps the most befuddled about what might lie ahead.

Before then, the ghost of a Trump 2.0 White House had n’t been taken too seriously by&nbsp, Tokyo government. Today, the situation has Japan’s state scrambling to examine the many risks this would cause — starting with Asia’s second-biggest business.

” Japan’s economy is in for a big ‘ Trump shock ‘ if Donald Trump returns to the White House”, says economist Richard&nbsp, Katz, author of&nbsp,” The Contest for Japan’s Economic Future” &nbsp, and the Japan Economy Watch newsletter.

His plan to impose an all-inclusive 10 % tax on all imports and 60 % on imports from China will seriously affect both the delicate global supply chains and the need for Japanese exports, Katz claims.

Katz warns that Trump’s inflationary plans, including more significant tax cuts and tariffs, will force the Fed to raise interest rates beyond what the Reserve currently intends. That, in turn, will put upward pressure on the renminbi”.

These challenges, and other uncertainties, are now complicating the Bank of Japan’s selection at next year ‘s&nbsp, July 30-31&nbsp, plan meeting. Anticipation that Governor Kazuo Ueda’s crew might raise interest rates may actually be overstated.

Now, Ueda confronts conflicting financial currents. On the one hand, the secret market is displaying encouraging signs of recovery, as demonstrated by the rise in the Jibun Bank Flash Japan Composite getting professionals index to 52.6 in July. It marked the fifth straight month of development.

Nevertheless, BOJ representatives notice a decline in consumer spending at a time when the market is only just starting to expand. Tightening today might even end&nbsp, Japan’s best inventory rally&nbsp, in more than 35 times.

This last tidbit explains why BlackRock Inc. is so confident that the BOJ wo n’t act next week. ” We expect an flexible environment to remain in Japan”, Yuichi Chiguchi, chief investment strategist at the Japan component of the country’s biggest asset manager, tells Bloomberg.

Another danger: a skyrocketing change level may unsettle global investors as the so-called “yen-carry business” goes awry. Immediately, investors who borrow cheaply in the yen could sell their positions in high-yielding assets all over, including those in Seoul and Shanghai.

Forex traders ‘ opinions about the BOJ meet next week are much more divided than usual. According to Charu Chanana, head of FX approach at Saxo Capital Markets, “potentially squeezing the yen small posts is a popular approach over the last few times.”

According to Chanana, Fed easing bets coincide with “expected that the Bank of Japan may increase rates further at the July meeting.” This potential change in yield differentials favors the yen.

Takeshi Yamaguchi, an economist at Morgan Stanley MUFG Securities, states that” we believe the economic case for a July rate increase is compelling because more data points to a rise in the underlying inflation trend.”

Meanwhile, Kishida’s political fate is getting renewed attention in the days since Biden bowed out of the election.

Within his party, Kishida is under pressure to “pull a Biden” so that the LDP can find a more dynamic successor. A new prime minister is needed, according to party powerbrokers who believe the country’s fragile economy and a string of finance scandals.

Biden’s political recusal robbed Kishida of a top selling point: a strong relationship with the&nbsp, US leader. Kishida also gained points from trilateral summits with Yoon and Biden as well as his closeness to Biden.

This sort of detente with Seoul disapproves Xi’s Communist Party, which fears that the US, Japan, and South Korea are constructing a democratic bulwark against China. even occasionally involving Philippine President Ferdinand Marcos Jr.

Biden’s exit complicates Kishida’s way forward. In much of his 33 months in office, Kishida struggled to get his support rates into the 30s, never mind the 20s they’re stuck in now. Even though Japan’s opposition parties are in disarray, the LDP may opt for a new face before September.

Should Trump return, Japan is not without leverage. For one thing, Kishida initiated a big jump in defense spending, heading off what’s sure to be a top Trump priority. For another, Japan is America’s top foreign investor.

” Trump wants Japan to keep investing in the United States”, notes David Boling, an analyst at Eurasia Group. Boling continues,” the United States needs Japan as an ally to effectively counter China.” Advisers to Trump will remind him of Japan’s importance”.

Given that” trade policy is one of Trump’s highest priorities and tariffs are in his genetic makeup, it will be difficult for Japan to avoid higher tariffs if Trump returns to office,” Boling writes.

Should the yen resume its decline, Trump might be even harder on Tokyo. According to Jasmine Duan, senior investment strategist at RBC Wealth Management Asia, the markets will be watching for Trump’s actions to increase the yen’s rise.

Bottom line,” we do n’t think Japan would be the&nbsp, safest market&nbsp, in Asia if Trump is re-elected”, Duan notes.

Trump’s trade dispute may have a far reaching impact beyond Asia. ” For Europe, the prime concern is tariffs”, says Sharon Bell, an analyst at Goldman Sachs. ” Trump has pledged to impose a 10 % tariff on all US imports. According to our economists, the US GDP could be reduced by 0.5 percentage points and by one percentage point from the Euro area.

Each one percentage point drop in sales-weighted gross domestic product could mean a 10 % drop in earnings per share, Bell explains.

The numerous different scenarios that investors must consider before the US election&nbsp, on November 5, add to the confusion factor.

David Roche, president of Quantum Strategy, thinks that Harris leading the Democrats boosts the odds of a Trump victory. However, it also makes it less likely that the Republicans will control both of Congress.

On the other hand, says Charles Myers, founder and CEO of advisory firm Signum Global Policy, Harris could spell trouble for Trump’s election hopes. Myers claims that Harris ‘ nomination as the Democratic nominee” a whole new race” makes it” a whole new.”

