Economics by Chris Rock

Chris Rock provides critical socio-economic insights by observing places where women don't work...

Happy Birthday: America Turns 249

In celebration of America's birthday, the U.S. Census Bureau ("CB") releases some fun facts every year. E.g., when America declared her independence from Great Britain in July 1776, there were an estimated 2.5 million people* in the 13 original colonies (vs ~7 million in the U.K.); today, per the live U.S. population clock on the CB website, there are over 342.0 million Americans** (vs 69.5 million Britons). Or that in 2024 the U.S. imported $4.7 million worth of American flags and exported(?) $2.0 million worth. Or that in 2024, the U.S. imported $470 million of fireworks. In any case, Happy 4th of July!

*Approximately 450,000 of the 2.5 million were African Americans, who pointedly didn't gain their independence in 1776.

**Approximately 42 million of whom are African Americans. 

Say My Name, Say My Name...

Today is the final day for early voting ahead of Tuesday's Democratic primary election for New York City mayor. Since NYC is a heavily Democratic city, so the winner of the primary will be heavily favored to win the general mayoral election (in November). Andrew Cuomo, the former disgraced NY state governor, is the front runner. But an exciting insurgent campaign from a young, charismatic state senator, Zohran Kwame Mamdani, has shaken up the race. Mr. Mamdani,33, is an Indian American Muslim born in Uganda, who is running on a socialist platform to tackle NYC's most pressing problems: the high cost of living and gaping economic inequality. Mamdani is the son of Columbia University professor, Mahmood Mamdani, and Oscar-nominated filmmaker Mira Nair and has represented New York's 36th State Assembly district in Queens since 2021.  

In the primary debates, Mamdani took Cuomo to task a number of times, no more so when asked why he would be a better candidate that his opponent. After rattling off a multitude of important reasons why he is the better choice, he pointedly corrected Mr. Cuomo that his name is pronounced Mamdani...M-A-M-D-A-N-I. Mic drop...

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Mamdani has been a staunch defender of Palestinian rights for years and has not shied away from his position even as he seeks to be the mayor of a city with almost a million Jews. Not surprisingly he's had to defend himself against allegations of antisemitism. Here Whitney Tilson, another candidate, tries to bait him with the same. But Mamdani gives such an eloquent response that even Tilson seems persuaded. 

Go vote!! Ve a votar!!

When Streaming Killed the TV Star

Change is the only constant...in the 1950s television replaced radio as the dominant form of entertainment. Then came cable television and HBO in the 1970s. Then it was the internet...and YouTube in 2005. Since then, broadcast television and cable have been losing ground to streaming services like YouTube, Netflix, Hulu, etc.; first slowly and then quite rapidly. The future that was long anticipated finally arrived last month. The New York Times reports that in May, "more Americans watched television on streaming than on cable and network television combined." It was the first time that happened over a full month.

Looking at the chart above, Americans were still consuming entertainment primarily through television even as late as five years ago. But streaming has made rapid strides in recent years. And ironically, it may be due to Boomers. As the NYT notes, "It’s no surprise that younger viewers were the first to jump to streaming. But another group has since made the leap as well: viewers over the age of 65." They are the fastest growing age group for streaming services, according to Nielsen. Older viewers watch a lot of television and are drawn to free platforms like Tubi, Roku, and Pluto. 

If the streaming vs television race is all but over, the winners within streaming are just as clear. Not all streamers are equal...YouTube is the undisputed king of streaming capturing 12.5% of all viewing time in May, followed by Netflix (7.5%) and Disney (5.0%).

What's next for the winners? Well, Ted Sarandos, Co-CEO of Netflix, says "What we really are focused on is the 80 percent of TV watching that is not on Netflix or YouTube today.”

