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Can a Green-Economy Boom Town Be Built to Last? – The New York Times

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NORMAL, Ill. — When he bought a construction contractor called Weber Electric in 2018, Josh Mosier inherited about 20 employees. By the end of the next year, he was up to about 100 employees. By the spring of 2021, the number was over 225.

“Because of this boom,” said Mr. Mosier, whose company often works on large building projects, “we’ve grown exponentially.”

The epicenter of that boom is an electric-vehicle maker named Rivian, which brought in Mr. Mosier’s company and others in the Normal, Ill., area to work on the city’s costliest construction project in decades: a massive auto plant.

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As it prepares to deliver its first electric pickup trucks and sport utility vehicles this year, Rivian has spent around $1.5 billion renovating and expanding a factory once owned by Mitsubishi. On a typical day the 3.3-million-square-foot plant hosts several hundred construction workers alongside more than 2,500 workers employed by the company, which expects to eventually double its local head count.

The effects are hard to miss in Normal and nearby Bloomington, a metropolitan area of about 170,000. Hotels are frequently booked up, pandemic or not; hundreds of housing lots are being developed; and many employers looking to hire a full-time plumber are basically out of luck.

“At Rivian, we’ve heard they’re hiring a lot of licensed plumbers,” said Lori Stickling, who operates a plumbing company with her husband. “We’ve had a post up for months with no qualified candidates.”

In recent years, makers of electric vehicles and their components, like Tesla, Lucid Motors and Lordstown Motors, have collectively spent billions building or renovating factories in Nevada, Texas, Arizona and Ohio.

The challenges are enormous, given that few of these companies have brought a vehicle to market. But if some succeed, the impact could be many times greater than the thousands of manufacturing jobs they create directly.

They could transform places like Normal, a university town where high-paying blue-collar employment lagged until the late 1980s, when Mitsubishi partnered with Chrysler to build a factory. The plant, which employed over 3,000 at its peak, and its suppliers attracted workers from across central Illinois. The resulting economic activity helped fill the city’s coffers and fund redevelopment.

When the plant scaled back production in the 2000s and closed in 2015, around the time of white-collar job cuts, Normal felt the pinch. Suppliers decamped, and many workers left in search of new jobs. Uptown, an elegant, brick-accented district with a restored 1930s theater and a pair of suddenly too-big hotels, became a monument to the city’s fading prosperity.

Local politicians and business leaders embraced Rivian, which is based in Michigan and has locations in other states, Canada and Britain, as a way to fill the vacuum. But in a place that has endured such changes of fortune, residents can be forgiven for wondering how long today’s good times will continue.

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Electric vehicles require fewer workers to make than gasoline-powered ones. And while Rivian’s prospects appear strong — it filed for a public stock offering in August, seeking a valuation of roughly $70 billion — the company could be overwhelmed by a growing list of competitors. At some point, the spending spree will end, and the local industry will rise or fall on whether Rivian can build a sizable customer base.

The initial froth is already dissipating. After reaching more than 200 employees earlier this year, Weber Electric is down to about 100. “We kind of rolled it back a little bit,” said Mr. Mosier, the owner, adding that he hopes to add workers again as the plant green-lights more construction.

In this way, the electric vehicle boom is something of a microcosm for the larger transition to a low-carbon economy: As governments and investors funnel hundreds of billions of dollars into green industries, there is certain to be an initial jolt. But will it last?

Not everyone in Normal has a connection to the Rivian plant, the company’s only production facility; it just feels that way sometimes. Sitting in a lobby at the plant one afternoon in June, Katy Tilley, who helps oversee workplace operations like site design and dining, said her younger sibling, who had just left the Marine Corps, was starting at the company the next week.

“My younger brother works in the battery department!” her colleague Laura Ewan, a community relations employee, chimed in. “We were so different, our parents would have never expected us to work in the same place.”

Hiring began in 2016, when Rivian kept on a handful of former Mitsubishi employees who had been maintaining the shuttered factory, but it has accelerated in the last year and a half. The company hired about 100 people a week in June and July.

The ramp-up has made labor, already in short supply during the pandemic, even more scarce. A branch of the International Brotherhood of Electrical Workers, which has helped contractors like Mr. Mosier staff up, says it has fully booked the roughly 280 licensed union electricians in the area.

To meet the demand, the union brought in a few hundred electricians from elsewhere in the country this year.

A nearby community college started a program this fall to train electric vehicle technicians, and Illinois State University, which abuts Uptown, is building an engineering school partly in response to Rivian.

Rivian brought in Josh Mosier’s company to work on the city’s costliest construction project in decades: a huge auto plant.

The boom has also sustained the local travel and hospitality business. Last October, after a four-year hiatus, Delta Air Lines resumed a nonstop flight to Detroit.

