Tech is the problem. The internet is global (or perhaps two or three regions), and winner takes all - so global value creation is being experienced everywhere, but being monetised in the US stock market.
Take tech out of the equation and the US is pretty much on par with EU, and China and India are just burning the coal for everyone else.
Tech is not a 'problem'. It has replaced Finance in the pecking order of power relationships. Since US controls it , it can exert control everywhere where its tech goes. China shielded itself from it early on.
Follow the money. Which companies are better at vacuuming money from all over the world into their countries of origin and exporting the rules, norms and regulations that everyone else -including domestic competition - has to play by. Is HSBC/JP Morgan more effective at this than Google/Apple?
As far as I see, tech has destroyed the “legacy media” almost completely. Only the older generation pays any attention to it: all the young people get their news from TikTok and podcasts; even the older generation has gotten brain rot from falling into Facebook/Youtube attention algorithm hell. And that is just one part of it.
Look all around you and tech is everywhere, from apps to hail cabs to get groceries. Our lives are now so fully immersed and our decisions dictated by tech companies its fucking insane. That is a lot of power.
Finance people used to run the world economies, but nowadays finance and banks are heavily dependent on the tech ecosystem to function. Tech can even do finance without much capital (hence fintech) but not vice versa. That's why tech companies can command huge margins from finance institutions
> Tech is the problem. The internet is global (or perhaps two or three regions), and winner takes all - so global value creation is being experienced everywhere, but being monetised in the US stock market.
I don't really understand what you mean. While their reach is global, it's largely American companies that are creating the tech value, no?
They're creating "value" the same way the British Empire did for China around 1800. It's almost 1:1 the same dynamic. Bad decision-making of individuals is exploited to make them act against the best interests of their country and ultimately themselves, causing money to flow outwards in exchange for virtually nothing, which is then used to import things of actual value from the hapless victims. A modern twist on this is also using that money to buy up anything of value in the victim country and renting it back to its citizens, taking the exploitation to a whole other level.
China was wise to this trick already, which is why they've shielded themselves from the very beginning. Most countries haven't learned the lesson yet, but slowly the EU is waking up as well and pushing back.
This argument falls apart when it comes to explaining the $1.4Trn market which is just IT/tech services, the providers of most of which are offshore even when the tech developed is American. By your logic the massive IT Services/Consulting industry that is driving India's economy is actually bad for the country and that it should go back to being a cluster of low-tech poor third-world villages.
Please do explain how any of that follows from what I said. It's perfectly fine to export a limited resource like labor as long as you're trading for something of equal value.
Besides, you think India is doing great? China - now boasting an economy more than twice that of India's - absolutely lapped them despite India having a head-start in the 1950s. So if I was to respond to your bad-faith argument, that response would be that India should've adopted the Chinese model, not go back to "being a cluster of low-tech poor third-world villages". But all this is only weakly related to the point I was making with many other factors at play, so I don't even want to put that forward as a rebuke. We're completely off the rails here.
Do you not know that the Chinese model came at a massive cost of human rights abuses, and that it was only possible in a well-endowed and homogeneous society like China?
India has more ethnic, cultural and societal diversity within itself than the entirety of Europe, full with as much sectionalism and conflicts as one can imagine. It has only managed to remain a single nation with a lot, a LOT of compromises. Study deeper into the dynamics and you'll find the notion of "why don't they just emulate China?" to be as ridiculous as it gets.
P.S. I'm sorry for that unnecessary last sentence in my previous comment that (understandably) gave you the image that I'm being bad-faith or abrasive.
By this logic, US should wisen up and go protectionist/isolationist against China (ban TikTok, tariffs on cheap products to make them on par with US goods with better environmental and labor regulations) and EU (no more subsidizing their GDP by defending global trade).
No it doesn't follow. I have absolutely no clue where you're getting that from.
The point was that exporting low-margin high-labor goods and importing high-margin low-labor goods with addictive properties and possibly even negative value is a bad deal for your economy. Especially if the latter could be trivially provided domestically, but isn't due to existing network effects, or shouldn't exist at all (in the case of addictive substances).
You're arguing against the import of very low margin labor-intensive physical goods. How did you get there? I have no idea.
If you go to a poor country, you'll find poor/slave workers and a few rich elites. The workers will slave for something like $10/day for the benefit of the rich boss. The rich boss will then collect the profit and go buy an LV bag for $10,000. Essentially worth 3 years of slave labor. Ironically, for most of the part, made by the same slave labor. The transfer of real value is complete.
But, uusshh, don't disturb the free market. That is until you start making high tech and quality vehicles and then we need to invent new words for such a free market.
Both are being empowered. Check out the concepts of "consumer surplus" and "producer surplus". If there's no surplus for either the producer or the consumer, typically there is just no transaction.
This is non-mainstream marxist-influenced economics we are talking about here, only certain activities are regarded as having "value" alongside with a zero-sum view of the economy.
>China and India are just burning the coal for everyone else.