The ascension of streaming as the primary form television consumption reminds us of the change seen in the music industry a few decades ago. On August 1, 1981 MTV (Music Television) went live and swiftly revolutionized the way people experienced music by playing (back then) music videos 24/7. The impact of a new technology on existing media was captured eloquently in the Buggles' icon video "Video Killed the Radio Star" (which was played heavily in the early days of MTV). And its message applies just as much to the next incumbent technology.   

Perspectives: Land Inequality

The global population is estimated to be over 8 billion (and perhaps even as high as 10 billion). Regardless, there's a lot of people in the world and it already feels very, very crowded. Just look at Tokyo, Jakarta, Delhi, Shanghai, etc. Imagine how it'll be in 2050 when the global population is anticipated to be 25% higher! Where will people live? Will we run out of space?

The below chart puts some of our demographic challenges into perspective. Excluding Antartica, the sum of the land area across the U.N.'s 193 or so countries is 57.5 million square miles. Roughly half of the world's population live in 20 Asian countries with a combined land area of only 7 million square miles (highlighted in yellow). So, 50% of humanity lives across just 12% of the world's land.  

But that's not all. There is also significant land inequality within nations. Consider China and India, two of the world's most populous countries. About 94% of China's 1.4 billion people live inside 50% of the country's land area. In India, 50% of its 1.4 billion people live on 27% of the country's land in the north. Add in Bangladesh and its 175 million people sitting next to India and below China and you have about a fifth of humanity living across less than 4% of the planet's land--roughly 730 people /square mile! 

Of course, we are not suggesting (by extrapolation) that earth can support 40 billion people! The question of how many people our planet can permanently support is a complex one and hotly debated. Various studies on the subject, based on the idea of "carrying capacity," have produced enormous ranges from 2 billion (were way past that!) to one trillion! Though the majority of studies put the earth's carrying capacity at around 8 billion. But maybe if we could just move people around a little better (immigration!), we might safely be able to support a few billion more! Consider Australia and Canada, they occupy 11% of the world's land area but have just 0.8% of its population!  

Land, labor, and capital...inequality exists across each of these key economic inputs.

Happy Birthday: America Turns 246

 

In celebration of America's 246th birthday, the U.S. Census Bureau released some fun facts. E.g., when America declared her independence from Great Britain in July 1776, there were an estimated 2.5 million people* in the 13 original colonies (vs ~7 million in the U.K.); today there are over 330 million Americans** (vs ~68 million Britons). Or that in 2021 the U.S. imported $6.7 million worth of American flags and exported $2.5 million worth. In any case, Happy 4th of July!

*Approximately 450,000 of the 2.5 million were African Americans, who pointedly didn't gain their independence in 1776.

**Over 48 million of whom are African Americans. 

The Remarkable Rise of Bangladesh

When people think of the Indian Subcontinent, they think of, well, India, and secondarily Pakistan, two rival nuclear powers. Often lost in the mix is another populous country with a long, shared, and bloody history: Bangladesh.

The end of British colonialism in India was associated with a rushed and botched partition of the country by Viceroy Mountbatten (better known to Americans as Prince Charles' ambitious uncle in Netflix's The Crown). In any case, at the stroke of midnight on August 15, 1947, two countries were born: Hindu-majority India, and Muslim-majority Pakistan. Pakistan itself was divided into two parts, East and West, separated by over a thousand miles (the two green sections, as shown below). In 1971, Bangladesh declared its independence from the richer and more powerful (West) Pakistan.

At the time, there seemed to be little hope for the new nation, reeling from a brutal war and a terrible famine. Henry Kissinger, then National Security Advisor, famously called it a “basketcase.” Oh, how times have changed! Fifty-years on, Bangladesh has emerged as an unlikely economic success eclipsing its two larger neighbors. In a fascinating piece for Bloomberg, Mihir Sharma argues that Bangladesh is South Asia's standout star. Per Sharma:

Bangladesh's GDP per capita grew by 9% over the past year, rising to $2,227 [in 2020-21]. Pakistan’s per capita income, meanwhile, is $1,543. In 1971, Pakistan was 70% richer than Bangladesh; today, Bangladesh is 45% richer than Pakistan. One Pakistani economist glumly pointed out that “it is in the realm of possibility that we could be seeking aid from Bangladesh in 2030.”

