Philippa Kaur

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Paris has long been at the heart of the history of flight. It is where the Montgolfier brothers ascended in the first hot-air balloon in 1783, and where Charles Lindbergh completed the first solo transatlantic aeroplane journey in 1927. Next year, if all goes to plan, Paris will be the site of another industry first when Volocopter, a German maker of electric aircraft, launches a flying-taxi service during the Olympic Games. At the Paris Airshow in June the company, and some of its rivals, paraded a new generation of battery-powered flying machines designed for urban transport.Listen to this story. Enjoy more audio and podcasts on More

The long-running legal battle over America’s opioid epidemic was reignited when, on August 10th, the country’s Supreme Court said it would review an earlier settlement secured by Purdue Pharma, a main character in the saga. Back in 2021 a federal judge had approved a bankruptcy plan for Purdue—the maker of OxyContin, a highly addictive painkiller—under which the business was to be restructured as a public-benefit company with all future profits going towards settling claims from victims and funding addiction-treatment programs. Members of the Sackler family, which owns the drugmaker, were to contribute $4.5bn (later increased to $6bn) towards the settlement.Listen to this story. Enjoy more audio and podcasts on More

“WE ARE WORKING flat-out,” says Armin Papperger, chief executive of Rheinmetall, Germany’s biggest arms-maker. Ever since Russia invaded Ukraine in February last year, the Düsseldorf-based maker of tanks, ammunition and other military kit has been inundated with orders. On August 10th the firm reported that sales of its military ware in the first half of the year had risen by 12% compared with the same period in 2022, and Mr Papperger expects growth to hit 20-30% for the year as a whole. A few days later the company said it had secured an order from the Ukrainian army for drones, and on August 18th it is due to inaugurate a large new factory in Hungary. Its share price has roughly tripled since the start of last year.Listen to this story. Enjoy more audio and podcasts on More

On August 15th VinFast, a Vietnamese electric-vehicle (EV) manufacturer, made its trading debut on the Nasdaq, an American stock exchange. It was quite the entrance: the company’s share price rocketed, pushing its market capitalisation from $23bn to $85bn. That is almost as much as Ford and General Motors, two giant American carmakers, combined, and seven times that of Vingroup, its parent company. On August 16th it fell a little, to $69bn.Investors are racing to get a stake in VinFast. The company is still a minnow in the EV business, but has big ambitions. In May Pham Nhat Vuong, the company’s founder and Vietnam’s richest man, said it hoped to sell 50,000 cars this year, up from 7,400 last. Although most of its vehicles are currently sold in Vietnam, it has its eyes set on the American market. Last month it broke ground on a factory in North Carolina, and has already begun selling imported vehicles in California, where it has 13 dealerships.The reviews have not been glowing. The VF8 model VinFast is selling in California is “simply not ready for America”, says Kevin Williams, an industry journalist. “Yikes,” is how Steven Ewing, another reviewer, titled his assessment of the car, citing a poor steering experience. At $46,000, it is not much, if any, cheaper than the entry-level models offered by rivals like Tesla, America’s EV goliath. A mere 128 VF8s were sold in America between February and May, according to Experian, a data-analytics firm. Even if VinFast achieves its lofty growth targets for the year, its valuation will continue to strain belief. It made a $2.1bn net loss last year, and has said it will break even, at the earliest, at the end of next year. AlixPartners, a consultancy, reckons EV makers need to produce around 400,000 cars a year before they start turning a profit. After that, the company would still have a long way to go before it caught up with the industry’s leaders. Last year Tesla sold 1.3m EVs. BYD, a fast-growing Chinese carmaker, sold 1.9m, around half fully electric and half plug-in hybrid.With a mere 1% of its shares put up for trading, VinFast’s lofty market valuation is vulnerable to rapid swings. Investors in the company may be in for a bumpy ride.■To stay on top of the biggest stories in business and technology, sign up to the Bottom Line, our weekly subscriber-only newsletter. More