” There’s a new candidate with an enormous amount of unity and enthusiasm behind her”, Myers explains. She’ll be a key driver of women, young people, Black voters … I think people will underestimate her, “he added.

Bottom line”, I think that it’s a bit too early for the markets to declare victory for Trump, and I think she’s going to give him a real run for his money,” Myers says.

Anatole Kaletsky, economist at Gavekal Dragonomics, adds that” whatever one thinks of Kamala Harris, her chances of winning the election are certainly higher than were Biden’s. And the remote possibility that the Democrats might agree on another, much better candidate than Harris— while a low-probability&nbsp, tail risk&nbsp, — would transform the likely outcome of the race.”

Kaletsky notes that, until new polls are released and the Democrats ‘ succession is clarified, it is impossible to quantify the scale of this transformation. My guess is that Trump will hold onto his position of authority for the next few weeks, at most until Labor Day’s traditional start of full-scale campaigning. But I think his probability of winning will fall sharply from last week’s 70 % or 80 %&nbsp, in the best election models, to something like 55 %.”

In theory, Tokyo would prefer a Harris victory, viewing it as the best chance of continuity. One of Trump’s biggest fears is that he will continue to try to bury Tokyo for$ 8 billion annually to house US troops ( Trump 1.0 tried unsuccessfully to do that policy ).

Japan also worries that Trump, who is “grand bargain,” may negotiate a “grand bargain” trade agreement with Xi, leaving other important Asian nations staring in the face.

But whether a Trump Trade emerges, or Harris wins the presidency, all that officials in Tokyo, Beijing, Seoul and Taipei thought they knew about the year ahead is no longer clear or certain.

Follow William Pesek on X at @WilliamPesek

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North Korea is winning its youth information war – Asia Times

Two opposing perceptions of North Korea’s younger technology have been presented to the outside world.

In the outside media, children are portrayed as rebel and dramatic, ignoring the Kim regime’s increasingly severe crackdowns on international media and trends, and rather toting the latest North Vietnamese fashion trends and adopting North Vietnamese lingo.

However, position advertising perpetuates the notion that young people in North Korea are incredibly committed to Kim Jong Un and the government.

Both conceptions of North Korea’s younger technology fail to acknowledge a more sophisticated reality.

Kim Jong Un is aware of the importance of winning over the younger generation in order to maintain his administration’s life. Since coming into strength, Kim has increased the magnitude of consequences for importing, distributing and consuming international press. This stale details environment amplifies the effectiveness of a youth-focused youth-loyalty campaign intended to be a bear hug to the younger generation.

As a consequence, when compared with older groups, North Korean children have a more positive perspective of the government, juche philosophy, and Kim Jong Un himself. In summary, the plan is successful.

A revitalized international media transmission strategy is needed to split the deadlock and win the battle over hearts and minds. Despite the dangers, North Koreans continue to be very interested in foreign press. Study shows that those who consume tend to feel more warmly about South Korea and see the North Vietnamese government thoroughly.

European media provide a strong foundation for a common knowledge of concepts like animal rights and civil society and can serve as a strong foundation for regime propaganda. A revitalized approach should focus on content collection and modern propagation methods to maximize energy and decrease blowback for end users in North Korea.

There are two types of the children of North Korea.

The outside world is presented with two very distinct narratives of North Korea’s children. On the one hand, the state media in North Korea portrays the country’s youth and twenty-somethings as steadfast supporters of the “revolutionary” produce led by Kim Jong Un. But, on the other hand, illegal balances hint that these youngsters are extremely questioning the faithful orientation that represented prior generations.

The youth’s ideological orientation speaks to the regime’s long-term viability, prospects for reconciliation with the international community, and a soft landing: change from within, which does n’t lead to bloodshed, more than just an academic discussion.

Kim Jong Un’s decision approach necessitates that he inculcates the children to feel the outside world is a hostile area. His autocratic control is legitimized by this assault mentality. The challenge for young people’s hearts and minds — pitting passion for the Marshal against South Korean K-Pop — is live, and there are reasons to think that the government has taken a pleasant result.

Let’s begin by examining the two distinct ways that younger people in North Korea are depicted.

In the government’s version, the children are doting and obedient, aspiring above all else to make the affection and approval of Marshall Kim Jong Un. The Kim dynasty and the state media would make the world think that its young people are unquestionably committed to the ideals of socialism, juche ideology, and the Kim dynasty.

A recent Rodong Sinmun article showcased a glossy propaganda scene rife with symbolism: children at Mangyongdae Schoolchildren’s Palace “burst into cheers full of great excitement” when Kim Jong Un arrived. For his enjoyment, children danced and sang “full of excitement and joy” in their own costumes.

This performance reportedly reflects the determination of the children to become “young revolutionaries and patriots … guaranteeing that the Juche revolution is full of vitality”. Kim Jong Un served as a representative of” the mightiness of Korean-style socialism” while the “bright laughing of children” served as a representation of his role as the “benevolent father.”

But other sources reveal that not all children are as devoted as the regime wants us to believe. When they watched a well-known South Korean drama called” Full House,” North Korean children first encountered a song called” Three Bears.” Youngsters adapted the lyrics of the song to insult the Kim regime, singing:” Grandpa bear]Kim Il Sung ] is fat, papa bear]Kim Jong Il ] is also fat, and baby bear]Kim Jong Un] is foolish”.

