Chartbook · Economics & Policy
TIER 4 Wed, 6 Nov 2024 10:30:17 +0000
Great links, images and reading from Chartbook Newsletter by Adam Tooze ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ | | ---|---|--- | | | Forwarded this email? Subscribe here for more --- --- # Wrangling over lithography machines. Thai coups. Power plays in Vietnam & the collapsing Lao state. ### Great links, images and reading from Chartbook Newsletter by Adam Tooze | | Adam Tooze --- | Nov 6 --- | --- --- | | | --- | | --- | | --- | | --- | | READ IN APP --- Thank you for opening the Chartbook email. | | ---|---|--- **Aaron Douglas, Aspects of Negro Life: From Slavery Through Reconstruction. New York Public Library, source:NYPL** **Power plays over lithography machines** | | ---|---|--- > Since the U.S. imposed export controls on semiconductors and related technologies to China, its partners - particularly the other members of the "Fab 4," the Netherlands South Korea, and Taiwan - have at times diverged from Washington's hardline stance on curbing semiconductor exports to China in order to safeguard their economic interests. In the most recent example, the Dutch government announced that it would regulate the exports of ASML's Deep Ultraviolet (DUV) lithography machines independently from the United States. Amsterdam has ruled that from now on ASML will be procuring the necessary license to export their DUV machines to members under the U.S. Bureau of Industry Standards' Entity List from the Dutch government instead of the U.S. government. This essentially means that the U.S.-mandated export controls will be under the licensing purview of administrators in the Netherlands instead of the United States. ASML's DUV machines are a critical set of equipment for semiconductor production. Legacy semiconductors (28 nanometers or larger) are widely used in various electronics and consumer goods, and these older chips are etched using ASML's commercially successful DUV lithography machines. China, which leads the legacy semiconductor market across the world, contributes 25 percent to ASML's annual revenue. The move to keep ASML accessible to Chinese customers despite heavy sanctioning on advanced semiconductor technology - at or below 14 to 16 nanometers - reflects the acceptance of China's position as a critical member to the global semiconductor value chain. Source: The Diplomat **Thailand 's auto slump is hurting Japanese producers.** In Thailand, pickups are know as "people's cars," | | ---|---|--- > Thailand has long been a stronghold for Japanese automakers, but the country's economic slump has prompted them to carry out drastic restructuring programs for passenger cars. Now they may have to do the same for pickups. | | ---|---|--- Source: Nikkei Asia * * * HEY READERS, THANK YOU for opening the Chartbook email. I hope it brightens your weekend. I enjoy putting out the newsletter, but tbh what keeps this flow going is the generosity of those readers who clicked the subscription button. Upgrade to paid If you are a regular reader of long-form Chartbook and Chartbook Top Links, or just enthusiastic about the project, why not think about joining that group? Chip in the equivalent of one cup of coffee per month and help to keep this flow of excellent content coming. | | ---|---|--- If you are persuaded to click, please consider the annual subscription of $50. It is both better value for you and a much better deal for me, as it involves only one credit card charge. Why feed the payments companies if we don't have to! Upgrade to paid And when you sign up, there are no more irritating "paywalls" * * * **On Thailand 's coup-happy military, this review essay is fascinating.** For contributing subscribers only. Upgrade to paid **Is the Lao State Collapsing? The current economic crisis has hollowed out the capacity of an already weak state apparatus. A fascinating analysis byDavid Hutt ** | | ---|---|--- > Between the 1980s and the late 2010s, the Lao state didn't really _need_ to be professional or competent. It collected very little tax and provided very few services to the people. The wealthy paid for private schools and clinics. The masses bribed teachers and doctors for low-quality services. The central bank allowed the kip to float against the Thai baht. No questions were asked about where the profits of companies were actually going (most weren't being stored in Laos). For the most part, the economy produced enviably high growth rates because the state didn't get involved. The state's purpose was to sign investment deals with Chinese companies (mainly for dams and mines), introduce reform bills that multinational institutions helped to draft, and distribute enough money between ruling families (the "red aristocrats") so that the communist party didn't splinter. Call it a species of feudal-Friedmanism. However, similar to other developing countries in mainland Southeast Asia, all that should have changed in the 2010s. Managing the economy and society became a more complex affair. The economy is now worth around $15 billion, compared to just $2.3 billion twenty years ago. The population rose