Bloomberg QuickTake Jan-June 20

This document is being provided for the exclusive use of AHMED AL-HASSAN at FORDHAM UNIVERSITY
Bloomberg
Issue 12 January — June 2020
QuickTake Hard-to-explain topics, explained simply
The Future of Capitalism��p16 Cybersovereignty��p32 The Vegan Economy��p42

Inside
Green Finance��p20 The Internet of Things�� p37 Universal Basic Income��p50
QuickTake
70¢ 30%
Projected cost of a taxi ride per mile once Drop over a decade in the number of times
cars are driverless, down from $2 to $3 now a new garment is worn
21 times
4.2m 25%
Multiple of income needed to buy a home in
Hong Kong, world’s least affordable city
Deaths annually from Share of U.S. high school
air pollution seniors who say they vape
Issue 12 January — June 2020
32
Milliseconds for a round-trip
data transmission using
low-Earth orbit satellites
100 14%
Number of projects underway to develop Share of foreign-born people in high-income
electric and hybrid airplanes countries in 2017, up from 9.6% in 2000
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Contents JANUARY — JUNE 2020
ECONOMY & FINANCE TECHNOLOGY
Buzzwords p14 Buzzwords p34

Negative-Yielding Bonds p15 New Monopolies p35
The Future of Capitalism p16 Low-Earth Orbit Satellites p36
Private Equity p18 The Internet of Things p37
Facebook’s Digital Coin p19 Electric Airplanes p38
Green Finance p20
Helicopter Money p22
CLIMATE
TRADE
Buzzwords p40
Decarbonization p41
Buzzwords p24 The Vegan Economy p42
Forced Technology Transfers p25 Sustainable Fashion p44
China’s Belt and Road Reboot p26
SOCIETY
WORLD AFFAIRS
Affordable Housing p46

Hong Kong’s Autonomy p28 Air Pollution p47
Migration p30 Mobility as a Service p48
Cybersovereignty p32 Universal Basic Income p50
India’s Caste System p51
Vaping p52
Index p54
MANAGING EDITOR COPY EDITORS PRODUCTION To contact the editor

Leah Harrison Singer William Elstrom Susan Fingerhut responsible for QuickTake:
Nicholas Mullan Kenneth Machlin-Lockwood Leah Harrison Singer
MAGAZINE EDITOR lharrison@bloomberg.net
Lisa Beyer ART DIRECTORS GRAPHICS EDITORS
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n the Bloomberg
EDITORS Saxton Randolph Sam Dodge Terminal at QUICK <GO>
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n the web, at
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John O’Neil Hayley Warren
Andy Reinhardt Align your phone’s
COVER ILLUSTRATION camera with this
CONTRIBUTING EDITOR Sergio Membrillas code to access
Melissa Pozsgay QuickTake videos

Editor’s Letter
To be an informed leader, investor, parent, student, global

citizen or dinner party guest, you need to understand a
wealth of big ideas. It’s an ever-shifting body of knowledge
that frames the key debates of our age — the fight over
the internet’s new monopolies, the rise of green finance,
the risks from air pollution and the future of Hong Kong.
To help you, our team of journalists at Bloomberg
curates a list of important issues facing our world. We
then craft concise, fact-based articles explaining each
one. We call them QuickTakes because they distill
complex topics onto a single page, stripping the story
down to reveal its basic conflicts for both well-versed
readers and those fresh to the subject. We aim for a
balanced presentation, using simple language, plenty of
skepticism and a global worldview.
This 12th edition of the QuickTake magazine offers
a news-driven sampling of the 600-plus QuickTakes
available on the Bloomberg Terminal through QUICK
<GO>. Individual pieces and videos are accessible on
the web.
We hope QuickTakes make you feel ready to engage in
the debates shaping our world.
Leah Harrison Singer, Managing Editor

It’s tiny, green, and could

be the future of biofuels.
Algae is a renewable source of energy. ExxonMobil is
researching its potential to produce a lower CO₂ emission
alternative to today’s transport fuels. And because algae
can grow in salt water and on land unsuitable for crops,
a successful algae-based biofuel could provide the world
with more energy without posing a challenge to global
food and fresh water supplies. Learn more at
EnergyFactor.com
#UnexpectedEnergy

375M
INCLUSION
Investing in the
Next Generation
Of Skilled Laborers According to the McKinsey Global Institute
(MGI), there are 375 million workers of all ages
CHALLENGE who will need to learn new skills by 2030.
By 2022, it is estimated that workers
will need an extra 101 days of on-the-
job learning to meet the demands of
evolving job profiles.
ACTION
3M partners with SkillsUSA and
WorldSkills to support 400,000+
college, high school, and middle
school students currently enrolled in
training programs in trade, technical,
and skilled service occupations.
27%
U R B A N I Z AT I O N
Responsibly
Energy demand is expected to grow by about
27%, or 3,743 million tons of oil equivalent
(mtoe), worldwide from 2017 to 2040.
Meeting Rising
Energy Needs
CHALLENGE
More than three times the amount of
energy currently consumed by Europe
will be added to global energy demand
in the next two decades, driven by
growth in Asia.
ACTION
The world needs more energy, but
fewer emissions. ADNOC is stepping up
production capacity, while operating
with one of the lowest carbon intensities
in the industry, and building one of
the largest refining and petrochemical
complexes in the world.
NewEconomyForum.com
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INCLUSION
Creating an
Army of Doers
CHALLENGE
The population of Africa is changing,
with an additional 187 million residents
joining cities by 2034.
ACTION
Dangote is empowering more youth
and women to increase their income
1.1B
generation capacity by providing
technical and vocational skills relevant
1.1 billion working-age people are
projected to live in Africa in 2034. to contemporary industry needs and
That will be the world’s largest providing unconditional cash transfers
working-class population.
to boost household income and access to
markets and finance.
5
C L I M AT E
+ Supporting
Growth in the
B
5+ billion is the projected
Middle Class
CHALLENGE
Massive population growth and
number of people in the
world’s economic middle improving living standards are
class by 2030, almost resulting in increased energy use.
twice today’s number.
ACTION
Since 2000, ExxonMobil has spent
$10 billion to develop and deploy
lower-emission energy solutions to
provide the growing middle class with
the energy it needs to sustain a higher
standard of living.
NewEconomyForum.com
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900B
TRADE 2020 is the year that cross-border
e-commerce is expected to increase to
Connecting
$900 billion, or roughly 22% of the global
e-commerce market.
People and
Possibilities
CHALLENGE
A connected world is a better world,
and trade is the lifeblood of the global
economy. It’s crucial that businesses,
both big and small, have access to new
international markets and customers.
ACTION
FedEx provides businesses with
global solutions to gain access to new
markets and customers, helping to
expand trade and increase consumer
choice around the world.
45%
TRADE
Businesses Must
45% of businesses globally plan to increase
investment in sustainability in the next two years.
Become More
Sustainable
CHALLENGE
Businesses face mounting sustainability
pressure from customers, shareholders,
and governments. Leading companies
will gain commercial advantage from
acting sustainably.
ACTION
HSBC aspires to be a leader in financing
and shaping the transition to a low-carbon
world. Our Navigator report helps businesses
maximize the commercial opportunities. It
reveals that 34% of businesses are making
sustainable investments to keep ahead
of competitors, 30% to meet customer
expectations, and 23% to future-proof
their brand.
NewEconomyForum.com
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60%
C L I M AT E
Finding
New Energy
The world needs to decrease energy-
Sources
related CO2 emissions by 60% by
2050 to keep the increase in the global CHALLENGE
average temperature to well below 2C
above pre-industrial levels. The effects of record CO2 emissions
include historically high temperatures
and severe weather. The world needs a
cleaner, more sustainable energy system
to keep the planet healthy and its
inhabitants safe.
ACTION
With its FCEV Vision 2030 in effect,
Hyundai continues to expand its role
beyond the automotive transportation
sector and play a pivotal role in global
society’s transition to a clean, renewable
energy system by helping make hydrogen
an economically viable energy source.
2.5B
INCLUSION
Connecting
Urban Dwellers
CHALLENGE
As the world’s cities grow larger and
2.5 billion people are expected to be
added to the world’s cities from 2018 to
more numerous, leaders in both the
2050, according to the United Nations. public and private sectors will need to
reconsider infrastructure, inclusivity,
sustainability, transportation,
education, and connectivity.
ACTION
Mastercard aims to bring more than
500 million unbanked/underserved
consumers and 40 million micro
and small businesses into the formal
economy by 2020.
NewEconomyForum.com
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91.6M
T E C H N O LO GY
Preparing the
Future Workforce
CHALLENGE
Over the next decade, as advanced
technologies disrupt the way we work The workforce in India will increase by
91.6 million from 2020 to 2030.
and advanced economies age, India will
add more than 90 million people to the
working population. Preparing for the jobs
of the future is key to realizing the benefits
of these unique demographics.
ACTION
The Tata Group works with public and
private partners to skill, reskill, and
upskill almost a million people a year.
Our programs address digital skills
(understanding how to interact with
technology), 21st century skills (such
as critical thinking, creativity, and
collaboration), and lifelong learning.
10T
U R B A N I Z AT I O N Global health-care expenditures are predicted
to rise to $10 trillion by 2022.
Supporting a
Healthy Workforce
CHALLENGE
The health of workforces will become
more important to modern corporations.
ACTION
Since 2013, Vanke has hosted more
than 400 major running programs
and sports events across 60+ cities in
China, attracting 20,000+ corporations
and cumulatively over one million
participants, as a way to encourage
healthier lifestyles of employees.
NewEconomyForum.com
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Thank you to our Founding Partners:
NewEconomyForum.com
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PM

Chapter 1
ECONOMY &
FINANCE
Does capitalism need fixing?
Who’s upset about Facebook’s
plan for a cryptocurrency?

Buzzwords The language of finance and markets includes terms new and old.
Here’s your guide to the argot.
DIRECT
Britain’s most famous stock pickers, Neil
Woodford, froze withdrawals from his flag-
ship equity fund, which had shifted almost
entirely into small-, mid- and micro-cap
stocks and unlisted securities. Then a
Why were markets so alarmed in global macro fund run by H2O, which
mid-2019 over sudden withdraw- is backed by Natixis SA, faced billions
als from a handful of European of dollars’ worth of withdrawals in a
investment funds? And why did matter of days over concerns about
LISTINGS
their troubles lead Bank of England investments in unrated bonds. The
Governor Mark Carney to warn of two incidents led Carney to warn
funds that were “built on lies”? The that liquidity risks are “systemic,”
answer has to do with what’s known with some $30 trillion tied up in
as “liquidity mismatch.” Mom-and- difficult-to-trade instruments. Those
pop investors have been pouring who are less worried point to the
into mutual funds and exchange- way exchange-traded funds track-
traded products that promise they ing bonds weathered earlier bouts of
can get their money out anytime turmoil. Michael Burry, an investor
they want. At the same time, many whose bet against the subprime bub-
bond funds that traditionally focused ble was featured in “The Big Short,”
on investment-grade bonds have warns that “The theater keeps get-
been edging into more complex cor- ting more crowded, but the exit door Hot technology startups have tradition-
ners of the fixed-income market to is the same as it always was.” ally relied on initial public offerings to raise
eke out better returns in today’s the cash they needed to break into the
By John Gittelsohn and Nishant Kumar
low-interest-rate world. But many big time. IPOs became synonymous with
of those higher-yielding bonds are instant wealth for company founders and
in thin or quirky markets, mak- windfalls for investors given first crack at a
ing them potentially hard to sell in company’s shiny new shares. But startups
a hurry. The same thing can hap- are staying private longer, growing on cash
pen in equities: In June 2019, one of supplied not only by venture capital firms
but by mutual funds and other large inves-
FRONTIER MARKETS
tors through so-called private markets. And
when they do go public, some new start-
ups are choosing a different path: a direct
listing. In 2018, music streaming service
Spotify Technology SA became the first
large company to try it; workplace mes-
saging platform Slack Technologies Inc.
followed suit, and other startups are con-
sidering doing the same, including Airbnb
Inc. In a direct listing, no new money is
For many investors, emerging markets are prove a safe bet in volatile times. That’s being raised and no new shares are sold.
as risky and exotic as it comes. But there’s because frontier markets have limited Instead, private investors or employees
another category of countries whose financial links to the outside world, mak- who hold existing shares can just start sell-
financial markets are too small or under- ing them less correlated to global markets ing them on a public exchange. One appeal
developed to earn even the “emerging” than their more-developed counterparts. is avoiding the “pop,” a first-day stock surge
label. Known as frontier markets, these The frontier-market universe is shrink- that can be a sign that the deal was mis-
30 or so nations include the likes of Sri ing as the more financially developed priced at shareholders’ expense; another
Lanka, Kazakhstan, Nigeria and Bahrain. countries within it get promoted to emerging- is the potential for lower banker fees. The
The main draw for investors is getting into market status. Argentina made the jump biggest risk is volatility. Before an IPO, a
a country as the economy takes off, and in 2019, and Kuwait will follow in 2020. company’s bankers set a price based on
before the crowds arrive. Pakistan’s stock But frontier markets have caught the eyes discussions with potential buyers and stand
index rose at an annual clip of 25% in U.S. of adventurous investors not least because ready afterward to buy or sell stock to limit
dollar terms from 2009 to 2016, before of their recent performance: The MSCI fluctuations. In a direct listing, a stock’s
Pakistan was reclassified as an emerging Frontier Markets Index outperformed the price is set entirely by the market demands
market. To be sure, investing in individ- closely watched MSCI Emerging Markets of the moment. As it happened, volatility
ual frontier markets is only for the brave; Index by more than 10 percentage points in was limited in both Spotify’s and Slack’s
Nigeria’s stock index lost two-thirds of its the year to Aug. 30, 2019. listings — an encouraging fact for imitators.
value in U.S. dollar terms from 2013 to the
end of 2018. Backing a group of them can By Livia Yap By Sonali Basak
14

Negative-Yielding Bonds
By John Ainger
A multitrillion-dollar black hole looms within the world’s financial markets. Negative-yielding debt — investments worth less,
not more, if held to maturity — has spread throughout the bond universe, destroying potential returns for investors and turning
normal market rules on their heads. The product of central banks focused on economic stimulus and investors focused on
safety, subzero bonds look like they’re here to stay, with implications for mom-and-pop savers, pensioners, investors, buyout
firms and governments.
● How can bonds eat your money? Another pillar of financial logic holds zero to keep their business. Mom-and-pop
The groundwork for the vast buildup of that if you lend money for longer, you investors and pensioners struggle to eke
negative-yielding bonds was laid by cen- should see a higher return. That’s also out an income from their savings.
tral banks that slashed interest rates on been broken — the time value of money
their banking systems, which pulled rates has disappeared. Subzero yields can push ● How did we get here?
down across their economies. But turning investors into riskier bets in the hunt for Less-than-zero rates are a symptom of
the yield on government or corporate debt returns, raising the chances of bubbles in deeper problems. It was Europe’s sover-
negative takes a determined buyer will- financial markets and real estate. eign debt crisis and fear that the common
ing to pay more for a bond than its face currency bloc would break up that ini-
value. If the total interest the bond pays ● Who benefits from negative rates? tially turned German yields negative. By
over its remaining lifetime is less than the Governments, for one. There are calls for 2014, central banks in Europe had started
premium the buyer paid for it, the inves- Germany, for example, to borrow more to deploy negative interest rates to spur
tor loses money. to lift public spending and invest in infra- an economic recovery; Japan soon fol-
structure rather than continue to run a lowed. The idea was to stimulate lending
● Why invest in a bond that will lose large budget surplus. Companies that sell by making banks pay to leave money idle
you money? bonds also reap the benefits of record- as reserves on deposit with a central bank.
Typically, bonds are the safest place to low borrowing costs. So do private equity Since interest rates for debt sold by govern-
store wealth, so investors seek them out firms, which typically borrow much of ments and companies typically follow the
at times of heightened market stress, say what they spend to acquire companies and central bank-set benchmark rate, that led
in response to a trade war or tensions in see greater opportunities when capital is to cheaper borrowing more broadly. The
the Persian Gulf. Some funds must buy cheap. Homeowners with variable-rate subzero rates were supposed to be tempo-
the bonds regardless of yield because they mortgages also have reason to celebrate. rary but have endured.
are duty-bound to track government bond
indexes. And some investors can still make ● Who gets hurt? ● Why have negative rates lasted
money on these bonds after adjusting for Pension funds and insurers, which are big so long?
currency swings or by selling them to investors in government bonds, are in a A decade on from the credit crisis, infla-
other buyers at even higher prices. particular predicament: Their liabilities tion is still scarce, with wages increasing
grow steadily as clients age, but often they only modestly despite large drops in
● How big a deal is this? are prohibited from taking on big risks. unemployment. Aside from the U.S.
The global sum of negative-yielding debt Banks see their margins squeezed. They’re Federal Reserve, few central banks that
soared to $17 trillion in August 2019, having earning next to nothing from lending but slashed interest rates during the credit
more than doubled since December 2018. still need to offer depositors a rate above crunch managed to raise them. That
It made up about a quarter of investment- leaves little room to maneuver during the
grade debt. All of Germany’s sovereign next downturn, so rates are likely to move
debt was under water as of mid-2019, and Below Zero further into negative territory.
investors were effectively paying 0.7% for Value of bonds with negative yields globally
the privilege of lending their money for ● Where’s this headed?
10 years. Government bonds in Denmark U.S. Federal Reserve Fed pivots away There are fears that Europe is following
begins raising interest from interest-rate
were in the red, along with some debt sold $18t the path of Japan’s so-called lost decade,
rates from near-zero hikes
by Italy, with spillover into a handful of cor- during which policy makers struggled
porate issuers. The U.S. was one of the few to revive anemic growth and the modest
outliers, with none of its $16 trillion govern- inflation that spurs spending and eco-
GRAPHIC SOURCE: BLOOMBERG
ment debt pile yielding less than zero. $9t nomic expansion. Geopolitical tensions
over trade and the future relationship
● Why is this reason for worry? between the U.K. and the European Union
Negative rates upend a basic principle of will keep driving investors into the safest
the global finance system: It’s supposed 0 assets, meaning demand will remain high
to cost money to borrow and pay to lend. 7/2014 8/2019 for negative-yielding debt.
15

