4 min read

A wet blanket on economic activity

China's Covid restrictions are a wet blanket on economic activity and childbirth; common sense triumphs in Chile; more than a dozen countries are set to shrink faster than China; and the pandemic has wreaked havoc on America's schoolchildren.

1—A wet blanket on economic activity

Chart showing China's demographic decline.
"China's demographic challenge was already dire. The number of births has declined for the past five years, last year barely outnumbering deaths.

Data for the first half of 2022 from some provinces and cities indicate further drops in births compared with last year, as Covid restrictions have kept tens of millions of Chinese at a time cooped up in their apartments and put a wet blanket on economic activity across the country.

Official data for July contained a stark data point: Among Chinese aged 24 and under, one in five was unemployed that month. Some who have lost their jobs say they have put big life plans on hold."

The above quote is from a recent WSJ feature on the Chinese economy. The article highlights that many of China's problems are self-inflicted, starting with a disastrous one-child policy (eventually scrapped in 2016), followed by a property bubble – making raising a family more expensive for young adults – and now a crisis which "ironically" stems from "Beijing's measures to make it more affordable to raise children":

"Crackdowns on property developers to rein in runaway housing prices and on costly private tutoring services resulted in layoffs for many who were employed in those sectors."

The full article, which you can read here (~6 minute read), goes on to note that high youth unemployment and a "difficulty in getting access to medical care amid Covid restrictions" are only compounding the problem, causing "a reduction in births by about one million over the course of 2021 and 2022".

2—Common sense triumphs

Chart showing GDP per capita in Chile and Latin America.
Chile has been much more successful than its Latin peers.
"For the past three years it seemed that Chile, one of Latin America’s most successful economies, was lurching decisively to the left. In October 2019 huge protests against inequality and poor public services shook the image of the country as a haven of stability. A year later, Chileans voted in a referendum to have an elected convention rewrite the constitution, which was first drafted under a military dictatorship in 1980 but has since been amended almost 60 times. Then last December they plumped for Gabriel Boric, a bearded and tattooed 36-year-old leftist, to be their president in a ruling coalition with the Communist Party."

That's from The Economist magazine, which went on to report that the new constitution was convincingly rejected this week, with 62% of Chilean voters deciding against change. The whole episode was farcical from the get-go:

"A few months later, another far-left member dropped out after it emerged he had lied about having cancer, which he had played on during his election campaign. Some members showed up in fancy dress; one voted from the shower and had to be asked to turn his camera off.
The content of the document was equally scandalous. At 388 articles and 170-pages, it would have been one of the world's longest constitutions. It enshrined over 100 fundamental rights, more than any charter in the world. Chileans would have enjoyed rights ranging from the bizarre–such as to 'nutritionally complete' food and 'neurodiversity'—to the worrying, including an unfettered right for trade unions to strike."

There's plenty more in the full story here (~4 minute read), which predicts that an expected Cabinet reshuffle will see "the younger faces who are closer to Mr Boric and his party" outed in favour of "members of the centre-left parties that have governed Chile for most of the past three decades".

3—It's not just China

4—The largest margin in more than 30 years

No, not the Fremantle Dockers' comeback last weekend but "the pandemic's devastating effects on American schoolchildren", with math and reading scores "erasing two decades of progress":

"This year, for the first time since the National Assessment of Educational Progress tests began tracking student achievement in the 1970s, 9-year-olds lost ground in math, and scores in reading fell by the largest margin in more than 30 years.

The declines spanned almost all races and income levels and were markedly worse for the lowest-performing students. While top performers in the 90th percentile showed a modest drop — three points in math — students in the bottom 10th percentile dropped by 12 points in math, four times the impact."

That tragic result comes courtesy of the New York Times, which warns the decline "could have powerful consequences for a generation of children who must move beyond basics in elementary school to thrive later on".

The cause? "The pandemic, which shuttered schools across the country almost overnight. Teachers taught lessons over Zoom, and students sat at home, struggling to learn online":

"In some parts of the country, the worst of the disruptions were short lived, with schools reopening that fall. But in other areas, particularly in big cities with large populations of low-income students and students of colour, schools remained closed for many months, and some did not fully reopen until last year."

There's plenty more in the full article which you can read here (~5 minute read).

5—Further reading...

❌ "The Kremlin has issued its sharpest comments about cutting off Russia's natural-gas flow to Europe via the key Nord Stream 1 pipeline on Monday, saying supplies would not resume until the 'collective West' lifts sanctions against Moscow."

☢️ Germany's government will extend the life of two of its remaining nuclear power plants in the midst of "a massive energy crisis as winter approaches".

🌊 There's no such thing as a water shortage – just poor pricing and property rights: "Once you put a price on something, you also lead people to economise. So we're not gonna change the rainfall or the amount of water in the ground, but maybe some people will say that it's costly to use this much water and there are other uses, maybe environmental uses, that are higher value. So we can increase the net water supply by reducing usage."