Jun 10, 2018

Axios Future

By Bryan Walsh
Bryan Walsh

Welcome from Beijing. I'm writing Future from China this week. Let me know what you think as we go.

Meanwhile, thanks for subscribing. Consider inviting your friends and colleagues to sign up. I'd love to hear your ideas of what we ought to cover, are getting wrong, or anything else you care to share. Just hit reply to this email or shoot me a message at steve@axios.com. Let's start with ...

1 big thing: China's three-level superhighway

Illustration: Sarah Grillo/Axios

China was already building the largest single infrastructure project since the Marshall Plan — the Belt and Road Initiative, echoing planet-spanning 19th and 20th century initiatives by the British and then the United States to set the rules for global commerce.

But now Beijing is looking to amplify its reach far beyond what the U.K. and the U.S. accomplished in their respective heydays. Among its additional plans:

  • A "digital Silk Road" that expands China's presence in cyberspace.
  • The first global electricity grid, linking Asia, Africa and Europe.

These massive new projects, costing billions of dollars and built alongside Belt and Road, will unfold over decades. But they already paint an even starker picture of an ultra-powerful China at the center of economics and — by extension — politics:

  • In terms of its capacity to project its will, Jonathan Hillman, of the Center for Strategic and International Studies, compares the grid plans to Russia's leveraging of its natural gas pipelines to intimidate Europe.
  • "Chinese technology standards would effectively become global standards, benefitting Chinese companies and exposing nations reliant on that technology to security risks," Hillman tells Axios.
  • And "if China becomes a significant exporter or central node in this global grid, that could enhance its coercive power."

The digital highway would be "a community of common destiny in cyberspace," a vice minister of information technology told the Economist. The super-grid is even more ambitious, relying on a technology called ultra-high-voltage transmission to transport electricity along vast distances, from continent to continent, according to Andrew Davenport of RWR Advisory, a consultant firm.

  • In an April talk at Harvard, Liu Zhenya, who runs the initiative, spoke of producing solar power in the Sahara and transmitting it to other, energy-starved continents.

Go deeper: Read how Belt and Road has spooked China's rivals; how Malaysia is reconsidering projects brought by Beijing; and the mountain of debt taken on by Sri Lanka.

Read the whole post.

2. "They believe the West is in free fall"

Saturday in Quebec. Photo: Jesco Denzel/German Federal Government/Merkel's Instagram.

Chinese leader Xi Jinping and Russia's Vladimir Putin are strategizing how to reposition themselves for a new, more powerful future amid a rapid deterioration of the U.S.-led global order.

What we're hearing: Xi and Putin, meeting Friday in Beijing and again yesterday in the city of Qingdao, don't appear to think they have the cachet — even combined — to create an entirely new system. Nor is it clear that at the moment they would want to trash the U.S.-led institutions that have anchored the global economy and political order since World War II (see below).

But look for the mutually distrustful pair to feel out ways to transition to a new world in which a loose grouping of China, Russia and their allies can become more or less the geopolitical equals of the West.

  • In a special report yesterday, Axios' Jim VandeHei and Jonathan Swan wrote that President Trump is shaking up U.S.-led institutions.
  • Yesterday, for instance, Trump threw down lightning bolts from Air Force One when Canadian Prime Minister Justin Trudeau dared challenge him on trade. He angrily tweeted that he withdrew the U.S. signature from a just-finished G7 Summit communique.
  • Such spectacles feed Xi's and Putin's conviction that "the West is in free fall," says Mathew Burrows, former counselor at the National Intelligence Council, and now at the Atlantic Council. "Both Xi and Putin have been surprised and shocked by the rapidity of the US decline."
"We’re descending fast into a Hobbesian world. Only the US think tank community believes it can restore the liberal rules-based order: Such grand illusions!"
— Burrows to Axios

How this new world might look: As discussed above, China's long-term vision is a world structured within its various big infrastructure initiatives. But Ian Bremmer, president of Eurasia Group, tells Axios that he does not see Xi and Putin for now attempting to replace the post-war multilateral architecture.

  • "They both see opportunities, to be sure," he said. "Russia — to undermine the U.S. and divide the west. China — to expand their political and economic influence globally."

Read the whole post.