For more than 200 years Luddites have received bad press—worse even than the British Members of Parliament who voted in 1812 to put to death convicted machine-breakers. Yet even at the time, the aggrieved weavers won popular sympathy, including that of Lord Byron. In an “Ode to Framers of the Frame Bill” the poet wrote: “Some folks for certain have thought it was shocking/ When Famine appeals, and when Poverty groans/ That life should be valued at less than a stocking/ And breaking of frames lead to breaking of bones.” He used his maiden speech in the House of Lords to urge for a mixture of “conciliation and firmness” in dealing with the mob, rather than lopping off its “superfluous heads.” Once again, technological upheaval is rife and there is a widespread feeling, even among the patrician classes, that the old ways are in danger of being trampled under foot by the march of progress. In America two big labour disputes—one looming, the other well under way—are, among other things, grappling with potentially seismic transformations caused by decarbonisation and artificial intelligence (AI).The United Auto Workers (UAW) union, representing employees of Ford, General Motors and Stellantis (maker of Chrysler and Fiat), is threatening a strike when labour contracts end on September 14th. As well as fighting for sharply higher pay, one of its goals is to extend wages and other benefits offered in conventional car manufacturing to people working on electric vehicles (EVs), the production of which typically uses more robots and fewer blue-collar workers. Over in Hollywood, writers and actors are at an impasse with studios over pay and conditions in the streaming era, a dispute that has been muddied by the vexing question of how AI will reshape the industry if new tools can be used to write scripts or simulate actors. Such struggles may well shape how workers in other industries view the impact of technological change on their jobs.A new generation of union leaders has come out swinging. Shawn Fain is the first president of the UAW in 70 years to emerge from outside the union’s ruling clique. He was elected in March by the rank and file, after a years’-long corruption scandal led to a change in the union’s voting procedures. From the start, Mr Fain has cast himself as a firebrand. He publicly threw a bargaining proposal from Stellantis into the bin. (The biggest shareholder in the firm, Exor, part-owns The Economist’s parent company.) Meanwhile, the Writers Guild of America and SAG-AFTRA, which represents actors, have gone on strike simultaneously for the first time in more than 60 years. Fran Drescher, leader of the actors’ guild (and star of “The Nanny”, a 1990s sitcom) has made clear that the showdown is part of a wider struggle. “The eyes of labour are upon us,” she said in a thundering speech announcing the strike.The fights are taking place in an unusually supportive environment for unions. Late last month more than half of the Senate’s Democrats signed a letter to the “Big Three” carmakers arguing that workers at their battery plants should be eligible for the same deal offered to other UAW members. President Joe Biden, who equates “good” jobs with union jobs, has just reinstated a rule shelved during the Reagan administration that will, in effect, boost wages for construction workers on government-backed projects. Nationwide, support for unions is at 71%, its highest level since the mid-1960s, according to Gallup, a pollster. Both in Detroit and in Hollywood, unions are tapping into popular disquiet over ballooning pay for CEOs. Even the Republicans, though vehemently anti-union, are trying to rebrand their relationship with workers. American Compass, a conservative think-tank, calls for the creation of worker-management committees, similar to Europe’s “work councils”, which give employees a voice in how a business is run.Some academics contend that workers are right to be wary of technological change. “Power and Progress”, a newish book by Daron Acemoglu and Simon Johnson, both of the Massachusetts Institute of Technology, wades through a thousand years of history to argue that new technologies lead to better livelihoods only when they create jobs, rather than just cost savings, and when countervailing forces, such as unions, shape their effect. It berates techno-optimism, and at times sounds like a Luddites’ manifesto. Speaking to your columnist, Mr Johnson expresses optimism that the UAW and the Big Three can find a way to ensure the switch to EVs does not lead to widespread job losses. He points to the eventual embrace by unions of the containerisation of shipping, which saved countless hours of labour at ports but also led to a surge in the amount of cargo that passed through them, preserving jobs and benefits for dockers. In theory, as EV production scales up, prices will come down and more drivers will buy them. If they put their feet on the gas the Big Three may even be able to reverse the decline in America’s car exports, fuelling demand for even more workers. The massive subsidies handed out by the Biden