Tag Archives: Social economy

Why Immigration Drives Innovation

Economic history reveals one unmistakable psychological pattern.
By Joseph Henrich – When President Coolidge signed the Johnson-Reed Act into law in 1924, he drained the well-spring of American ingenuity. The new policy sought to restore the ethnic homogeneity of 1890 America by tightening the 1921 immigration quotas. As a result, immigration from eastern Europe and Italy plummeted, and Asian immigrants were banned. Assessing the law’s impact, the economists Petra Moser and Shmuel San show how this steep and selective cut in immigration stymied U.S. innovation across a swath of scientific fields, including radio waves, radiation and polymers—all fields in which Eastern European immigrants had made contributions prior to 1924. Not only did patenting drop by two-thirds across 36 scientific domains, but U.S-born researchers became less creative as well, experiencing a 62% decline in their own patenting. American scientists lost the insights, ideas and fresh perspectives that inevitably flow in with immigrants.

Before this, from 1850 to 1920, American innovation and economic growth had been fueled by immigration. The 1899 inflow included a large fraction of groups that were later deemed “undesirable”: e.g., 26% Italians, 12% “Hebrews,” and 9% “Poles.” Taking advantage of the randomness provided by expanding railroad networks and changing circumstances in Europe, a trio of economists—Sandra Sequeira, Nathan Nunn and Nancy Qian–demonstrate that counties that ended up with more immigrants subsequently innovated more rapidly and earned higher incomes, both in the short-term and today. The telephone, hot blast furnace, screw propeller, flashlight and ironclad ship were all pioneered by immigrants. The analysis also suggests that immigrants made native-born Americans more creative. Nikola Tesla, a Serbian who grew up in the Austrian Empire, provided George Westinghouse, a New Yorker whose parents had migrated from Westphalia, with a key missing component for his system of electrification based on AC current (Tesla also patented 100s of other inventions).

In ending the quotas imposed under the Harding-Coolidge administration, President Johnson remarked in 1964 that “Today, with my signature, this system is abolished…Men of needed skill and talent were denied entrance because they came from southern or eastern Europe or from one of the developing continents…” By the mid-1970s, U.S innovation was again powerfully fueled by immigrants, now coming from places like Mexico, China, India, Philippines and Vietnam. From 1975 to 2010, an additional 10,000 immigrants generated 22% more patents every five years. Again, not only did immigrants innovate, they also stoked the creative energies of the locals. more>

Was it a coup? No, but siege on US Capitol was the election violence of a fragile democracy

By Clayton Besaw and Matthew Frank – Did the United States just have a coup attempt?

Supporters of President Donald Trump, following his encouragement, stormed the U.S. Capitol building on Jan. 6, disrupting the certification of Joe Biden’s election victory. Waving Trump banners, hundreds of people broke through barricades and smashed windows to enter the building where Congress convenes. One rioter died and several police officers were hospitalized in the clash. Congress went on lockdown.

While violent and shocking, what happened on Jan. 6 wasn’t a coup.

This Trumpist insurrection was election violence, much like the election violence that plagues many fragile democracies.

The uprising at the Capitol building does not meet all three criteria of a coup.

Trump’s rioting supporters targeted a branch of executive authority – Congress – and they did so illegally, through trespassing and property destruction. Categories #2 and #3, check.

As for category #1, the rioters appeared to be civilians operating of their own volition, not state actors. President Trump did incite his followers to march on the Capitol building less than an hour before the crowd invaded the grounds, insisting the election had been stolen and saying “We will not take it anymore.” This comes after months of spreading unfounded electoral lies and conspiracies that created a perception of government malfeasance in the mind of many Trump supporters.

Whether the president’s motivation in inflaming the anger of his supporters was to assault Congress is not clear, and he tepidly told them to go home as the violence escalated. For now it seems the riot in Washington, D.C., was enacted without the approval, aid or active leadership of government actors like the military, police or sympathetic GOP officials. more>

Updates from Chicago Booth

How central bankers misjudge forward guidance
By Rose Jacobs – One of the best ways to spur an economy is to get people spending, and policy makers have a number of tools to do that. Yet growing evidence suggests a favored approach of late—forward guidance by central banks—doesn’t work. Such guidance, usually focusing on the outlook for interest rates, is meant to make clear to consumers that prices are likely to rise soon, so buying big items now would be smart.