Representatives from the Socialist Youth League were dispatched to catch and discipline students found singing the song or possessing foreign media in response. This was in 2015. However, traditional patterns are sadly lost. In 2022, Youth League monitors were again tasked with busting students for singing mocking, satirical versions of revolutionary North Korean songs and embracing South Korean music.

In fact, since a famine in the middle of the 1990s broke the social contract between the state and society, millennials have been referred to as the jangmadang ( market ) generation because of their resistance to state ideology and proclivity for adopting South Korean fashion, slang, and even dating culture.

This version of freewheeling youngsters conflicts with the version described by Kim Jong Un and broadcast in state media. Which is the truth, then? A careful analysis suggests that these conflicting characterizations represent extreme ends of the spectrum and both fail to reflect the complex reality.

North Korea recently increased penalties for those who speak the language of South Korea, which suggests that the government is trying to keep an ideological hold on the populace. A new law is especially telling. The anti-reactionary thought law, which was passed in 2020 and amended in 2022, “describes South Korean movies, dramas, news, and other outside content ] as ] reactionary thought and culture.”

Those caught with the banned content are subjected to heightened punishments: six years to life of reform through labor for consuming, and ten years or even death for importing or distributing.

Additionally, the law forbids the use of South Korean expressions like “older brother” and adding the honorific suffix “nim” to titles when addressing others. These phrasings are signifiers of South Korean influence that diminish the more stodgy and rigid North Korean values and conventions.

The law forbids” citizens from imitating puppet style ] South Korean intonation by raising and lengthening their intonationation obsequiously, lilting, and nauseatingly in aegyo speech.” Anyone who has watched South Korean movies or dramas knows what this is referring to.

While bribery and corruption have reduced the impact of previous crackdowns, this one is having a stronger impact: Video footage shows two teenage boys serving 12-years of hard labor in a show trial in front of hundreds of classmates for the crime of consuming South Korean media.

This is part of a larger trend that has its roots at the inception of Kim’s rule. In an effort to combat the flow of foreign media and information, Kim Jong Un oversaw the establishment of the Central 109 Inspection Command of The State Security Department ( now known as Group 109 ).

Since then, 85 % of respondents said that punishments are tougher now for consuming foreign media than they were under Kim Jong Il, according to a 2018 survey by the US Agency for Global Media.

According to a poll conducted by InterMedia of 350 refugees who left the nation between 2016 and 2018, two-thirds of North Koreans “personally experienced an inspection by Group 109.” North Korea ranked dead last in the 2023 World Press Freedom Index by Reporters Without Borders.

North Korean refugees provide the most reliable information on this subject, but sadly, the number of people who have escaped has dramatically decreased since the Covid border lockdown. Much information is therefore out of date. Only as the border opens, will we be able to better understand how things have changed recently.

North Korea’s not-so-radical youth

Analysis of other defector surveys paints a much more complex picture than the persistent presence of North Korean interest in foreign media, which suggests that North Koreans are largely rejecting the regime’s narratives and ideology in favor of more entertaining foreign alternatives.

In particular, the younger generation is overall more positive toward the regime, juche ideology, and Kim Jong Un compared with older cohorts, according to defector surveys conducted by Seoul National University ( SNU).

A higher proportion of North Korean defectors in their 20s and 30s viewed Kim Jong Un as the country’s most popular leader from 2011 to 2020 than their elders did. Twenty and 30-somethings were also less likely to report hearing criticism about the government and the leader compared with those in their forties, fifties, and sixties.

The young generation had less pride in juche in 2014 than the older generation. But that dynamic flipped in 2020: over half of the young respondents had” a lot” of or” some” pride in juche, while the majority of older respondents had” not much” or “none”.

What justifies these surprising discoveries? There are a few factors at play. First, the Kim regime has launched a youth loyalty initiative to win back from Kim Jong Un and the party.

Young people are a captive and malleable audience. The days of students are jam-packed with Kim family history and ideological training, labor mobilizations, organizational activities, and criticism sessions.

The exploits of Kim Il Sung, expounded in a massive eight-part memoir, are akin to a Homeric epic that is genuinely entertaining to North Korean students. According to North Korean refugee Jae Young Kim, the book is even more challenging to borrow from the library because of its popularity.

One North Korean refugee turned activist, Kang Chol Hwan, described his childhood perception of Kim Il Sung as a” Father Christmas” who gifted children sweets and school uniforms. This education gave Kang, who would later be sent to a political prison camp and then defect,” a wellspring of admiration and gratitude for our political leaders and in the willingness to sacrifice everything for them.”

The foreign media crackdown is another factor. Although there is conflicting evidence regarding whether or not consumption has decreased in recent years, former US special envoy for North Korean human rights Ambassador Robert King contends that the crackdown has discouraged “more casual use of foreign media.”

This ca n’t help but have knock-on effects. Consuming foreign information slowly but surely alters the viewpoint of the North Korean people. Those who consume foreign media tend to have more negative feelings about the North Korean government and its intentions, according to surveys conducted by Stephan Haggard and Marcus Noland for their book” Witness to Transformation: Refugee Insights into North Korea”.

Significantly, after Kim Jong Un’s increased crackdown on foreign media, survey respondents increased their likelihood of finding state media to be credible ( over 70 % ), while the percentage of skeptical people decreased to about 20 %.

The lack of disconfirming sources no doubt plays a role in youth’s perceptions. Consensusting foreign information has the effect of enhancing kinship ties between North and South. Nearly three-quarters of respondents said their perception of South Korea “improved a lot” after consuming South Korean media, according to a 2020 SNU survey.