The Future of Capitalism

By Peter Coy
Capitalism creates prosperity. By channeling energies into production and innovation, it has enabled billions of ordinary
people to live better than the royalty of old. But capitalism puts power in the hands of owners, including hard-to-love
billionaires and multinational corporations. It’s blamed for widening the gap between rich and poor. Many people equate it
with cronyism and the capture of government by special interests. One camp says the solution is to clean up capitalism:
End subsidies and protections for businesses, dismantle monopolies and unwind red tape. Another camp says government
needs to play a bigger role because the profit motive of capitalists can’t be relied upon to meet society’s needs.
● The Situation assets, and they hire workers to use that Objections in the U.K.
“capital” to create products and services More respondents rejected traditional capitalist
Inequality has gotten both better and for sale. In theory — and usually in practice views than supported them in a Legatum Institute/
Populus poll
worse. Inequality between nations has — competition for customers induces cap-
diminished with the rise of China, India italists to improve. The “invisible hand” of
and other nations that have turned to the free market, rather than government, Statement Percent who agreed
capitalism and free markets. But inequal- guides who does what. The American “The pay of senior executives in 77%
ity between rich and poor within nations economist Milton Friedman argued in the businesses should be capped”
has increased. Overall, the bottom half of 1970s that maximizing profits for share- “Businesses should pay their senior 21%
the world owns less than 1% of the world’s holders, subject to following the law, executives whatever they see fit”
wealth, while the top 1% of adults own should be the only objective of corpora-
PHOTO: JUSTIN KANEPS/THE NEW YORK TIMES/REDUX

47%. Capitalism and free markets are tions. Corporate boards largely embraced “Making a profit should only be one 71%
being challenged by both the left and the that message. But there has since been consideration among many”
right. In their campaigns to become the a growing movement toward so-called “The primary purpose of business should 26%
Democratic Party’s presidential candidate, stakeholder capitalism, which demands be to make a profit”
U.S. Senators Bernie Sanders and Elizabeth that companies balance the interests of
Warren argued that the economic sys- shareholders against those of employees, “Some companies make so much profit 60%
tem is rigged to benefit the wealthy. On customers and society. In August 2019, it can’t be justified”
the right, President Donald Trump called Business Roundtable, an association of “Companies are entitled to make as much 39%
himself “Tariff Man” and moved to restrict U.S. chief executive officers, endorsed profit as they can if it’s legal”
immigration, even though the free flow of that idea. Germany already requires that
goods and people is fuel for growth in cap- employees play a role in setting compa-
italist economies. Ray Dalio, the billionaire nies’ strategies. of or in addition to making capitalism work
founder of Bridgewater Associates, the better — is for the government to take over
GRAPHICS SOURCES: MONMOUTH UNIVERSITY (APRIL 2019 POLL), LEGATUM INSTITUTE/POPULUS (AUGUST 2017 POLL)
world’s biggest hedge fund, says discon- ● The Argument parts of the economy where the capitalist
tent with disparities in wealth could boil system has failed to provide basic needs.
over into revolution. The free-market fix for capitalism is more In this vision, the government would
capitalism: Breaking up the tech giants build more housing instead of simply giv-
● The Background would level the playing field for competi- ing incentives for private construction. It
tors. Erasing tariffs would benefit the poor, would guarantee state jobs for people who
Capitalism is built on profit-seeking by pri- who spend a bigger share of their income got laid off in the private sector, averting
vate owners of property. Individuals and on imported products. Loosening limits a decline in employment whenever the
companies own land, machines and other on the types of homes that can be built economy slows. In the U.S., this viewpoint
would make housing more abundant and propels the argument for replacing the
affordable. Restrictions on lobbying would existing patchwork of private health plans,
Ambivalence in the U.S. give politically unconnected companies a which leaves more than 30 million people
A Monmouth University poll that asked respondents fairer shot. Many of these fixes are sup- uninsured, with government-provided cov-
to rate their views on capitalism revealed ported by people on the center-left such erage for all. It’s also behind the push for
reservations, especially among the young
as Warren, who calls herself “a capital- free or debt-free college education to uplift
Positive Neutral Negative Don’t know ist to my bones.” On taxes, capitalists are the less advantaged. Those ideas come
divided. Some say lower taxes will spark from the left. On the right, the “national
Ages 18-34 more growth and prosperity. Others cite conservatism” movement would rein in
24% 49% 22% high-tax Scandinavia as a model: Unleash free markets by engaging in industrial plan-
Ages 35-54 private enterprise to create prosperity, ning and protecting key industries from
43% 39% 15% and then use taxes and transfers to off- foreign competition. The upshot: Some on
Ages 55+ set the income inequality that inevitably the left embrace capitalism, and some on
48% 35% 13% results. Another approach — either instead the right mistrust it.
16


Private Equity
By Jason Kelly
They own the gym, the pet shop and maybe even your dentist’s office. They might be selling you electricity or operating the
hotel in your town. No matter where you live, companies that are part of your daily life have likely been taken over by private
equity firms. Once hidden in the shadows of global finance, the industry has quietly amassed a portfolio valued at more than
$4 trillion, emerging as a stealth force shaping how capitalism plays out around the world. The billionaire owners of these firms
say they’re making money by building healthier corporations, often rescuing them from the vagaries of poor management or
likely failure. They shake things up by restructuring operations, repositioning products or reaching for new markets. But in the
process, they can sometimes strip companies bare — closing stores and factories and firing workers, all while earning fees for
themselves and big returns for their clients. To critics, private equity firms are “vampires” or “locusts,” loading companies up
with debt, exploiting regulatory loopholes and exacerbating inequality.
● The Situation public company and take it “private” by on a daily, sometimes second-to-second
borrowing money and pairing it with cash, basis, private equity funds typically
Investors have poured money into private or “equity,” to fund the takeover. The oper- hold the companies they buy for years.
equity, with the likes of Blackstone Group ations can then be turned around away The billionaire owners of the firms have
Inc. and Apollo Global Management LLC from the quarter-to-quarter glare of stock emerged as global power brokers, with
each raising a single fund of more than markets. The strengthened company is Blackstone’s Stephen Schwarzman and
$20 billion since 2017. The industry’s later resold, often through an initial pub- KKR & Co.’s Henry Kravis counseling lead-
pile of so-called dry powder — commit- lic offering, reaping what can be huge ers from U.S. President Donald Trump to
ted, uninvested capital — reached about profits. Over the last two decades, buy- China’s Xi Jinping.
$1.5 trillion at the end of 2018. All that out artists amassed money from pension
money has fueled expanding ambitions. funds and endowments eager for the ● The Argument
After starting off with unloved units of double-digit annual returns they could
large corporations, the firms are now deliver, making private equity an allur- Many private equity takeovers are suc-
taking over dental chains and amass- ing asset class in an environment of cess stories: Blackstone’s buyout of Hilton
ing holdings of single-family homes. low interest rates and paltry returns on returned the iconic hotel brand to glory,
Household names such as J.Crew, Hilton other investments. Like hedge funds, while KKR saved retailer Dollar General,
and Dell have all received private equity the firms use a so-called 2-and-20 fee a vital part of many rural U.S. communi-
backing, while the big U.S. funds have structure, earning an annual 2% man- ties. But the industry’s sheer economic
reached overseas to suck up real estate in agement fee on their pot of assets and might has attracted ire, and its tech-
Spain and brewers in Japan. Local private keeping 20% of profits. Unlike hedge niques can bring what’s known as the
equity firms have also sprung up around funds, which trade individual securities “creative destruction” of capitalism into
the globe. The industry has presided over high relief. Some studies have shown that
dramatic turnarounds as well as spectac- takeover targets shed jobs at a faster rate
ular failures. The 2017 collapse of Toys Private Equity Life Cycle than similar firms, but then hire workers
“R” Us, one of the largest retail bank- Reaping fat profits from corporate turnarounds faster when the company is returned to
ruptcies of all time, was blamed in part health. Some lawmakers argue that pri-
on the crushing debt load engineered by vate equity firms are exploiting a loose
its trio of private equity owners. The loss Private regulatory regime. In her campaign to
equity
of more than 30,000 jobs shined a light Investments
fund
Cash + debt become the Democratic Party’s candi-
on the industry and helped to renew calls date for president in 2020, U.S. Senator
to rein it in. One target is the so-called Elizabeth Warren attacked the firms as
Pension Buys
carried interest benefit, which enables fund company “vampires” that bleed companies dry to
private equity firms to pay lower taxes by generate profits for wealthy owners. Her
classifying their earnings as capital gains populist pitch includes plans to make the
rather than ordinary income. 80% 20% firms responsible for the debts and retire-
ment obligations of the companies they
● The Background buy, while limiting their ability to pull
Distribution Restructures money out or insulate themselves from
company
Private equity emerged from the leveraged of profits losses. Others seek reform from within:
buyout wave of the late 1970s and 1980s, Some pension funds are pushing for
when dealmakers began to use large Sells lower fees and more transparency in an
amounts of debt to amplify their own company effort to better align interests and ensure
money. The basic technique is to buy a a fair division of profits and risk.
18

Facebook’s Digital Coin

By Olga Kharif
Facebook Inc.’s plan to create a digital currency, Libra, is a big idea. If a third of the social network’s 2 billion members use Libra,
it might be in more (virtual) pockets than the U.S. dollar. On the other hand, it could flop if it turns out to offer little more utility
than existing payment apps. Or it might not ever see the light of day, if it’s strangled in its crypto-crib by regulators appalled by
the idea of a potentially dominant global currency that could operate beyond their reach.
● What is Libra? way government-issued currencies once ● What makes stablecoins important?
A digital coin that, according to Facebook, were backed by gold. The most popular They’re seen as a bridge between crypto
initially would just allow its users to send stablecoin to date, Tether, tracks the U.S. and traditional currencies because they
or receive money or pay for things within dollar and its price typically varies only make it easier to convert one into the
the social network but could eventually by a few cents, though how it manages other. JPMorgan Chase & Co. is developing
be used for transactions outside it as issuance and reserves is not clear. a stablecoin (called JPM Coin) for its clients
well. Balances and transactions would to use in making payments to each other;
be run on a blockchain, a shared digital ● Is that how Libra would work? it thinks stablecoins and blockchains
ledger. Facebook planned to launch in In announcing Libra, Facebook revealed will eventually outperform traditional
2020 along with partners that included very few details but said it would be tied payment systems.
some of the biggest payment firms. But to a so-called basket of assets that would
in October 2019, Visa, Mastercard, PayPal include the dollar, euro, pound and yen, ● What are regulators upset about?
and EBay, among others, pulled out amid along with low-risk securities such as U.S. Libra’s potential for use in money
fierce criticism of the project. Treasury bills. They all tend to move within laundering, among other things. And
narrow ranges, and their movements often Facebook’s proposal came on the heels
● How would I use Libra? offset each other. of a string of scandals involving its misuse
Through electronic “wallets” that of data and infiltration by Russian bots
members would use to buy Libra ● What’s the appeal for users? during the 2016 U.S. campaign. But their
using their local currencies. Facebook The main service described by Facebook chief worry is the possibility that Libra
is planning one called Calibra; rival — sending money “as you might send could be so big that it could make it
products are also in the works. The a text message” — is already offered by hard for countries to manage their own
exchange rate could shift from day to plenty of other companies. It’s possible currencies. And if the U.S. Securities and
day but in theory not by much: It would that using a blockchain could allow Exchange Commission were to label Libra
be a “stablecoin” — a digital currency Facebook to handle transactions for the a security — an investment rather than
designed to avoid the huge price swings world’s 1.7 billion adults without a bank a currency — that would add layers of
that have made Bitcoin and many other account more cheaply. In countries with complexity that could be a potential death
cryptocurrencies all but unusable for a high inflation rate, such as Venezuela, knell for the project.
real-life transactions. buying Libra could be a way for people to
safeguard the value of their money. ● What do central bankers say?
● What would keep Libra’s price steady? The debate has pushed a number of cen-
Stablecoins aim to peg their value to that of ● Why is Facebook doing this? tral banks, including China’s, to highlight
another asset, one with low volatility. Many Its revenue growth has slowed, and their work on their own digital curren-
issuers say they back up the value of their Libra could unlock new opportunities in cies. And Mark Carney, head of the Bank
coins by holding reserves of that asset — the payments and commerce. of England, cited Libra while discussing
problems caused by the U.S. dollar in
its roles as the world’s unofficial reserve
GRAPHIC SOURCES: COINMARKETCAP.COM, BLOOMBERG
A Stablecoin Is, Well, Stabler asset and as the most common medium
Price swings on a rolling 20-day annualized basis Bitcoin’s price of international trade and finance — a
is highly volatile, while
Bitcoin Tether combination that gives it extra strength,
Tether typically tracks
the U.S. dollar
180% especially in downturns, hurting the
users of other currencies. Carney said a
solution could be the creation of a new
90% reserve asset he described as “an interna-
tional stablecoin fully backed by reserve
assets in a basket of currencies.” Meaning
0 that it might be very much like Libra —
7/12/16 7/21/19 except controlled by central banks.
19

Green Finance
By Tom Freke
The field known as green finance could be at a tipping point. After a decade of explosive growth, it’s running into a perhaps
surprising roadblock: a shortage of projects that are green enough. That’s set off a scramble to create a wider range of debt
market instruments and incentives. Central bank officials and a growing list of investors are pushing to make the $100 trillion
bond market — one of the world’s largest pools of money — a driving force in the urgent efforts to limit climate change.
● What’s green finance like now? Sustainable make improving their performance on ESG issues
Massive amounts of money are shifting toward Debt Boom an integral part of their strategy.
environmentally conscious investing. How much Values-driven debt financing
depends on how the field is defined: By the broad- has surged as more types ● What’s in this for investors?
of securities are developed
est measure, $31 trillion has been invested in and sold So far, evidence suggests there’s little difference in
assets that have been screened to weed out com- the performance of green and traditional bonds.
panies scoring poorly on an environmental, social Green bonds However, an increasing body of research suggests
or governance (ESG) concern. The simplest and Green loans that investment strategies that focus on ESG goals
most established form of green finance is green Sustainability bonds do better, probably because they screen out poorly
bonds, which fund environmentally friendly proj- Sustainability-linked bonds run firms.
ects. The amount sold in the first half of 2019 was Sustainability-linked loans
up 44% from the same period in 2018; new borrow- Social bonds ● Who decides what’s really green?
ers included the government of Ireland and PepsiCo So-called greenwashing is still a risk, and crit-
Inc. But the $750 billion or so issued so far rep- ics complain about a lack of global standards and
resents just a tiny slice of the overall bond market. inconsistency among ESG scoring methods. The
$300b European Union’s June 2019 proposals for a green
● Why is there a shortage of projects? bond standard and verification system are seen as
Green bonds are quite restrictive: Their proceeds potentially creating a benchmark that could ease
have to be used exclusively for green purposes. the sale of green securities worldwide. (Bloomberg
That’s left many companies uncertain whether they LP, the parent company of Bloomberg News, pro-
would qualify. It’s easy for a solar energy company vides ESG data, analytics and indexes via the
to certify that the money it borrows won’t be used Bloomberg Terminal and data licensing services.)
to drill for oil. It’s harder for an oil company to do
that without provoking some skepticism. ● Where is green lending happening?
China’s green bond market has rushed ahead as
● What else can be done? part of the government’s effort to limit air pollu-
A lot of work is going into bonds that aren’t so $200b tion. Scandinavian investors and French lenders
PHOTO: PAUL LANGROCK/ZENIT/LAIF/REDUX

restrictive, such as transition bonds. The idea there such as BNP Paribas and Credit Agricole have
is to create a separate asset class for bonds that been prominent among the pioneers in this sec-
help a “brown” company switch to a cleaner way of tor; U.S. investment banks now sense they need to
doing business. One of the first of these deals was compete. Countries that are short of capital such
for Italian gas company Snam SpA, which raised as Indonesia and Nigeria argue that green lending
500 million euros ($550 million) early in 2019 for could help them build out their infrastructure in a
projects meant to reduce its methane emissions climate-friendly way, giving a bigger bang per green
25% by 2025. Another Italian firm, Enel SpA, offered buck. But they’re also where projects are most
investors a different innovation: so-called sustain- likely to fall short on transparency and other gover-
ability-linked bonds that would increase in cost if nance risk measures.
the company misses a renewable-energy target. $100b
● Who else is pushing green finance?
GRAPHIC: *DATA THROUGH OCT. 1; SOURCE: BLOOMBERGNEF
● Has that kind of thing been done before? As the new European Commission president,
Yes, in the loan market, with sustainability-linked Ursula von der Leyen, took office, she gave sup-
loans (SLLs), also known as positive-incentive port to a French proposal for a bank that could
loans. The fastest-growing sector in green finance, unlock 1 trillion euros in lending related to climate
they’re tied to a specific set of actions: About change. Talk in Germany about a possible fiscal
three-quarters of the SLLs have set environmental stimulus to offset a weakening economy focused on
targets, according to BloombergNEF. The interest borrowing to speed a shift away from fossil fuels.
rate can slide up or down depending on perfor- Most of the world’s major central banks joined in
mance, but the difference is usually only a few April 2019 in issuing a road map for the expansion
basis points, or hundredths of a percentage point. 0 of green lending, though the U.S. Federal Reserve
The bigger impact may be in pushing companies to 2012 2019* was not involved.
20