administration to promote EV production afford the industry a rare opportunity to regain the initiative.Bish, bash, botBy contrast, Mr Johnson’s prognosis for writers and actors in the age of AI is darker, likening their plight to that of the weavers-cum-Luddites whose jobs were rendered unnecessary by machines. That view helps explain why they are seeking to pre-emptively curtail studios’ use of AI. Yet the technology’s impact on Tinseltown need not be zero-sum. By speeding up the writing process, for instance, AI could lower costs and allow more content to be created.What’s more, the gales of creative destruction can be held back only for so long. For unions to secure their members’ livelihoods they need to work with technological change, rather than against it. That means using a Byronesque combination of conciliation and firmness to ensure that it is used to grow the pie for everyone, rather than double down on anti-corporate rage. If not they may end up, like the Luddites, on the wrong side of history. ■ More

CHINA AND India are not on the friendliest of terms. In 2020 their soldiers clashed along their disputed border in the deadliest confrontation between the two since 1967—then clashed again in 2021 and 2022. That has made trade between the Asian giants a tense affair. Tense but, especially for India, still indispensable. Indian consumers rely on cheap Chinese goods, and Indian companies rely on cheap Chinese inputs, particularly in industries of the future. Whereas India sells China the products of the old economy—crustaceans, cotton, granite, diamonds, petrol—China sends India memory chips, integrated circuits and pharmaceutical ingredients. As a result, trade is becoming ever more lopsided. Of the $117bn in goods that flowed between the two countries in 2022, 87% came from China (see chart). India’s prime minister, Narendra Modi, wants to reduce this Sino-dependence. One reason is strategic—relying on a mercurial adversary for critical imports carries risks. Another is commercial—Mr Modi is trying to replicate China’s nationalistic, export-oriented growth model, which means seizing some business from China. In recent months his government’s efforts to decouple parts of the Indian economy from its larger neighbour’s have intensified. On August 3rd India announced new licensing restrictions for imported laptops and personal computers—devices that come primarily from China. A week later it was reported that similar measures were being considered for cameras and printers.Officially, India is open to Chinese business, as long as this conforms with Indian laws. In practice, India’s government uses a number of tools to make Chinese firms’ life in India difficult or impossible. The bluntest of these is outright prohibitions on Chinese products, often on grounds related to national security. In the aftermath of the border hostilities in 2020, for example, the government banned 118 Chinese apps, including TikTok (a short-video sensation), WeChat (a super-app), Shein (a fast-fashion retailer) and just about any other service that captured data about Indian users. Hundreds more apps were banned for similar reasons throughout 2022 and this year. Makers of telecoms gear, such as Huawei and ZTE, have received the same treatment, out of fear that their hardware could let Chinese spooks eavesdrop on Indian citizens.Tariffs are another popular tactic. In 2018, in an effort to reverse the demise of Indian mobile-phone assembly at the hands of Chinese rivals, the government imposed a 20% levy on imported devices. In 2020 it tripled tariffs on toy imports, most of which come from China, to 60% then, at the start of this year, raised them to 70%. India’s toy imports have since declined by three-quarters.Sometimes the Indian government eschews official actions such as bans and tariffs in favour of more subtle ones. A common tactic is to introduce bureaucratic friction. India’s red tape makes it easy for officials to find fault with disfavoured businesses. Non-compliance with tax rules, so impenetrable that it is almost impossible to abide by them all, are a favourite accusation. Two smartphone makers, Xiaomi and BBK Electronics (which owns three popular brands, Oppo/OnePlus, Realme and Vivo), are under investigation for allegedly shortchanging the Indian taxman a combined $1.1bn. On August 2nd news outlets cited anonymous government officials saying that the Indian arm of BYD, a Chinese carmaker, was under investigation over allegations that it paid $9m less than it owed in tariffs for parts imported from abroad. MG Motor, a subsidiary of SAIC, another Chinese car firm, faces investment restrictions and a tax probe. A convoluted licensing regime gives Indian authorities more ways to stymie Chinese business. In April 2020 India declared that investments from countries