While people may agree with the buy-now logic, they still may not react as economists and policy makers expect, according to Boston College’s Francesco D’Acunto, Karlsruhe Institute of Technology’s Daniel Hoang, and Chicago Booth’s Michael Weber. That’s because they don’t understand the signal, the researchers find.

“If you’re an economist too much stuck in your model world, this is very surprising to you,” Weber says. On the other hand, he acknowledges that not everyone can follow the logic chain that leads from a central banker predicting depressed interest rates, to lower borrowing costs, to higher inflation, to the urgency of buying now. “If you’re not too detached from reality, it’s not surprising,” Weber says.

The researchers analyzed two events in which governments or central banks signaled that prices were set to rise. One was a 2005 announcement by the German government that the country’s value-added tax (similar to the US sales tax) would increase from 16 percent to 19 percent in 2007. The second was a 2013 statement by then European Central Bank president Mario Draghi that interest rates would stay low or decline further for some time. To economists, this statement was a clear signal that price inflation would soon follow. more>

Related>

Updates from ITU

Banking for all: Can AI improve financial inclusion?
ITU – In a world where an estimated 1.7 billion people do not have a bank account, can artificial intelligence help make financial inclusion a reality for everyone?

This was the topic under discussion at a webinar during the year-round AI for Good Global Summit 2020.

Inclusive financial access directly helps enable seven of the 17 United Nations Sustainable Development Goals. It requires people and businesses in underserved areas to have affordable and easy access to secure financial services and products.

This means being able to build credit, receive funds, deposit money, buy insurance, invest in education and health and withstand economic shocks.

With the rise of mobile phone use and information and communication technologies (ICTs) penetration in developing countries, financial service providers are now turning to artificial intelligence to make financial inclusion happen.

‘Superpowers’ for digital services

Typically, to lend money, providers use documents to verify the identity of a person, evaluate their credit score and offer a collateral loan. But AI tries to fix this for people who cannot meet these requirements, said panelist Rory Macmillan, Founding Partner at Macmillan Keck, Attorneys & Solicitors. more>

Related>

The rule of law: a simple phrase with exacting demands

If the finger is to be pointed—rightly—at Hungary and Poland, then the EU must insist on compliance by all with universal norms.
By Albena Azmanova and Kalypso Nicolaidis – That the European Union, in its moment of public healthcare emergency and acute economic plight, should find itself paralysed over such a seemingly abstract matter as the rule of law is one of the great paradoxes of our times. And yet this is exactly the conundrum plaguing approval of the EU’s seven-year budget and recovery fund, totaling €1.81 trillion, which Poland and Hungary have been blocking over rule-of-law conditionality for the funds’ disbursement.

Respect for the rule of law is one of those self-evident truths—the absolute minimum requirement of decent political rule—which should be unproblematic in the family of liberal democracies that is the EU. It is equally beyond doubt that the prompt approval of the pandemic recovery fund is in everyone’s interest.

Many commentators assert that the EU should stand up to the defiant governments, in the name of its fundamental values. We do too. But our hope is that we, in Europe, can use this moment as an opportunity to question ourselves further.

Most of us may believe that the arguments put forward to resist rule-of-law conditionality are disingenuous. And they are. But we must still take them seriously when they are presented in line with … the rule of law.

Hungary and Poland are claiming that, by being poorly defined, the rule-of-law principle opens the door to discretionary decisions and thus to the abuse of power.

The rule of law as a political principle and legal norm was indeed born of the ambition to constrain the arbitrary power of central authority. This was why the English barons forced King John to adopt the royal charter of rights, the Magna Carta, on June 15th 1215. The specification of basic freedoms, codified not as privileges for a handful of aristocrats but as abstract and unconditional rights, was meant to ensure that no authority could place itself above these rights in pursuit of its political ends

It is true that the EU should make no compromises with the very foundation of the liberal political order. But the EU itself has complied with these principles erratically and selectively, thus violating the spirit of the rule of law.

This has been evident in several instances—from lack of concern with the Silvio Berlusconi media monopoly in Italy to France’s semi-permanent state of emergency, Malta’s and Slovakia’s complacency with political murder and the Spanish government’s response to the 2017 independence referendum in Catalonia. Often, the EU is content with narrowly reducing the remit of the rule of law to a simple matter of legality—ignoring routine violations of core values, such as the right to peaceful assembly, freedom of speech or even the right to liberty and life itself.

