๐ first Derivative [86]
๐ first Derivative [86]
Wednesday | May 10, 2023
๐๐ฎ Seeing Poland and Turkey pop up in my reading this week reminded me of this book I read in 2013, The Next 100 Years by George Friedman (founder of private intelligence and forecasting company, Stratfor). In Friedmanโs geopolitical forecast for the next century, he identified several rising powers including Poland and Turkey, along with Mexico, a resurgent Japan, and a still dominant US. Maybe time for me to revisit the book given how itโs played out, including Japanโs gradual movement towards remilitarization.
๐ต๐ฐ In other world news, nationwide protests in Pakistan following the arrest of former prime minister Imran Khan. Always comforting to see mass civil unrest in a nuclear power.
Happy reading,
-TK
๐ต๐ฑ๐ Poland will be wealthier than Britain by 2030, tracking Polandโs rise as an economic, political, and military power. (Telegraph | Daniel Johnson | May 2023)
Polandโs military awakening, following the invasion of Ukraine. This is kind of indicative of how I canโt see how Russiaโs invasion of Ukraine as anything but a strategic failure thatโs triggered the militarization of its neighboring states and pushed Sweden and Finland towards joining NATO. Itโs not hard to see an increasingly powerful bloc in the EU/NATO of its Eastern European/Baltic member states who are increasingly vigilant against Russia and are prepared to expend resources to defend themselves.
Warsaw's plan is to double the size of the army to 300,000 soldiers, equipped with the latest Western kitโฆ
Poland has raised its defence spending to 4pc of GDP this year, from 2.5pc last year. This makes Warsawโs war chest relatively one of the largest in Nato, with plans to sustain or even increase these levels for the foreseeable futureโฆ
What this means is that Poland may well soon possess the largest and best land fighting capabilities of all the European members of Nato. Even France, with only some 200,000 front-line troops, may soon find itself outnumbered by Poland.
Rapidly growing economy:
After the fall of the Iron Curtain, the Poles were the first former Soviet country to restore democracy, free markets and the rule of law. Yet they still had a mountain to climb. In 1989, Polish workers had a GDP per capita that was just a tenth of their German counterparts.
Three decades of steady growth has wrought a miracle. The economic disparities have narrowed dramatically. Adjusted for purchasing parity, GDP per head in Poland is now ยฃ28,200 compared with ยฃ35,000 in the UK, ยฃ34,200 in France and ยฃ39,800 in Germany. At its current trajectory rate, Poland will overtake the UK by 2030.
Since the millennium, Polandโs real GDP per capita has more than doubled; by contrast, GDP per capita in Britain, France and Germany grew between 15pc and 24pc over the same period.
Education:
In education, Poland excels too. It consistently ranks among the top five or six in reading, maths and science out of 38 OECD countries โ well above richer countries such as Britain, France or Germany.
Demographics and immigration:
To put it in context, Poland has absorbed nearly 10 times as many refugees as Britain. Yet there is an important difference to bear in mind.
Poland has one of the lowest birth rates and consequently fastest ageing populations in Europe. The country needs immigration, but has been reluctant to accept much ethnic or linguistic diversity.
Ukrainians blend into Polish society more easily and many have family members there. Even before the war, the Polish-Ukrainian border was one of the EUโs most porous frontiers.
Potential deeper turn towards the authoritarian:
It is domestic politics that could prove the biggest stumbling block to Polandโs effort to become a superpower. Accusations of undermining the rule of law and suppression of public debate have been levelled at Law and Justice, while an air of paranoia has hung over the country's politics for a long timeโฆ
Perhaps the most serious accusation against the government is that it has not only appointed loyalists to be judges and prosecutors, but has in effect outlawed opposition lawyers. It is increasingly difficult to obtain a fair trial, or indeed any trial at allโฆ
The irony that the rule of law is threatened under a party calling itself Law and Justice is not lost on many Polish citizens. Trust in government is at just 34.2pc, partly for this reason. The figure is much lower in Poland than in the UK, France or Germany.
๐น๐ท๐ณ President Erdoฤan may finally lose his grip on Turkey after 21 years in power, with very close polling ahead of elections this Sunday that will determine the direction of a growing regional power (NATOโs 2nd-largest standing army). (FT | Andrew England, Adam Samson | May 2023)
Turkey, or Tรผrkiye as we should maybe call it now, is reeling after years of high inflation (last year consumer price growth was over 80%) and a devastating earthquake in February that killed over 50,000 and displaced millions, governmentโs handling of both of which has been criticized.
Analysts typically divide Erdoฤanโs years in power into two halves. During his first decade, he oversaw widespread development, implemented myriad infrastructure projects, improved the lot of pious conservatives previously marginalised by secular politicians and attracted foreign investment. The tide began to turn, however, after the months-long Gezi park protests in 2013 over a planned urban development in Istanbul. Erdoฤan responded with a violent crackdown. The slide towards authoritarianism gathered pace after a 2016 coup attempt, after which he launched a sweeping purge of the security services and the civil service, while imposing a state of emergency that remained in place when elections were held two years later.