India — eternally confident about being the only South Asian economy that matters — now must grapple with the fact that it, too, is poorer than Bangladesh in per capita terms. India’s per capita income in 2020-21 was a mere $1,947.

Bangladesh’s growth rests on three pillars: exports, social progress and fiscal prudence...Between 2011 and 2019, Bangladesh’s exports grew at 8.6% every year, compared to the world average of 0.4%. The success is largely due to the country’s relentless focus on products, such as apparel, in which it possesses a comparative advantage. Meanwhile, the share of Bangladeshi women in the labor force has consistently grown, unlike in India and Pakistan, where it has decreased. And Bangladesh has maintained a public debt-to-GDP ratio between 30% and 40%. India and Pakistan will both emerge from the pandemic with public debt close to 90% of GDP. Fiscal restraint has allowed Bangladesh’s private sector to borrow and invest.

But Sharma also notes that success brings its own set of problems. For one, Bangladesh's exports benefit from the country’s participation in various mechanisms that allow tariff-free access to developed economies, such as the U.S.’s Generalized System of Preferences. These groupings are only open to the world’s least developed countries. Thanks to its growth, Bangladesh will likely have to give up these privileges by 2026 or so. Structurally, as its economy matures, its comparative advantages will also change. Like Vietnam and others, it will then have to shift emphasis away from garments to higher-value exports. The transition will test Bangladesh as it has those other nations.

These are good problems to have, and Bangladesh has demonstrated an ability to meet challenges. Moreover, the country isn't content to just be a local success story. It aims to be a developed economy by 2041. Ambitious? Yes. But as Sharma notes, "the past 50 years have shown how unwise it is to bet against Bangladesh."

Was Boss Baby Right about the Impending Economic Collapse?

Back in 2017 the Boss Baby tried to warn us about the impending demographic catastrophe in that (in)famous 'puppies are evil' presentation (see below). Despite being a box-office hit, not many people paid attention to the wunderkind's dire warnings. Not anymore. The Pope has taken notice and has commented that choosing pets over children is "selfish and diminishes us." 

Pope Francis' strong words were not well-received by many couples of fur babies, but he has a point. According to the Census Bureau, the U.S. population grew at the slowest rate in recorded history in 2021. And that trend was largely consistent across the world for several years, as shown in the chart below. Thanks again, millennials! (Are they really the most narcissistic generation? Umm, it's complicated, but there is a serious debate about it!) Anyways, a graying population has serious implications, not just slowing economic growth...but also national sadness? As Tyler Cowen writes, "a significantly growing population is a kind of macroeconomic free lunch." And he wouldn't say that lightly...he's an economist after all.

Meanwhile, the American Pet Products Association’s annual survey reveals that millennials are now the biggest cohort of pet owners in the U.S. And young pet owners are more likely to dote on their pets as if they were children, as research from AlphaWise and Morgan Stanley shows. 

There is good reason for that. The average millennial has experienced slower economic growth since entering the workforce than any other generation in U.S. history, even though they are the best educated and, arguably, the hardest working generation in the workforce today. It's not that they don't want kids, most do, someday...but kids are so expensive. According to Bloomberg, the average cost of raising child in the U.S. born in 2015 is $233,610. By comparison the lifetime cost of owning a dog or cat is $36,568 and $16,252, respectively. For an overworked and financially insecure generation, pets make a lot of sense. 

So, Boss Baby was only partially right. Sure, puppies are cute, but if The Baby Corp wants to increase market share, they've got to find a way to make babies less expensive!

Does "Printing" Money Cause Inflation? Not Necessarily...

