Author Archives: Net economy

Saving Capitalism from Inequality

Robust middle incomes deliver the demand that businesses need to produce.
By Robert Manduca – After decades of praise heaped on “job creators,” viewers today may find it disorienting to see the consumer—and a middle-income one at that—cast as the hero of the economy, instead of the investor or the entrepreneur.

Yet Fortune, which produced the video in 1956, was hardly an outlier. In the mid-twentieth century, advertising, popular press, and television bombarded Americans with the message that national prosperity depended on their personal spending. As LIFE proclaimed in 1947, “Family Status Must Improve: It Should Buy More For Itself to Better the Living of Others.”

This messaging was not simply an invention of clever marketers; it had behind it the full force of the best-regarded economic theory of the time, the one elaborated in John Maynard Keynes’s The General Theory of Employment, Interest and Money (1936). The key to full employment and economic growth, many at the time believed, was high levels of aggregate demand.

But high demand required mass consumption, which in turn required an equitable distribution of purchasing power. By ensuring sufficient income for less well-off consumers, the government could continually expand the markets for businesses and boost profits as well as wages.

Conversely, Keynes’s theory implied, growing income inequality would lead to lower demand and slower economic growth.

The basic Keynesian logic of demand-driven growth came to be accepted across U.S. society in large part due to significant postwar efforts to explain, communicate, and popularize it. Proponents of Keynesian thinking worked hard to educate the public about the new economic theory and the possibilities of abundance that it foretold. A particularly compelling example is the book Tomorrow Without Fear (1946). more>

Updates from McKinsey

Climate risk and response: Physical hazards and socioeconomic impacts
By Jonathan Woetzel, Dickon Pinner, Hamid Samandari, Hauke Engel, Mekala Krishnan, Brodie Boland, and Carter Powis – After more than 10,000 years of relative stability—the full span of human civilization—the Earth’s climate is changing. As average temperatures rise, climate science finds that acute hazards such as heat waves and floods grow in frequency and severity, and chronic hazards, such as drought and rising sea levels, intensify.

In this report, we focus on understanding the nature and extent of physical risk from a changing climate over the next one to three decades, exploring physical risk as it is the basis of both transition and liability risks.

We estimate inherent physical risk, absent adaptation and mitigation, to dimension the magnitude of the challenge and highlight the case for action. Climate science makes extensive use of scenarios ranging from lower (Representative Concentration Pathway 2.6) to higher (RCP 8.5) CO2 concentrations. We have chosen to focus on RCP 8.5, because the higher-emission scenario it portrays enables us to assess physical risk in the absence of further decarbonization.

In this report, we link climate models with economic projections to examine nine cases that illustrate exposure to climate change extremes and proximity to physical thresholds. A separate geospatial assessment examines six indicators to assess potential socioeconomic impact in 105 countries. We also provide decision makers with a new framework and methodology to estimate risks in their own specific context.

We find that physical risk from a changing climate is already present and growing. Seven characteristics stand out. Physical climate risk is:

Increasing: In each of our nine cases, the level of physical climate risk increases by 2030 and further by 2050. Across our cases, we find increases in socioeconomic impact of between roughly two and 20 times by 2050 versus today’s levels. We also find physical climate risks are increasing across our global country analysis even as some countries find some benefits (such as expected increase in agricultural yields in countries such as Canada).

Spatial: Climate hazards manifest locally. The direct impacts of physical climate risk thus need to be understood in the context of a geographically defined area. There are variations between countries and within countries. more>

Updates from Ciena

The submarine network seascape in 2020
Submarine networks carry over 99% of intercontinental data traffic making it critical infrastructure to be protected and innovated upon at a frantic rate to maintain pace with the approximately 40% bandwidth growth in all submerged corridors of our world. Ciena’s submarine networking expert, Brian Lavallée, highlights key areas for focused innovation throughout 2020.
By Brian Lavallée – There are several key technologies that are the focus of submarine network innovation and will garner a great deal of time, money, resources, and attention in 2020. These technologies will once again allow submarine cable operators to modernize their submerged assets and not only maintain pace with voracious and ongoing growth in bandwidth demand but provide critical competitive differentiation as well. I cover below these key technology innovation areas that I believe will dominate the discussion seascape throughout 2020.