The actual effect of this is far less than you think. While it's true there's some amount of "exporting" of emissions from rich countries to china/india, the effect is small. Consumption based emissions (ie. accounting for imports) for US is only 11% higher than territorial emissions. Meanwhile the difference for China is also 11% (in the opposite direction, of course).
For all the workers are living paycheck to paycheck, they are sitting on a gigantic monetizable pile of money.
Consider this: the most popular languages in YouTube videos are English and Spanish. And did you ever notice how most videos, when they talk about units, talk about Dollars, Miles, Inches, Pounds and Degrees Fahrenheit? That is why...
To be a wealthy YouTuber seems to mean catering to people in North America (the US specifically).
Disposable income is the money people have after taxes.
You can have 10000 dollars of monthly disposable income and be well above the global average. You can have 9999 dollar rent with only a single dollar left. A single basic peanut butter and jelly sandwich could cost 100 dollars. Your disposable income is still massively above the average. Your discretionary income would be very low, though.
Part of the causality is the other way around: The largest language communities attract the most monetization. Europe being compartmented into 24+ languages is one reason that it’s harder to monetize.
I don’t know. For example, I see a lot of US citizens complaining that the price of the Apple Vision Pro is ridiculous and unaffordable for what it is, or similar about the Mac memory and storage upgrade pricing. Or even for streaming subscription prices. If you were right, those prices shouldn’t be a big deal.
As for the currency unit, everyone knows what a USD is worth, much less than AUD or CAD or GBP or whatever. The reasons to use USD are the same as for language choice.
You jumped the shark on the Apple pricing argument. People will always complain about prices no matter how rich they are. That is a character trait for many.
I am amenable to your second talking point. I still think my perspective is a useful model to consider. Not "right" in any absolute sense.
I think it was in the book "Cypherpunks" (the one with Julian Assange, Jacob Appelbaum, Andy Müller-Maguhn and Jérémie Zimmermann) where one of them said something about the last few decades with the move to total dependence on digital technologies in so many ways, and it being the largest transfer of power in the history of the species.
If someone has the exact quote, I'd welcome it...
Anyway, the idea stuck with me. Anyone who wants to reject the point will have an easy time as it's such a broad claim, but I think it's worthy of reflecting on, and perilous to ignore.
There's a lot of ink splattered about technology these days, of course, but it's still rare enough that the larger picture of what's going on historically in terms of power structures is seriously reflected on.
I second that. In addition, most of those companies use a portion of their revenue to buy back their shares, pushing their price up. So, the value created worldwide ends up growing the US stock market.
Ths stock market is not considered in GDP. So by that measure it does not directly impact "economic growth." I can see an indirect relation that says that US investors (primarily through pensions and 401Ks) are the primary benefactors of a growing US stock market which then translates to more investment and opportunity of US citizens, but that is a pretty long trail to account for our economic path right now.
And then even more specifically - at least in terms of local problems - that pushes up the value of compensation for a lot of people in the SF Bay Area which inflates the cost of land there.
Staying out of whether or not the concentration is a problem at the national/international level, is there any realistic alternative short of massive protectionism a la China to force home-grown tech companies in other parts of the world?
The US has a massive advantage of being the largest economy, having a vast single market, issuing the world's reserve currency, and having unique hubs like the Bay Area attracting the best and brightest. It would be hard to replicate its success elsewhere without having some of the above prerequisites.
>being the largest economy, having a vast single market
America is NOT the largest market the EU is MUCH BIGGER. And it is not "America" that commercialises technology, but a small portion of California called The Valley.
I guess I still don't understand though. Is the claim that tech innovation in the rest of the world is being turned into money in the US only? If so, why is that happening?
The claim here is that the tech innovation is occurring in the US. It adds value globally, but most of the profits from that value are being realized in the US b/c the innovation is by US companies.
There’s no natural law that says technical innovation must occur in NA, but due to contingent historical conditions, it is occurring here. Thus, the gains are being realized in the US stock market b/c it’s the one capitalizing the winners.
>It adds value globally, but most of the profits from that value are being realized in the US
this is contradictory. profits are added value. if value is added globally, there are extra profits (likely as cost savings by other industries adopting tech)
US cultural dominance for one thing, then success begets success - lots of VC money in the US because the US is rich which gets invested which returns even more and makes it richer.
US businesses more likely to work with US suppliers, US customers more likely to buy from US businesses, then those dominant domestic positions can be used to expand globally far easier than say a Spanish firm can expand into the US.
They’re generalising to say the world uses Apple, Google, Microsoft, Zoom, Cisco, Tesla, and so on… US tech stocks. We use them and they gain revenue and profit.
Of course there are many successful tech co’s outside the US but (and I haven’t looked) I imagine the US tech stocks must overshadow every other countries tech sector.
From a stock market perspective, if you look at a graph of Vanguard FTSE All World ex US ETF (ticker VEU), it looks like normal growth, but looks vastly different from say Vanguard Total Stock market (ticket VTI) which shows phenomenal growth. This is because VTI includes US tech stocks and VEU doesn't. Take out the tech stocks and maybe VTI would look like VEU.