Given that Kim Jong Un recently declared that North Korea would no longer pursue unification and labeled South Korea as the North’s “number one enemy,” the ability to improve South Korea’s image is especially relevant.

Finally, young people tend to have rose-colored glasses when looking at the government, compared with the older cohorts, because they have yet to spend any significant time in the sphere of North Korean life that tends to lead to the most antipathy towards the regime: the markets.

During Kim Jong Un’s rule, there has been a rise and remain high in the proportion of North Koreans who participate in the unofficial market economy, but there has been a steady decline in the proportion of respondents who participate in the official ( state ) economy. More significantly, only a tiny minority of respondents ( 13 % ) earn enough money per month to buy a single kilogram of rice from their state jobs, the SNU survey reveals.

This implies that the majority of people rely on market earnings for their household income, which places the state as a burden on their way of life rather than a resource. In fact, respondents spent an average of 20 % of their earnings on bribes and 46 % of people identified “bribes and crackdowns” as the greatest difficulty for their economic activity.

This explains why the older “money-making” generations in North Korea have resisted the regime. In contrast, the younger cohorts are busy with school and compulsory military service through their early 30s and therefore have yet to encounter the regime in this light.

Next steps

Despite Kim Jong Un’s severe crackdowns and harsh punishments, North Korean people remain interested in outside media. This presents a chance. Increasing the quantity and availability of foreign information inside North Korea will be crucial for:

  • establishing a civil society, planting the seeds,
  • challenging state propaganda that demonizes the outside world,
  • educating people about their human rights in North Korea.
  • increasing feelings of kinship with South Korea and
  • creating conditions that can result in a long-term soft landing, making the peninsula a more stable and prosperous place for all Koreans.

It’s especially important to reach young North Koreans to counteract the Kim regime’s information blockade and loyalty campaign, which have proven surprisingly effective. The North Korean Human Rights Act of the United States authorizes funding for information programs.

The last iteration of the law authorized the government to spend$ 3 million per year to increase” the availability of sources of information not controlled by the Government of North Korea”. Although the law has bipartisan support, it expired in September 2022 and has not yet been reauthorized.

Reauthorization bills have been introduced multiple times, for example in the House by Congresswoman Young Kim (R-California ) and Congressman Ami Bera (D-California ) and in the Senate by Senator Marco Rubio (R-Florida ) and Senator Tim Kaine (D-Virginia ), but each of these efforts have ultimately foundered.

The National Endowment for Democracy funded a number of innovative initiatives, many of which were based in South Korea and were led by North Korean refugees, in order to reach the North Korean people through radio news programs in 2021.

A focus on both content and method is required to enhance North Korea’s foreign media presence. It will only be possible to outcompete regime propaganda if the content succeeds in meeting the needs, gaining the trust, and provoking the curiosity of the North Korean people.

According to a 2019 survey by Unification Media Group, when asked what types of media North Koreans need the most, the most widely received response was “news about South Korean society” ( 41.5 % ), followed by “entertainment programs made in South Korea” ( 18 % ).

Radio broadcasts that feature North Korean defectors provide a familiar voice that North Koreans can relate to. Heavy-handed content that explicitly criticizes the regime is counterproductive because it resembles North Korean propaganda and poses a risk to any North Koreans who consume it.

On the other hand, entertaining and straightforward depictions of ordinary South Koreans going about their lives with the freedom to choose their own jobs and vote for their own government officials can be subtly radicalizing.

Actionable content, such as market prices and weather forecasts, can also help to establish a foundation of trust, allowing for the introduction of topics like universal human rights and civil society.

Content should also be differentiated for audiences, as in the case of VOA’s Korean targeting elites.

Also, methods for distributing information need to be rethought and revitalized. With the border largely sealed, the most effective way to inject information into the country is currently radio broadcasts. However, radio is impeded by signal jamming, and surveys indicate that the older generation favors radio.

Distributing the kind of content favored by the young, like hallyu pop music and K-dramas, is typically done manually over the border via memory sticks like USBs and micro SDs. Although overused, distributors can now make money from this method. However, it is dangerous and very risky. To get around this, innovative new concepts like utilizing satellite technology or decentralized mesh networks should be looked into.

In this game of cat and mouse with the authorities, the key is to replace old, discoverable methods with new, innovative ones faster than the regime can keep up. Each method must also be carefully examined to make sure it is simple to use, deployable, and protects end users from detection. A balance must also be struck to avoid provoking too forceful a response from the regime.

Conclusion

Kim Jong Un is aware that winning the hearts and minds of his country’s youth is a crucial step in ensuring the continued rule of his family. For now, Kim has the edge. However, if they play it right, outside actors who want to spread foreign media within North Korea, such as those from the US and South Korea, can win.

Doing so can help foster the rudiments of a civil society capable of seeing through the Kim regime’s lies and imagining a brighter future.

The Korea Society’s director of policy is also a professor at SUNY Stony Brook University and Columbia University’s School of International and Public Affairs. Chelsie Alexandre is the policy program officer at The Korea Society. At SUNY Stony Brook University, Alexander Tufto is a political science student.

First published by Pacific Forum, this article is republished with permission. Read the original here, complete with endnotes and charts.

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Australia’s ANZ faces fire for alleged market manipulation – Asia Times

The Australian Securities and Investments Commission ( ASIC ) is looking into ANZ in light of serious allegations that the bank manipulated the market when it facilitated a$ 14 billion ( US$ 9.2 billion ) sale of government bonds in April of last year.