The visitors, including contractors, suppliers and Rivian employees from other locations, have helped keep the city’s restaurants and hotels afloat during the pandemic. “It’s really saved their bacon,” Mayor Chris Koos said. One indication of their reliance on Rivian: The company runs a shuttle service to and from a stop near the hotels from 6 a.m. to 8 p.m.

In principle, a factory like Rivian’s should provide a more lasting boost than a solar or wind farm, which creates a flurry of construction activity but requires relatively few employees to operate. An automobile factory could also provide a bigger stimulus than an e-commerce warehouse because its workers tend to be more productive and can therefore be more highly paid.

Such factories also attract more suppliers, said Willy C. Shih, an expert on manufacturing at the Harvard Business School.

Despite this potential, new factories don’t benefit all cities equally. When a factory opens where much of the population is already employed, the net gain to the local economy can be muted, according to research by Timothy J. Bartik, an economist at the W.E. Upjohn Institute for Employment Research in Michigan.

But in an area like Normal that is suffering industrial decline, a factory’s effect on employment can be up to three times as great. The benefits can last for decades — if the factory survives.

“When the employment-population ratio is going up, it drives up earnings, and that goes on for 20 years,” Mr. Bartik said.

In 2010, about 65 percent of working-age people in the Bloomington-Normal area were employed, according to the Census Bureau, far higher than the national average of 57 percent. By the eve of the pandemic, however, the local employment rate had fallen just below the national average, which had recovered to about 60 percent.

One contributor to the decline was the shuttering of the Mitsubishi plant, originally known as Diamond-Star Motors. The 2015 announcement blindsided workers, some of whom were hired only weeks before, and took a financial toll on veteran production workers, whose hourly pay had once been in the upper $20s.

The closing also wiped out suppliers and squeezed local restaurants and retailers. “We had restaurants close by,” said Bob Dobski, who owned several McDonald’s franchises in the area. “We definitely saw diminished traffic.”

Around the same time, State Farm, whose headquarters is in Bloomington, was shrinking its local work force. The real estate market wilted.

In 2016, an auction company was preparing to sell the Mitsubishi plant in pieces. After executives from Rivian came to scout equipment, the company’s 38-year-old founder, an M.I.T. Ph.D. named R.J. Scaringe, decided that the plant itself was the real find. “It was like, ‘How much for the whole thing?’” Mr. Scaringe recalled.

The company barely had a website, much less a product. When it asked for tax subsidies before it completed the $16 million purchase, local government officials were not entirely convinced that the company was for real.

“We gave them a list of things we need,” said Mark Peterson, then the city manager. The list included such rudiments as the names of board members and a photo of a prototype. The company responded to roughly half the requests, Mr. Peterson recalled. (Both he and the company said Mr. Scaringe later provided more information at a Town Council meeting.)

The city and other local authorities approved a package of tax abatements and grants worth up to $4 million in any case, realizing it had no other option for reviving the plant, but the skepticism lingered.

In 2019, however, the company raised nearly $3 billion from the likes of Ford Motor and Amazon, which also ordered 100,000 electric delivery trucks. That fall, Rivian held a public curtain raiser in Normal for its $70,000 trucks, which it says can accelerate to 60 miles per hour in about three seconds.

“To a lot of people in the community, it was the first solid touch they’d had with Rivian,” said Mr. Koos, the mayor. “There was a lot of excitement.”

Workers at the nonunion plant start at $20 an hour and top out at $23 after three years — less than what veteran workers earn at unionized plants owned by General Motors and Ford, but more than the typical wage in the Bloomington-Normal area, where most of the new hires have come from.

“I was about to start sending out applications,” said Becky Skeen, a longtime Mitsubishi employee facing limbo before Rivian hired her in 2017. “I was really grateful.”

For the local economy, the suppliers attracted by Rivian may be as important, part of a virtuous cycle that can pull in workers from the margins of the labor force.

A few could end up at a recently revived industrial park near the Rivian plant. More than a decade ago, a civil construction firm called Stark Excavating took over an unfinished 500,000-square-foot structure there after the developer ran into financial problems.

But last year, Stark Excavating sold the building to a real estate investment firm, which finished construction and leased it to Rivian, then began work on a second 500,000-square-foot building that could be used by suppliers or Rivian itself.

“That’s all attributable to Rivian — they’re driving this town,” said David Stark, Stark’s president. “It reminds me of when Diamond-Star Motors built that original car plant that was taken over by Mitsubishi. It’s what made Bloomington-Normal grow.”