To be clear VTI is only US stocks and VEU is everything else. It is confusing because "Vanguard Total Stock Market" contains only United States equities.
>The internet is global (or perhaps two or three regions), and winner takes all - so global value creation is being experienced everywhere, but being monetised in the US stock market.
This argument could be made for many industries. E.g. Boeing and Airbus together control almost 100% of the global passenger jet market. "Passenger jet value creation is being experienced everywhere, but being monetized in the US and EU stock market."
If you remove non-industrial and financial activity from US GDP, the economic picture is bleak. US and G7 have been steadily deindustrializing while BRICS have been doing the opposite.
US GDP is misleading in the sense that it increasingly includes a large portion of economic activity that isn't actually producing tangible wealth.
Comparative advantage only works without trade barriers, and when the USA has something people want to import cheaper than elsewhere. The USA doesn’t have competitive exports. The USA is the largest net importer. By an order of magnitude. The USA is deeply in debt in both nominal financial terms and in real trade terms.
What's the USA's comparative advantage? Nukes and dollars. Demand for dollars and rent seeking via the post WWII global financial system. But G7 is no longer the only game in town. They have become the consumers while the rest of the world has become the producers.
Moreover, the leadership in China is fully aware of the macroeconomic situation and USA leadership doesn’t even appear to know how tariffs work.
You have just described the US top comparative advantage. There is no economy in the world that allows you to create a company, open a bank account and start trading. The UK come close but doesn't completely match the US.
The US is the global engine of the world because it has accepted to be very negative on NIIP. (https://en.wikipedia.org/wiki/Net_international_investment_p...) China or the BRICS or Russia do not offer an alternative and not because of lack of technical capabilities; they just don't want to do it.
China can replace the US dollar "hegemony" in a few years. They keyword is can because they don't want to do it.
It seems to me that NIIP is very related to high US stock prices. Everyone, including Americans, wants to invest in the US. Americans own American assets, and so do foreigners, but Americans don't want to buy foreign assets. Hence the high prices of American stocks, and the NIIP thing.
>Take tech out of the equation and the US is pretty much on par with EU
Disagree. It's not just the nature of the technology itself but the whole ecosystem -- including VC and education -- in Sillicon Valley that develops cutting edge computer tech, plus generally looser business regulation in the US and a culture of greater optimism nationally, especially relative to EU.
Certainly having a unified market (not just in regulation, government, and currency but also linguistically) has helped too especially given the network/winner-take-all effects of tech you mention. Yes the nature of technology is part of it. But it's not everything. It's a whole gestalt.
I mean, consider where we are right now, who set it up, who hangs out there, etc.
The article discusses this and disagrees. Even in the same sectors and with the top 7 companies removed, sectors in the US have higher P/E ratios due to higher projected growth rates.
The article quotes Draghi as saying “If we exclude the tech sector, EU productivity growth over the past 20 years would be broadly at par with the US,” so I think it agrees.
How is that a "problem"? What is preventing other countries from building tech winners? The USA isn't launching missiles to destroy the next foreign Nvidia or Meta competitor.
What is preventing every other state in the US from building tech winners? The majority of large tech companies are headquartered in CA and there are a few others in WA, TX, NY, and ID. There used to be quite a few in MA and even FL was in the running for a while. What caused them to fall behind within a few decades, while other states never really got started? Some are hopelessly handicapped by horrible geography or low population density but others like CT or IL would appear to have all the necessary ingredients.
That doesn't really explain anything. CA is also a high tax state. CT has similar climate and geography to MA, which was once a technology leader but later fell behind. There must be other, more important differentiating factors.
California has a Mediterranean climate with world class outdoor features and the freshest foods. They also ban all non competes, and have a solid history of pumping out valuable tech companies. They can afford to have taxes others can’t.
Connecticut also lacks a big city with a big airport.
Nothing, but having the world’s largest free trade and migrations zone means that it’s not economically efficient. Centralising industries produces large benefits in efficiency and hiring. We only don’t see it as much on a global scale because of trade and migration restrictions.
And what's preventing China from building their own EUV lithography? They can do whatever they want internally regardless of US sanctions. It seems like they're not trying very hard, or are wasting resources on unproductive initiatives.
Sure, I'm aware of that but so what? US sanctions can't prevent China from building their own EUV lithography independent of ASML. Why are they still so backwards?
Of course they are also investing in their lithography equipment, but still, it's an insanely complex set of tools and know-how required that's backed by countless patents and well kept secrets.
Only because China is threatening to take over the country producing those chips and seizing territory in the South China Sea in violation of international law.
If China played nice with America.. there's no problem.
I don't think it's a problem. What's preventing other countries from building something similar to the US tech companies is a combination of regulation and culture.
Toys? Not a priority. RCAT is the best American drone company. I won't disagree communists can produce efficiently, but that comes with a culture that guns down their own like the protesters in Tiananmen square.
Take tech out of the equation and the US is pretty much on par with EU, and China and India are just burning the coal for everyone else.