Helicopter Money
By Mark Gilbert
Imagine waking one morning to find extra cash in your account, a gift from your country’s central bank. That might sound
outlandish — even some proponents of the idea admit it’s unlikely. But the concept of so-called helicopter money, which has
been seriously debated by economists for several years, is coming back into vogue. That’s because, despite the trillions of
dollars, euros, yen and pounds that central banks have pumped into the global financial system since the 2008 financial crisis,
global economic growth is slowing once again. Helicopter money handed directly to consumers, the theory goes, would send
us scurrying to the shops to spend our windfalls, boosting confidence in the economy. That increased demand would allow
prices to rise again, a crucial step because a slide in prices, known as deflation, is viewed as creating the risk of extended
stagnation. This renewed interest in an idea that’s almost half a century old is evidence that measures previously regarded as
daring have become commonplace, repetitive — and increasingly ineffective.
● The Situation Looking for a circumstances.” In today’s debates, it’s expected

New Jolt that helicopter money would be distributed either
The U.S. Federal Reserve cut interest rates in July Helicopter money is an by crediting people’s bank balances or as a tax
and September 2019 as the outlook for global untried but more direct rebate. The key is that it would come from a one-
means of stimulating an
growth dimmed. With Germany on the edge of economy time creation of money by the central bank, rather
recession, the European Central Bank also eased than being borrowed by the government or coming
monetary policy. But policy makers were facing a out of existing spending.
steep hurdle: There’s only a limited scope for fur-
ther stimulus through cutting borrowing costs. ● The Argument
That’s because yields have already been driven to
record lows in many markets by massive central “An unprecedented response is needed when mon-
bank purchases of government bonds, a policy etary policy is exhausted and fiscal policy alone is
known as quantitative easing. The traditional alter- not enough” is how three former central bankers
native would be for governments to cut taxes or — ex-Swiss central bank chief Philipp Hildebrand,
increase spending to provide fiscal stimulus. Most Traditional former Federal Reserve and Bank of Israel official
Cut interest rates
were unwilling or unable to do so, however, despite Stanley Fischer, and Jean Boivin, ex-deputy gov-
Making money cheaper
calls from a range of economists and politicians for creates an incentive to ernor of the Bank of Canada — made the case in
aggressive spending to combat climate change or borrow and spend August. Central banks, the trio wrote in an article
longer term economic stagnation. That’s put heli- for their current employer, BlackRock Inc., need
copter money back on the agenda, as pressure to put money “directly in the hands of public and
mounts on central banks to reach deeper into their private sector spenders,” though they advocated
toolkits for ever more unconventional policy tools. a more cautious approach than an unlimited heli-
copter program. Other supporters of helicopter
● The Background money argue that it may be less risky than quantita-
tive easing, which has been blamed for fueling what
Milton Friedman came up with the concept of heli- some see as a bubble in global stock and bond mar-
copter money in 1969. The Nobel Prize-winning Formerly radical kets. It’s also possible its benefits would be spread
Quantitative easing
economist envisaged a whirlybird flying over a more broadly. Opponents point out that helicopter
Central bank bond
community dropping paper money from the sky purchases indirectly infuse money isn’t really free. Printing more money deval-
as a thought experiment to see what a never-to-be- cash into the economy ues the buying power of what savers have in their
repeated increase in the money supply would do to accounts, in the same way that a company selling
spending and saving. The idea was made famous by new shares dilutes the holdings of its existing stock-
Ben Bernanke in 2002 when, as a Federal Reserve holders. Others say helicopter money is an overly
governor, he referred to it while arguing that a cen- complicated substitute for the fiscal stimulus gov-
tral bank can always stoke inflation if needed. The ernments should be providing. There’s also the
nickname “Helicopter Ben” stuck, even though danger that helicopter money could trigger much
ILLUSTRATIONS BY QUICKHONEY
the playbook Bernanke followed as Fed chairman higher inflation than the 2% that’s deemed desir-
during the recession that followed the financial cri- able, if people thought banks or governments might
sis stopped short of printing money and handing it Next frontier get addicted to its boost. And it might fail anyway:
Helicopter money
out to consumers. In an April 2016 blog post, how- Given that nothing in economics is currently work-
Dropping money into
ever, Bernanke said helicopter money may be “the consumers’ bank accounts ing out the way the textbooks promised, people
best available alternative” under some “extreme would be a direct injection might just save the windfall instead of spending it.
22

Chapter 2
TRADE
What are forced tech transfers?

Why is China rebooting its
signature project?

Buzzwords Conflicts over economic relations have their own lexicon.

Here’s help deciphering it.
OIL’S RISK BLACKLISTING

PREMIUM BLACKLISTING
BLACKLISTING
It was the blow that everyone feared but
no one had priced in. On Sept. 14, armed
drones and cruise missiles hit Abqaiq and
Strait of Hormuz Iran BLACKLISTING
BLACKLISTING
Persian
Khurais, two of Saudi Arabia’s biggest Gulf
sites for processing crude oil, knocking
BLACKLISTING
out half the country’s production and 5% Qatar
Dubai Port of
of global supply. The disruption triggered Abu Dhabi Fujairah
the largest one-day jump in Brent crude Gulf of
Oman
prices on record. It also renewed talk that
U.A.E.
markets had long underestimated how Saudi Oman Tariffs aren’t the only weapon in a trade
Arabia
large the so-called risk premium — the war. More countries are turning to “black-
part of oil’s price that reflects geopoliti- some attacks in Saudi Arabia was claimed lists” that block foreign purchases or
cal concerns and other factors — should by Iran-backed Houthi rebels who’ve been establish export controls, tearing apart
be. Tensions had begun to escalate after resisting a Saudi-led campaign to restore the system of international commerce.
the U.S. tightened sanctions on Iran’s oil Yemen’s internationally recognized gov- The U.S. has put dozens of Chinese com-
in May, crippling its economy. A series of ernment. For a half-decade, oil markets panies on what it calls the Entity List,
attacks followed on Saudi oil facilities and have seemed inured to political drama in restricting their ability to purchase
on tankers in the Strait of Hormuz, a nar- the Middle East, Venezuela and other hot American software and components.
row waterway connecting the Persian Gulf spots amid a glut in world supply. That Most prominent is Huawei Technologies
to the Indian Ocean that’s the world’s most might start to change, even though the Co., the giant telecommunications firm
critical oil transportation chokepoint. The price of oil fell back the week after the at the global forefront of fifth-genera-
strait handles a third of all crude moved by attacks on Abqaiq and Khurais. tion, or 5G, mobile technology. The list
sea every year. Iran was suspected in the originally was set up to sanction com-
strikes but denied responsibility. Credit for By Grant Smith and Julian Lee panies that helped build weapons of
mass destruction but was expanded to
cover activities deemed contrary to U.S.
national security. Some companies were
RARE EARTHS
included because of their alleged human
rights violations. In retaliation, China is
compiling its own blacklist of foreign com-
panies, organizations and people it calls
“unreliable entities.” These are defined
In the trade war between the U.S. and is used in cancer and rheumatoid arthri- as having “severely damaged the legiti-
China, almost any product can become tis drugs as well as color TVs and camera mate interests” of Chinese firms by not
a weapon, it seems, including tiny mag- lenses. Rare earths are also components obeying market rules, violating contracts
nets that contain minerals known as rare of everyday objects such as light-emitting or blocking or cutting off supply for non-
earths. A May 2019 visit to a Chinese rare- diodes, or LEDs. Despite their name, commercial reasons. Ahead of publication
earths processing plant by President Xi they’re not as rare as precious metals such of the list, China opened an investigation
Jinping prompted speculation that his gov- as gold. But they’re usually intermixed into FedEx Corp. for misrouting some par-
ernment might use U.S. dependence on with other minerals to an extent that cels sent by Huawei. The lists are part
China for the bulk of its supplies as lever- makes their extraction and refinement of the broader battle for what hawks
age in the dispute. U.S. President Donald costly, especially under the environmental in both governments see as the fight
Trump responded by ordering the Defense standards of developed countries. Almost for technological and economic domi-
Department to find alternative sources. 30 years ago, Beijing labeled rare earths nance. The use of trade restrictions to
Rare earths are a group of 17 elements that a strategic material and banned foreign- settle scores has spread to export power-
have magnetic and optical properties use- ers from mining them. Since then, it has houses Japan and South Korea, both of
ful for making electronics more efficient. gradually replaced the U.S. as the world’s which have removed the other from their
Neodymium and praseodymium make leading producer: China accounted for 71% lists of most-trusted trading partners as
powerful magnets used in aircraft, head- of the rare earths mined in 2018, according they try to gain leverage to settle a feud
phones and much more. Makers of electric to the U.S. Geological Survey. dating back generations.
vehicles rely on them for lighter-weight
battery and motor components. Yttrium By Justina Vasquez By James Mayger and Brendan Murray
24

Forced Technology Transfers

By Bloomberg News
It’s been one of the most contentious fronts in the U.S.-China trade war: so-called forced technology transfers. The term
refers to ways in which companies from the U.S., Europe or elsewhere that want to operate in China are induced to part with
their know-how. It may be through a simple requirement to form a joint venture with a local firm, or more insidious methods
such as overly intrusive factory inspections. What might once have been a mere annoyance has taken on more serious
implications as China has developed into a strategic competitor, especially in growth areas such as artificial intelligence.
The Chinese government dismisses allegations of strong-arming as unfounded, describing any exchanges as voluntary and
conducted on market principles. A 2018 report by the U.S. Trade Representative quoted one ex-White House official as saying
the transfers are voluntary in the same way a business proposition from mob boss Vito Corleone in “The Godfather” was.
● What’s the charge? devices, pharmaceuticals and cars were 2019 that the U.S. hasn’t provided exam-
Before China joined the World Trade particularly targeted, it said. ples despite repeated requests. Aside from
Organization in 2001 — and agreed to abide such denials, China made a rapid-fire series
by its rules — technology transfers were ● How does it supposedly work? of legal changes in early 2019 that appeared
often explicitly required for entry into Historically, China required outside com- designed to help it reach a trade deal with
China. The U.S.-China Business Council panies to form joint ventures with local the U.S. A new foreign investment law
and other lobbying groups say the prac- partners in return for market access. As scheduled to take effect in 2020 will ban
tice has continued, though demands that part of the deal, the foreign company administrative agencies from forcing tech-
now could be breaching WTO rules come would have to share its secrets — how to nology transfers. It also exposes officials
verbally and behind closed doors. The make a certain pigment, say, or vehicle who disclose or leak trade secrets gleaned
European Union Chamber of Commerce part. China now allows some industries to from regulatory approvals to potential
in China found that 20% of companies sur- have majority or 100% foreign ownership. criminal penalties. A revision to another
veyed in 2019 felt compelled to hand over With those companies, the most egregious law also prohibits officials from revealing
know-how to maintain market access, up cases are alleged to flow from environ- trade secrets and confidential information.
from 10% in 2017. High-value, high-tech mental impact assessments or other steps
industries such as chemicals, medical required for an operating license. Take ● That’s not good enough?
chemicals, for example. In the U.S., inspec- U.S. officials say China has committed to
tions for new chemical plants may require changes before but not followed through.
Globalization of Innovation reporting a range of temperatures at which The EU Chamber of Commerce reported
GRAPHIC: WORLD INTELLECTUAL PROPERTY ORGANIZATION DATA SHOW FILINGS UNDER THE INTERNATIONAL PATENT CORPORATION TREATY;
Share of new patents a manufacturing process operates, whereas that the new foreign investment law “con-
in China the specific temperature must be tains broad terms and vague language
U.S. 32% 29% disclosed, according to Jacob Parker, vice throughout” that create uncertainty,
president for operations at the U.S.-China which can discourage investment by dam-
Business Council in Beijing. Another issue aging business confidence.
is the dominance of state-owned enter-
prises in some industries. That creates a de ● Does technology transfer also
facto cartel that can be used to extract con- happen legally?
cessions from foreign companies. Absolutely, and in fact China is among
9.1% the world’s biggest payers of fees to pat-
Japan 22%
● What’s been done? ent and license holders, according to the
14% The informality of China’s pressure tactics International Monetary Fund. In 2018, its
makes it “impossible to prosecute,” the outlay on foreign intellectual-property
Information Technology and Innovation rights rose 24% from the previous year,
SOURCES: QUESTEL ORBIT INTELLIGENCE AND FAMPAT DATA, VIA WIPO
9.6%
Foundation, a Washington-based advo- to $35.8 billion, according to China’s State
World Intellectual cacy group, wrote in a 2018 submission to Administration of Foreign Exchange. The
Property
Organization 15% the U.S. Trade Representative. Lobbying payments were mainly in such indus-
3%
7.3%
groups for foreign companies say their tries as computing, telecommunications,
European Patent clients usually try to deal with the issue carmaking, shipbuilding and aviation.
Office 13% 28% in private. The fear is that if they go pub- (It received about $5.6 billion for its own
lic, they could lose access to the world’s intellectual property.) Over time, China’s
Germany 8.1% second-biggest economy. shift into higher-technology fields should
lead it to further tighten laws and regula-
South Korea 6.3% ● What does China say? tions over trade secrets — if only to protect
The People’s Daily, the flagship Communist its own companies.
China 4.7% Party newspaper, has dismissed the
2000 2014 charges as fabricated and wrote in May Kevin Hamlin contributed to this article
25

China’s Belt and Road Reboot

By Bloomberg News
By many measures, China’s Belt and Road Initiative has been a monumental success. Since 2013, when China launched the
effort to expand trade links, more than 130 countries have signed deals or expressed interest. The World Bank estimates
some $575 billion worth of energy plants, railways, ports and other projects have been built or are in the works. But President
Xi Jinping’s signature effort has also come in for criticism, including accusations that China is luring poor countries into debt
traps for its own political and strategic gain. The mixed reviews abroad and worries at home about the cost have led China
into something of a reboot as it tries to increase transparency, improve project quality and reduce financial risks.
● Where are the problems? for a giant solar project due to the legacy and 3.4% foreign, “third-party” compa-
Several countries have run into trou- debts of the government there, according nies. Obstacles include the absence of
ble with Belt and Road projects or had a to RWR Advisory Group, a Washington- open tenders, standardized contracts,
rethink, often after a popular backlash, based consulting firm. transparent procurement rules and
change of government or both. Complaints anti-corruption safeguards.
include corruption, padded contracts, ● What else is China trying?
heavy debt loads, environmental damage It’s offering skeptical countries a ● What’s the bigger picture?
and a reliance on imported Chinese labor framework dubbed third-party mar- China faces a tougher economic environ-
over local hires. Some examples: ket cooperation — an agreement to ment than in 2013. Its growth has slowed
consider working together without actu- to the weakest pace since at least 1992 as
○ China was set to lend Pakistan $8 billion to ally endorsing the BRI. China hopes such trade tensions with the U.S. persist. To
upgrade a railroad from Karachi to Peshawar,
but a new government in Islamabad, struggling partnerships will give it access to Western stimulate the economy, policy makers are
with long-standing debt problems, wants to technology and expertise, reduce finan- leaning toward more spending on domes-
cut the cost in half. cial risks and dispel allegations about its tic projects, potentially limiting funds
○ Myanmar drastically scaled back a port deal motives. Japan, Australia and France are available for lending abroad. But China has
struck under its previous military regime, to among those that have signed up. Even so, other reasons for pressing ahead, includ-
$1.3 billion from $7.5 billion.
a 2018 report by the Center for Strategic ing desires to better integrate its remote
○ A new Malaysian government canceled and International Studies found that the western provinces and to diversify transit
$3 billion worth of pipelines and renegotiated
a rail project, cutting its cost by a third to
vast majority of contractors participating routes for its energy imports.
$11 billion. in Chinese-funded infrastructure proj-
○ A court in Kenya halted construction of a
ects were Chinese. Only 7.6% were local Dandan Li and Miao Han contributed to this article
Chinese-backed power plant on Lamu Island,
a major tourist destination, and ordered a new
environmental impact assessment.
Mixed Reception
China’s Belt and Road Initiative has run into roadblocks across Asia
● How is China responding? Supportive Cautious Opposed
Xi signaled in 2019 that China’s govern-
ment would exert more control over
projects in the Belt and Road Initiative,
or BRI, and tighten oversight. He urged
“higher quality” and “greener” projects China
and vowed “zero tolerance” for corrup-
tion. State-owned enterprises, by far the Myanmar
Price tag for
biggest investors in BRI projects, are being
deep-sea port
told to beef up auditing and increase cut 80%
supervision of their overseas units.
● Is China serious about change?

Signs of a more cautious approach have
GRAPHIC SOURCES: EURASIA GROUP, BLOOMBERG
Pakistan
Projects scaled back
emerged — at least around its debt expo- Indonesia
amid debt troubles
sure. China has withheld some $4.9 billion Pursuing high-speed
rail, other projects but
in new loans for a railway in eastern Africa India
wary of public debt
Opposes projects
amid concerns about Kenya’s finances.
in disputed
Revenue from the railway is supposed to Kashmir region
repay the initial $3.6 billion loan, but crit-
ics say it won’t turn a profit for a long time. Malaysia
Renegotiated railway
In Zimbabwe, the Export-Import Bank of to cut cost by a third,
China backed out of providing financing canceled gas pipelines
26

Chapter 3
WORLD AFFAIRS
Is Hong Kong’s autonomy fading?

Why is migration bigger and
more contentious than ever?