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What to read about India's economy – The Economist

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AS INDIA GOES to the polls, Narendra Modi, the prime minister, can boast that the world’s largest election is taking place in its fastest-growing major economy. India’s GDP, at $3.5trn, is now the fifth biggest in the world—larger than that of Britain, its former colonial ruler. The government is investing heavily in roads, railways, ports, energy and digital infrastructure. Many multinational companies, pursuing a “China plus one” strategy to diversify their supply chains, are eyeing India as the unnamed “one”. This economic momentum will surely help Mr Modi win a third term. By the time he finishes it in another five years or so, India’s GDP might reach $6trn, according to some independent forecasts, making it the third-biggest economy in the world.

But India is prone to premature triumphalism. It has enjoyed such moments of optimism in the past and squandered them. Its economic record, like many of its roads, is marked by potholes. Its people remain woefully underemployed. Although its population recently overtook China’s, its labour force is only 76% the size. (The percentage of women taking part in the workforce is about the same as in Saudi Arabia.) Investment by private firms is still a smaller share of GDP than it was before the global financial crisis of 2008. When Mr Modi took office, India’s income per person was only a fifth of China’s (at market exchange rates). It remains the same fraction today. These six books help to chart India’s circuitous economic journey and assess Mr Modi’s mixed economic record.

Breaking the Mould: Reimagining India’s Economic Future. By Raghuram Rajan and Rohit Lamba. Penguin Business; 336 pages; $49.99

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Before Mr Modi came to office, India was an unhappy member of the “fragile five” group of emerging markets. Its escape from this club owes a lot to Raghuram Rajan, who led the country’s central bank from 2013 to 2016. In this book he and Mr Lamba of Pennsylvania State University express impatience with warring narratives of “unmitigated” optimism and pessimism about India’s economy. They make the provocative argument that India should not aspire to be a manufacturing powerhouse like China (a “faux China” as they put it), both because India is inherently different and because the world has changed. India’s land is harder to expropriate and its labour harder to exploit. Technological advances have also made services easier to export and manufacturing a less plentiful source of jobs. Their book is sprinkled with pen portraits of the kind of industries they believe can prosper in India, including chip design, remote education—and well-packaged idli batter. Both authors regret India’s turn towards tub-thumping majoritarianism, which they think will ultimately inhibit its creativity and hence its economic prospects. Nonetheless this is a work of mitigated optimism.

New India: Reclaiming the Lost Glory. By Arvind Panagariya. Oxford University Press; 288 pages

This book provides a useful foil for “Breaking the Mould”. Arvind Panagariya took leave from Columbia University to serve as the head of a government think-tank set up by Mr Modi to replace the old Planning Commission. The author is ungrudging in his praise for the prime minister and unsparing in his disdain for the Congress-led government he swept aside. Mr Panagariya also retains faith in the potential of labour-intensive manufacturing to create the jobs India so desperately needs. The country, he argues in a phrase borrowed from Mao’s China, must walk on two legs—manufacturing and services. To do that, it should streamline its labour laws, keep the rupee competitive and rationalise tariffs at 7% or so. The book adds a “miscellany” of other reforms (including raising the inflation target, auctioning unused government land and removing price floors for crops) that would keep Mr Modi busy no matter how long he stays in office.

The Lost Decade 2008-18: How India’s Growth Story Devolved into Growth without a Story. By Puja Mehra. Ebury Press; 360 pages; $21

Both Mr Rajan and Mr Panagariya make an appearance in this well-reported account of India’s economic policymaking from 2008 to 2018. Ms Mehra, a financial journalist, describes the corruption and misjudgments of the previous government and the disappointments of Mr Modi’s first term. The prime minister was exquisitely attentive to political threats but complacent about more imminent economic dangers. His government was, for example, slow to stump up the money required by India’s public-sector banks after Mr Rajan and others exposed the true scale of their bad loans to India’s corporate titans. One civil servant recounts long, dull meetings in which Mr Modi monitored his piecemeal welfare schemes, even as deeper reforms languished. “The only thing to do was to polish off all the peanuts and chana.”

The Billionaire Raj: A Journey Through India’s New Gilded Age. By James Crabtree. Oneworld Publications; 416 pages; $7.97

For a closer look at those corporate titans, turn to the “Billionaire Raj” by James Crabtree, formerly of the Financial Times. The prologue describes the mysterious late-night crash of an Aston Martin supercar, registered to a subsidiary of Reliance, a conglomerate owned by Mukesh Ambani, India’s richest man. Rumours swirl about who was behind the wheel, even after an employee turns himself in. The police tell Mr Crabtree that the car has been impounded for tests. But he spots it abandoned on the kerb outside the police station, hidden under a plastic sheet. It was still there months later. Mr Crabtree goes on to lift the covers on the achievements, follies and influence of India’s other “Bollygarchs”. They include Vijay Mallya, the former owner of Kingfisher beer and airlines. Once known as the King of Good Times, he moved to Britain from where he faces extradition for financial crimes. Mr Crabtree meets him in drizzly London, where the chastened hedonist is only “modestly late” for the interview. Only once do the author’s journalistic instincts fail him. He receives an invitation to the wedding of the son of Gautam Adani. The controversial billionaire is known for his close proximity to Mr Modi and his equally close acquaintance with jaw-dropping levels of debt. The bash might have warranted its own chapter in this book. But Mr Crabtree, unaccustomed to wedding invitations from strangers, declines to attend.