Has the EU not thereby set itself up for the current crisis, supplying the ammunition for autocrats to try to absolve themselves from compliance with the rule of law? more>

2021 Global Economic Outlook: The Next Phase of the V

Morgan Stanley projects strong global GDP growth of 6.4% for 2021—led first by emerging markets, followed by reopening economies in the U.S. and Europe—in a macro outlook that diverges from the consensus.
Morgan Stanley – Rising COVID-19 case numbers in the U.S. and Europe make it difficult right now to envision a return to normal. Yet, even as the pandemic drags on, the global economy has proven remarkably resilient.

Following a steep decline in early 2020, the world economy rode a rebound that began in May and remains on track to surpass prepandemic GDP levels by the end of this year—setting the stage for strong post-recovery growth in 2021.

In their 2021 outlook, the economics team at Morgan Stanley Research says the V-shaped recovery that the team forecast in their 2020 midyear outlook is now entering a new self-sustaining phase and is on track to deliver 6.4% GDP growth in the coming year.

“This projection stands in stark contrast to the consensus, which forecasts 5.4% global growth and worries that the pandemic will have a bigger impact on private-sector risk appetite and, hence, global growth,” says Chetan Ahya, Morgan Stanley’s Chief Economist. “We maintain that consumers have driven the recovery, and investment growth—a reflection of the private corporate sector’s risk tolerance and a key feature of any self-sustaining recovery—is bouncing back as well.”

Three key factors will characterize the next stage of the V-shaped recovery, says Ahya: synchronized global growth, an emerging-market rebound and the return of inflation. Against this macro outlook, Morgan Stanley strategists urge investors to trust the recovery and overweight equities and credit vs. government bonds and cash (see the 2021 Strategy Outlook for more). more>

How to Build Better Sidewalk Connectivity

TI is working to improve near the sidewalk edge connectivity for household wireless devices.
By John Blyler – Late last year, Amazon announced their “Sidewalk,” a neighborhood network designed to help customer devices work better both at home and beyond the front door. A little less than a year later, the company announced additional details on the Amazon Sidewalk, which highlighted the low-power, long-range connectivity benefits for IoT devices. For anyone who has attempted to install a smart security camera or a connected doorbell at the edge of their Wi-Fi connectivity range, this announcement came as a welcome respite from the difficulties in getting IoT devices to connect and stay connected.

Texas Instruments (TI) is among the chipmakers working with Amazon to make Sidewalk a reality. When TI announced its support for Amazon Sidewalk, it highlighted several low-power, multi-band devices that enabled developers to build applications that leveraged the Sidewalk protocol as well as Bluetooth Low Energy.

To learn more about these multi-band wireless devices and how they support the Sidewalk, Design News talked with Casey O’Grady, marketing manager at Texas Instruments. She focuses on removing barriers for the global deployment of Sub-1 GHz connectivity to achieve greater distances with ultra-low power.

O’Grady: Amazon Sidewalk can extend the range of low-bandwidth devices and make it simpler and more convenient for consumers to connect. Ultimately, it will bring more connected devices together into an ecosystem where products such as lights and locks can all communicate on the same network. Sidewalk can enable devices connected inside the home to effortlessly expand throughout the neighborhood. more>

The EU’s credibility is at stake

By Otmar Lahodynsky – In July, after a four-day marathon summit in Brussels, there was agreement on the EU budget for 2021-2027 and a recovery fund for the EU’s 27 members following the COVID-19 crisis.

Together, almost €2 trillion have been reserved for this purpose. The €750 billion corona aid package is intended to help those countries that have been the most affected by the disease, including as Italy, Spain and France, but also the other Member States as they will need to rebuild their economies.

At the EU summit, a typical Brussels-style compromise was reached – each head of government presented themself as a winner at home if they will receive a lot of money for economic recovery. It was then that the so-called “frugal four” – Denmark, the Netherlands, Austria and Sweden (plus Finland) – forced a reduction in the number of grants in exchange for an increase in the share of loans and a cut in their membership fees. The heads of Poland and Hungary also celebrated at home after the successfully de-linked their access to EU funding from their records on the rule of law.

Subsequently, however, the other EU states introduced this clause by a clear majority.

The Poles and Hungarians felt pressured and they vetoed the seven-year EU budget, which requires unanimity despite the fact that they were not bothered that they had previously approved it.

