Economy

The geopolitics of AI chips

The article discusses how the production of AI chips could have significant geopolitical implications. These chips, which serve as the backbone of AI technology, are primarily manufactured in a few key countries like the United States and China. However, as AI becomes increasingly integral to various industries, other nations may seek to establish their own chip-making capabilities.

This shift could potentially reshape global power dynamics, as control over AI chip production becomes a crucial factor in determining influence and competitiveness on the world stage. In essence, the article highlights how the future of AI is closely intertwined with the geopolitics of chip manufacturing.

Interest rates raised in Japan

The Bank of Japan (BOJ) raised its main interest rate from -0.1% to between 0% and 0.1%. In 2016, the BOJ made the rate less than zero to help Japan’s economy.

The decision to raise rates depended on big companies increasing their workers’ wages to deal with the higher cost of living. Recently, Japan’s biggest companies agreed to increase wages by 5.28%, the largest increase in over 30 years. Wages had not increased since the late 1990s as prices rose very slowly or even fell.

The BOJ said there won’t be more rate increases for now. With inflation slowing down, it’s likely that workers will ask for smaller wage increases next year.

Wage increase in Japan

Big companies in Japan are giving their workers the pay raises they asked for. Some companies are even giving more than what was asked. 

Suzuki, Toyota, and Honda, among others, agreed to give raises. Those in the retail and food service are also increasing wages. However, it's still not clear if small and midsize companies will follow suit.

Because wages were low, people were saving more and spending less. Now that many will be receiving a pay raise, it's expected that people will start spending more.

Spending and saving money

Money is a tool we use to achieve a goal. Different people have different strategies for what to do with money.

Some spend everything on consumer goods or recreational activities, such as enjoying a meal in a restaurant or going to a cinema. Others are in a situation where they can’t save money at all. They have to live from paycheck to paycheck. Such people are said to be living hand-to-mouth.

Other people save money for a rainy day. They can keep their money at home or in a bank. Still, other people invest their money. They invest in safe places such as properties or precious metals, or stocks of large companies. Some invest in risky places such as cryptocurrencies. They hope to gain a large return on their investments.

The true power of a passport

Most organizations, such as the widely recognized Henley Passport Index, believe the strongest passports are the ones that allow their citizens to enter more countries without a visa. They rank Singapore as the most powerful passport in 2023 because it provides easy access to 194 countries.

But is this the best way to decide how strong a passport is? Global Citizen Solutions has developed a more detailed but slightly different approach. The Global Passport Index analyzes how desirable a country passport is, considering the following:

Changes in the job market

In the US, the labor market is slowing down. Around 250,000 workers found new jobs and the unemployment rate fell to 3.4%, last April.

However, few jobs are hiring at the moment. Employers are looking for highly skilled individuals and cutting unnecessary jobs. Some of the industries hiring are professional and business services, health care, leisure, and hospitality. There is also high demand for specialized construction contractors and food service experts. Professional and business services had the biggest increase, adding 43,000 jobs. Employees in this industry made an average of $40.20 per hour.

Do we need to replace the GDP?

The standard measure of economic performance, the gross domestic product (GDP), measures the value of goods and services produced within a country over a given period. However, the GDP doesn’t measure social factors like income inequality, domestic violence, drug addiction, or the impact of today’s actions on future generations. It also ignores sustainability and environmental destruction. It’s a very short-term view of market factors without respect to what’s happening on the social and environmental levels. As a result, the GDP gave us no warning of the impending global financial crisis in 2008.

But we continued to base our economic predictions on that metric. And it began to show economies recovering and growing—so everything’s going well again, right? But what if we factor in social and environmental realities?

Visuals: The world gets better

The Conversation, a publication that promotes academic debate, posits that not only do many people across advanced economies have no idea that the world is becoming a much better place, but they actually think the opposite. This is no wonder, when the news focuses on reporting catastrophes, terrorist attacks, wars and famines. These subjects simply make for more exciting coverage than stories about how more than 300,000 people a day get access to electricity and clean water for the first time.

The Conversation states that globalization has helped lift hundreds of millions of people above the global poverty line.

Take a look at the three graphs below and discuss their meaning with your teacher.

New Zealand new trade agreements

The UK agreement

A new free trade agreement with the UK allows New Zealand to remove export tariffs during the next 15 years. This deal promises a GDP boost of up to $1 billion.

On top of the economic elements, the agreement includes conditions for the environment, tackling climate change and creating equity in economic advancement. According to New Zealand Prime Minister, Jacinda Ardern, it is the country’s “first bilateral trade agreement to include a specific article on climate change”. 

Another unique point of that agreement is a separate Māori trade chapter featuring the acknowledgement of the relationships between the Māori people and the British, who colonised the country. In addition, the chapter included the protection of Ka Mate haka, in which the UK promises to protect the famous ceremonial dance. 

Visuals: the price of war

The war in Ukraine has had a vast impact on the whole world. In addition to the humanitarian catastrophe, it has also caused increased rates of inflation all over the globe. 

This rise is mostly linked to increases in food, energy prices and disrupted supply chains. The impact is affecting the poorest countries the most. 

Look at the graph below describing the projected inflation rates for several countries, and discuss it with your teacher.