ASIC has today officially stated that it believes ANZ acted unlawfully. ASIC chair Joe Longo told the Australian Financial Review on Tuesday,” We are talking about you.

The CEO of ANZ has the right to define how he would describe it, but it is clear that it is an research, which means we must by definition believe there is a violation of the law.

Earlier this month, ANZ launched its own domestic investigation into alleged misconduct in its industry sector. ANZ says it is treating the claims” with the highest severity” and has engaged additional constitutional lawyers to help with its studies.

ANZ has also been accused of increasing the value of its bond buying by billions of dollars in order to get “lucrative” government mandates that come from large-scale trading.

Tie markets? State demands? You’d be forgiven for feeling a little lost.

On its encounter, the alleged crime might seem very mystical and professional. However, the Australian Financial Review has suggested that the dispute might turn into” the biggest incident” in ANZ’s 182-year story.

To be clear, these are claims amid an ongoing research by Australia’s business regulation. However, it’s crucial to comprehend exactly what the lender has been accused of doing here and how what transpires in the relationship sector has the power to affect everyone.

It’s all about federal borrowing

You need a thorough understanding of a transaction that sounds a little dry-sounding and quite routine in order to understand the allegations made against ANZ.

The state of Australia frequently takes out loans. It does this by selling so-called “bonds” to shareholders.

An investor purchases a bond, which was once a piece of paper but is now electronic, and in exchange receives (usually fixed ) interest payments known as” coupons,” one each month or year.

At the issuance of the tie, get it after three years, ten years, 20 years or more, the trader gets her or his money again.

You do n’t need to know everything about how bonds function. Bonds are only available on the open market, meaning that their value is shift, and that investors can buy them to other investors.

The investors ‘ returns are a result of both ( a ) receiving those coupons and ( b ) the difference between the amount they spend on the bond and the final principal amount when the bonds are due.

The price of the friendship will drop if standard interest rates rise above the bond’s coupon rate. Because the bond simply would n’t pay enough in comparison to what they want from an investment with that much risk.

Likewise, if standard interest rates fall, the relationship price is likely to walk.

An Australian Office of Financial Management ( AOFM), a branch of the Commonwealth Treasury, issues new government bonds. In order to conduct significant relationship sales, AOFM normally appoints a bank or banks to oversee the process and communicate with investors.

The state contracted ANZ to maintain a sizable A$ 14 billion bond sales in April 2023. ANZ was given access to sensitive information, including information about when the giving do take place.

ANZ was required to purchase bonds from investors who wanted to trade them for new bonds as part of the position. The value of those securities may depend on the gain that investors want from government bonds. Remember that a bond’s value drops if it receives an unrequited gain in excess of what is needed. So, if the expected return increases, the cost ANZ has to spend decreases.

You might have heard the notion: purchase low and sell high. Also, ANZ reportedly sought to do just that.

It is claimed that ANZ allegedly tried to raise bond yields by investing in what is known as the “futures industry,” a market that essentially allows traders to place bets on upcoming interest rate movements.

These wagers even affect the reference rate that determines the cost of new ties. Because the government uses the futures level to determine the profit the business needs for its debt and determine the bond issuer’s coupon rate.

If that prospects price climbs, then so too does the discount price on the government’s new relationship issues. This increases the government’s overall interest costs.

Image: ASIC Chairman Joe Longo. &nbsp, Photo: Lukas Koch / AAP via The Talk

ANZ is accused of manipulating future yields to get it to buy bonds from investors for a lower rate.

ANZ supposedly then reversed its future trades, allowing the price of the securities it held to rise and the general interest rate to fall, earning a profit.

If the claims are accurate, ANZ did have engaged in both insider trading and market manipulation. This would be outlawed.

According to the Australian Financial Review, trading information details to unexpected price moves on and around April 19 of last year.

Up until the relationship was issued on April 19, the data shows that bond prices had risen (yields had risen ), then produces had dropped, leading to a rise in bond rates.

But it’s important to notice this diagram says nothing about cause. Charges may have decreased for reasons related to ANZ.

Exaggerated achievement

ANZ has also been accused of overstating its investing success to the state, to secure rewarding friendship control options.

Based on their trading of government bonds and their skills, the state chooses managers. It is claimed that ANZ falsely reported how much buying it did.

According to the Australian Financial Review, ANZ told the government it had “facilitated”$ 137.6 billion in bond trades to the year ended June 2023, when it had really only facilitated$ 83.2 billion – a discrepancy of$ 54.4 billion.

Although it may seem far removed from daily life, what happens on the bond market has the ability to have an impact on everyone.

If found to be true, ANZ’s reported deception was reportedly had cost citizens as much as A$ 80 million. That number reflects how much more interest the government may be required to pay if it issued bonds with higher interest rates than they needed to.

Mark Humphery-Jenner is associate professor of funding, UNSW Sydney

This content was republished from The Conversation under a Creative Commons license. Read the original post.

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Why is US manufacturing so unproductive? – Asia Times

Throughout the 2010s, many people – including myself – treated it as a truism that manufacturing industries have faster productivity growth than service industries.

Historically that was true, and the reason wasn’t hard to grasp – machines improve faster than human beings do, so industries that depended on better machines naturally tended to advance faster than labor-intensive service industries.