sharing a border with it must receive special approvals. No specific neighbour was named but the target was clearly China. Since then India has approved less than a quarter of the 435 applications for foreign direct investment from the country. According to Business Today, a local outlet, only three received the thumbs-up in India’s last fiscal year, which ended in March. Last month reports surfaced that a proposed joint venture between BYD and Megha Engineering, an Indian industrial firm, to build electric vehicles and batteries failed to win approval over security reasons. Luxshare, a big Chinese manufacturer of devices for, among others, Apple, has yet to open a factory in Tamil Nadu, despite signing an agreement with the state in 2021. The reason for the delay is believed to be an unspoken blanket ban from the central government in Delhi on new facilities owned by Chinese companies. In early August the often slow-moving Indian parliament whisked through a new law easing the approval process for new lithium mines after a potentially large deposit of the metal, used in batteries, was unearthed earlier this year. Miners are welcome to submit applications, but Chinese bidders are expected to be viewed unfavourably.In parallel to its blocking efforts, India is using policy to dislodge China as a leader in various markets. India’s $33bn programme of “production-linked incentives” (cash payments tied to sales, investment and output) has identified 14 areas of interest, many of which are currently dominated by Chinese companies. One example is pharmaceutical ingredients, which Indian drugmakers have for years mostly procured from China. In February the Indian government started doling out handouts worth $2bn over six years to companies that agree to manufacture 41 of these substances domestically. Big pharmaceutical firms such as Aurobindo, Biocon, Dr Reddy’s and Strides are participating. Another is electronics. Contract manufacturers of Apple’s iPhones, such as Foxconn and Pegatron of Taiwan and Tata, an Indian conglomerate, are allowed to purchase Chinese-made components for assembly in India provided they make efforts to nurture local suppliers, too. A similar arrangement has apparently been offered to Tesla, which is looking for new locations to make its electric cars.Some Chinese firms, tired of jumping through all these hoops, are calling it quits. In July 2022, after two years of efforts that included a promise to invest $1bn in India, Great Wall Motors closed its Indian carmaking operation, unable to secure local approvals. Others are trying to adapt. Xiaomi has said it will localise all its production and expand exports from India which, so far, go only to neighbouring countries, to Western markets. Shein will re-enter the Indian market through a joint venture with Reliance, India’s most valuable listed company, renowned for its ability to navigate Indian bureaucracy and politics. ZTE is reportedly attempting to arrange a licensing deal with a domestic manufacturer to make its networking equipment. So far it has found no takers. Given India’s growing suspicions of China, it may be a while before it does. ■ More

Your columnist has just had the bittersweet pleasure of driving along America’s Pacific coast, wind blowing through what is left of his hair, in a new Fisker Ocean electric SUV. Sweet, because he was in “California mode”—a neat feature that with the touch of a button lowers all windows, including the back windscreen, pulls back the solar-panelled roof, and turns the car into the next best thing to an all-electric convertible. Bitter, because once he had returned the trial vehicle, he had to drive home in his Kia Niro EV, which is smaller, shorter range and has no open roof—call it “rainy Britain mode”. The consolation was that it is about a tonne lighter, and if you drive an EV, as Schumpeter does, to virtue-signal your low-carbon street cred, being featherweight rather than heavyweight should count. Except it doesn’t. Just look at the future line-up that Fisker, an EV startup, unveiled on August 3rd. It included: a souped-up, off-road version of the Ocean, which Henrik Fisker, the carmaker’s Danish co-founder, said would be suitable for a monster-truck rally; a “supercar” with a 1,000km (600-mile) range, and a pickup truck straight out of “Yellowstone”—complete with cowboy-hat holder. Granted, there was also an affordable six-seater called Pear. But though Fisker says sustainability is one of its founding principles, it is indulging in a trait almost universal among car firms: building bigger, burlier cars, even when they are electric. There are two reasons for this. The first is profit. As with conventional cars, bigger EVs generate higher margins. The second is consumer preference. For decades, drivers have been opting for SUVs and pickup trucks