With voracious and ongoing bandwidth growth experienced for many years now, coupled with expanding rollout of 5G services that significantly increase access speeds to content hosted in data centers, cable operators are constantly seeking new ways to increase available bandwidth between continental landmasses for Data Center Interconnection (DCI) purposes – satellite networks need not apply!

Although Submarine Line Terminating Equipment (SLTE) has been constantly innovative upon at a frenetic pace for the past decade, the wet plants they connect to have experienced comparatively little innovation – until now. Wet plants leveraging SDM technology offer more fiber pairs than traditional submarine cables, and although SDM cables support less capacity per fiber pair, they have a much higher overall capacity due to far more pairs (12 and higher), which is further enhanced with power-optimized repeater (misnomer for subsea optical amplifier) designs.

As an industry proof point, the first SDM-based submarine cable deployed is the transatlantic Dunant cable, which supports up to 250Tb/s of overall capacity over an aggregate of 12 fiber pairs, which is many more than the traditional 6 to 8 fiber pairs offered on recent submarine cable deployments. more>

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Updates from Chicago Booth

How multinational companies help spread recessions
By Bob Simison – The Great Recession a decade ago was one example of how economic cycles across the world can move in parallel, a phenomenon that economists don’t fully understand. It could be that a common event, such as a surge in oil prices, affects many economies at the same time—or perhaps linkages between countries transmit economic shocks from one country to the world economy.

One such linkage is multinational corporations,  according to Marcus Biermann, a postdoctoral scholar at the Catholic University of Louvain, and Chicago Booth’s Kilian Huber, who explore the role of multinationals in spreading the global recession by analyzing the ripple effects of one German bank’s struggles during the 2008–09 financial crisis.

Commerzbank was Germany’s second-biggest commercial lender behind Deutsche Bank. Losses on trading and investments abroad hammered the bank, especially after Lehman Brothers collapsed in September 2008. Commerzbank’s capital fell by 68 percent between December 2007 and December 2009, which forced the bank to reduce its aggregate lending stock by 17 percent. Biermann and Huber find that this pullback in credit available to German parent companies affected subsidiaries in other countries, thus helping to transmit the economic contraction. more>

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From the Revolution of 2020 to the Evolution of 2050

By Basil A. Coronakis – European societies are already on the move and 2020 will shape the direction that they go in. Within 30 years, in one way or another, the new world’s political condition will be settled.

The potential options for 2050 are numerous, from too extreme to everything in-between. The point is that whichever option is good, as well as whichever is bad, is a question that cannot be given a reply by either science or faith, but only philosophically.

However, since the “kings” of our society, and not the “philosophers”, will decide for the next big social step to take (or not),

Under the circumstances, we stand before two extreme scenarios and cannot say which of the two is the good and which is the bad, as we are all part of the problem. As a result, none of us can have an objective view. Therefore, will consider scenario A and scenario B without qualifying any.

Scenario A, which is likely to be the most probable as our “kings” are far for “adequately philosophizing”, and which although may have huge collateral damage and a generalized social upside-downs, in terms of long-term survival of humankind is not necessarily the worse.

Scenario A ends with an anarchy dominated chaotic social explosion that, when settled, will bring a new social order where the last will be first and the first the last. Of course, this will be the way of the “Parable of the Workers” from Matthew 20-16 in the New Testament but based on nature’s law of selection according to which the strong survives and the week disappear.

Scenario B is rather unlikely as it provides, after a smooth transition, that we will be living in the ideal city by 2050 – the contemporary version of Plato’s Utopia.