Hong Kong’s Autonomy

By Natalie Lung and Iain Marlow
The British gave Hong Kong back to China more than two decades ago, but the city of 7.5 million people is still very different
from the rest of the country. An international financial center, it has a vibrant free press, for example, and an independent
judicial system. But its freedoms may prove fleeting. In 2019 a proposal to allow extraditions to the mainland provoked waves
of unrest as residents reacted to what they viewed as the latest threat to the city’s semi-autonomous status. The protests
echoed those of 2014, which were also about growing Chinese government control. Such strains are ever-present in Hong
Kong, while the democracy that protesters demand remains elusive.
● The Situation resonance by the passing of the 30th anni- protests erupted, with tens of thousands
versary of the Tiananmen Square massacre, of student activists and their supporters
Peaceful protests that began early in 2019 when hundreds, maybe thousands, of dem- blocking major roads for 79 days. They
grew by June into marches of historic pro- onstrators were slain in Beijing. Against the were enraged that candidates would have
portions, drawing hundreds of thousands backdrop of a trade war between China to be pre-screened by an election commit-
of people. They were quickly overshad- and the U.S., events in Hong Kong stoked tee dominated by Beijing loyalists. Hong
owed, however, by outbreaks of violence a broader culture clash in other arenas; Kong’s legislature rejected the plan in 2015
and a broader challenge to Beijing’s tighten- America’s National Basketball Association and the process stalled there. In 2017 the
ing grip on Hong Kong. The spark was the lost most of its Chinese sponsors after a same committee handed Lam an easy vic-
extradition bill, which opponents feared team manager tweeted support for the tory, with no popular vote. In other signs of
would open the door for anyone who runs protesters, while U.S. lawmakers infuriated China’s growing assertiveness, six winners
afoul of the Chinese government to be Chinese authorities by inviting activists to were disqualified after the 2016 legislative
arrested and sent to the mainland. Hong Washington and taking up legislation back- elections, which had generated a surge in
Kong’s leader, Chief Executive Carrie Lam, ing the pro-democracy movement. support for pro-democracy candidates;
eventually withdrew the bill, but protesters prominent activists and student leaders
expanded their demands to include direct ● The Background were prohibited from running for office;
elections for the city’s top job — something and a pro-independence party was banned
Hong Kong has never had. Masked pro- The 1984 Sino-British power transfer agree- entirely. Chinese President Xi Jinping has
PHOTO: MIGUEL CANDELA

testers flinging Molotov cocktails clashed ment specified that China would give Hong said that challenges to Beijing’s rule in
repeatedly with riot police firing tear gas, Kong a “high degree of autonomy” for Hong Kong won’t be tolerated.
rubber bullets or — at times — real ones. 50 years under a principle the Chinese
The main legislative building was ran- call “one country, two systems.” The idea ● The Argument
sacked along with subway stations, Chinese of holding democratic elections with uni-
bank branches and other property. As dem- versal suffrage (one person, one vote) to The massive opposition to the extradi-
onstrators complained of police brutality, choose the chief executive was written into tion bill — and repeated demands for more
the government banned face coverings and the city’s Basic Law, and a goal of 2017 was democracy — illustrate the breadth of pub-
some subway stations were sporadically set. But it also was described as the “ulti- lic concern about preserving Hong Kong’s
GRAPHIC: SURVEYS TAKEN IN JUNE EACH YEAR; SOURCE: UNIVERSITY OF HONG KONG PUBLIC OPINION PROGRAM
closed in an effort to damp the violence. mate aim,” signaling it wasn’t set in stone. unique character. Serious erosion of the
Speculation grew that China may resort When the government presented its elec- city’s autonomy also could jeopardize the
to sending in troops — a notion given extra tion plan in 2014, the “Occupy Central” special trading status under American law
that Hong Kong has long enjoyed — and that
has helped it prosper. Pro-Beijing groups
Diminishing Pride argue that China never promised more
Share of Hong Kongers who say they’re proud to be Chinese citizens, than the limited voting system in place,
according to an annual, mid-year survey that extradition is needed to prevent Hong
March 2019 Kong from becoming a criminal haven,
Extradition bill 50% and that repeated scenes of mayhem on
protests begin
the streets damage the city by undermin-
ing the stability and rule of law essential
for a global financial hub. China’s aversion
to Hong Kong’s democracy movement is
35% entwined with its claim to have redressed
past national humiliation by regaining the
city from the British, who took control
in 1841 after the First Opium War. To lose
July 1997 Aug. 2008 Sept. 2014
British handover Beijing ‘Occupy Central’ control of it now would so undermine the
to China Olympics protests begin 20% Communist Party’s credibility as to make
1997 2019 such a scenario unacceptable.
28


Migration
By Emma Vickers and Caroline Alexander
The world is on the move as never before. Migrants, defined as people living outside their country of birth whether for work,
to follow a family member, study or escape adversity, numbered more than 250 million in 2017. That was 3.4% of the global
population, an increase from 2.8% in 2000. Half were living in high-income countries, where they made up 14% of the population,
up from 9.6% in 2000. The swell has produced a backlash. In the U.S. and Europe, concerns that migrants are stretching local
services and disturbing order have been harnessed by nativist politicians embracing tighter controls. Advocates for migrants
lament the many who die attempting to reach a new land or face exploitation once there.
Number of migrants by region, as of 2017

Change since 2005:
Decrease Increase of 1%-25% 26%-50% 51%-100% More than 100%
People: 1m 10m
Unauthorized migration via the Mediterranean Sea The oil-rich countries of the Persian Gulf attract
has provoked resentment in Europe, notably in Italy, large numbers of migrants from the region and
and concern over the safety of smuggled migrants. Asia. The kafala (sponsorship) system tying
An estimated 17,600 died making the journey from migrant workers to their employers makes many
Latin America &
2014 through 2018. vulnerable to exploitation, including forced labor.

Caribbean
Northern
America
Saharan
Europe
Middle
Africa
North
& the
Sub-
East
To
From
Latin
America &
Caribbean
Northern
America
Europe
North
Africa
& the
Middle
East
Sub-
Saharan
Africa
The European Union hosts a high number of Conflicts in North Africa and the Mideast have
migrants from within the bloc, thanks to its rules spurred emigration, while violent extremism has India
guaranteeing the right to work anywhere within its raised concern about migrants committing terrorist Chin
boundaries. The U.K. was the world’s fifth-largest acts. President Donald Trump cited security threats and
destination for migrants in 2015, a factor in its in a 2017 order generally barring the citizens of four Chin
voters deciding the next year to exit the EU. nations in the region from entering the U.S. stud
30

● Why is migration rising? international students in 2016, up from pressure on pension systems. Still, large
While conflicts and instability have 2 million in 2000. Climate change and the inflows sometimes stress schools, health
increased the number of people forced water shortages, bad harvests and rise care systems and housing markets. Some
from their homes, refugees make up only in sea level it’s causing are expected to analyses have found that an increase in
about a tenth of the migrant population. push more people from their homes in newcomers reduced native wages, though
Work is the main reason people move to the future. the effects were small. Immigration critics
another country, and the falling cost of often highlight specific crimes committed
travel has made it easier to do. So has the ● Are migrants a burden? by new arrivals, but research challenges
boom in digital connectivity, enabling Economists say that migration can benefit the notion that migration leads to more
voyagers to learn about their destinations economies. Studies show that the social lawlessness. In the U.S., a number of
in advance and connect to home once services migrants use are largely paid studies have concluded that migrants
they’ve arrived. Opportunities to study for by their tax contributions. By adding commit crimes at lower rates than native-
abroad also have expanded significantly. (mostly younger) workers, migration can born Americans. In Germany, crime fell
There were more than 4.8 million raise gross domestic product and ease 10% amid an influx of migrants.
A closer look: Pathways of more than 1 million people, as of 2017
ract Mexico is the biggest source of migrants to the

nd U.S., but its role is diminishing. In recent years,
arrivals have surged from El Salvador, Guatemala
many and Honduras, where poverty, corruption and
abor. gang violence are widespread.
Saudi Arabia
Kazakhstan
Ivory Coast
Hong Kong
Singapore
Germany
Malaysia
Australia
Lebanon
Thailand
Pakistan
Oceania
Saharan
Ukraine
Jordan
France
Kuwait
Turkey
Russia
Oman
Africa
U.A.E.
India
Sub-
Asia
Italy
U.S.
Iran
To
GRAPHIC: NORTHERN AMERICA CONTAINS BERMUDA, CANADA, GREENLAND, SAINT PIERRE AND MIQUELON AND THE U.S.; SOURCE: UNITED NATIONS POPULATION DIVISION
From
Asia
Kazakhstan
South Korea
Malaysia
Myanmar
Oceania
Mexico
Poland
Romania
Russia
U.K.
Ukraine
Algeria
Syria
Burkina Faso
Afghanistan
China
India
Pakistan
Turkey
Uzbekistan
Vietnam
Indonesia
Philippines
Cuba
Dominican Rep.
El Salvador
Puerto Rico
Pal. territories
Bangladesh
India had 17 million natives living abroad in 2017; 13 million of Mexico’s native sons and Syria’s war has driven 5.6 million people from
China had 11 million. But that represented just 1.2% daughters live abroad. The vast majority are the country, pushing global refugee numbers to a
and 0.8%, respectively, of their huge populations. in the U.S. and roughly half of them lack legal record 25.4 million at the end of 2017. Like other
China is the world’s biggest source of international status there, fueling a decades-long debate refugees, Syrians tend to take shelter initially
students, accounting for 1 in 6. over immigration and border security. close to home, with Turkey the largest host.
31

Cybersovereignty
By Karen Leigh, Stepan Kravchenko and Saritha Rai
Early on, the narrative around the internet was that it would be unfettered and borderless, a global commons outside any one
country’s jurisdiction. That didn’t last long. Chinese President Xi Jinping has led the way in asserting what’s become known
as cybersovereignty. That means government control over how the internet is run and used, as well as what happens with the
masses of data generated — the backbone of the digital economy. Other authoritarian regimes are following suit. The U.S. and
some other democracies have taken steps to assert control over homegrown data, even as they defend an open internet as
promoting free speech and innovation. Perhaps a divide was inevitable as it became clear the internet isn’t just a pipeline for
exchanging information but also a powerful tool for economic and political purposes.
● The Situation and election systems, and censorship, Internet Freedom

the suppression of information for politi- The higher the score, the worse a country
China’s model combines strict data con- cal or other purposes. It has implications was ranked on censorship, privacy and other
factors by a pro-democracy research group
trols with sweeping content curbs. A 2017 as well for all the information that’s shared
law requires that personal data generated in today’s digital world, the so-called big Improved in 2018
in-country be stored in-country — and be data that can be parsed, analyzed and Declined in 2018
accessible on demand to state officials. then exploited. Companies use it to tar- No score change
The Chinese government uses that trove in get advertising, hone their products or
part to keep tabs on its citizens. Online dis- develop “deep learning” algorithms and
course as well as any information deemed other cutting-edge technologies. Much of China 88
sensitive, such as reports about the 1989 that data migrates to the so-called cloud — Ethiopia 83
Tiananmen Square massacre, is censored. online computing and storage — where it Pakistan 73
Services from Facebook, Google, Twitter can be vulnerable to tampering or theft. Egypt 72
and other U.S. companies are kept out United Arab Emirates 69
(which also cleared the way for pliant, ● The Argument
Russia 67
homegrown tech giants such as Weibo, Venezuela 66
Baidu and WeChat to emerge). In Southeast Chinese officials say their approach is Cambodia 55 Not free ▲
Asia, Vietnam passed a law in 2018 mirror- necessary to preserve the stability of Gambia 55
ing China’s censoring approach. Thailand’s a vast country undergoing rapid eco- Malaysia 45
military government followed with a law nomic and social changes. Xi, who chairs India 43
giving the state power to seize digital data China’s top policy-setting body for cyber- Singapore 41
and equipment without a warrant and to space, also has repeatedly underscored Malawi 39
monitor online traffic. Russia engages in the importance of building an indepen- Philippines 31
online censorship and blocks foreign com- dent cyberspace that foreigners can’t Armenia 27 Partly free ▲
panies such as LinkedIn that don’t locate disrupt. Russian President Vladimir France 25
servers within its borders. Russia’s 2019 Putin has called his country’s new law U.K. 23 Net neutrality repealed,
“sovereign internet” law allows authorities a response to the threat of surveillance U.S. 22 warrantless surveillance
program reauthorized
to track and selectively block information by the U.S. The national security argu- Australia 21
flows nationwide, and even disconnect ment carries over into infrastructure Germany 19
from the outside world in a crisis. President and equipment. Trump cited fears about Free ▲
Donald Trump signed a law in 2018 that potential spyware and hidden backdoors
enables authorities to order U.S.-based when he moved in 2019 to effectively bar
technology companies to hand over data Huawei Technologies Co., China’s larg- have “serious consequences for eco-
stored anywhere in the world. That has est tech company, from the U.S. market nomic growth, investor confidence and
countries in Europe and elsewhere worried — and has been pressing U.S. allies to opportunities for local businesses.” More
about threats to their sovereignty and their do the same. Ex-Google Chief Executive governments, though, are viewing data
ability to protect sensitive or commercially Officer Eric Schmidt has predicted that as a resource to be protected not only for
valuable information. India’s central bank within a decade, the internet will split privacy but to help in developing tech-
requires Mastercard and Visa to store trans- in two, with one led by the U.S. and the nologies such as artificial intelligence.
action data only on local servers, a rule that other by China. Tech companies worry Germany asserted its right to “technolog-
GRAPHIC SOURCE: FREEDOM HOUSE
could be expanded to other companies. that a profusion of regulatory regimes ical sovereignty” in joining a French call
would hinder innovation and raise for European companies to store data
● The Background costs. The Asia Internet Coalition, which at home, out of the reach of the U.S. or
counts Google, Amazon, Apple, Line, China. A draft of India’s nascent e-com-
Cybersovereignty enables both cyberse- Grab and Rakuten among its members, merce law stated: “Indian citizens and
curity, the protection of things such as warned Vietnam that the requirement companies should get the economic ben-
transportation networks, electrical grids in its new law to store data locally would efits from the monetization of data.”
32

Chapter 4
TECHNOLOGY
Is Big Tech too big?

Can privacy survive when our
toasters can tell on us?

Buzzwords No field spits out fresh jargon like technology.

Here are some terms in the news.
The first thing to know about the so-called engine that turns a large rotor. Think a estimate that such services could be prof-
flying cars coming relatively soon is that hobbyist’s drone expanded to hold half a itable by 2028 by charging roughly $50 a
they aren’t flying cars. No one in the near dozen people. They’re being designed to trip. As technology, regulation and popu-
future will be driving out of the garage be lighter, quieter, more environmentally lar acceptance advance, air taxis could be
and down the street before taking off for friendly and less expensive to operate than operated remotely, which would reduce
a quick flight to work. It’s complicated choppers. More than 70 companies have costs. On-demand service, as with a reg-
to make a vehicle that can traverse both projects in development. They include ular taxi, will take longer to be financially
the roads and sky, and airspace would get planemakers Airbus SE, Boeing Co. and viable: There would be fewer passengers
dangerously crowded if just about any- Embraer SA; Textron Inc.’s Bell helicop- per flight on average and a need for more
one could become a pilot. What could ter unit; Uber Technologies Inc.; and takeoff and landing areas. Self-flying air-
be in wide use before 2030 are air taxis. dozens of startups. At the outset, air taxis craft would cut costs further. Morgan
Now under development, they’re similar are most likely to be deployed with a pilot Stanley Research projects they could
to helicopters except that they have sev- onboard on a schedule between set points become common as soon as 2040.
eral electric motors, each with a propeller, — from an airport to downtown, for exam-
instead of a single internal combustion ple. Crown Consulting and McKinsey By Thomas Black
DIGITAL TAXES
Big internet companies have long been the target of complaints Fighter pilots use it. You did too, if you chased virtual mon-
that they don’t pay enough in taxes. Fed up, France became the sters during the Pokemon Go craze. Augmented reality is what
first country to impose a 3% “digital tax” on the revenues of com- happens when computer-generated text and images are super-
panies such as Facebook Inc. and Alphabet Inc.’s Google. Italy imposed on the real world in front of your eyes. (Virtual reality,
planned to follow, and other nations, including Germany, Spain by contrast, immerses the user in a completely artificial world.)
and the U.K., mulled similar moves. The idea is to shift the locus Widely used examples of AR include face-distorting lenses on
of taxation to where users of online services are located, rather the Snapchat photo-sharing app and an iPhone feature, called
than where companies base their headquarters or book their Animoji, that incorporates the user’s expressions to animate vir-
profit. The taxes target companies — most of which are American tual animal faces. Head-mounted AR displays, similar to those
— whose multinational earnings often escape the taxman’s grip developed for military aircraft cockpits in the 1950s, use a mon-
thanks to legal loopholes and the virtual nature of their offerings. itor to project imagery and data into the user’s field of view.
Among the activities set to be taxed: sales of digital advertising Advances have allowed headsets to be shrunk down to the size
and electronic data, and the value of services booked through of a pair of eyeglasses. Alphabet Inc.’s Google Glass is used in
intermediaries such as Uber Technologies Inc. and Airbnb Inc. the manufacturing, logistics and health care industries, allow-
The levies focus on the top line because profit is harder to pin ing operators to do hands-on work while viewing schematics and
down as companies move money across borders to take advan- instructions. A startup, Magic Leap Inc., released what it calls a
tage of tax-minimization schemes. The digital tax opened a new virtual retinal display, a headset that transmits images directly
front in the trade war: France’s law prompted complaints from into the user’s eye. Microsoft Corp. won a contract to produce a
the U.S., which threatened to retaliate after weighing whether the specialized AR headset for the U.S. Army — the Integrated Visual
measure unfairly targets American companies. Officials from Augmentation System — that uses satellite images to give soldiers
the world’s richest nations are trying to cool tensions with a a bird’s-eye view of their surroundings, including the locations
coordinated effort under the stewardship of the Paris-based of fellow soldiers who are similarly equipped. Research firm
Organization for Economic Cooperation and Development, IDC estimates that 200,000 AR headsets were shipped by man-
which is aiming for a more uniform approach to digital taxes as ufacturers in 2018 and sees that number jumping to 31 million
soon as 2020. in 2023.
By William Horobin and Aoife White By Donald Moore
34

