Meridian Reads: the U.S. economy, bananas and big tech

Hey there, Meridian Readers! Happy Sunday. We’re feelin’ good, we hope you are too – now let’s sit back and catch up on the latest news.

US economy slows to 2.1 percent growth in second quarter

Publication: The Hill | By Sylvan Lane

• We know that the slowing of the economy is never a good thing, but what does this actually mean?
• According to data released Friday (7/26) by the Commerce Department, the U.S. GDP grew at a rate of 2.1 percent between April and June, in line with expectations, but well below the 3.1 percent growth-rate notched in the first three months of 2019.
• The report also showed signs of resilience for the U.S. economy as it stretches a record decade of expansion toward the 2020 presidential election. Guessing this will be talked about in the next debate.
• How does this affect the 2020 race?
  • President Trump’s reelection chances could largely depend on the strength of the economy. So, this could affect the outcome of the race big-time.
• The slowing of the economy involves several factors, but here’s one explanation:
  • Consumers spending, which makes up roughly 70 percent of the economy, spiked 4.3 percent in the second quarter, rebounding from a 1.1 percent rise in the first quarter. Government spending also rose 5.5 percent in the past three months, likely due to expenditures delayed during the federal shutdown. Productivity-boosting business investment declined 0.6 percent in the same period, reflecting concern about the long-term health of the U.S. economy.
• Bottom line: the U.S. is a global superpower and boasts one of the most productive economies on Earth. When it slows, the whole world feels it.

China uses banana diplomacy in Philippines to edge out Japan

Publication: Nikkei Asian Review | By Cliff Venzon

• Banana diplomacy? We’re listening.
• Here’s the sitch: China became the largest importer of Philippine bananas last year, dislodging Japan, which had been the biggest market for decades.
• Some companies are now eschewing Japan for full-year supply contracts with Chinese importers.
  • With Asia’s two biggest economies competing for influence in the Philippines, the shift symbolizes the country’s growing dependence on China over Japan.
  • While Tokyo pushes rail projects to get the upper hand in infrastructure, Beijing has doubled down on agriculture.
• “The Chinese are not only doing this because they hanker for Davao bananas,” said Herman Kraft, a professor of international relations at the University of the Philippines. “There is a political aspect to this.”
• Chinese President Xi Jinping set the stage for banana diplomacy when Philippine President Rodrigo Duterte visited Beijing in October 2016 — a trip during which he announced his country’s “separation” from the U.S., its main ally. In return, Xi vowed to import more Philippine fruits and pledged investments worth $24 billion. That’s a lot of bananas.
• Last year, China bought $496 million worth of bananas, up 71% from 2017, while orders from Japan rose 24% to $485 million, according to Philippine government data.
  • “In a way, bananas became a symbol of the relationship between the two countries,” Kraft said.
• So, bananas can be symbolize political power. Good to know.

Did big tech get too big?

Publication: The Washington Post | By David McLaughlin

• It’s no secret, surprise or anything other than a fact: the world is addicted to technology.
• Almost everyone has a smartphone in their hands at all time. We half-listen to the conversation we’re in while scrolling down a screen. We use apps to order dinner, to get home from work, to teach our moms what an emoji is, to see photos of our nephews and so much more. People rely on tech to get through the day. But how much is too much?
• The rise of global technology superstars like Amazon, Apple, Facebook and Google created new challenges for the competition watchdogs who enforce antitrust laws around the world.
• A big question we have to answer: Are the tech giants (think: Apple, Amazon, Facebook) monopolies?
  • They’re powerful, for sure. Google and Facebook together controlled 60% of mobile ad revenue and 51% of digital ad revenue globally in 2018, according to eMarketer. In the U.S., Apple has about 45% of the smartphone market and about 47% of all U.S. e-commerce sales go through Amazon.com.
  • However, under modern antitrust enforcement, those percentages alone aren’t enough to alarm regulators in the U.S., which long ago stopped equating big with bad. (Standard Oil’s market share got as high as 88% late in the 19th century.)
• What is illegal is for a monopoly to abuse its market power to prevent rivals from threatening its position. U.S. courts ruled Microsoft did this in the 1990s.
• So, what’s the U.S. doing about these tech giants?
  • The Justice Department and the Federal Trade Commission, which both have a mandate to enforce antitrust laws, are working together to ramp up oversight of the technology giants. The DOJ announced a broad antitrust review into whether the companies are using their power to thwart competition. The FTC is investigating whether Facebook violated antitrust laws in a broad sphere of its business — social media, digital advertising and mobile applications.
  • Great, the only problem? These formal inquiries could last for years.
• Clearly, tech isn’t going anywhere, but we’ll have to wait and see how the U.S. government will work to regulate it.

That’s it for this week, we’ll see you next time.