But this particular piece of conventional wisdom stopped being true over a decade ago. In 2011, manufacturing productivity in the US hit a ceiling, and has actually declined in the years since:

Joey Politano has a good post where he breaks this productivity stagnation down by industry and shows that it holds true across industries in general. Here’s his key graph:

Source: Joey Politano

Importantly, this manufacturing slowdown isn’t mirrored by a general labor productivity slowdown across the economy! Service industries have been picking up the slack here, and keeping labor productivity growth going:

Service productivity rising faster than manufacturing productivity runs counter to many of the narratives you see in economics and policy debates. But it appears to be the reality for the last 13 years.

Americans seem to be waking up to the fact that something is wrong here. Greg Ip had a good chart showing that the stagnation in manufacturing productivity isn’t worldwide – the US and Japan have done uniquely badly since 2009:

Source: WSJ

A word of caution here: This data is cobbled together from various different sources. One or more of those sources might have major problems, and even if not, they might make different methodological choices that make them not directly comparable (for example, including subcontractors or not).

But the stagnation is so broadly distributed across manufacturing industries that it’s pretty clear something big is going on here. Anyone who wants to revive the US manufacturing sector, for national security purposes or otherwise, needs to worry about the possibility that something is going especially wrong with the American system.

Did the problems begin earlier?

In fact, the troubles might have begun well before 2011, and simply been masked by two other forces: 1) Moore’s Law, and 2) China.

You’ll notice in Politano’s chart that one sector dominated manufacturing productivity growth from 1987 to 2005 – “computer and electronics.” A landmark 2014 paper by Houseman et al. showed just how crucial this sector was to US manufacturing in that era:

Manufacturing output statistics mask divergent trends within the sector…Real value-added in the computer and electronic products industry, which includes computers, semiconductors, telecommunications equipment, and other electronic products manufacturing, grew at a staggering rate of 22% per year from 1997 to 2007…Real value-added declined in seven industries over the decade…[W]ithout the computer and electronic products industry, which accounted for just 10 to 13 percent of value-added throughout the decade, manufacturing output growth in the United States was relatively weak.

And almost all of the growth in that sector was due to quality improvements — the US wasn’t producing more computers and computer chips, but thanks to Moore’s Law, we were producing better ones:

The rapid growth of real value-added in the computer and electronic products industry…can be attributed to two subindustries: computer manufacturing…and semiconductor and related device manufacturing…The extraordinary real GDP growth in these subindustries, in turn, is a result of the adjustment…for improvements in quality.

Now, producing better stuff, instead of more stuff, is real productivity growth! Moore’s Law represents real improvement in our productive power. But the fact that quality improvement was the main driver of total US manufacturing output for much of the pre-2011 period means that other things may have been quietly going very wrong in terms of the US ability to manufacture large quantities of output.

And at the same time, there was another factor pumping up the US’ manufacturing productivity, especially in the 2010s: offshoring to China.

Until 2001, manufacturing output and manufacturing productivity went up in tandem in the US. Starting in 2001, productivity kept rising for a decade, while output flatlined:

The 2000s were the decade of the China Shock, when the US – along with many other rich countries – offshored a large amount of manufacturing work to the People’s Republic of China.

That raised measured manufacturing productivity in two ways. First, there’s a composition effect. Remember that in the 2000s, even as US manufacturing output per worker supposedly rose, the total number of manufacturing workers was falling off a cliff:

The most productive US manufacturers tended to stay competitive and survive this devastation, while less productive ones were driven out of business by Chinese competition. That composition effect will tend to raise measured productivity even if it doesn’t result in any increase in the productive power of American manufacturing overall.1

Second, offshoring to cheaper countries introduces biases in the data. Houseman et al. (2011) pointed out that when US manufacturers switch to suppliers in cheaper countries, the US government statistics often miss the switch, interpreting it as a rise in product quality rather than a drop in input cost.

That means that the manufacturing productivity benefits of offshoring to China in the 2000s were likely overstated. (Basically, Susan Houseman warned us, and we all should have been paying attention.)

So it’s very possible that serious structural problems in US manufacturing were brewing as early as the 90s but were covered up first by Moore’s Law and later by offshoring to China.

Anyway, let’s talk about some hypotheses as to why American manufacturing productivity flatlined.

Hypothesis 1: US manufacturers don’t buy enough machinery

One popular explanation for stagnating labor productivity in US manufacturing is low capital investment. Basically, a factory worker with machines is going to be more productive than a worker without machines. If you look at Chinese factories, they’re absolutely chock-full of machinery to help human workers do every task:

YouTube video

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In the US, meanwhile, investment in this sort of capital equipment – and every other sort – has slumped in recent years. Capital intensiveness – basically, the amount of machines per worker – has increased more slowly since the 2009 recession:

Many observers point to this lack of investment as a factor behind slowing productivity. For example, Robert Atkinson of the Information Technology and Innovation Foundation, writes:

In 2021, China had installed 18% more robots per manufacturing worker than the United States. And when controlling for the fact that Chinese manufacturing wages were significantly lower than US wages, China had 12 times the rate of robot use in manufacturing than the United States…The United States had 274 robots per 10,000 workers, while China had 322.

And he posts the following chart:

Source: ITIF

Robots are only one small part of capital investment. But they may be an indicator of a more general failure of capital accumulation in US manufacturing. After 2004, although a drop in total factor productivity (TFP) growth was the biggest culprit, capital deepening (an increase in the amount of capital per worker) also made a much smaller contribution to overall US productivity growth than in the years prior:

I should note that Chad Syverson, an expert on productivity measurement, is skeptical of this factor; he points out that there’s no short-term relationship between capital deepening and labor productivity. But that still leaves room for a long-term relationship, since companies presumably take time to learn how to most effectively use the equipment they buy.