The big financial news of the past week was that the consumer price index (CPI), a broad measure of inflation, jumped to 4.2% yoy in April, up from 2.6% in March--the highest level since...2008. Cue the frantic headlines in the financial press. Never mind, that (i) the change is coming off a low base due to the Covid-19 lockdown and (ii) that in 2008 we were in the midst of the Great Recession. Yes, inflation was higher even during that recession than it is today, which tells you how much of a disinflationary environment we've been living in the past dozen years. When the Fed says any inflation is likely to be transitory, we are inclined to agree with them.

But investors know better, of course, and the financial press that caters to them are screaming about how we are on the precipice of runaway inflation. Why? Is it because of ultra accommodative monetary policy? Umm, no...the market is okay with that...throwing a major tantrum last time yields rose. Free money is great! (to be fair not everyone agrees...hedge funds have long complained about low rates). No the "real" danger are the massive stimulatory fiscal policies designed to help lower-income Americans, which they feel will end very badly. Paul Krugman's recent column has a couple of interesting charts that say otherwise.

First, while there was a relationship between money supply (blue line) and CPE--the measure of "core" inflation the Fed follows--in the 1970s and 1980s, there has been little, if any, correlation between money supply and CPE over the last 30 years.  

What's going on? The classic definition of inflation is "too much money chasing too few goods." And that shows up in the "velocity" of money, technically the ratio of GDP to money supply, but more colloquially how quickly money changes hands. Well, the velocity of money has plunged in the last 20 years. So while money supply has spiked, GDP hasn't, growing at an anemic 2% per year.  

Moreover, most, of that growth, as we know, has accrued to the top 1%, which has resulted in asset price inflation. We mention that because Biden's policies are geared towards giving lower-income households economic relief as this cool chart from the NYT shows. Middle and lower-income families are more likely to spend than save. That could increase the velocity of money and economic growth, which would be good. But runaway inflation? Nah, demographics and other powerful structural factors will keep inflation in check.  

Netflix and Chill? Umm, No Thanks

New data from the CDC shows birth and fertility rates in the U.S. continued to decline in 2020 to the lowest level in more than 40 years down to 56 births per 1,000 women of child-bearing age and 1.6 births per woman, well below the 2.1 replacement rate. Twenty five states had more deaths than births.

Early in the pandemic there had been speculation that with couples cooped up at home with no place to go, there would be a baby boom. Well, the opposite happened. Instead of "Netflix and chilling," couples were just...well, Netflix binging. The amount of time U.S. households spent streaming nearly doubled in 2020 over 2019. It's hard to get busy when you're busy watching the Queen's Gambit, the Crown or Bridgerton. Last year Netflix added 37 million new subscribers worldwide — by far the biggest increase since the company expanded its DVD-by-rental service into video streaming 14 years ago. But its wasn't just Netflix, Amazon, Disney+ and a plethora of other streaming services gained captive viewers.

Of course, correlation isn't causation as statisticians frequently warn...so what's really happening? As the NYT notes, "births tend to dip after economic crises, as women put off having babies because of uncertainty with jobs and income. The birthrate dropped sharply in the early 1930s, after a stock market crash precipitated the Great Depression. But it picked up a few years later, once the economy started to bounce back. However, the recent decline, which began after the Great Recession in 2008, has continued, despite improvements in the economy. This unusual pattern has led demographers to wonder whether something else is going on."

Economics still may be an important factor, as couples worry about student debt, housing affordability and rising cost of child rearing, but there is also likely a social impetus with women choosing to form families at later ages to complete studies, build careers and generally gain more "maturity".

There are of course economic consequences to a lower birth rate. Combined with a leveling off of immigration rates (see chart below), falling birth rates could slow long-term growth. After all, GDP growth is driven by two key factors, the size of the labor force and productivity gains (for a given level of capital stock, which is ample in developed countries). Unless there are significant increases in productivity (which hasn't happened in 20 years), a shrinking labor pool will challenge standards of living as retirement and health benefits financed through taxes fall increasingly on lower proportions of the population. As they say, demographics is destiny...