New Monopolies
By David McLaughlin
Technology superstars Facebook, Google, Amazon and Apple are in the crosshairs of U.S. and European Union regulators
who are zeroing in on the downside of their dominance. Their unquestionable size and power and (in the case of all but Apple)
aggressive buyouts of would-be rivals are facing broader scrutiny from antitrust enforcers. Reigning over markets including
internet search, digital advertising, online commerce and mobile apps, they’ve become some of the most valuable companies
in the world in part by exploiting so-called network effects — as they get bigger, they become ever more enticing to users.
● The Situation platforms and offering products on them. School (and derided as “hipster antitrust”
This would force Amazon, for example, to by critics) would rewrite the playbook
For more than a decade, the EU has been decide whether to keep its online market- entirely and prevent, for example, tech
the most aggressive jurisdiction in reg- place or its private label, AmazonBasics. platforms from vertically integrating into
ulating Big Tech, fining Google more other lines of business.
than $9 billion in three separate cases ● The Background
for using its dominance to disadvantage ● The Argument
potential rivals. The EU has a lower bar Being a monopoly isn’t illegal in the U.S.
for what constitutes harmful conduct or in most other countries, as regulators The tech giants say rival services and
by a monopoly and, in contrast to the long ago stopped equating big with bad. products are springing up all the time,
U.S., its competition commissioner can Traditional antitrust enforcement focuses threatening their market dominance.
move to block a merger without seek- on whether a dominant company uses its Rather than stifle competition, they say,
ing a judge’s approval. In mid-2019, U.S. power to thwart competition and raise their platforms enable up-and-coming
regulators began ramping up their over- prices — a mostly moot point in the case businesses to advertise and sell. But reg-
sight. In some quarters, there’s talk of of free services such as internet search ulators and lawmakers worldwide appear
going beyond probes and fines to rewrite and social media, which generate reve- to have run out of patience with those
the rulebook or even break up the tech nue through targeted advertising. The defenses. In addition to new rules and
firms. A panel appointed by the U.K. gov- last major anti-monopoly case brought fines over the use of personal data, the
ernment envisions a new regulator that by the U.S. was against Microsoft Corp. companies have been blamed for a litany
could force tech companies to share in the 1990s. During the ensuing 20-year of ills including killing off local retailers,
data on customers with smaller com- dry spell, the U.S. mostly watched from enabling addictive online behavior, dis-
petitors. U.S. Senator Elizabeth Warren, the sidelines as tech juggernauts used seminating dangerous propaganda and
campaigning for the Democratic Party’s their profits and big-data advantages to amplifying hate speech. A growing body
2020 presidential nomination, called for gobble up smaller rivals. Some econo- of research documents the relationship
unwinding mergers such as Amazon’s pur- mists, lawmakers and tech experts who between rising corporate consolidation
chase of grocer Whole Foods, Google’s say enforcement has been too timid urge — a phenomenon not exclusive to tech —
deal for ad network DoubleClick and wider scrutiny of dominant companies to and worrying economic trends such as
Facebook’s acquisitions of photo-sharing take into account, for example, the effects tepid wage growth, reduced business
site Instagram and messaging service of concentration on innovation, employ- investment, fewer startups, a drop in the
WhatsApp. Warren would also make ment and consumer privacy. A fresh line number of important patents and worsen-
companies choose between operating of thinking labeled the New Brandeis ing wealth inequality.
The Evolving Language of Antitrust

Big Tech’s dominance is driving a reevaluation of what’s fair and what’s not
Term ▶ Platform bias Killer acquisitions Diminished Kill zone Data Structural Vertical
quality accumulation dominance integration
ILLUSTRATIONS BY QUICKHONEY
What it means ▶ Favoring certain Buying would-be Poorly serving Copying Vacuuming up Exerting control Branching into
products in search rivals clients, for innovations by users’ personal over entire other businesses
results example by competitors who information for markets in one’s supply
infringing on get too close use in targeted chain
their privacy advertising
Who’s accused ▶ Amazon, Google Amazon, Google, Facebook Facebook, Google Facebook, Google Amazon Amazon, Apple,
Facebook Facebook, Google
35

Low-Earth Orbit Satellites

By Greg Ritchie
With the world divided between digital haves and have-nots, billionaires Elon Musk, Jeff Bezos and Richard Branson are among
those racing to roll out a solution in not-so-deep space: thousands of washing machine-sized satellites racing around the globe
in what’s known as low-Earth orbit, or LEO. They hope to prosper by providing high-end services to stock traders and others
willing to pay to shave a few milliseconds off their transmissions, and by bringing high-speed internet coverage to regions too
poor or remote to attract it on the ground. Neither result is certain. Startup costs in the billions of dollars are.
● How low is low? Lower, Faster Calls ● Are LEO satellites new?
LEO satellites operate from 500 kilometers (310 From Above No. Most of the Earth’s approximately 2,000
miles) to 2,000 kilometers above the Earth’s surface. Most of the current active satellites are already in LEO, where a net-
Traditional communication satellites are stationed communications satellites work belonging to the U.S. company Iridium
are in a geostationary orbit.
far higher, at roughly 36,000 kilometers: They travel Swarms of smaller satellites Communications Inc. has been operating since 1998.
in so-called geosynchronous orbits, moving at the are planned for a low-Earth Previous efforts led to bankruptcies by Iridium and
speed of the Earth’s rotation and appearing to float orbit, where they will be Globalstar Inc., also a U.S. enterprise. The new ven-
better positioned to quickly
motionless above a fixed point. receive and transmit data. tures are counting on savings from smaller, cheaper
satellites and reusable rockets, along with more pow-
● What’s the advantage of a lower orbit? erful software capable of tracking all those handoffs.
A shorter trip is a faster trip, so the time needed for
data to be sent and return — what’s known as latency ● When will this start?
— is lower for LEO satellites than for those farther out. In May 2019, a single SpaceX rocket launched 60
And because signals can travel more rapidly through of a planned 12,000 satellites; in October, the com-
36,000km
the vacuum of space than through fiber-optic High-Earth orbit pany sought permission for 30,000 more. Musk and
cables, LEO satellites have the potential to rival or geostationary satellites OneWeb have said that partial networks could go
possibly exceed the fastest ground-based networks. into service in 2021. China’s state-owned Aerospace
Science and Industry Corp. is proposing a network
● How fast is fast? of 156 satellites by 2022. Bezos’s Amazon.com Inc.
OneWeb, a London-based company backed by has requested permission to launch 3,236 satellites.
Branson’s Virgin Group that’s begun launch-
ing LEO satellites, recorded an average latency of ● Are they going to make money?
32 milliseconds in July 2019 on transmissions Many satellites never have. SpaceX has said complet-
between space and South Korea. Musk, the founder ing Starlink may cost more than $10 billion, though
of Space Exploration Technologies Corp., has said Musk estimates it could bring in $30 billion to $50 bil-
that his Starlink satellite system is aiming for a lion per year once fully operational. (He says the
latency of 20 milliseconds initially, which he hopes satellites will produce the money needed for his ulti-
to eventually cut in half. Talk like that has sparked mate goal of settling Mars.) To reach the 4 billion
interest among financial firms that have spent bil- people who lack high-speed internet access, the
lions to speed up their terrestrial securities trading satellite companies hope to sell their services to
operations. High-orbit systems, by contrast, have a governments, nonprofits and telecommunications
median latency of nearly 600 milliseconds. That’s providers. OneWeb has signed contracts it says could
adequate for broadcasting but is a barrier to real- lead to Wi-Fi hotspots connected to its satellites.
time two-way communication.
● Is there room up there for all these satellites?
● What’s the downside of a low orbit? No one knows how close existing satellites are to
The speed needed for stable orbit — achieved by 500-2,000km triggering the Kessler Effect — named after NASA
Low-Earth orbit satellites
balancing an object’s inertia with the Earth’s grav- scientist Donald Kessler, who raised the possibil-
ity — diminishes with distance: The high-flying ity that if space becomes too crowded, there will
geostationary satellites travel at about 11,000 kilo- be collisions that create more debris and more
meters per hour, while LEO satellites travel at about collisions. The U.S. Air Force is developing a ground-
27,000 kph, completing a full circuit of the planet based radar system known as the Space Fence; in
in 90 to 120 minutes. That means each individ- September, the European Space Agency moved a
ual satellite is only in direct contact with a ground space probe after being warned it could come too
transmitter briefly and is why LEO projects involve close to a Starlink satellite. Another worry is that a
so many satellites: OneWeb says that in its system, more crowded sky will ruin the view: Astronomers
signals are handed from one satellite to another, via complained after the SpaceX launch about sunlight
laser, every 3 minutes or so. they suspected was reflecting off the satellites.
36

The Internet of Things

By Olga Kharif
Are you looking forward to the day when your sleeping baby’s diaper tells you it’s wet before the wee wakes Junior? Or are
you haunted by the idea that an insurance company, retailer or hostile government could learn everything about you that your
TV, appliances or even internal organs are able to divulge? Either way, that future is arriving, as cheap sensors connected to
fast wireless networks and the internet invade our lives. Communicating without human intervention, these chatty devices
make up what’s known as the internet of things. For consumers, it could mean homes that look after themselves and cars that
take over the driving. For industries, the technology is creating automated “smart factories” and warehouses that can fulfill
their own orders. But smart sensors also unleash a host of new problems, changing the very nature of privacy itself.
● The Situation gadgets remained largely out of the reach downtime by alerting supervisors to
of consumers until the rise of smartphones problems, though they can also monitor
Wireless carriers and tech companies such boosted demand for smart gizmos by put- workers’ movements — even trips to the
as Samsung, Apple and Google are stepping ting a master control panel in everybody’s toilet. Health-tracking gadgets know a per-
up efforts to connect all kinds of devices — pocket. Sensors typically connect to a home son’s blood pressure and heart status at
from light switches and smoke detectors to or industrial Wi-Fi network or to other any given moment — and might share that
gas meters, door locks and “smart speak- devices via Bluetooth wireless. Growing data in unexpected ways, such as with an
ers,” such as Amazon’s Echo with its Alexa numbers of devices now connect directly insurance company. In one incident, crim-
voice assistant. They offer convenience to mobile networks and could one day inals hacked into a digital thermometer in
along with efficiency and cost savings; the talk to satellites. Among the early internet- a casino’s aquarium and worked their way
use of electronic monitoring, for instance, of-things success stories was startup Nest through the company’s network to gain
can let patients leave the hospital sooner or Labs, which makes connected thermostats access to its database of high rollers. Critics
enable seniors to continue living at home. and security cameras and was acquired by say that developers of connected devices
The proliferation is driven by advances in Google in 2014 for $3.2 billion. aren’t doing enough to satisfy such security
miniaturization and artificial intelligence, concerns. These worries might worsen as
and will be fueled by the arrival of speedy ● The Argument Chinese companies, such as Alibaba Group
5G mobile networks. At the same time, the Holding Ltd. and Huawei Technologies Co.,
risks of web-linked devices are becoming Connected devices are convenient, but race to take advantage of China’s head start
better understood: In 2018, U.S. authori- they come with tradeoffs in security and in 5G wireless to set global standards for the
ties issued a security alert to let consumers privacy. Smart factories cut machine internet of things.
know the gizmos could be exploited by
malicious actors, and studies have shown
that devices from security cameras to cars Smart Things Automate the Home
aren’t hard to hack. Privacy concerns are
coming into focus: Reports emerged in Baby care Alarms Child and elder care Kitchen help
2019 that Amazon workers had listened to Sleeping baby’s diaper Wireless smoke and Smart doors know that An oven can let you
tells you it needs carbon-monoxide the kids are home from know the turkey
recordings of Alexa customers. Many appli- changing before the sensors sound sirens school, and bed sensors is cooked, and in
ances are harvesting data that could prove discomfort wakes him. and send out alerts. tell you Grandpa is up the future a fridge
valuable — for better or worse — to product from his nap. will automatically
reorder milk.
designers, advertisers, governments and Gardening
law enforcement. Sensors that track
moisture send
messages when it’s
● The Background time to water plants.
In 1982, computer science students at

Carnegie Mellon University put sensors
in a beverage vending machine and con-
nected it to an early version of the internet
so they could tell if it was empty with-
out having to walk there. It was the first
known example of the internet of things,
ILLUSTRATION BY CHRIS PHILPOT
though the term wasn’t coined until 1999

by Kevin Ashton, the co-founder of a Appliances Lights and Security Personal assistants
center at MIT that helped develop radio- A washing machine thermostats Smart video cameras Voice-activated devices
frequency identification chips used to track tells you it’s time to put Homeowners can survey your property such as Alexa can
clothes in the dryer or control heating and and let you watch on answer questions, play
goods and materials. Despite hype dat- buy more detergent. cooling remotely or turn your phone or PC. music or help you shop.
ing back to the late 1990s, web-connected lights on and off.
37

Electric Airplanes
By Benedikt Kammel, Tara Patel and Oliver Sachgau
In Sweden they call it flygskam, or flying shame — that guilty feeling that you’re destroying the planet when you zip off to Spain
for the weekend. Airlines and planemakers are acutely aware that one day they may face backlash from climate-conscious
customers, along with tougher government regulations. That’s why they’re seeking ways to cut pollution and reduce their
carbon footprint, including through the development of electric and hybrid planes. There’s hope that some day electric
technology can do for the skies what Toyota Motor Corp.’s groundbreaking Prius hybrid car did for the roads.
● Are electric planes even possible? Cleaner Airways

Yes, but they have to start small. Los Hybrid airplanes promise to cut carbon emissions. Here’s how one
Angeles-based startup Ampaire Inc. has would work based on a design by the aviation startup Zunum Aero.
taken an early lead by converting a six-
passenger Cessna 337 into a hybrid model Generator
with both a conventional combustion Electric engines Running on
conventional jet fuel, it
engine and an electric motor. Ampaire Fed by batteries, they
produces electricity to
fly the plane with less
says the plane, dubbed the Electric EEL, noise and carbon run the engines
could enter service by 2021 and cut fuel emissions
consumption and greenhouse gas emis-
sions by 50%. Israeli rival Eviation Aircraft
Ltd. displayed an all-electric nine-seat
prototype at the Paris Air Show in June Hybrid powertrain Cabin
2019 and is aiming for short-range commer- Manages generation Seats six passengers
and storage of in a business class
cial flights within three years. In all, says electrical power to configuration or
consultancy Roland Berger, there are about run engines 12 in a coach layout
100 different electric aviation programs
under development around the world.
But the bigger the plane, the higher the
hurdles: Airbus SE has floated the possi- Removable battery packs Fuel tank
bility of introducing a hybrid version of its Store generator’s Holds conventional
output and supply energy liquid jet fuel that feeds
best-selling single-aisle A320, which seats in-flight. Can be swapped the generator
up to 240 people — but not before 2035. out at the airport
● What’s the challenge?

The big problem for electric motors is the batteries and a conventional engine pow- today, though surging passenger num-
size and weight of the batteries needed to ered by gasoline. They can work together bers mean it could become a much bigger
power them. Current lithium-ion batteries or separately, and the gas engine also source of pollution.
store only a small fraction of the energy charges the batteries. Airplane engine
in an equal volume of liquid jet fuel. maker United Technologies Corp.’s Project ● Would emissions really be lower?
That makes them too inefficient for large 804 is testing a slightly different “parallel” That depends. As with cars, the car-
or long-distance electric planes. Hybrid system. The company has reengineered a bon footprint of a hybrid-electric plane
technology mitigates that by using both Bombardier Dash 8 aircraft with an elec- depends on how much it uses electric
conventional and electric engines. Either tric motor for supplemental power during power and the source of the electricity. ILLUSTRATION BY CHRIS PHILPOT
they share the workload or the conven- takeoff and ascent and a conventional A plane that charges its battery midair
tional engine charges the batteries; in engine for cruising. In this design, the bat- by burning jet fuel won’t reduce emis-
either case, the batteries can be much tery isn’t recharged by the jet. The Airbus sions much. But all-electric designs and
smaller and overall emissions are lower. In A320 project employs a “serial” approach “parallel” hybrids charged before take-
some hybrid designs, electric engines are that uses a battery-powered motor for off using renewable energy sources could
used to power the short but heavily pollut- takeoff, flying and landing. A conventional make a real difference. Still, for the next
ing takeoffs and landings, while at cruising engine is used to recharge the batteries. few decades the total potential pollution
altitude, propulsion is provided by con- reductions are limited. A study published
GRAPHIC SOURCE: ZUNUM AERO INC.
ventional jet engines designed to be more ● What’s driving the electric push? in the magazine Nature in 2018 estimated
fuel-efficient midflight. Unlike cars, which have long had to that with current technology, planes with a
adhere to rules on exhaust, neither air- range of 690 miles (1,110 km) could handle
● How does that compare to a Prius? planes nor the companies that fly them half of flights and reduce aviation’s car-
Toyota’s Prius, introduced in 1997, uses are currently subject to binding limits. bon emissions by 15%. Deeper cuts would
what it calls “full” hybrid technology that The aviation industry accounts for about depend on the development of batteries
connects an electric motor powered by 2% of global greenhouse gas emissions that can store more power per pound.
38

Chapter 5
CLIMATE
What will it take to decarbonize?

Can we eat our way
to a healthier planet?