rather than smaller cars, and this now applies to battery-charged ones. EV drivers, who fret about the availability of charging infrastructure, want more range, hence bigger batteries. BNEF, a consultancy, says the result is that average battery sizes increased by 10% a year globally from 2018 to 2022. That may help make for a more reassuring ride. But eventually the supersizing trend will prove to be unsustainable and unsafe. Already it is verging on the ludicrous. General Motors’ Hummer EV weighs in at over 4,000kg, nearly a Kia Niro more than its non-electric counterpart. Its battery alone is as heavy as a Honda Civic. General Motors also recently unveiled a 3,800kg Chevrolet Silverado electric pickup, which can tow a tractor and has a range of up to 720km. This year Tesla plans to start production of its electric “Cybertruck”, described by Elon Musk, its boss, as a “badass, futuristic armoured personnel carrier”. Such muscle trucks may be the price to pay to convince hidebound pickup drivers to go electric. Yet size matters to suburbanites, too. The International Energy Agency, an official forecaster, calculates that last year more than half the electric cars sold around the world were SUVs. For now, carmakers can argue that however big the electric rigs, they have a positive impact on the planet. Though manufacturing EVs—including sourcing the metals and minerals that go into them—generates more greenhouse gases than a conventional car, they quickly compensate for that through the absence of tailpipe emissions. Lucien Mathieu of Transport and Environment, a European NGO, says that even the biggest EVs have lower lifetime carbon emissions than the average conventional car. That is true even in places with plenty of coal-fired electricity, such as China. But in the long run the trend for bigger batteries may backfire, for economic and environmental reasons. First, the bigger the battery, the more pressure there will be on the supply chain. If battery sizes increase there are likely to be looming scarcities of lithium and nickel. That will push up the cost of lithium-ion batteries, undermining carmakers’ profitability. Second, to charge bigger batteries in a carbon-neutral way requires more low-carbon electricity. That may create bottlenecks on the grid. Third, the more pressure on scarce resources vital for EV production, the harder it will be to make affordable electric cars critical for electrifying the mass market. That will slow the overall decarbonisation of transport. Finally, there is safety. Not only is a battle tank that does zero to 100 kilometres per hour in the blink of an eye a liability for anyone that happens to be in its way. Tyres, brakes and wear and tear on the road also produce dangerous pollutants, which get worse the heavier vehicles are. Governments have ways to encourage EVs to shrink. The most important is to support the expansion of charging infrastructure, which would reduce range anxiety and promote smaller cars. Taxes could penalise heavier vehicles and subsidies could promote lighter ones. At the local level, congestion and parking charges could have similar effects. At a minimum, carmakers could be required to label the energy and material efficiency of their vehicles, as makers of appliances do in the European Union. Derange anxiety Ultimately, the industry is almost sure to realise the folly of pursuing size for its own sake. The penny is starting to drop. Ford’s CEO, Jim Farley, recently said carmakers could not make money with the longest-range batteries. His opposite number at General Motors, Mary Barra, has taken the unexpected step of reversing a plan to retire the affordable Chevy Bolt EV. In Europe, carmakers like Volkswagen are building smaller, cheaper EVs. Tesla is said to be planning a compact model made in Mexico. The pressure is partly coming from competition. Felipe Munoz of Jato Dynamics, a car consultancy, says China prizes battery efficiency above bigness and is hoping to muscle in on overseas markets with lighter, cheaper brands, such as BYD. Innovation in batteries based on solid-state or sodium-ion chemistry may also make EVs more efficient. For the time being, drivers with money to splurge will no doubt relish flaunting their low-carbon credentials from the vantage point of a large SUV or monster truck. And so they should—until they realise that they may be making electrification less accessible to the rest of humanity. ■Read more from Schumpeter, our columnist on global business:Meet America’s most profitable law firm (Aug 2nd)Why Walmart is trouncing Amazon in the grocery wars (Jul 24th)Hollywood’s blockbuster strike may become a flop (Jul 19th)Also: If you want to write directly to Schumpeter, email him at [email protected]. And here is an explanation of how the Schumpeter column got its name. More