The opposition parties have united to put forward a single candidate:
Kฤฑlฤฑรงdaroฤlu has also promised to do away with Erdoฤanโs prized powerful executive presidency, adopted after a contentious 2017 constitutional referendum, and return to a parliamentary democracy.
People seem to expect a degree of tampering, but the election, if close, will reveal if Turkeyโs democracy is past a point of no return:
An opposition victory, particularly by a narrow margin, would test Erdoฤanโs commitment to democracy, as well as the allegiances of a judiciary, police and military that he has spent two decades striving to bring under his control. If Erdoฤan, who displays an increasing intolerance for dissent, secures another term, his critics fear he will steer Turkey deeper into authoritarianismโฆ
โDespite everything, Turkey has enough democratic history and institutions to prevent a power grab,โ says Selรงuki atย Istanbul Economics Research. โSecond, I think the security institutions will side with the victor. Ruin the judiciary, ruin the institutions, but when it comes to the ballot box, donโt mess with that โ the Turkish public reacts every time.โ
๐ฐ๐ท๐บ๐ Netflix is committing $2.5B spend on South Korean content over the next four years, capitalizing on the booming global popularity of Korean TV (Bloomberg | Lucas Shaw | Apr 2023)
South Korea is the single largest producer of successful shows in Asia. Itโs also the largest producer of hit series globally for Netflix outside the US. The company said more than 60% of its customers watched a Korean show last year.
For two consecutive weeks in March, The Glory โ a 16-episode drama about a woman seeking revenge against the tormentors from her childhood โ was the most-watched show on Netflix, drawing about as much viewership as the two biggest English-language series combined. It was one of Netflixโs 10 most popular series in more than 90 countries, including Argentina, France, India and South Africa.
Lucasโs piece covers a brief history of CJ ENM, its future ambitionsโฆ
In the 1990s, two of Leeโs grandchildren, Lee Jay-hyun and Miky Lee, dove in headlong, transforming CJ into a sprawling entertainment conglomerate. They created and acquired a handful of domestic TV networks, live-event businesses and record labels. In 1994, they invested $300 million in DreamWorks SKG, a new movie studio being formed by Steven Spielberg, Jeffrey Katzenberg and David Geffen. In 1998, the CJ Group opened the countryโs first multiplex, spawning a successful cinema chain that would go on to manage theaters throughout Asia.
and the trajectory of Netflixโs growth in the Asia region through Korean content:
as they cultivated deeper relationships in the region, Netflix executives started to realize that it was South Korea, not Japan, that would be the key to attracting legions of new subscribers throughout Asia. TV networks in Japan, Taiwan and Hong Kong were already buying up popular Korean TV series and re-airing them on broadcast and cable networks with great fanfare. So far, nobody outside of the region had scooped up many of the streaming rights.
๐๐ฐ The buyout model is no longer attractive, says private equity pioneer Hunter Lewis (FT | Hunter Lewis | Apr 2023)
From the research I have seen over the years, buyouts, net of fees and leverage, have not outperformed public markets. One 2020 paper by Ludovic Phalippou of the Saรฏd Business School, for example, found that private equity funds had returned about the same as public equity indices since at least 2006. Claims of lower volatility for private equity funds are also not what they seem. Just because prices are not marked to market does not mean that those prices have not moved with the market. Inflated returns, denial of volatility, high prices and fees, excessive leverage, absence of covenants on buyout debt โ all this together representsย fantasy thinking. It is what happens when a successful investment model becomes too popular.
Something to keep an eye on as well as the effects of the regional banking crisis on our shadow banking system, where a lot of the credit creation in our economy has already moved to. Just because thereโs no mark-to-market doesnโt mean thereโs no volatility
๐ฌโ๏ธ Profile of writer-director Paul Schrader (Taxi Driver, American Gigolo) that kind of makes him look like an asshole, but talented nonetheless (New Yorker | Alex Abramovich | May 2023)
One evening, at a bar in Morningside Heights, he was reading Pauline Kaelโs first book, โI Lost It at the Movies,โ and he struck up a conversation with another patron, Paul Warshow, whose father was the late critic Robert Warshow. Warshow knew Kael; he brought Schrader to her apartment the next day. โSitting around an oak table, beneath a spider-patterned Tiffany lamp, we ate and drank and argued,โ Schrader later recalled. He slept on the sofa. In the morning, Kael said, โYou donโt want to be a minister. You want to be a film critic. We are going to keep in touch.โ For years afterward, Schrader sent her everything he wrote. She offered to help him get into film school, and he started at U.C.L.A. in the fall of 1968.
Iโve only seen a few of Schraderโs films (Taxi Driver, Raging Bull, Blue Collar, First Reformed) but Iโve enjoyed reading some of his film criticism.
Great issue as usual. Poland is successful because it is holding onto traditional values & is one of few EU none woke states pn the continent. Hungary is too small too become a real player.