D
Buzzwords Environmental challenges come with their own catchwords.
Here’s assistance decoding them.
planned through 2030 risks

being rendered near-worth-
less under policies that would
achieve the United Nations’ tar-
get of limiting the rise in Earth’s
When you see a half-constructed build- temperature to well below 2C (3.6F).
ing that’s been abandoned, it’s a sign the That’s according to Carbon Tracker, an
project no longer made economic sense. environmental group that advises insti-
ivestment
There’s an argument that trillions of dol- tutional investors and coined the term
lars’ worth of investments to tap new “stranded assets.” (Climate Tracker has
supplies of oil and gas might suffer the received support from the charitable
same fate, becoming what are known foundation of Michael Bloomberg, the
as “stranded assets.” Some analysts and majority owner of Bloomberg LP, the par-
investors are warning energy compa- ent of Bloomberg News.) So far, though,
nies that there’s a real risk the value of the warnings are having limited impact.
their projects to develop new fields or Energy companies say they’re confident
deep-water wells could fall to zero — if that their efforts to replenish supplies
governments make good on pledges to cut of oil and gas make sense. After all, the
Can you fight climate change by getting greenhouse-gas emissions. They argue world’s appetite for fossil fuels is projected
rid of your oil company stocks — and can that it’s time financial markets consider to hold steady for another two decades.
you do it without losing money? The idea the economic risks of climate change and
is not just for activists anymore. Norway factor in the possibility of tough restric- By Mathew Carr
took a partial step in selling off oil and gas tions coming into effect. Any decline in
stocks in its massive $1 trillion wealth fund. demand for carbon-based fuels could
Others are using the threat of divestment hurt prices and make new projects uneco-
as a cudgel to force energy companies to nomical. About a third of the almost
adopt greener ways. The climate divest- $6.5 trillion in fossil-fuel investment
ment movement harks back to the fight on
college campuses in the U.S. and Europe in
the 1970s and ’80s to force South Africa to
give up its apartheid system of racial segre-
gation. It was revived in 2012 by 350.org, an
activist group led by the American writer
Bill McKibben whose name refers to what
some scientists consider the maximum safe
level of atmospheric carbon in parts per
million. Other investors are divesting inde-
pendently. BNP Paribas Asset Management
announced it would dump almost 1 bil-
lion euros ($1.1 billion) of coal stocks from The discussion around the changing “climate emergencies,” according to the
its actively managed funds. While coal was weather is itself changing. Anodyne refer- Climate Emergency Declaration Petition,
the initial focus of the debate, divestment ences to “global warming” are on the way a campaign group. The climate strikers
is now a concern for petroleum compa- out, with policy makers, activists and jour- want governments to commit to switch-
nies. One of Exxon Mobil Corp.’s largest nalists increasingly casting the situation in ing to 100% renewable energy as soon as
shareholders, Legal & General Investment more urgent terms. The U.K.’s Guardian possible, preferably by 2030. Hard-hitting
Management, sold $300 million of the oil newspaper, which champions environ- language, of course, is no guarantee of
giant’s stock. Divestment is not an option mental issues, has changed its house action. The U.S. House of Representatives
for funds that track broad indexes, and style, ending use of the more passive- has established a body with a tough term
most money managers prefer engag- sounding term “climate change” and in its name: The Select Committee on the
ing with companies to getting rid of their switching to “climate crisis” in its place. Climate Crisis, which aims, by March 2020,
shares. Climate Action 100+, a group of Young demonstrators around the world to publish a blueprint for keeping the gain
money managers overseeing more than are demanding that their governments in the Earth’s temperature to less than 1.5C
$35 trillion, works to influence the larg- declare climate “emergencies,” with (2.7F). Legislative changes, however, would
est corporate emitters of greenhouse these so-called climate strikers skipping also require approval by the Senate, which
gases. The organization has, for instance, school every Friday to make the point. is controlled by the Republican Party of
persuaded Royal Dutch Shell Plc to set They, along with other activists, argue President Donald Trump, who insists that
short-term climate targets and publish a that stronger words can focus attention U.S. economic growth is a more urgent pri-
report on its lobbying of governments. on the planet in a new way. By mid-2019, ority than the climate.
local and national governments repre-
By Kelly Gilblom senting 206 million people had declared By Emma Vickers
40
BZ12_Quicktakes_40-56_1153656.indd 40 10/17/19 1:07 PM

Decarbonization
By Reed Landberg and Jeremy Hodges
What is “decarbonization”? It’s an approach to climate change both sweeping and incremental: working industry by industry,
process by process, to bring greenhouse gas emissions down as close to zero as possible. Some challenges are familiar:
switching power plants to renewable sources and filling roads with electric vehicles. A look at agriculture, which accounts for
25% of emissions, along with cement and steel, which combined account for 14%, gives a sense of less well-known tasks.
● Agriculture while others are testing substitutes includ- Energy Agency says that a decarbonized
ing fly-ash, the residue left in chimneys of cement industry would rely mostly on
� Sources: The widespread practice of coal-burning furnaces; slag from iron pro- carbon capture technologies that are cur-
burning stubble after harvests releases car- duction; and hemp mixed with lime. rently too expensive for mass use.
bon dioxide, while heavy use of inorganic
fertilizers releases methane and nitrous � Hurdles: Regulators are very cautious � Bright spot: Brazil’s cement is among
oxide. The destruction of rainforests for about approving alternatives to a substance the world’s cleanest, thanks to the avail-
ranching and farming, including grow- holding together most of the world’s build- ability of pozzolan, a volcanic material
ing animal feed, is part of why livestock ings. Some options may be three times as that can take the place of clinker.
accounts for 60% of agricultural emissions. expensive as regular cement.
● Steel
� Solutions: Steps on the supply side � Long-range prospects: Cement produc-
include improving soil management and tion is expected to increase by as much � Sources: Iron ore is purified in tradi-
developing livestock with digestive sys- as a quarter by mid-century. Reducing tional blast furnaces by heating it along
tems that produce less methane. On the the amount of carbon released hinges on with coke, a refined form of coal. Coke
demand side, advocates hope to persuade improving energy efficiency and shifting releases carbon monoxide that absorbs
people to eat less meat and dairy and to to cleaner fuels. But those steps would oxygen from the iron ore, creating pig iron
pressure food companies to buy only from only make a dent: The International and carbon dioxide.
environmentally friendly sources.
� Solutions: European steelmakers are
� Hurdles: Brazilian President Jair Cutting Carbon in Construction testing a switch to hydrogen as the bonding
Bolsonaro has been hostile to measures to To make cement, limestone is heated to produce agent. Hydrogen produced by renewable
reduce deforestation in the Amazon, while the key ingredient, clinker, releasing carbon dioxide power could also be used to fire furnaces.
food production in Asia is dominated by Raw material Rotating kiln Increasing the use of recycled steel is seen
poor, small-scale farmers, including many as critical to reducing emissions as it’s far
CO2 is released
reluctant to give up traditional methods. when material less energy-intensive.
splits into calcium
� Long-range prospects: With the world’s oxide and carbon � Hurdles: The chief technology offi-
dioxide
population growing and consumers in Heat cer of ArcelorMittal, the world’s biggest
China and other emerging markets eat- steelmaker, estimates that switching to
ing more meat as they grow more affluent, hydrogen could double the cost of steel.
consumption of animal products is fore- The large amount of upfront investment
cast to rise 60% by 2050. Preheater Clinker needed for the change could require sig-
produced
nificant government aid.
� Bright spot: In the developed world,
meat consumption is dropping, while sub- In steelmaking, coal is used both as a heat source � Long-range prospects: Global demand
stitutes such as those made by Beyond and, in the form of coke, to purify iron ore for steel is expected to rise by 50%
Meat Inc. have drawn investor interest. between 2019 and 2050 as cities grow. The
Iron ore, coke and limestone IEA says the carbon intensity of steel — the
● Cement energy needed to produce a given amount
CO2 is
CO2 CO2 Blast — needs to fall 1.9% each year through
� Sources: Producing cement’s main produced furnace 2030; between 2010 and 2016 the average
ingredient, called clinker, involves heating as a decrease was 1.4%.
byproduct
limestone in a kiln, where carbon trapped of iron
Heat
in the stone combines with oxygen and is purification
generation � Bright spot: A pilot project called
also
released as CO2. More carbon is released if produces Carbon2Chem by the German steelmaker
the heat comes from fossil fuels. CO2 Thyssenkrupp AG uses carbon dioxide and
Heat other gases released in the steel produc-
� Solutions: Some companies are work- Slag
Iron
tion process as raw materials for making
ing to reduce the amount of clinker used, chemicals, reducing overall emissions.
41

The Vegan Economy

By Deena Shanker and Lydia Mulvany
Veganism is on the rise. The phenomenon has spawned a burgeoning industry in alternatives to animal-derived products that’s
already worth billions of dollars. It includes nondairy milk and cheese, imitation beef, chicken, fish and pork, and leather made
from pineapple leaves or apple peel. A sizzling initial public offering by meat substitute maker Beyond Meat Inc. underscored
optimism about a new “vegan economy.” The promise is rooted not just in consumers who choose to cut out meat and dairy
for ethical reasons but also from the growing ranks of nonvegans concerned about their health — and that of the planet.
● The Situation three years earlier, according to research engineered ingredients — such as the iron-
firm GlobalData Plc. One survey found rich molecule heme that makes Impossible
Many meateaters are cutting back on burg- that concern for animal welfare was a key Burgers taste meaty — require more rigor-
ers, steaks and sausages, or say they’re driver for reducing meat intake among ous research to determine their safety.
trying. A U.S. survey found 31% of respon- Britons, while personal health ranks There’s also concern that much of the
dents labeled themselves “flexitarians” among the most often cited reasons in industry’s innovation is coming from
— people who regularly substitute other many countries. Numerous studies point Silicon Valley startups backed by venture
foods for meat. In other polls, one-third to the benefits of a flexitarian or plant- capitalists whose focus on maximizing
of Britons said they had scaled back or based diet, including reduced risk of heart consumption might override public safety
stopped meat purchases, while half of disease and some cancers. Concern for the worries. Bullish signs for the future of the
Australians reported eating less red meat. planet is an increasingly strong motiva- vegan economy include the huge invest-
The change is happening even as global tion. Avoiding meat and dairy is one of the ments in plant-based foods by traditional
meat consumption rises, including in the most effective ways to reduce one’s envi- meat and dairy companies. Surveys high-
U.S. and developing countries such as ronmental impact, according to the author light a key breakthrough since the days
China with traditionally plant-heavy diets. of a 2018 study in Science magazine. That’s when bland-sounding vegan fare was con-
It’s especially marked among younger peo- because livestock farming produces an signed to natural-food stores: Half the
ple and has led to soaring demand for a estimated 14.5% of the world’s greenhouse consumers in one U.S. survey said the
new category of products with taste and gas emissions that stoke global warming. main reason they choose plant-based foods
texture similar to meat, milk and cheese. Rearing animals is also a massive contrib- is the taste. Advocates for meat replace-
There’s the Beyond Burger and the utor to deforestation, which curtails the ment argue that like it or not, humans will
Impossible Burger, vegan parmesan or Earth’s ability to absorb carbon dioxide. have to radically change their diets to limit
ricotta, and milk alternatives derived from climate change. They cite research such as
nuts, oats, rice and soy, to name a few. ● The Argument a paper in the journal Nature estimating
The fervor for Impossible Burgers (now on that meat consumption in Western nations
Burger King menus) and the oat milk drink Nutritionists question the health creden- must fall by 90% to keep global tempera-
Oatly led to shortages of both across the tials of some processed meat alternatives, tures under control. They note that the
U.S. in 2019. While early funders included noting their high sodium and calorie pressure on food systems is exacerbated by
Microsoft Corp. co-founder Bill Gates, counts. The environmental group Friends forecasts that there will be 2 billion more
regular investors are now getting a taste: of the Earth has warned that genetically mouths to feed within three decades.
Beyond Meat’s shares surged 600% in the
three months after its IPO in May 2019.
Barclays Plc expects the meat-alternative Meat and Greet
industry to grow to $140 billion in the next A glossary for dinner party hosts to keep their guests happy
decade, or 10% of the global meat market.
More U.S. consumers are also shunning Term Meaning
leather footwear and car interiors. Vegan Eats only plant-based foods, so no meat, fish, eggs or dairy
PHOTO: JEENAH MOON/THE NEW YORK TIMES/REDUX
Raw Vegan Vegan, but no processed food or food cooked at high temperatures
● The Background
Vegetarian (ovo-lacto) No fish or meat but fine with eggs and dairy products
In 1944, an Englishman named Donald Vegetarian (ovo) No fish, meat or dairy products but fine with eggs
Watson coined a term for vegetarians who
Vegetarian (lacto) No fish, meat or eggs but fine with dairy products
shun dairy and eggs when he co-founded
the Vegan Society. While the number of Flexitarian Regularly eats plant-based food in place of meat or fish
vegans has jumped in the past few years, Pescatarian OK with fish and seafood but no other meat
they still represent a small minority;
Pollotarian OK with poultry but no other meat
some 6% of Americans described them-
selves as vegan in 2017, up from 1% just Reducetarian Gradually reduces consumption of animal products
42


Sustainable Fashion
By Allegra Catelli and Ellen Milligan
There’s a clash brewing in the fashion industry, between environmentally conscious shoppers and their seemingly
unquenchable thirst for the latest new thing. More consumers have embraced what’s become known as fast fashion,
where they update their wardrobes at an ever faster pace and often cheaply. Yet making clothes is hard on the environment.
Now apparel makers for all budgets are pledging to make fashion more sustainable. Is green the new black?
● What is sustainable fashion? contaminate sewage. These tiny fibers in everything from jeans to sneakers
It’s a movement aimed at creating a more make up a significant part of the micro- and swimsuits in the next decade or so.
environmentally responsible fashion plastic polluting the world’s oceans. And Recycling is another area of focus. Less
industry by changing the ways clothes people tend to wash and dry their clothes than 1% of material produced to make
are designed, made, transported, used far more often than necessary, adding to clothes is reused in new apparel. Adidas
and discarded. The idea is to move away a garment’s water consumption and car- AG says it will use recycled polyester
from the rapid production of clothes in bon footprint. Finally, people often throw wherever possible by 2024. Prada SpA has
response to constantly changing trends out trash bags full of clothing rather than vowed to replace its entire nylon supply
and wean shoppers off their disposable find a way to recycle it. It’s been estimated with more sustainable versions, including
attitude. There’s also a focus on making that every second, a garbage truck full of fabric made from plastic recovered from
the industry more socially responsible, textiles is dumped in a landfill or burned. the ocean. Efforts to develop novel sys-
notably by improving working conditions tems for manufacturing clothes include
and protecting the welfare of animals. ● What are companies doing? work by jeans makers such as Levi Strauss
They’re pledging to reduce the use of & Co. on new ways to dye and distress fab-
● How do clothes harm the materials that are bad for the environment ric that would require fewer chemicals
environment? and less water and electricity. Even as sus-
With clothing production roughly dou- tainability pledges multiply, many fashion
bling in the past 15 years, carbon emissions Disposable Fashion companies still burn millions of dollars’
from textile production are now estimated We’re buying more clothes than ever but wearing worth of unsold clothes. After facing crit-
to be more than those of all maritime ship- them less icism, Burberry Group Plc promised to
ping and international flights combined. Retail value of global apparel sales stop destroying unwanted stock. Instead,
Polyester and cotton make up 85% of all Average number of times a new garment is worn it will work to unload it by increasing
the materials used in clothes, and both sales to its employees and donating to
are rough on the planet. Most polyester, $1.5t brands that make new items out of scraps
a man-made fiber, isn’t biodegradable. of leather. Also, after decades of facing
It also requires chemical dyes, which 188 times ire from animal rights groups, Prada is
can contaminate groundwater sources. the latest luxury brand joining Gucci and
GRAPHIC; NUMBER OF WEARS IS CALCULATED BASED ON CLOTHING SALES AND POPULATION FIGURES;
SOURCES: THE ELLEN MACARTHUR FOUNDATION (WEARS), EUROMONITOR INTERNATIONAL (SALES)
Globally, there is little regulation requir- Burberry in banishing fur from its lines.
ing companies to be transparent about
the chemicals used to dye and treat fab- ● Is it all making a difference?
rics, making it difficult to evaluate the true $1.0t Better practices still don’t offset rapid
environmental impact of the industry. growth. It’s projected that by 2030 more
Cotton is an especially water- and insec- than 100 million tons of apparel and foot-
ticide-intensive crop. Some 2,700 liters wear will be purchased each year. An
(713 gallons) of water — enough to sustain industry group, Global Fashion Agenda,
a person for three years — are needed to warned that manufacturers and retailers
grow the cotton in a single T-shirt. Organic aren’t implementing changes fast enough
cotton, which makes up 1% of the global $0.5t to balance the negative environmental
crop, is grown without pesticides but uses and social impact of their expansion. Fast
as much water as regular cotton. fashion shows little sign of slowing down,
either. In India, Tata Group, Inditex SA’s
● What role do consumers play? partner running Zara stores, is building
People are buying more clothes and its own apparel empire that promises to
keeping them for shorter periods. When 128 deliver “extreme fast fashion,” getting run-
polyester and nylon clothes are washed, 0 way styles to customers in just 12 days and
they expel minuscule particles that 2004 2018 at half the price.
44

Chapter 6
SOCIETY
SOURCES: THE ELLEN MACARTHUR FOUNDATION (WEARS), EUROMONITOR INTERNATIONAL (SALES)
How can cities become

affordable again?
What will replace your car?