The idea of Universal Basic Income

According to Vox Media, the idea of a basic income was, for decades, something of a policy fantasy. However, the last few years have seen it become less fringe and more mainstream. In fact, we now have many limited basic income programs running around the world.

The general idea—that the government should give every citizen a regular infusion of money with no strings attached—has been around since the 16th century. However, the COVID-19 pandemic has given the idea fresh momentum, with the crisis generating significant financial loss and uncertainty.

Critics worry that UBI will disincentivize work and hurt the economy. They also say that it is unaffordable for the government to pay every citizen enough to live on, regardless of whether they work. So far, the evidence has not supported these critiques.

Will US hedge funds go bankrupt?

An interesting situation has emerged in the American stock market. It has caused the stock of several companies to be extremely volatile.

Hedge funds in the US have opened so many short positions—basically, they have bet that stock prices will fall. Now it is believed that they have short sold more than the number of shares available on the market.

However, savvy retail traders noticed this. They started to buy up these shares in large volumes in the hope to push up the price.

Trading has been so aggressive that the share prices have wildly fluctuated and multiple brokers have been refusing to even allow purchases. The situation has gotten lots of attention, with multiple members of congress showing interest in the behaviors of brokers and hedge funds. Some have called for congressional inquiries.

It isn't clear what the aftermath will be. Only time will tell.

COVID-19: A global economic crisis

This simple equation is at the heart of the global economy: One person’s spending = another person’s income.

It’s referred to as “supply and demand”—producers will supply as much as consumers demand. So if consumers aren’t buying anything, producers won’t be able to sell anything. In other words, whenever you buy something, you pay someone else’s wages.

So the current COVID-19 pandemic is not just a global health crisis but also an economic one. When people are told to stay at home, they stop going to restaurants, bars, and movies. They can’t travel, so they don’t spend money on gas or airfare, and they don’t stay at hotels. And when no more than 10 people can be together in one place, everything from birthday parties to music festivals to major world sports events are canceled.

Cashing in on the Olympics

In 2017, the Tokyo Metropolitan Government estimated that the economic effects of the upcoming Olympic Games will be worth about $292 billion over a span of 17 years. In an attempt to cash in on this, a wide array of businesses in Japan have been ramping up preparations, including the taxi industry.

In January 2018, the Japan Federation of Hire-Taxi Associations formulated measures for the Olympics and Paralympics. The association set a goal of having 9,000 drivers taking English lessons by April, and over 16,000 have already completed them.

Only drivers who have completed at least a mid-level English course are allowed to pick up passengers at the international terminal at Haneda airport in Tokyo. To take the exam, which is designed to test communication skills, drivers must finish an advanced English course.

The issue of universal basic income

The idea of universal basic income (UBI) has been gaining steam around the world. A Japanese billionaire and an American presidential candidate, among others, have both thrown their weight behind it.

The concept is simple: the government provides unconditional money to their citizens. The theory is that in order to provide basic services for all citizens and to stimulate the economy, a small amount of money can be given to each person, equally. 

In the United States, presidential candidate Andrew Yang has even given away $12,000 to a random Twitter follower. In his plan, each adult would receive that amount of money every year. Yang argues people will continue working, even with UBI. $12,000 a year is barely enough to live on in many places and certainly not enough to afford much in the way of experiences or advancement. To get ahead meaningfully, people will still need to get out there and work.

The sharing economy in Japan

AirBnB suffered a major blow when Japan’s main tourism body sharply restricted home-sharing, forcing AirBnB to eliminate four-fifths of its 60,000 listings in Japan. The experience illustrates the country’s hesitant approach to the sharing economy, in which people rent goods and services from one another, usually through internet platforms. The sharing economy’s value in Japan is at most ¥1.2trn yen ($11bn), compared with $229bn for China.

Regulation, which tends to favour big companies and industries, is a key obstacle to faster and more mainstream growth. Another hurdle is the attitude of the Japanese public. Many people are simply ignorant of the existence of sharing apps. Others reckon they may be illegal.

Different standards for the wealthy

In the US, the widespread belief that the poor are simply lazy has led many states to impose work requirements on aid recipients—even those who have been medically classified as disabled. Limiting aid programs in this way has been shown to shorten recipients’ lives, creating a difference of more than 20 years in life expectancy between the rich and the poor.

When the wealthy are revealed to be drug addicts, philanderers, or work-shy, the response is at most a collective shrug. At the same time, behaviors indulged in the rich are not just condemned in the poor, but are used as a justification to punish them, denying them access to resources that keep them alive, such as healthcare and food assistance.

Japan and EU sign free trade deal

The European Union and Japan signed a monumental trade deal in, July 2018, eliminating nearly all tariffs between the entities in one of the world’s largest free-trade deals. The pact, signed in Tokyo, covers a third of the global economy.

The agreement is in stark contrast to President Donald Trump’s trade war and alignment with Russian President Vladimir Putin. Although the leaders didn’t mention him by name, Japanese Prime Minister Shinzo Abe and EU leaders Donald Tusk and Jean-Claude Juncker distanced themselves from Trump’s tactics in a press conference following the deal.

“Politically, it’s a light in the increasing darkness of international politics,” European Council President Tusk said of the deal. “We are sending a clear message that you can count on us. We are predictable – both Japan and [the] EU – predictable and responsible and will come to the defense of a world order based on rules, freedom and transparency and common sense.”