Unequal: Why India Lags Behind its Neighbours. By Swati Narayan. Context; 370 pages; $35.99

Far from the bling of the Bollygarchs or the ministries of Delhi, Swati Narayan’s book draw son her sociological fieldwork in the villages of India’s south and its borderlands with Bangladesh and Nepal. She tackles “the South Asian enigma”: why have some of India’s poorer neighbours (and some of its southern states) surpassed India’s heartland on so many social indicators, including health, education, nutrition and sanitation. Girls in Bangladesh have a longer life expectancy than in India, and fewer of them will be underweight for their age. Her argument is illustrated with a grab-bag of statistics and compelling vignettes: from abandoned clinics in Bihar, birthing centres in Nepal, and well-appointed child-care centres in the southern state of Kerala. In a Bangladeshi border village, farmers laugh at their Indian neighbours who still defecate in the fields. She details the cruel divisions of caste, class, religion and gender that still oppress so many people in India and undermine the common purpose that social progress requires.

How British Rule Changed India’s Economy: The Paradox of the Raj. By Tirthankar Roy. Springer International; 159 pages; $69.99

Many commentators describe the British Empire as a relentless machine for draining India’s wealth. But that may give it too much credit. The Raj was surprisingly small, makeshift and often ineffectual. It relied too heavily on land for its revenues, which rarely exceeded 7% of GDP, points out Tirthankar Roy of the London School of Economics. It spent more on infrastructure and less on luxuries than the Mughal empire that preceded it. But it neglected health care and education. India’s GDP per person barely grew from 1914 to 1947. Mr Roy reveals the great divergence within India that is masked by that damning average. Britain’s “merchant Empire”, committed to globalisation, was good for coastal commerce, but left the countryside poor and stagnant. Unfortunately, for the rural masses, moving from rural areas to the city was never easy. Indeed, some of the social barriers to mobility that Mr Roy lists in this book about India’s economic past still loom large in books about its future.

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We regularly publish special reports on India, the latest, in April 2024, focuses on the economy. Please also subscribe to our weekly Essential India newsletter, to make sure you don’t miss any of our comprehensive coverage of the country’s economy, politics and society.

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The Fed's Forecasting Method Looks Increasingly Outdated as Bernanke Pitches an Alternative – Bloomberg

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The Federal Reserve is stuck in a mode of forecasting and public communication that looks increasingly limited, especially as the economy keeps delivering surprises.

The issue is not the forecasts themselves, though they’ve frequently been wrong. Rather, it’s that the focus on a central projection — such as three interest-rate cuts in 2024 — in an economy still undergoing post-pandemic tremors fails to communicate much about the plausible range of outcomes. The outlook for rates presented just last month now appears outdated amid a fresh wave of inflation.

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Slump in Coal Production Drags Down Poland’s Economic Recovery

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Coal

A 26% plunge in coal mining weighed on Poland’s industrial output in March 2024, casting a shadow over the expectations that the biggest emerging-market economy in Europe would grow by the expected 3% this year.

Coal mining output slumped by 25.9% year-over-year in March, contributing to a 6% decline in Poland’s industrial production last month, government data showed on Monday. This was the steepest decline in Poland’s industrial output since April 2023, per Bloomberg’s estimates. It was also much worse than expectations of a 2.2% drop in industrial production.  

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The steep drop in the Polish industry last month raises questions about whether the EU’s most coal-dependent economy would manage to see a 3% rebound in its economy this year, as the central bank and the finance ministry expect.

Still, it’s too early into the year to raise flags about Poland’s economy, Grzegorz Maliszewski, chief economist at Bank Millennium, told Reuters.

“I wouldn’t radically change my expectations here, because there are many reasons to expect a continuation of economic recovery, as domestic demand will increase and the economic situation in Germany is also improving,” Maliszewski said.

Meanwhile, Poland’s new government has signaled it would be looking to set an end date for using coal for power generation, a senior government official said.

“Only with an end date we can plan and only with an end date industry can plan, people can plan. So yes, absolutely, we will be looking to set an end date,” Urszula Zielinska, the Secretary of State at the Ministry of Climate and Environment, said in Brussels earlier this year.

Last year, renewables led by onshore wind generated a record share of Poland’s electricity—26%, but coal continued to dominate the power generating mix, per the German research organization Fraunhofer Society.

Poland’s power grid operator said last month that it would spend $16 billion on upgrading and expanding its power grid to accommodate additional renewable and nuclear capacity.

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