The so-called “in the between” will be simply a prolongation of the status quo, which ultimately will lead to scenario A, though with increased collateral damage. more>

Updates from McKinsey

Redefining the role of the leader in the reskilling era
To enable continuous learning, leaders will need to think and act differently.
By Lynda Gratton, Joe Voelker, Tim Welsh and David Rock – ontinuous learning in the workplace must become the new norm if individuals and organizations want to stay ahead. This places more demand than ever on leaders to take on a new role they might initially find unfamiliar—that of learning facilitator-in-chief.

It’s harder to learn new things as an adult; the pain of making mistakes doesn’t roll off as quickly as it might have when we were younger. So how can leaders foster an environment of psychological safety where employees are supported but still productively challenged? The members discussing this problem concluded that part of the solution may be for leaders to dial up their levels of empathy and humility and focus more on enabling the best in their people, rather than commanding it from them.

When we think about reskilling, our minds immediately go to the idea that you do a program or a course, something concrete that upskills you. Actually, for most people, their capacity to reskill comes from the job itself. So the crucial role for leaders is to be thoughtful about the way they design jobs, how they allow their people to move across different types of positions at the company, and allowing those employees to build their skills and forge a navigable path.

Because for most people, it’s likely that the job they’re in now will not exist in the future—or at least not in the same form. So leaders need to provide ongoing momentum for people to use their agency to decide for themselves, “What am I going to do next?

To give employees the insights they need to make informed decisions, it’s also important for leaders to help people in their organization understand what’s happening in the world—maybe not in 30 years’ time, but certainly in three years’ time. Data show clearly that people want some sort of insight about where they might be going in their organization and what role they might play in it or not. Leaders need to be transparent and honest about those changes, engaging in an adult conversation about what might realistically happen in the future and how it could affect employees. more>

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Updates from Ciena

How you can accelerate and de-risk your network transformation with Lifecycle Management
Successful network transformation is about delivering the right business outcomes, not just deploying new kit. With effective Lifecycle Management (LCM), you can make sure that your projects are properly aligned to your business needs and – crucially – you can accelerate and de-risk your transformation projects as well, says Robin Hobbs, Director, Services Sales & Strategy for Ciena in EMEA.
By Robin Hobbs – It can seem that most technology vendors just want to sell you equipment and oversee deployment activities until their kit is live in your network. However, their primary concern may not be whether their solution is delivering the business benefits you set out to achieve.

This deployment-focussed approach can leave you at a loss as to how to fine-tune and optimize your environment. That means you may be unable to meet customer SLAs consistently as traffic demands grow, or you may struggle to monetize your network to its fullest potential.

So how can you ensure that you choose the right underlying technologies to support your transformation strategy, and design and build a solution that meets your business needs long term? And how can you operate your upgraded network effectively and optimize its performance and efficiency over time to maximize your competitive advantage and ROI?

To avoid the dangers of ‘short-termism’ in network upgrade strategies, operators are increasingly turning to LCM (Lifecycle Management). This is a systematic, ‘step-based’ approach to network transformation and ongoing management. This approach means you can deliver projects quickly and cost-effectively, while also ensuring the best business outcomes for your organization and your customers.

Crucially, LCM recognizes that network transformation is a journey and one that is cyclical in nature, not just a deployment. This means every step is carefully structured and documented, with no element of your transformation left to chance. Some of the benefits are a faster, lower-risk deployment and migration, improved customer experience based on optimizing network availability and performance, and the ability to continually assess and ‘future-proof’ your network to avoid costly forklift upgrades in the future. more>

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Updates from ITU

Mapping schools worldwide to bring Internet connectivity: the ‘GIGA’ initiative gets going
By Martin Schaaper – Recently, I participated in a training programme to learn ways to identify and map the location of a learning institution and the level of internet connectivity available.

Held in Jolly Harbour, Antigua and Barbuda, the training provided a great learning experience to understand what it takes to put schools on a map, from a technical perspective, and the available tools and software.

