The Economist - Special reports

IN WAREHOUSES AROUND the globe, they wait: toys, phones, dresses, televisions, blankets, trainers, laptops and much more. In China, online retailers are gearing up for “Singles Day”, November 11th, the world’s busiest shopping day. Last year Alibaba, much the biggest of the country’s e-commerce giants, rang up sales of $18bn on that occasion, the most ever spent in one day anywhere on Earth. Much of the rest of the world is preparing for the Christmas rush. Present-hunters used to wear themselves out tramping around crowded shops. Now, increasingly, they order from the comfort of their homes or offices.

Over the past decade global e-commerce has been expanding at an average rate of 20% a year as bricks-and-mortar shops have languished. Yet its share of total retail trade last year, at 8.5% worldwide, was still modest. Even in South Korea, the country with the highest percentage of retail sales online, it amounted to only 18%, according to Euromonitor, a research firm. In America, the world’s...

Amazon’s spheres of influence

FOR SHOPPERS IN 2017, it can be hard to remember what life was like in the early 1990s. There was mail order, but by and large if you wanted to buy something you went to a shop. Jeff Bezos, Amazon’s founder, who was then working for a New York hedge fund, noticed the exponential growth of the internet. His idea was to create an online company that would bring together shoppers and manufacturers around the world, starting with books.

Not everyone was convinced. A cover story in 1999 in Barron’s, a business weekly, entitled “Amazon.bomb”, argued that the company would struggle to compete with mighty Walmart and Barnes & Noble. But like many of Amazon’s competitors, it failed to predict the firm’s ever-expanding scope, the feverish pace of its spending and the enthusiastic support from investors.

For much of its life Amazon has bled red ink. As recently as 2014 it lost $241m on sales of...

IN SEPTEMBER 2014 Jeff Bezos announced his first big investment in India, hopping aboard a colourful bus in Bangalore. It was the start of a rapid $5bn investment in India, part of Mr Bezos’s plans to take Amazon global. Two months later Alibaba’s Jack Ma appeared in Delhi. “We will invest more in India,” he declared. The following year Alibaba put $500m into Paytm, an Indian digital-payments company. This year it led a fundraising round for Paytm’s e-commerce arm. The two giants seem set for an epic clash in India.

But in their home markets they have so far stayed out of each other’s way. Amazon has only a tiny business in China. Alibaba’s strategy in the United States has been to help American businesses sell in China and vice versa. “People always ask me, when will you go to the US?” says Alibaba’s CEO, Mr Zhang. “And I say, why the US? Amazon did a fantastic job.” The two firms have mostly invested in different foreign markets: Alibaba across South-East Asia and Amazon across...

YANG MING IS standing beside his red electric tricycle in a courtyard in Beijing. A former factory worker from an industrial town outside the capital, he and dozens of other men are awaiting the arrival of a lorry. As it pulls in from JD’s warehouse, the men form an assembly line to unload boxes. They reload the packages to their tricycles and are off, weaving through the traffic. JD has about 400 such delivery stations in Beijing alone. Across the country, 2.5m couriers are at the ready to shuttle packages to their final destinations. When he first started several years ago Mr Yang made about 80 deliveries a day. Now the number is closer to 130 and still rising.

To a consumer, e-commerce’s rapid delivery seems like magic: a few clicks, and within an hour or two a package can land on your doorstep. Behind this, however, lies an enormous amount of investment, engineering and hard work as firms face ever-rising expectations of fast, cheap delivery. Delivery networks are likely to be...

Cainiao has developed a waist-high robot called Little G to undertake the final leg of delivery

A STRETCH OF Bleecker Street, in Manhattan’s West Village, is among the loveliest in New York, with quaint shopfronts opening on to tree-lined pavements. Until recently a landfill across the Hudson river, in New Jersey, was among the region’s most repulsive. For years smouldering hazardous waste sparked fires among the rubbish. But Bleecker Street is now dotted with empty shops, their landlords unable to find tenants. The lot in New Jersey has been cleaned up and turned into a giant warehouse by Prologis, the world’s biggest industrial-property firm. The chemical fires are out. Delivery trucks are in.