from 4.3 million in 1990 to around 7.3 million in 2020. Urbanization (which rose from 31 percent to 37.5 percent between 2012 and 2022) reduced the welfare people got from their community, making them more reliant on the state. Fewer people lived with extended family. The central bank had to manage vastly more foreign currency heading into the country. Regulation became more complex. There was more money flowing around the system to monitor. How did the Lao state react? Badly. At the same time as it needed to professionalize, it was hollowed out. That was mostly because the communist government chose in the early 2010s to accumulate a national debt now in excess of 125 percent of GDP (if you include arrears and swap arrangements), meaning much government expenditure (around 44 percent now) goes towards repaying the interest, a problem before the COVID-19 pandemic. According to the World Bank, government revenue, already low by regional standards, declined from 22 percent to 16 percent of GDP between 2014 and 2019. State spending on education fell from 3.2 percent of GDP in 2013 to 2.1 percent in 2019 and sits at around 1.4 percent now. Combined public spending on education and health fell from 4.9 percent of GDP in 2013 to 2.3 percent in 2023. … According to the World Bank's Worldwide Governance Indicators, Laos' Government Effectiveness ranking fell between 2017 and 2022, while its Regulatory Quality fell between 2012 and 2022. Rule of Law is no better now than in 2012. Then came COVID-19 and the financial crisis, which brought stagnant wages and crippling inflation and resulted in thousands of civil servants voluntarily leaving their posts. So the state is now trying to do much more compared to a decade ago but with a lot less. Today, the education sector is in freefall. … The healthcare sector is equally puny. Crime is spiking because law enforcement is corrupt or incompetent - or both. … The illegal scamming industry, run mostly by the Chinese, could be generating the equivalent of between a tenth or half of Laos' annual GDP. Human trafficking is rife. The administrative side isn't faring much better. There's almost no regulation of most industries. The central government apparatus has little control over the provinces. Small wonder the grand anti-corruption campaign promised in 2016 petered out within a year. The financial crisis since 2022 has shown how the accumulation of incompetency over decades has afflicted the central bank, for instance. The business community doesn't trust the kip, preferring to keep its assets in baht or U.S. dollars while trying to avoid each of the measures the government imposes to compel them to hold their assets in the kip. … illegal trading remains rife because the central bank cannot enforce its own regulations, so businesses still turn to illicit currency traders, further jacking up inflation and weakening the kip. Last year, the government admitted that only a third of export receipts enter Laos through the banking system. That means that while exports were valued at $8.19 billion in 2022, only $2.7 billion entered the country. Moving forward, the question isn't whether the Lao government has the motivation to make tough decisions. … the more interesting question is whether the Lao government has the capacity to improve. The debt problem isn't going away. The IMF, in a report published this year, reckons debt will remain "very high" for the next two decades. In lieu of repayments, the state is actually whittling itself away. The energy grid is now basically controlled by Chinese state-run firms after the Electricite du Laos was sold off in 2020. I've argued that China is unlikely to allow Laos to go broke, but all that depends on China not going broke first, which you shouldn't bet against over the next two decades. Moreover, this policy simply hands over state property to more effective Chinese managers to handle, which makes sense in the short term but isn't great if you're actually trying to improve your own bureaucracy Source: The Diplomat | | ---|---|--- **Birds in Flight c. 1927-1929Aaron Douglas (American, 1899 -1979), source: Philadelphia Museum of Art** **A common conceit amongst Western observers is that China lacks soft power. Pew data suggests a rather different conclusion.** > A survey conducted by the Pew Research Center, a Washington think tank, from January to May revealed that while only 24% of people in high-income countries viewed China favorably, the figure was 56% among middle-income economies. In the Asia-Pacific region, over 70% of respondents in Thailand, Malaysia, Singapore and Sri Lanka credited China with contributing to global peace and stability. Diplomatic experts in Southeast Asia suggest these results partially reflect the growing economic cooperation with China and a critical view of Washington's support for Israel in Middle Eastern conflicts. Source: Nikkei Asia * * * **Impressive series of meetings btw new Vietnamese leadership and Chinese counterparts: merely a matter of managing the South China Sea, or a more broad-based rapprochement?