3. Urbanization, meh

Paris. Photo: Nicola Vigilanti/Gamma-Rapho/Getty

For years, an unwavering certitude of industry, think tanks, demographers, policy-makers and city planners everywhere has been that humanity, led by millennials, is moving to the city: We just needed to figure out how to house, employ and feed everyone in a condensed space.

Yes, but: As more and more millennials marry and have children, that presumption is coming under scrutiny.

What's happening: The forecast of global massive urbanization was important since it suggested that vast swaths of countryside would empty out, and we would adopt entirely new lifestyles.

  • But, in a mea culpa at Brookings, William Frey, a demographer and believer in the trend, said that, based on new census data, he has changed his mind. He still thinks that cities will attract "young people — especially well-off, affluent millennials and post-millennials."
  • "But this won't be most cities," he tells Axios. "And, for this younger generation, what I see is more clustered developments within the suburbs, and smaller metros, greater reliance on public transportation and perhaps ride-hailing and self-driving cars."

What happened: Frey said it might be "just a 'return to normal' of the suburbanization we saw prior to the Great Recession." But Karen Harris, managing director at Bain Macro Trends, tells Axios that, for one thing, it's probably time for millennials — given their stage in life — to start moving out to the 'burbs with their kids.

  • Harris also says that very few experts took note of the changed economics of distance.

Read the whole post.

4. Mailbox: What's happening on Main Street

Photo: Chip Somodevilla/Getty Images

Last week, Axios' Jonathan Swan asked Peter Navarro, Trump's trade adviser, to respond to critics who say steel tariffs are excessive — that most countries are not doing America wrong on trade.

  • In Swan's resulting post, Navarro said his critics are wrong to say that steel jobs are rightly passé. "We on Team Trump are astonished by the argument that America's future is in the services sector, and Americans don't want 'dirty' jobs in steel furnaces," he said.
  • Navarro went on to advise them to "get out more often to the Heartland and see what Main Street and Trump country really look like."

That piqued the interest of Jed Kolko, chief economist at Indeed, who emailed Swan and me saying he had looked at recent county-level employment data, and combined that with 2016 presidential voting patterns. "Here's the outcome," Kolko writes:

  • Manufacturing is indeed a larger share of non-farm private employment in red places than in blue places.
  • In dark red counties (those that voted for Trump by a 20% margin or more), the manufacturing sector accounts for 16% of employment, versus just 6% in dark blue counties. 
  • But, but, but: Even in the reddest counties, manufacturing still accounts for a small share of employment — only 1/6th of jobs (16%).
  • "Looking more broadly, goods-producing sectors (manufacturing, construction, and mining) are only 24% of employment in dark red counties," Kolko said.

The bottom line: "Even places that voted most strongly for Trump are primarily service-producing, not goods-producing, economies." 

5. Worthy of your time

Illustration: Lazaro Gamio/Axios

  • How Trump escalated his trade battle with China (Bob Davis, Peter Nicholas, Lingling Wei - WSJ)
  • Why our geopolitical tech battles are so complicated (Ina Fried - Axios)
  • The U.S. has the fastest supercomputer (Martin Giles - Tech Review)
  • Google's new ethics rules for AI (Sundar Pichai - Google)
  • Bitcoin's early investors have cashed in (Hannah Murphy - FT)
  • Bullshit jobs (Nathan Heller - The New Yorker)
6. 1 puppy thing: When your daughter prevails

JK Growling, pedigree unknown. Photo: Brendan Greeley.

Back in March, the canine longings of an 8-year-old Maryland girl became a Twitter sensation. As Brendan Greeley's daughter told him in very plain capital letters across his morning FT, she wanted a puppy. Some 189,000 people sympathized when Greeley tweeted about it, among them writer J.K. Rowling and "The Wire" creator David Simon.

So it is that, three months later, Greeley wears his long shirt sleeves rolled up near the elbows to let the air heal the bloody scratches and digs inflicted by JK Growling, the new family puppy.

Photo: Brendan Greeley.

These wounds are part of diverting Growling's alpha instinct: Greeley and his wife Beth are attempting to teach their children how to let the pup know he isn't leading this particular pack. "He's aggressive," Greeley told me.

  • When the family took Growling home from the local SPCA, Greeley thought he was a shepherd-Labrador mix. Now, he reckons he might have some pit bull, too. "No good deed goes unpunished," Greeley said.
Bryan Walsh