If US manufacturers aren’t buying enough machinery, what’s the reason? Poor business prospects, due to slowing technological improvements, Chinese competition, and/or slowing population growth are one obvious cause. If you don’t think your business can expand in the future, why buy machinery in the present?

Another possibility, raised by Robert Atkinson, is that US wages are too low:

[M]any [US] manufacturers can staff operations with a relatively low-paid workforce. This reduces their incentive to invest in raising productivity…[H]igher productivity enables firms to pay higher wages. Still, it’s also likely that the causation runs the other direction, with lower wages providing less motivation for raising productivity.

Of course, Chinese manufacturing wages are also low, but the government puts its thumb very heavily on the scale there, encouraging capital investment instead of letting China specialize in more labor-intensive products and production methods.

It’s also possible that the US financial system is broken when it comes to financing manufacturing. In other countries — China, Japan, Korea, Europe, etc. – manufacturers usually finance themselves with bank loans. In the US, they mostly borrow from markets – i.e., they issue bonds.

US banks don’t do much financing of manufacturing; instead, they concentrate mostly on financing home mortgages, and on various kinds of bond trading. Banks might provide a crucial source of expertise in making loans to manufacturing companies – expertise that bond investors might simply lack. Also, banks are an easy lever for governments like China’s to boost their manufacturing industries by insisting that loans be made at below-market rates.

Finally, American management might just be short-sighted. Perhaps stock-based compensation discourages long-term investment. Or perhaps all the good managers have gone to work in software, finance, and consulting.

So there are a bunch of sub-hypotheses of why capital investment might be low in the US manufacturing industry. But in any case, let’s turn to the next explanation: industry concentration.

Hypothesis 2: The sector is too concentrated

In general, US industry has been getting more concentrated since around the turn of the century. This has fed fears of monopoly power. But a lack of competition might also be making US manufacturing industries more torpid and complacent. Politano writes:

Using data on the dispersion of productivity across factories and other establishments, it also becomes clear that the gap between the most and least productive US manufacturers increased considerably since the turn of the millennium. This gap is most stark in previously high-productivity-growth sectors like electronics—a small subset of factories saw substantial (if slower) productivity gains through the 2000s and 2010s while most establishments saw stagnating or declining productivity…[A] small subset of companies remained at the technological frontier, where a much larger share fell behind.

And he posts the following chart:

Source: Joey Politano

Syverson also suggests this as one possible explanation:

The second explanation, proposed by Andrews, Criscuolo, and Gal (2015), is that a productivity growth rate gap has opened between frontier firms and their less efficient industry cohorts. Andrews et al. (2015) show that companies at the global productivity frontiers of their respective industries did not experience reductions in their average productivity growth rates throughout the 2000s.

However, most other firms in their industries did see decelerations. It appears that something has impeded the mechanisms that diffuse best technologies and practices through an industry.

Here’s the graph from Andrews et al. (2015):

Source: Andrews et al. (2015)

Now, it’s notable that the divergence is worse for service industries here, even though service-industry productivity in the US has kept on growing.

Also, that chart is for the entire OECD. Politano’s graph shows that the dispersion in US computer and electronics manufacturing productivity mostly happened in the 2000s and leveled off after 2010.

Data from Akcigit and Ates (2019) shows the productivity dispersion for overall US manufacturing mostly happening in the late 90s. So the timing doesn’t really seem to line up perfectly with the observed productivity slowdown since 2011.

But anyway, this could be one thing contributing to manufacturing’s slowdown.

Hypothesis 3: The US doesn’t export enough

One possibility that I haven’t seen anyone talk about, but which seems like a pretty obvious hypothesis, is that US manufacturers don’t export very much.

Industrial policy enthusiasts tend to be fans of the idea of “export discipline.” This is based on the theory that competing in export markets, instead of staying within the safer and less competitive domestic market, forces companies to adopt international best practices, while also offering them opportunities to develop new markets, invent new products, and absorb foreign technologies.

Manufactured goods figure prominently among the US’ export mix. But compared to other advanced countries, US exports just aren’t very significant as a percentage of its total economy:

A lot of this is just that the US is really, really big. The bigger a company’s domestic market, the less incentive there is to go looking for customers abroad. China is big too, but its government puts its thumb very heavily on the scale in favor of exports. If you’re a manufacturer in Pennsylvania, why bother selling to Korea when you can sell to Florida?

America’s meager exports are exacerbated by its possession of the global reserve currency, which increases demand for the dollar and thus makes US exports uncompetitive. But even if exports rose so much that the entire trade deficit vanished, that would leave the US still behind Japan and the UK in terms of exports as a percent of GDP – and far behind China, France, Germany, etc.

If lots of American manufacturers are ignoring export markets, either voluntarily or due to macroeconomic factors beyond their control, that will also tend to weaken investment. The smaller your expected customer base, the less machinery you need to buy.

Hypothesis 4: The end of the rainbow

So far, all of these hypotheses have come with policy prescriptions attached. The US can incentivize its manufacturing businesses to invest more. It can encourage the circulation of workers between manufacturing companies, in order to diffuse know-how and innovation from frontier firms to lagging firms. And it can subsidize exports in various ways.

