Stuck in the past

Raging fires in California have cast a ghostly light on a dilemma afflicting much of the planet: Life in one of America's wealthiest states is increasingly incompatible with climate change.  California is stuck in the past. It was designed for an era when the supply of just about everything—water, power, roads, parking spaces—seemed infinite. "We are BlackBerry after the iPhone, Blockbuster after Netflix," laments New York Times columnist Farhad Manjoo, a longtime California resident. A sustainable redesign would produce taller and more compact cities, fewer cars, larger numbers of trains and buses and a more affordable housing stock. Instead, California has opted for "quick-fix hacks and outsized prizes to the rich," he writes. As a last resort to limit the spread of the infernos, California is switching off power, plunging millions of residents into darkness. If there's no real hope of fireproofing California, the leading hub of global technology, what are the prospects for retrofitting the megacities of the developing world for a warming environment? According to a new study, 300 million people now live on land that will be below flood level by 2050, most of them in Asia. Without seawalls and levees, Bangkok, Shanghai, Mumbai and swaths of southern Vietnam will be either fully or partially submerged.  Drivers and Disrupters Climate change is one of the five disruptive forces identified in a Bloomberg Economics study for the New Economy Forum that highlights the enormity of the challenge faced by developing countries aspiring to escape poverty and catch up with the rich world. The others are populism, protectionism, digitization and automation. Together, these forces turn upside down everything we know—or thought we knew—about pathways to prosperity.  Our Drivers and Disrupters Index measures countries according to traditional markers of success—workforce, investment and productivity. By those measures, China is a star performer. But the first-of-its-kind index also estimates how well economies will hold up in the face of massive disruptive forces that have gathered momentum in the past several years. China is particularly threatened—its coastal cities by floods, its exports by tariffs, its workers by robots. Only a handful of developing economies have ever joined the ranks of the wealthy, among them South Korea, Taiwan and Singapore. For those following in the footsteps of these East Asian "Tigers," the bar is rapidly moving higher.  Old Before Rich Remember, too, that China is aging faster than any society in history: The country will get old before it gets rich. The Economist notes that 2020 will see an inauspicious milestone. The median age of Chinese citizens will overtake that of Americans, but with median income barely a quarter of that earned by their western counterparts. China Won't Budge Disruptive structural trends are bearing down on Chinese negotiators trying to hammer out a partial trade deal with the U.S. In the near-term, they're also grappling with an economy growing at its slowest pace in three decades. Officials from both countries are scrambling to figure out arrangements for a summit between U.S. President Donald Trump and his Chinese counterpart Xi Jinping to sign an agreement after Chile cancelled the Asia-Pacific Economic Cooperation meeting where they were to meet.  At best, though, this mini-deal will be a band-aid. As my Bloomberg colleague Shawn Donnan writes: "In private conversations with visitors to Beijing and other interlocutors in recent weeks, Chinese officials have warned they won't budge on the thorniest issues, according to people familiar with the matter. They remain concerned about [Trump's] impulsive nature and the risk he may back out of even the limited deal both sides say they want to sign." A Third Way on Trade? All too often, it is assumed that the U.S. and China face a binary choice: Either China's economy converges with the Western model, implying wrenching changes to its industrial structure, or the two countries must reduce their economic interdependence. Is there a middle ground between integration and decoupling?  Dani Rodrik, a Harvard trade economist, thinks so. He's one of the authors of a report by U.S. and Chinese scholars that proposes a more laissez faire approach to global trade.  On the one hand, the report proposes, countries should feel free to pursue whatever economic policies they feel are right for them. On the other hand, countries ought to have a right to defend themselves from the negative effects of those policies, including by imposing tariffs. Trade rules should play a more modest, but nonetheless critical role: to prevent "beggar thy neighbor" policies, which is to say policies that can only produce benefits to the home country by harming others. In an increasingly polarized world, this proposal is a rare attempt at a sensible compromise. The New Economy Forum salutes the effort. We'll be talking about trade—and proposing solutions—at our gathering in Beijing on Nov. 20-22. (Last week's Turning Points newsletter incorrectly identified the decline in international student applications to Dartmouth's Tuck School of Business. The total decline in applications to the school was 22.5%. Tuck said it doesn't break out international applications.) __________________________________________________________ Like Bloomberg's New Economy Forum Turning Points? Subscribe to Bloomberg All Access and get much, much more. You'll receive our unmatched global news coverage and two in-depth daily newsletters, The Bloomberg Open and The Bloomberg Close. Sign up for the Bloomberg Recession Tracker: Bloomberg Economics crunches the numbers every month using our proprietary model to reveal the probability of a downturn over the next year. We'll deliver an updated assessment of all relevant indicators, directly to your inbox. 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