Affordable Housing
By Prashant Gopal and Rob Urban
Cities around the globe are facing a stark reality: There are not enough affordable places for people to live. Housing in most big
urban areas is now considered out of reach for the average worker, fueling a growing sense that a decent home has become
a privilege traded among the “haves,” impoverishing the “have-nots.” Thorny questions abound: Should new luxury apartments
in London — many owned by foreigners — be allowed to lie empty, while thousands of people sit on waiting lists for affordable
homes? If migrants streaming into Beijing for a better life turn to dangerous, illegal dwellings, where will they go when those
places are demolished? The worst may be yet to come. The share of the world’s population living in cities is projected to reach
68% by 2050, up from 55% today.
● The Situation create 15,000 homes in California. Still, units has shrunk by 4 million since 2011,
that’s a drop in the bucket in a state with an and about 47% of renters spend more than
Rising prices have made homes in 58% estimated annual shortfall of 180,000 units. 30% of their income on housing. That’s
of major cities significantly unafford- contributed to a spike in homelessness in
able, compared with less than half five ● The Background some of America’s richest cities.
years ago, according to an annual study
by research firm Demographia. That In the 19th century, farmworkers who ● The Argument
means it costs more than 4.1 times median flocked to cities crowded into squalid quar-
annual income to buy a median-priced ters near factories. Now, technology, health Critics of rent control say it’s a crude
home. A typical apartment in Hong Kong care and finance companies are pulling in solution that can backfire, scaring away
now costs HK$7,169,000 ($916,225). Other throngs of white-collar workers, gentrifying investment and causing buildings to fall
hotspots include Berlin, where a grass- neighborhoods close to transit links. That’s into disrepair, often resulting in fewer
roots campaign to nationalize housing displacing teachers, nurses, firefighters, affordable units. But advocates say price
helped propel a plan to freeze rents for five office cleaners and other essential workers, caps can keep neighborhoods stable and
years. Vancouver adopted North America’s aggravating inequality. There’s also more slow the rate of gentrification. Private devel-
first tax on empty homes, and cities from competition from international and insti- opers say they often have no choice but to
New Orleans to Athens are grappling with tutional investors, who’ve shifted money focus on expensive units because labor,
the impact of Airbnb-type rentals that into real estate after a decade of low inter- materials and especially land have gotten
effectively set aside thousands of units for est rates reduced returns on other assets. so pricey. Local governments, they say,
tourists. New York City installed its most Supply hasn’t kept up. Since the 1980s, the could help by easing zoning rules, relaxing
GRAPHIC: SALARY AND HOME PRICES ARE MEDIAN MEASUREMENTS FOR THIRD QUARTER OF 2018; SOURCE: DEMOGRAPHIA
sweeping tenant protections in decades U.S. and U.K. have scaled back investment building codes and overruling “not-in-my-
in 2019, capping rent increases and elim- in state-funded homes. These governments backyard,” or NIMBY, protests that stymie
inating loopholes. The move came after have largely gotten out of the business of projects. One controversial solution gaining
Amazon.com Inc.’s expansion plans there constructing public housing and instead support is to force more neighborhoods to
were thwarted by community groups who encouraged development by nonprofits accept higher density across the board, an
feared residents would be priced out of the and private companies with subsidies or approach long favored by urban planners.
city. More governments have pledged to tax incentives. Many cities began to require In 2018, the city of Minneapolis became one
step up building: India aims to construct developers building luxury homes to set of the first and the largest in the U.S. to end
more than 40 million homes by 2022. Big aside a small portion of units for lower- single-family zoning, which means develop-
companies have also responded. Alphabet income buyers or renters. It hasn’t been ers will be able to build homes for two or
Inc.’s Google pledged $1 billion to help enough. In the U.S., the number of low-rent three families on each plot.
World’s Least Affordable

Years of annual salary needed to buy a home in selected cities
Miami Auckland Hong

New York London, Toronto San Jose Sydney Kong
Seattle San Francisco Melbourne Vancouver

Portland San Diego Los Angeles
4 8 12 16 20
46

Air Pollution
By Jonathan Tirone
From Beijing to Berlin, New Delhi to London, improving air quality is a matter of life and death. The World Health
Organization estimates that outdoor air pollution kills 4.2 million people each year. It leads to billions of dollars spent on
medical care and missed work and causes widespread illness, particularly among the very young and the very old. It’s a
problem that knows no borders, though it’s felt most severely in the developing world and in cities. New methods to detect
pollution and different approaches to legal challenges are some of the ways that people are fighting back against what’s
been called the “new tobacco.”
● The Situation Choked and the use of catalytic converters, for instance,
The rising cost of air reduced vehicle lead emissions in the U.S. by more
More than 90% of people live in places where pollution globally than 90% between 1980 and 1999. A combination
WHO air quality guidelines are breached. That 1990 of urbanization, laxer regulations, soaring fossil
means most humans are overexposed to the 2013 fuel consumption and rapid economic transforma-
microscopic particles and gases emitted by cars, tion has stoked the problem in developing coun-
factories and power plants that can lead to heart Premature deaths tries. Air quality is an issue that brings people out
and respiratory diseases and cancer. Diesel vehi- into the streets — as witnessed in recent years by
cles soared in popularity in Europe partly because protests in China, Mongolia and India. Frustrated
of their lower carbon emissions, but the nitro- at the lack of enforcement of emission standards
gen dioxide fumes they produce have made pol- in South Africa, environmental groups there are
luted air the “biggest environmental risk to public suing the government. The U.K., France, Germany,
health,” according to U.K. authorities. It’s now ille- Hungary, Italy and Romania have received final
gal to drive some diesel cars in Madrid, Paris or warnings to improve air quality from the European
Brussels, while Germany has banned older die- Court of Justice following legal action by the envi-
sel automobiles. In parts of the developing world, 4.8m 5.5m ronmental charity ClientEarth.
rapid industrialization aimed at lifting hundreds
of millions of people out of poverty has come at Value of foregone labor
● The Argument
the expense of air quality. In 2013, a rare public
outcry on Chinese social media pushed author- Advocates for urgent action contend that clean-
ities to tighten environmental regulations, close ing up the air makes economic sense as well as
some coal-fired facilities and switch millions being the right thing to do; health-related savings
of homes and businesses from coal to cleaner- outweigh the costs of cleaning the air to the tune
burning natural gas. Still, air pollution kills an of more than $1 trillion a year, according to one
estimated 1.1 million Chinese a year and costs the United Nations estimate. While climate change is
economy $37 billion, a 2018 study found, and the seen as a global issue, air pollution is viewed as
country continues to build power plants that burn $162b $225b a local problem, meaning poorer countries can’t
coal. In India, industrial and vehicle emissions rely on support from richer ones to solve their
combine with the illegal burning of farm stubble to problems. Those nations often must balance the
GRAPHIC SOURCES: WORLD BANK, INSTITUTE FOR HEALTH METRICS AND EVALUATION
Value of lost well-being

leave cities such as the capital New Delhi shrouded need to promote economic growth (for instance by
in a blanket of thick smog each winter; the coun- building cheap coal-fired power plants) with pub-
try is now home to seven of the world’s 10 most- lic anger over pollution’s health impact. Enforcing
polluted cities. anti-pollution and related regulations is among the
most effective ways to make a difference, as evi-
● The Background denced by Indonesia’s efforts to crack down on
the agricultural burning of forest that sporadically
Air pollution has been killing people since the blankets parts of Southeast Asia in a thick haze.
Industrial Revolution, and the worst excesses $2.6t $5.1t Leaps forward in sensing technologies are giving
today are no worse than London’s pea soup in local regulators and citizen scientists the ability
the 19th century or Japan’s smoggy 1960s. Acid to generate more and better data that helps pin-
rain that destroyed forests in the 1970s prompted point and track the industries and plants that are
50 countries to reduce sulfur emissions; their sources of danger. Such advances provide the intel-
agreement still serves as a blueprint for how sci- ligence to address pollution in real time and the
entists and policy makers can work together to ammunition to force action through the legal sys-
improve the environment. Innovations in engines tem against those neglecting their responsibilities.
47

Mobility as a Service
By Keith Naughton and David Welch
To carmakers and urban planners, those jumbles of electric scooters piled up on sidewalks in San Francisco, Paris and other
cities are more than just a mess. They represent the primordial ooze from which a new transportation ecosystem could arise,
one expected to lead to a drop in traffic, pollution and driving fatalities — and to the extinction of the mobility model that
dominated the 20th century: the individually owned automobile.
● What will replace my car? the 10% that automakers clear in the best ● Will this be a good deal for riders?
Something that’s known as mobility as a years in their traditional operations. Others There would be fewer wasted resources,
service, or MaaS, according to carmakers are skeptical of such claims, questioning since individually owned cars sit unused
and urban planners. Car payments and why competition wouldn’t drive margins 94% of the time. With mobility as a ser-
parking fees will be replaced by transporta- down. So far, after all, companies such as vice, travelers will pay only for the
tion bought by the month or mile, offered Uber and Lyft are consistent money losers. transportation they use. In cities with
through coordinated networks that draw Even so, the field is attracting venture cap- extensive public transit, there are savings
on a range of transportation options to get ital — about $5 billion in 2018, according to to be had today. But for most people the
you from A to B in a way that’s more conve- BloombergNEF — and a host of startups. answer is not yet, as relying on human-
nient than public transit alone and cheaper driven taxis or ride-sharing services
than a cab or car ownership. ● What would make this work? currently costs more than private owner-
Implementing the idea on a large scale and ship of a car.
● Is this a real thing yet? making it profitable both depend on remov-
Not really. Networks exist only in lim- ing the driver — a step that UBS estimates ● Are there other reasons to switch?
ited tests in a few cities. One of the largest will cut the cost of a ride from $2 to $3 a A world of coordinated and automated
is in Helsinki, where an app called Whim mile to about 70 cents per mile. Carmakers transportation could dramatically reduce
was launched by MaaS Global Oy in 2017. also think the first driverless cars, laden the 1.25 million global road deaths annually,
Commuters can choose different levels with advanced technology, will be too safety experts say: U.S. regulators blame
of service to gain access to taxis, buses, expensive for individuals to own and will human error for 9 out of 10 highway fatal-
trams, trains, ferries, rental cars, shared need to be part of a network in which mul- ities. The coming driverless robo-taxis are
cars and bikes, with discounts built in for tiple users pay for them collectively. Tesla’s being designed to rely on electric engines,
some options. Whim has expanded into chief executive officer, Elon Musk, foresees and since generating electricity is already
Birmingham, in the U.K., and Antwerp, a different version of MaaS: He believes that cleaner than burning gas in internal com-
Belgium. MaaS Global planned to roll it out once Teslas can drive themselves, people bustion engines, the change will reduce
in North America, Asia and Australia. will continue to buy them, but some will let carbon dioxide emissions, a leading cause
their cars carry other people around when of climate change. That’s a benefit that
● Who’s pushing it? they’re not using them, for a cut of the fare. will only grow as more electricity gener-
Many of the same companies that are devel- Musk thinks that could bring the cost down ation is switched from fossil fuels to solar
oping self-driving cars: tech giants Apple to 18 cents a mile. or wind power.
and Google parent Alphabet; the world’s
biggest automakers, including Volkswagen,
Toyota and General Motors; Tesla and How Mobility as a Service Works in Helsinki
ride-hailing ventures such as Lyft and Uber.
PHOTO: ROMAN SIGAEV/AGEFOTO
The Whim app offers different levels of service for different types of travelers
Uber, for instance, has started displaying
public transportation options in its app in Urban 30 Weekend Unlimited
London and Denver and has added Jump Monthly fee ▶ €59.70 €249 €499
shared electric scooters in some cities.
Public transit ▶ Unlimited Unlimited Unlimited
● What do they hope to get out of it? Taxis ▶ Maximum charge of €10 15% discount on all trips Unlimited for trips
for trips under 5 km under 5 km
Car companies and the others see the
switch as inevitable. There won’t be enough
Shared bicycles ▶ Unlimited 30 min. trips, Unlimited 30 min. trips, Unlimited 30 min. trips,
room on the roads to accommodate indi- then €1 per 30 min. then €1 per 30 min. then €1 per 30 min.
GRAPHIC SOURCE: MAAS GLOBAL OY
vidually owned cars as the world’s biggest

cities swell until they’re home to two-thirds Rental cars (daily) ▶ €49 a day Fri.-Mon. rental included Unlimited
of a projected global population of 9.8 bil- Rental cars (hourly) ▶ Not included Not included 2 hours a day included
lion in 2050. There’s also a big monetary
incentive. Ford Motor Co. estimates that Target traveler ▶ Uses bikes or taxis Rides public transit on Wants the convenience
to connect to public weekdays; leaves the of car ownership
mobility services could grow to a $10 tril- transit; occasionally city on the weekends without the hassles
lion business, with profit margins double needs a car
48


Universal Basic Income

By Paula Dwyer
Should the government guarantee every citizen a monthly stipend, no strings attached, no questions asked? Or a decent-paying
job with benefits such as health care and sick leave? Those ideas are part of a global debate over whether and how much
to strengthen the social safety net to offset widening inequality and to ease deepening anxiety over joblessness caused by
workplace automation. While programs that provide jobs are among the biggest anti-poverty measures in developing countries,
the stipend idea known as universal basic income is generating interest and has prompted trials in Europe, North America and
Africa. A guaranteed allowance that takes the place of means-tested welfare programs could have appeal across the political
spectrum, depending on how it’s structured. In the U.S., the notion of ensuring a basic income or a job is a common thread among
candidates seeking to be the Democratic Party’s nominee for president in the 2020 election.
● The Situation wage.” How to pay for that? Some back- in the form of a negative income tax.
ers of the plan embrace Modern Monetary That idea didn’t make it out of Congress
Some of the biggest evangelists for a uni- Theory, an unconventional doctrine that but led to adoption of the earned-income
versal basic income can be found in Silicon insists governments can run budget defi- tax credit, which supplements the earn-
Valley, where technology billionaires such cits far bigger than economists typically ings of the working poor. Conservative
as Mark Zuckerberg and Elon Musk see it accept, so long as inflation stays low. In economist Milton Friedman, who is cred-
as a solution to potentially large job losses his campaign for U.S. president, Senator ited with proposing the negative income
— and consumer backlash — from driv- Bernie Sanders proposed using tax dol- tax, wanted to end the “earnings cliff,” in
erless cars, robotics and other forms of lars to ensure that everyone who wants which government aid disappears once
automation. Google’s philanthropic arm is a job gets one paying at least $15 an hour, income exceeds a cap, potentially dis-
a backer of GiveDirectly, a New York-based plus benefits, doing things like rebuild- couraging people from working. As for a
nonprofit that is providing 5,000 Kenyans ing crumbling infrastructure or providing job guarantee, the U.S. has the experience
a guaranteed income of about 75 cents child care. Entrepreneur Andrew Yang of President Franklin D. Roosevelt’s Works
per day for up to 12 years to test, among based his long-shot campaign for the Progress Administration, which employed
other things, how it affects employment, Democratic nomination on a plan to give several million people in construction and
nutrition and mental health. One of the every American adult $12,000 a year. the arts during the Great Depression.
broadest experiments is being planned
in the Indian state of Sikkim, where the ● The Background ● The Argument
ruling party says it will provide a basic
income for every one of 610,000 citizens The idea of a government-guaranteed min- Many basic-income backers cast the idea
by 2022. India’s government already guar- imum income dates back centuries, with as the ultimate expression of what a devel-
antees rural workers up to 100 days per some saying a version originated with oped economy can achieve: It would
year of paid employment. Some U.S. law- humanist philosophers of the 16th century. lessen poverty and inequality, reward
makers are ready to leap in. The liberal It wasn’t until the 1960s that it became work and encourage enterprise, maybe
legislative wish list known as the Green part of the mainstream political discussion even make people a little healthier and
New Deal envisions guaranteeing all in the U.S., when President Richard Nixon happier. But two questions would be key
Americans “a job with a family-sustaining proposed a minimum income for families to any program. How big a payment to
give? And what would become of existing
means-tested safety-net programs, which
What Basic Income Could Replace focus on helping the neediest? To win
Spending on U.S. programs often described as ‘welfare,’ by percentage of gross domestic product over the anti-government-handout crowd,
Unemployment compensation a program guaranteeing a basic income
GRAPHIC SOURCE: WHITE HOUSE OFFICE OF MANAGEMENT AND BUDGET
Food and nutrition assistance would need to replace, not supplement,

Income assistance to blind, disabled, elderly the dozens of social welfare programs
Temporary assistance to families now costing U.S. taxpayers about $1 tril-
Earned-income tax credit lion a year. In theory, the political right
1.00% and left might be able to coalesce around
a guaranteed-income program generous
0.75% enough not to leave anyone worse off, but
not so lavish as to discourage job seeking
0.50% or require higher taxes. Rather than trust
elected leaders to thread that needle,
0.25% some Democrats in the U.S. would prefer
to focus on advancing more practical pri-
0 orities, such as a $15 minimum wage and
1962 2018 paid family leave.
50

India’s Caste System

By Archana Chaudhary
For generations of Indians, the ancient code of social stratification known as the caste system has defined how people earn
a living and whom they marry. Despite reform efforts, a sense of entitlement and deep-rooted prejudices hold firm among
higher castes, while those on the lowest rungs still face marginalization, discrimination and violence. Prime Minister Narendra
Modi has a strategy that purports to look beyond caste and focuses on improving the lot of all Indians. His approach has won
overwhelming backing from voters, but critics say it risks exacerbating the plight of the most disadvantaged.
● The Situation Determined at Birth