The ProjectConnect training was part of GIGA, a unique partnership launched by ITU, the UN specialized agency for information and communication technology and UNICEF, the UN Children’s agency. The project aims at mapping the connectivity of all existing schools as a step towards ensuring that every school is connected to fast and reliable internet.

Announced during the UN General Assembly meetings in September 2019, it is the vision of this initiative to ensure that every child is equipped with the information, skills and services they need to shape the future they want in the digital era.

Latest data from ITU indicate that up to 3.6 billion people remain offline, with the majority of the unconnected living in least developed countries where just two out of ten people are online. more>

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Low unemployment isn’t worth much if the jobs barely pay

By Martha Ross and Nicole Bateman – Each month, the Bureau of Labor Statistics releases its Employment Situation report (better known as the “jobs report”) to outline latest state of the nation’s economy. And with it, of late, have been plenty of positive headlines—with unemployment hovering around 3.5%, a decade of job growth, and recent upticks in wages, the report’s numbers have mostly been good news.

But those numbers don’t tell the whole story. Are these jobs any good? How much do they pay? Do workers make enough to live on?

Here, the story is less rosy.

In a recent analysis, we found that 53 million workers ages 18 to 64—or 44% of all workers—earn barely enough to live on. Their median earnings are $10.22 per hour, and about $18,000 per year. These low-wage workers are concentrated in a relatively small number of occupations, including retail sales, cooks, food and beverage servers, janitors and housekeepers, personal care and service workers (such as child care workers and patient care assistants), and various administrative positions. more>

Updates from McKinsey

Four ways governments can get the most out of their infrastructure projects
Best practices can help governments invest in infrastructure that expands the economy and better serves the public.
By Aaron Bielenberg, James Williams, and Jonathan Woetzel – Infrastructure—for example, transportation, power, water, and telecom systems—underpins economic activity and catalyzes growth and development. The world spends more than $2.5 trillion a year on infrastructure, but $3.7 trillion a year will be needed through 2035 just to keep pace with projected GDP growth.

National, state, and local governments are devoting increased amounts of capital to meet these needs, and for good reason. The McKinsey Global Institute estimates that infrastructure has a socioeconomic rate of return around 20 percent. In other words, $1 of infrastructure investment can raise GDP by 20 cents in the long run.

Gains from infrastructure are fully realized, however, only when projects generate tangible public benefits. Unfortunately, many governments find it difficult to select the right projects—those with the most benefit. Furthermore, infrastructure can provide social and economic advantages only when the capital and operating costs can be financed sustainably, either by the revenues a project generates or by the government sponsor. Too many projects become an economic burden and drain on finances when a government borrows money for an undertaking and neither its revenues nor its direct and indirect economic benefits adequately cover the cost.

Our framework includes four key best practices to help modernize decision making for infrastructure and to improve its social and economic impact. Each step is enabled by and contributes to a consistent, fact-based process for identifying and executing infrastructure projects. The first step—ensuring that projects yield measurable benefits—lays the foundation for all the rest.

  1. Develop projects with tangible, quantifiable benefits
  2. Improve the coordination of infrastructure investments to account for network effects
  3. Engage and align community stakeholders to promote inclusive economic and social benefits
  4. Unlock long-term capital

Consistent, transparent assessments are required to determine if infrastructure satisfies the elements of our framework—whether a project offers robust public benefits, is compatible with other projects and appropriately aligned with the community’s objectives, and uses the best long-term financing available. Thus, governments may have to invest in capabilities to evaluate the benefits of projects and commit themselves to transparent evaluations that include the necessary checks and balances.

Governments should assess their institutional capabilities against the framework’s elements, such as mapping current processes to develop infrastructure projects from concept to operation.

Can the government complete a structured quantification of public benefits?

Is there a way to assess the portfolio as a whole in light of the debt-management strategy? more>

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