There are other hypotheses I didn’t list above2, such as bottlenecks in the manufacturing ecosystem and overregulation of land use, both of which also come with policy solutions attached. But there’s one more common explanation out there that’s much more pessimistic than the others, because it implies there’s very little to be done about the manufacturing productivity slowdown – at least, in the short term.

This is the hypothesis that manufacturing productivity growth depended on a set of key innovations – steam power, chemistry, combustion engines, electricity, computerization, and perhaps one or two others – that have now been mostly fully exploited.

Syverson suggests this possibility:

One is that the “easy wins” among information-technology-sourced TFP gains have largely been won, and producers have entered a period of diminished returns from these technologies. There is considerable evidence that information technologies (IT) were a key force behind the productivity acceleration of 1995-2004 (e.g., Jorgenson, Ho, and Stiroh, 2008). More recent work like Fernald (2015) and Byrne, Oliner, and Sichel (2015) have presented evidence that these IT-based gains have slowed over the past decade, however.

And The Economist sums this idea up succinctly, writing that “low-hanging fruit might have been plucked more eagerly in manufacturing.”

Why did manufacturing traditionally have such rapid productivity growth? One reason is that manufacturing technology is embodied — whereas improvements in services typically require imparting new knowledge to humans or changing up human organization, in manufacturing you can buy a new machine. This makes it easy to spread productivity-improving technologies. It also increases the demand for innovation, because machines are easier to sell at scale than business processes.

Another reason is that manufacturing is very modular, and thus lends itself to constant rearrangements of the production process. My favorite explanation is how electricity supercharged manufacturing productivity in the early 20th century not by offering cheaper energy, but by enabling the rearrangement of factory floors into a bunch of little independent workstations.

It’s conceivable that both of those processes are now reaching the end of the rainbow that began in the Industrial Revolution. It’s possible that factory floors have been optimized, machine tools installed, and production processes computerized.

There’s no guarantee that those techniques will be able to keep boosting manufacturing productivity at historic rates forever. In fact, manufacturing R&D in the US has grown in real terms since 1990, at an accelerating (linear) rate. But it’s not doing much to boost productivity.

Of course, even if that low-hanging fruit has been picked, manufacturing productivity can still improve. It can still get cheaper energy – which thanks to solar, may now become a reality.

And it can get better inputs – better materials, more high-performing computer chips, and so on. But if the problem of how to set up a factory has been mostly solved, it might put a big damper on overall manufacturing productivity growth – even if AI makes some marginal improvements.

OK but if that’s the case, how come other countries – Germany, Korea, France, etc. – have managed to increase their manufacturing productivity over the past 13 years?

One possibility is that they’re just catching up to the US and Japan, which were the leaders in manufacturing productivity back in the early 1990s. I can’t find a great data set comparing absolute levels of manufacturing productivity across countries over time, but I’ll keep looking.

Another important thing to remember is that we’ve been talking about labor productivity. If manufacturers buy more machinery, labor productivity will go up, because each human can do more. But machinery isn’t free — creating it and upkeeping it comes at a cost. And it’s possible to buy too much of it.

(If you don’t believe me, imagine buying 20 machine tools for each human being in the labor force; they wouldn’t be able to operate it all! That’s an extreme example, but you see the principle.)

It’s possible that all those vast fields of machine tools in the China factory videos are something the US should emulate. But it’s also possible that they’re wasteful — that China has over-automated, and that its economy is going to be held back by paying the upkeep and obsolescence costs on a bunch of machinery that made only marginal improvements in labor productivity.

The way to test this would be to look at total factor productivity. TFP measures the combined productivity of labor and capital (or at least, it tries to). If you pump up labor productivity past the optimal point by buying too many machines, your capital productivity should go down, and your TFP will remain unchanged.

And when we look at the TFP for advanced economies, we see that it has flatlined for every single country on Greg Ip’s chart from above, since right around…2010 or 2011.

China’s TFP has even gone down in recent years.

Now, there are some big caveats here. First of all, TFP is hard to measure, and I don’t entirely trust these numbers. Second, this is TFP for the whole economy, including services, manufacturing, and agriculture – not just for manufacturing alone. So this is very far from definitive proof that humanity has reached the end of the Industrial Revolution rainbow. But it’s at least one hypothesis we should look into.

Anyway, the question of why American manufacturing productivity has stagnated is a very important open question. More than just a few percentage points of economic growth hang in the balance here — defense and defense-related manufacturing will be one of the keys to victory in Cold War 2, and the US has a lot of catching up to do in that regard. So we had better get started chasing down some of these hypotheses — and any other plausible ones we can think of.

1 Note: This may be one reason US and Japanese manufacturing productivity grew more slowly than others in the 2010s. US offshoring to China slowed considerably after the Great Recession, while Japanese offshoring to China was always limited by the political troubles between the two countries.

So some of the relatively faster manufacturing productivity growth of Taiwan, France, etc. in the 2010s might be because they kept going full speed ahead with offshoring to China. This could be a combination of “real” productivity growth (specialization), composition effects, and statistical artifacts similar to the one Houseman et al. (2011) document for the US.

2 Note: I talk about overregulation of land use and bottlenecks in the supply chain so much that I didn’t feel the need to go over them again. Both also have significant weaknesses as overarching explanations for the manufacturing productivity slowdown – in particular, the timing is way off for both. But in any case, my list of hypotheses is not an exhaustive one.

This article was first published on Noah Smith’s Noahpinion Substack and is republished with kind permission. Read the original here and become a Noahopinion subscriber here.

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