In his explanatory statement, Polish Prime Minister Mateusz Morawiecki railed against an “attack on Polish sovereignty” and adding that the EU was no longer the same as when Poland had joined the bloc in 2004, a generation after the end of Communism. Morawiecki said the Polish economy was so strong that it no longer needed any subsidies from Brussels (more than €12 billion each year). Morawiecki said that Poles were even considering an EU withdrawal along the lines of Brexit.

Hungarian Prime Minister Viktor Orban, Brussels’ bête noire, went even further. In his view, the EU is acting like the Soviet Union once did. It wants to blackmail Hungary and force it to accept Middle Eastern refugees. In the future, Orban added, the European Commission would have the power to meddle in the internal politics of all of the Member States, as it sees fit. Orban also emphasized that the EU’s previous accusations against Hungary were all unfounded and that the concept of the rule of law was not precisely or universally defined.

The reality is that these core concepts of the bloc were long-ago enshrined in the EU treaties and in Europe’s charter of fundamental rights. Conditions for EU accession were already laid down in the 1993 Copenhagen criteria and include the stability of institutions, democracy, the rule of law, respect for human rights and respect and protection of minorities.

The Commission has, for too long, turned a blind eye to the transgressions of the nationalistic populists in Poland, Hungary and other Eastern European countries. The isolated attempts to bring about punitive proceedings under Article 7 of the EU Treaty did not act as a deterrent, because sanctions were not imposed. For this reason, the governments of Hungary and Poland mutually helped each other.

But now the basic principles of the EU, above all the rule of law, are being put to the test. more>

Updates from McKinsey

E-commerce: How consumer brands can get it right
Consumer brands need to make direct-to-consumer economics feasible and the customer experience seamless.
By Arun Arora, Hamza Khan, Sajal Kohli, and Caroline Tufft – Consumer brands have been seeking to establish direct relations with end customers for a range of reasons: to generate deeper insights about consumer needs, to maintain control over their brand experience, and to differentiate their proposition to consumers. Increasingly, they also do it to drive sales (see sidebar, “Why go direct?”).

For any brands that have considered establishing a direct-to-consumer (DTC) channel in the past and decided against it, now is the time to reconsider. COVID-19 has accelerated profound business trends, including the massive consumer shift to digital channels. In the United States, for example, the increase in e-commerce penetration observed in the first half of 2020 was equivalent to that of the last decade. In Europe, overall digital adoption has jumped from 81 percent to 95 percent during the COVID-19 crisis.

Many companies have been active in launching new DTC programs during the pandemic. For example, PepsiCo and Kraft Heinz have both launched new DTC propositions in recent months. Nike’s digital sales grew by 36 percent in the first quarter of 2020, and Nike is aiming to grow the share of its DTC sales from 30 percent today to 50 percent in the near future. “The accelerated consumer shift toward digital is here to stay,” said John Donahoe, a Silicon Valley veteran who became Nike president and CEO in January. 1 Our consumer sentiment research shows that two-thirds of consumers plan to continue to shop online after the pandemic.

The vast majority of consumer brands are used to selling through intermediaries, including retailers, online marketplaces, and specialized distributors. Their experience with direct consumer relationships and e-commerce is limited. As a result, they often hesitate to launch an e-commerce channel despite the obvious opportunity it offers. Just 60 percent of consumer-goods companies, at best, feel even moderately prepared to capture e-commerce growth opportunities. more>

Updates from Adobe

Build dynamic cityscapes with Brian Yap
The Adobe creative director and illustrator demonstrates how to make a complex metropolis using very simple shapes and lines.
By Jordon Kushins – Two rectangles and a triangle. Those are the basic building blocks Brian Yap uses to form the foundation of one of myriad structures in a dynamic cityscape he brought to life with Adobe Illustrator on the iPad.

As a creative director and illustrator here at Adobe, Yap knows his way around Creative Cloud, and his portfolio is a testament to the capabilities of a variety of apps and programs. “I’m almost entirely mobile now,” he says. “I’ll sometimes scribble in a notebook, or finish something off on desktop, but the tablet is my main tool.”

Downsizing from desktop to tablet hasn’t made him any less meticulous. “I’d describe my work as over-detailed,” he says with a laugh. “Or maybe ‘complex’ is a better word. I like to work in a variety of different digital styles — everything from what feels like classic ink drawings to music posters to very graphic and sometimes even sculptural works — as well as experiment with different materials.” more>

Related>