E-commerce will not obliterate all retail trade. Stores that are distinctive in one way or another—because they offer excellent service, for instance, or unique products—will remain. But consider the change already wrought in America, where e-commerce accounts for...

IN WALKING A middle path, between self-indulgence and self-mortification, Buddhists face great temptations. This struggle for self-control animates many of their paintings, including “Star’s Seed” by the Thai artist Thawan Duchanee. The painting depicts a muscular man with the mandibles of a rhinoceros beetle—beastly appendages that symbolise man’s base cravings. Only by shedding these cravings, Buddhists believe, can man be free from fear.

The painting hangs on a wall in the Bank of Thailand, which faces its own temptations and fears. Like any central bank, it must resist the lure of inflation. And like many of its peers in emerging markets, it lives with a fear of global financial forces beyond its control. When America’s Federal Reserve raises interest rates, when global investors lose their appetite for risk, or when multinational banks shrink their lending, emerging markets worry about the impact on their own currencies, balance-sheets and economies.

The...

BANGLADESH EXPORTS 60% more ready-made garments than India, a country with over eight times its population. On the busy roads of Dhaka, Bangladesh’s capital, white vans nose through the traffic on “Emergency Export Duty”, according to the ambulance-like letters painted on their sides. The success of this quintessentially labour-intensive industry helped make Bangladesh a lower-middle-income country in 2014, according to the World Bank’s classifications.

But some think that Bangladesh’s garment industry now faces a new problem almost as grave as the traffic: the threat of automation. Robots are already common in other kinds of manufacturing, but still rare in clothes-making. Of the 1.63m industrial robots in operation worldwide in 2015 (the latest year for which figures are available), only 1,580 were in textiles, apparel and leather, says the International Federation of Robotics (IFR).

Robots find garment-making so hard because its basic materials are so soft. When...

THE LAMP POSTS in Kliptown, South Africa, do not all stand up straight. One lists awkwardly, laden with cables carrying stolen electricity to a squatters’ settlement nearby. Many families in this suburb of Soweto, a formerly black township in greater Johannesburg, are still crammed into makeshift housing. When it is hot outside, the temperature inside is “times two”, says one resident, who shares six rooms with 20 others. And when it turns cold, the chill inside is also “times two”.

On the other side of the railway tracks the government is investing heavily in Walter Sisulu Square, where in 1955 the African National Congress (ANC) and its allies adopted the Freedom Charter, a statement of principles for a post-apartheid nation. The charter’s commitments, written in stone on a monument in the square, include demolishing slums and building well-lit suburbs. They also include transferring ownership of the mineral wealth beneath the soil to the people. The contrast between what the...

WHAT COUNTS AS an emerging market? Broadly speaking, an economy that is not too rich, not too poor and not too closed to foreign capital. The term was coined by Antoine van Agtmael in 1981 when he was working for the International Finance Corporation (IFC), a division of the World Bank. He hoped to create what he had named: a set of promising stockmarkets, lifted from obscurity, thereby attracting the investment they needed to thrive.

At the time, it was hard work even to compare the performance of stockmarkets in places like Brazil, India and South Korea. The IFC, having collected data on ten such markets, felt that foreign investors might take to these boondock bourses, but would be put off by the risk of investing in a single company or the trouble of diversifying across many firms and places. The answer, the IFC concluded, was to provide them with a one-stop, broadly representative “Third-World Equity Fund”. When Mr Agtmael pitched the idea to a group of fund managers at an event hosted by Salomon Brothers, some were sceptical, other intrigued. One liked the idea but hated the name. So Mr Agtmael spent the weekend dreaming up the term “emerging markets”, with which he hoped to evoke “progress, uplift and dynamism”. That label proved wildly successful.

The first such fund, pioneered by Capital Group in 1986, included only four countries. The most...

THE SOUND OF an orchestral horn fills the hall as musicians warm up for an evening performance of Rachmaninoff and Tchaikovsky. The venue is a dramatic Beaux-Arts building that started life as the central post office of Buenos Aires. It perfectly illustrates Argentina’s pendulum swings between liberalism and populism. In 1946 it doubled as a headquarters for the charitable work of the president’s wife, Eva Perón. In 1997 the postal service was privatised during one of Argentina’s periodic experiments with free markets and hard money. As that came to a grisly end in the default of 2001, bankruptcy also ensnared the post office’s new owner, a conglomerate led by Franco Macri.