** For contributing subscribers only. Upgrade to paid **More brilliance byDavid Hutt, here in SCMP, on the rearrangement of power within Vietnam. What a concise and powerful analysis!** > There is a hint of wishful thinking in seeing the appointment of a four-star general as Vietnam's new president to balance the influence of the domestic security hawks with increased authority for the military as a welcome return to normalcy in Hanoi. Last week's elevation of Luong Cuong, formerly the top political commissar of Vietnam's armed forces, to head of state did reconstruct the "four pillars" system, which divides the four main political offices between four individuals, a way of avoiding one-man rule like in China. For much of this year, To Lam was both party chief and state president. Yet what power-sharing stability exists is now almost entirely divided between the military and public security apparatus - who now occupy the majority of seats in the Politburo - while most other consensus-seeking checks and balances exist to be ignored. … These are lean times for the Communist Party of Vietnam, which has been hollowed out by the relentless "blazing furnace" anti-corruption campaign orchestrated for the past eight years by Trong. But whereas Trong was an ideologue who saw the concentration of power as a justifiable means to restore socialist morality to a party existentially challenged by corruption, To Lam - formerly the public security minister and Trong's enforcer - holds no such lofty illusions. His power grab is motivated by more parochial concerns. Small wonder that the man who kept the dirty dossiers on all other apparatchiks could so quickly amass power; the corruption crusade has made the security factions the gatekeepers of power. … The only rival power base within the party appears to be the military. Its authority has risen in recent years by virtue of its vast business interests and because rising tensions in the South China Sea have enhanced its bargaining power within the party. Whether Cuong's elevation is a genuine check on To Lam's ambitions remains to be seen. If there were no concerns about To Lam's intentions, why would non-allies rush to appoint a new president who seems ill-suited for the role? If To Lam indeed harbours autocratic ambitions, why would he permit Cuong's appointment unless he believed the general poses no real threat? The political intrigues in Hanoi are unlikely to affect Vietnam's broader foreign policy trajectory. The Communist Party as a whole remains committed to neutral, friend-to-all "bamboo diplomacy". Nevertheless, while Washington and Beijing might regard any sign of political stability in Hanoi as desirable, the situation is not as straightforward. … If there is now stability within the Politburo, it is in the form of conformity and uniformity. The foreign and economic ministries, gutted by anti-corruption crackdowns, no longer have the same influence they once did. Lower-ranking officials are terrified of the purity codes. Power has been taken away from the provinces and municipalities and recentralised into the hands of an increasingly homogeneous elite in Hanoi. All this closes the door to the reformist, practical and perhaps dissenting voices of those actually experienced in governance and diplomacy. These are the people who might lobby for rights reforms to appease Western investors or push to ease restrictions on Chinese investment. As power is centralised, there's a danger that diplomatic decision-making also becomes centralised. This makes it difficult for foreign officials to form meaningful relationships with lower-ranking Vietnamese counterparts, the sort of ties that greatly helped drive US-Vietnam rapprochement in the 1990s…. The anti-corruption campaign has been blamed for causing bureaucratic malaise … There is hope that political stability will now unblock the logjam, yet the corruption crusade is unlikely to be abandoned. … For decades, the party has been driven by internal disputes over one central question: embrace reforms that bolster the economy but weaken the party's control or resist change and increase its authority? In the past, disparate voices from different branches of the party had space to offer opposing opinions … Although the security hawks are now embroiled in their own power struggle, they are united in their conviction that the party's supremacy must not budge an inch. This is at a time when dissenting voices are being shut out of the corridors of power. Foreign investors and diplomats might soon find themselves looking back with nostalgia on the days of dispute and instability within the Communist Party. At least back then, not everything was dictated by the watchful eye of the security apparatus. **Aaron Douglas, Song of the Towers, 1934, source:Illustration History** | | ---|---|--- If you have scrolled this far, you know you want to click: Upgrade to paid #### Invite your friends and earn rewards If you enjoy Chartbook, share it with your friends and earn rewards when they subscribe. Invite Friends --- | | | Like --- | | Comment --- | | Restack --- (C) 2024 Adam Tooze 548 Market Street PMB 72296, San Francisco, CA 94104 Unsubscribe