Decades after India banned discrimination, caste still shapes economic prospects
Seven decades ago, the founders of
postcolonial India outlawed caste dis- Average per Male workers
crimination and enshrined affirmative Population capita income Females with defined as
action in the constitution. That included Caste share (in rupees) some education professionals
reserving government jobs and places Brahmin 4.9% 35,303 84.6% 43.8%
in higher education for Dalits — a group
Other upper castes 14.9% 36,060 80.6% 34.8%
at the bottom rung of the caste system
who now number more than 200 mil- Dalit 21.8% 19,032 49.4% 18.1%
lion. Yet caste remains a significant factor Other “backward” castes 42.8% 21,546 59.1% 19.0%
in deciding everything from family ties
and cultural traditions to educational
and economic opportunities, especially karma (actions) and dharma (duty) for ● The Argument
in small towns and villages, where more Hindus, who today represent 80% of
GRAPHIC: BALANCE OF THE POPULATION INCLUDES MUSLIMS, CHRISTIANS AND OTHER MINORITY GROUPS. DATA IS FOR 2011; SOURCE: NITIN KUMAR BHARTI,
than 70% of Indians live. Nearly a third of India’s population. In it, society was Modi’s stated aim is to make traditional
Dalits make less than $2 a day, and many divided into four strictly hierarchical castes irrelevant. He says there are now
don’t have access to education or running groups known as varnas: the Brahmins just two castes: the poor and those who
water. Most menial jobs are carried out — priests and other intellectuals — at the will contribute to eradicating poverty.
by Dalits; few office jobs are. Hate crimes top; then the Kshatriyas, or warriors; It’s a message that resonates with voters
against Dalits have proliferated in recent then the Vaishyas, or traders; and lastly desperate for faster progress in a country
years, prompting criticism of the rul- the Shudras, those who did menial labor. where salaries are less than one-quarter
ing Bharatiya Janata Party for allegedly The texts laid down laws on marriage, of those in China. Skirting the issue of
stoking social divisions. The party is the property and even food. For instance, if caste, Modi’s critics say, risks allowing
natural home for Hindu hardliners, some a Brahmin consumed food prepared by a prejudice to fester and violence against
PARIS SCHOOL OF ECONOMICS (2018 PAPER “WEALTH INEQUALITY, CLASS AND CASTE IN INDIA, 1951-2012”)
of whom have attacked Muslims for eat- Shudra, he’d be born a pig in his next life. Dalits and Muslims to thrive. The strat-
ing beef and lower-caste Hindus over The system has since evolved to include egy may also mask the economic plight
their links to the beef trade. (Hindus con- some 3,000 castes and 25,000 subcastes. of lower castes. A study in 2018 by the
sider cows sacred.) Dalits have taken to Over time, as social segregation and caste Paris School of Economics concluded
the streets by the tens of thousands to prejudice deepened, another layer of that they were failing to close the gap
demand protection of their rights. Yet, for Shudras emerged at the base of the pyr- with other groups, and that inferior
the second straight election, Modi led the amid: Dalits, meaning “divided, split, education means they’re likely to fall
BJP to a resounding victory in 2019, even broken, scattered” in classical Sanskrit. further behind. Numerous studies point
securing a larger share of Dalit votes. Not only were they barred from shar- to entrenched caste prejudice in rural
Parties with policies aimed in particular ing food with or marrying people from India, yet there are signs of change as
at promoting lower castes were trounced, higher castes, some couldn’t even brush more Indians move to cities (half will be
as Modi’s appeal to a common Hindu her- the shadow of a Brahmin. They got their urban dwellers within two decades) and
itage trumped caste consciousness. other name — “untouchables” — because younger people (almost half the popula-
their mere touch could supposedly defile. tion is under 25) show greater tolerance.
● The Background Not all of them are Hindu; Dalit Muslims, While just 5% of Indian marriages are
many descended from lower-caste Hindus between different castes, a study in 2019
While there’s disagreement over its ori- who converted to Islam in an effort to identified a “generational shift” in atti-
gins, the caste system was formalized in escape the repression of the caste system, tudes, with almost a quarter of profiles on
a legal treatise called Manusmriti, dating continue to face prejudice from non-Dalit matrimonial websites showing an open-
from about 1,000 B.C. The text defined Hindus and Muslims, a 2016 study found. ness to inter-caste marriage.
51

Vaping
By Robert Langreth and Lauren Etter
Is vaping a way for smokers to quit cigarettes or a new health menace? That question has provoked one of the most robust
debates among public-health specialists in years. The early evidence suggests e-cigarettes are much less harmful than
combustible ones that cause cancer. But an epidemic of teen vaping in the U.S. followed by an outbreak of sometimes fatal
respiratory ailments linked to e-cigarettes in late 2019 complicated the discussion. The developments led to new restrictions
on the devices in the U.S. and turmoil in the tobacco industry, which has looked to vaping products to make up for lost
revenue as cigarette smoking declines worldwide.
● How does vaping work? ● Are there any clues? ● Are vaping-related injuries new?
E-cigarettes, first popularized in China in An early study concluded that injuries Not entirely. Bloomberg News identified
2003, contain a battery-powered element in 17 patients were most likely caused by at least 15 lung injuries prior to the 2019
that heats a liquid spiked with either nic- exposure to toxic chemicals. The health outbreak, from Guam to Japan to England
otine, the addictive stimulant present in effects of regularly inhaling the base com- to the U.S. As vaping exploded in popu-
tobacco, or THC, the psychoactive ingre- ponents of vaping fluid — propylene glycol larity, scientists and regulators missed
dient in marijuana, producing a vapor and glycerin — aren’t fully understood. hints that it might not be as benign as
the user inhales. Vaping is a way to ingest While these common food additives are proponents hoped. Focused on whether
those substances without the smoke and deemed safe to eat, heavy vapers receive vaping reduces exposure to cancer-causing
tar that comes from a burning cigarette or large doses over long periods of time, compounds in cigarettes, they largely
joint. In some cases, a vaping device, such delivered in ultrafine particles to the sidestepped questions about whether
as the popular Juul, is small enough that an deepest parts of the lungs. In 2015, a U.S. e-cigarettes posed entirely new risks.
underage vaper, say, can palm it, discreetly government researcher warned that two
take a hit when a teacher or parent isn’t ingredients in some e-cigarette flavorings, ● What’s the response to the outbreak?
looking, and breathe the resulting aerosol diacetyl and pentanedione, had been A number of U.S. states and cities moved to
into a sleeve or collar. found to be potentially harmful. Diacetyl limit access to vaping products, with some
was linked to a 1990s case in which eight banning them outright and others block-
● How popular is vaping? workers at a microwave popcorn factory ing sales of flavored products. The FDA
The market for vaping products was esti- in Missouri developed lung damage after in September said it planned to remove
mated at about $11.5 billion worldwide in breathing in the chemical, used to give the from the market all flavored vaping prod-
PHOTO: JESSICA CHRISTIAN/SAN FRANCISCO CHRONICLE/POLARIS

2018 and is growing rapidly. A quarter of popcorn a buttery flavor. ucts, excluding tobacco flavors. Sales could
U.S. high school seniors say they indulge, resume only with the agency’s approval.
spurring a debate about how the sleek (Michael Bloomberg, the founder and
design, marketing and candy-like flavor- An Explosion of Teen Vaping majority owner of Bloomberg News par-
ings of vaping products have attracted Percentage of U.S. adolescents who say they ent Bloomberg LP, has campaigned and
millions of non-smokers and hooked a vaped nicotine in the previous 30 days given money in support of a ban on fla-
new generation. The U.S. Food and Drug vored e-cigarettes and flavored tobacco.)
Administration initially did not regu- 30% Walmart and other big U.S. retailers said
late them as it has conventional tobacco they would stop selling e-cigarettes. The
products. A judge required the agency outbreak derailed merger talks between
to advance its deadline, to May 2020, for tobacco giants Philip Morris International
e-cigarette makers to submit applications Inc. and Altria Group Inc., which owns
for approval to keep selling their wares. a 35% stake in Juul Labs, the dominant
20% e-cigarette maker in the U.S. Juul faces
● What caused the illnesses? legal claims that it improperly marketed
It wasn't immediately clear. More than its goods, particularly to teens.
GRAPHIC SOURCE: NATIONAL INSTITUTE ON DRUG ABUSE
1,200 lung injuries and 26 deaths were tied

to vaping in the U.S. from April to early ● What about outside the U.S.?
October 2019. Many of the cases shared 12th graders
E-cigarette sales were already banned
pneumonia-like symptoms and signs of 10% in 28 countries, including Brazil, India,
chemical burns, though it’s been difficult 10th graders Turkey and Uganda. Under European
for health authorities to zero in on the cul- Union regulations, the nicotine in vap-
prit; in one analysis, 86 patients reported ing liquid is limited to about a third the
using 234 unique products with 87 differ- 8th graders strength delivered by Juul refills in the U.S.
ent brand names. Much of the focus was on In the U.K., public health officials stood by
products containing THC, as well as poten- 0 their position that while vaping entailed
tial additives or cutting agents. 2017 2019 risks, it was safer than smoking.
52


Index There are more than 600 QuickTakes available on the Bloomberg Terminal at
QUICK <GO>. Individual articles can be found online at www.bloomberg.com.
Or search “QuickTake” and the topic in your web browser.
Banking Chemical Weapons Economics Finance & Related Public Policy Debates
Cold War Redux Regulation
Avoiding the Next Cyberwarfare Abenomics Affirmative Action
Financial Crisis Fighting Islamic State Central Bank Independence Active vs. Passive Affordable Housing p46
Banker Bonuses Future of Jihad Central Bank Rethink Bail-In Black Lives Matter
Broken Benchmarks Hamas Current-Account Deficits Capital Controls Congestion Pricing
Capital Requirements Hezbollah Deflation Carried Interest Family Leave
Dirty Money India vs. Pakistan Dot Plot Circuit Breakers Fertility Falloff
Europe’s Rickety Banks International (Dis)Order Forced Technology CoCo Bonds Gay Rights
Family Offices Iran’s Nuclear Program Transfersp25 CLOs Gentrification
Money Laundering Iran’s Revolutionary Guard Forward Guidance Contagion Marijuana Legalization
Shadow Banking Israeli Settlements Full Employment Dark Pools Migrationp30
Stress Tests Japan’s Military Future of Capitalism p16 Exchange-Traded Funds Polling’s Perils
Subprime Lending Kurds GDP Fallen Angels Populism
Swiss Bank Secrets Lone-Wolf Terrorism Helicopter Money p22 Fat Finger Trades Public-Private Partnerships
Too Big to Fail Muslim Brotherhood Homeownership Fintech Refugees and Asylum
Volcker Rule North Korea’s Nukes Income Inequality Frontier Markets Safety Net
Nuclear Weapons Intellectual Property Green Finance p20 Sexual Harassment Laws
China Focus Palestinian “Right of Return” Job Guarantees Hedge Funds Student Debt
Privacy vs. Security Middle Class High-Speed Trading Transgender Rights
AIIB Sanctions Minimum Wage Insider Trading Voting Gender Gap
Belt and Road Reboot p26 Space Force Negative Interest Rates Islamic Finance
China Inc.’s M&A Spree Sunni-Shiite Divide Negative-Yielding Bonds p15 Leveraged Loans Sports
China’s Shadow Banking Syria’s Civil War Neutral Interest Rates Libor’s Replacements
Debt Bomb Taiwan’s Tightrope Productivity Market Melt-Up College Sports
Depositary Receipts Two-State Solution Retirement, Delayed MiFID II Doping
Economic Data Ukraine Standoff Secular Stagnation Peer-to-Peer Lending Esports
Financial Risk Yemen’s Crisis Soft Landing Private Equity p18 Gay Athletes
Great Firewall of China Taxing the Rich Repo Market Golf in the Rough
Jet Challenge Countries & Regions in Trade War Robo-Advisers Sports Betting
“Made in China 2025” Transition Universal Basic Income p50 Short Selling World Cup Corruption
Monetary Policy Toolkit U.S. Jobs Report Data Spoofing
Market Meddling Africa’s Population Sustainable Investing Technology
Opening to Foreign Finance Arctic Opportunity Energy University Endowments
Social Credit System Brazil’s Disappointment Volatility 5G
Tech Giants Brexit’s Roots Better Batteries Vulture Investing Artificial Intelligence
Territorial Disputes Catalonia’s Separatism China’s Electric Vehicles Yield Curve Cybersovereigntyp32
Toxic Smog Colombia’s Peace Plan Coal Digital Cold War
Two-Child Policy Cyprus’s Reunification Divesting Fossil Fuels Medicine & Health Digital Disinformation
Uighurs Egypt’s Déjà Vu Fracking in Europe Driverless Cars
Europe’s Refugee Crisis Liquefied Natural Gas Alzheimer’s Disease Drones
Commerce & Corporate EU’s Liberalism Rattled Nord Stream 2 Antibiotic Resistance Electromagnetic Spectrum
Governance Hong Kong’s Autonomy p28 Nuclear Fusion Cancer Immunotherapy Europe vs. Big Tech
Hungary’s Populism Nuclear Power Crispr Gene Editing EU’s GDPR
1MDB India’s Caste System p51 OPEC Fights Back Crystal Meth Facebook’s Stumbles
Aramco Indonesia’s Nationalism Peak Oil Dangers of Sitting Facial Recognition
Black Friday Iran’s Economy Russia’s Grip on Gas DNA Testing Internet of Things p37
Buybacks Japan’s Shrinking Population Shale Revolution Ebola Kids and Screen Time
CFIUS Libya’s Breakdown Solar Power Flu LEO Satellites p36
Crowdfunding Mexico’s Troubles Wind Power Food Safety Mobility as a Service p48
Dual-Class Shares Myanmar’s Transition Future of Meat Net Neutrality
Executive Pay Nigeria’s Hopes Environment GMO Food New Monopolies p35
Gender Pay Gap Pakistan’s Turmoil Human Microbiome Quantum Computing
Japan Post Philippines’ Firebrand Air Pollution p47 Measles Returns Space Race
Profit Shifting Poland’s Populist Turn Bee Blight Mindfulness Space Taxis
Remaking Japan Inc. Qatar’s Bets Carbon Capture Obesity Streaming
Saudi Sovereign Wealth Fund Saudi Arabia’s Shift Carbon Pricing Opioid Crisis Virtual Reality
Sharing Economy Scotland’s Independence Circular Economy Organic Food
South Korea’s Chaebol South Africa’s Challenge Climate Change Right to Try U.S. Government & Politics
Telecommuting Switzerland’s People Power Climate Lawsuits STIs
Women on Boards Thailand’s Troubles Decarbonizationp41 Sugar Budget Deficit
Turkey’s Continental Divide Deforestation Vaccines Vilified Debt Ceiling
©Bloomberg L.P. 2019 619788
Commodities Venezuela’s Collapse Desalination Vapingp52 Drug Prices
Women in the Mideast Earthquake Readiness War on Smoking Electoral College
Cocoa’s OPEC Moment El Niño and La Niña What to Eat Estate Tax
Gold’s Ups and Downs Currencies Electric Airplanes p38 Fannie Mae and Freddie Mac
Iron Ore Wars Electric Vehicles Profiles Guns in America
Nickel and Cobalt Feud Bitcoin and Blockchain Fatbergs Immigration Overhaul
Palladium’s Popularity Crypto’s Many Questions Green New Deal Pope Francis Impeachment
Rare Earths Currency Wars Hurricanes and Typhoons Jack Ma Labor Unions
Resource Curse End of Cash India’s Monsoon Angela Merkel Medicare for All
Wheat Worries Euro’s Existential Crisis Overfishing Elon Musk Obamacare
Facebook’s Digital Coin p19 Plastic Problems Vladimir Putin Sanctuary Cities
Conflict & Security Mobile Payments Recycling Queen Elizabeth II Supreme Court
Stablecoins Sustainable Fashion p44 Prince Mohammed bin Tax Inversions
Afghanistan’s War Strong Dollar Policy Vegan Economy p42 Salman Trump’s Wall
Boko Haram Yuan Internationalization Wildfire Prevention Xi Jinping Voting Rights
54

HISTORY IS 创
造
WATCHING 历
史
How will today’s leaders shape this century’s destiny?
We live in an age of transformation. Commerce is shifting

from sea lanes to fibre-optic cables. Street markets have
migrated to the cloud. Tomorrow’s machines may be
more intelligent than humans.
We struggle with complexity. Populism, protectionism,

automation, climate change: the threats to development
and prosperity are varied and growing.
This November, a community of leaders will gather in Beijing

to address the forces upending the global economy,
seek solutions to our most pressing challenges —
and chart the path to a New Economy.
Join the conversation.
Beijing | November 20-22

©Bloomberg L.P. 2019 619788
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Issue 12 January — June 2020

QuickTake Hard-to-explain topics, explained simply

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To learn more, visit:

© 2019 Bloomberg L.P. 583006 0919

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Contents JANUARY — JUNE 2020

ECONOMY & FINANCE TECHNOLOGY

Buzzwords p14 Buzzwords p34

Affordable Housing p46

MANAGING EDITOR COPY EDITORS PRODUCTION To contact the editor

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To be an informed leader, investor, parent, student, global

Leah Harrison Singer, Managing Editor

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It’s tiny, green, and could

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Thank you to our Founding Partners:

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The Future of Capitalism

PHOTO: JUSTIN KANEPS/THE NEW YORK TIM​ES/REDUX

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Facebook’s Digital Coin

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PHOTO: PAUL LANGROCK/ZENIT/LAIF/REDUX

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● The Situation Looking for a circumstances.” In today’s debates, it’s expected

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What are forced tech transfers?

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Buzzwords Conflicts over economic relations have their own lexicon.

OIL’S RISK BLACKLISTING

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Forced Technology Transfers

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China’s Belt and Road Reboot

● Is China serious about change?

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Is Hong Kong’s autonomy fading?

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Hong Kong’s Autonomy

PHOTO: MIGUEL CANDELA

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Number of migrants by region, as of 2017

2014 through 2018. vulnerable to exploitation, including forced labor.

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A closer look: Pathways of more than 1 million people, as of 2017

ract Mexico is the biggest source of migrants to the

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● The Situation and election systems, and censorship, Internet Freedom

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PHOTO: JUSTIN KANEPS/THE NEW YORK TIMES/REDUX