The postal service was renationalised early in the presidency of Néstor Kirchner, who led a new wave of “post-neoliberal” populism. In 2005 Mr Kirchner decided to turn the defunct building into a cultural centre. His wife, Cristina Fernández de Kirchner, who succeeded him as president, eventually completed the project and named the building after him. Her chosen successor lost the 2015 presidential elections to none other than Mr Macri’s son, Mauricio. His government swiftly tried to reschedule the debts that his father’s company still owed to the state (until a backlash prompted it to reconsider).

The Macri government has been trying to tidy up a lot else, too. Among other things,...

EVEN BEFORE THEY claim their baggage at the airport, visitors to the city of San Luis Potosí in central Mexico see an advertisement for the site where Ford Motors was planning to build a $1.6bn factory. The Planta Ford is still marked on a map in the arrivals hall, albeit only on a Post-it note. Follow the map, and you will see the factory’s white steel skeleton standing out against the brown hills of the Gogorrón National Park.

Ford’s facility, intended to build its small Focus cars, would have created 2,800 jobs directly, and many more indirectly. But in January the company announced it was pulling out and investing $700m in Flat Rock, Michigan, instead. President Donald Trump, who had threatened to impose border taxes on carmakers that shifted production to foreign locations, was delighted. “Thank you to Ford for scrapping a new plant in Mexico and creating 700 new jobs in the US. This is just the beginning,” he tweeted to his many followers. Everybody in San Luis Potosí, by...

THESE ARE NOT your father’s emerging markets, notes Mark Dow, a money manager who used to work for the IMF, on his blog. The phrase alludes to a 1980s car advertisement contrasting a range of flashy new models with the tried-and-trusted versions bought by a previous generation. Today’s emerging markets are also different from earlier models. But unlike the cars, they are less exciting than their predecessors.

In the past, they suffered from a chronic lack of macroeconomic credibility. They could not persuade outsiders to hold their money or their debt through thick and thin, unless they anchored their exchange rates to the dollar and denominated their debt in harder currencies than their own. So they have often struggled to offset downturns by easing either monetary or fiscal policy. They could not cut interest rates for fear of sinking the currency and unleashing inflation, and they could not cut taxes or increase public spending without raising fears of default. They were locked...

EVERY FEW YEARS Foreign Affairs, a magazine about international relations, provokes a fracas in a neighbouring discipline, international economics. In 1994 it published an essay by Paul Krugman, “The Myth of Asia’s Miracle”, which re-examined the source of the tigers’ success. Then, after the Asian financial crisis, it came up with “The Capital Myth” by Jagdish Bhagwati, which re-examined the case for free capital flows, the source of the tigers’ humiliation. In 2004 it offered “Globalisation’s Missing Middle” by Geoffrey Garrett, then at the University of California, Los Angeles. This essay is cited much less often than the other two, but in a roundabout way it has been equally influential. It argued that middle-ranked countries were in a bind, unable to compete either with the cutting-edge technology of rich nations or the cut-throat prices of poor ones. “Middle-income countries”, it said, “have not done nearly as well under globalised markets as either richer or...

IN 1875 THE Ottoman Empire defaulted on half its foreign debt, a victim of the “first major debt crisis of the developing world”, according to one account of the mess. Its creditors, led by the Imperial Ottoman Bank, forced the empire’s grand vizier to accept a humiliating solution. Rather than wait to be repaid out of tax revenues, they won the right to collect half a dozen taxes themselves, including stamp duty and duties on alcohol. After 15 years of tax farming, the Imperial Ottoman Bank was comfortable enough to build impressive new headquarters in Istanbul, neo-orientalist in style on one side and neoclassical on the other.

Since long before the term was invented, emerging markets have provided a rich source of both peril and profit. That financial crisis in 1875 was followed by many others, including a hatful in Turkey. And like the Imperial Ottoman Bank, investors with strong stomachs have often profited the most from emerging markets at their worst. Hedge funds that bought...