WSJ : Israel’s Highest Court Strikes Down Controversial Law to Curb Its Power

Israel’s Highest Court Strikes Down Controversial Law to Curb Its Power
The law was a centerpiece of the judicial overhaul pursued by the Netanyahu government before the Gaza war erupted

TEL AVIV—Israel’s highest court has struck down a controversial judicial overhaul law enacted last year by the government of Prime Minister Benjamin Netanyahu that would have limited the justices’ power.

Israel’s Supreme Court ruled against a central piece of a judicial overhaul that Netanyahu was pushing before the war in Gaza erupted last October. The court struck down a law, which was passed in July and was akin to a constitutional amendment, that would have taken away the court’s powers to abrogate government decisions it deems to be “unreasonable in the extreme.”

The ruling could revive the deep political and social strife generated by the judicial reform last year, just as the country reels from the Oct. 7 attack by Hamas militants on southern Israel and is embroiled in a devastating war in Gaza.

Before the Oct. 7 attack, hundreds of thousands of Israelis came out weekly to protest against Netanyahu’s push to limit the powers of the court and give more control to the elected government.

Eight justices ruled in favor of striking down the law, with seven against.

The much-anticipated decision is overshadowed by Israel’s continuing war with Hamas militants in the Gaza Strip. But analysts say it could have substantial consequences for postwar domestic politics, including any inquiry into the intelligence failures leading up to the Oct. 7 Hamas-led assault on southern Israel, which left about 1,200 people dead—most of them civilians—according to Israeli authorities.

The ruling also has potential to reignite a divisive national debate and provoke a constitutional crisis.

The law, passed last summer by Israel’s parliament, the Knesset, was part of a broader package of legislation aimed at limiting the court’s power and giving more control to lawmakers. Netanyahu has argued that activist, liberal judges control the court and that the legislation seeks to restore a proper balance of power. Opponents charge that the legislation would undermine the court’s role as a check on executive and legislative power and would erode Israel’s liberal democracy.

Israel has no written constitution like the U.S. and relies on a series of basic laws, which have special, quasi-constitutional status and delineate the basic tenets of the state such as electoral procedures, minting currency, and individual rights. Since the mid-1990s, the court has interpreted them as the country’s constitution.

In a decision that could have wide repercussions, the court also ruled 12 to 3 that it has the right to strike down a basic law in “unusual and extreme cases” when it goes against the core principles of Israel as a Jewish and democratic state.

“This is really an unprecedented decision because it is the first time in the history of the state where the court strikes down a basic law” that is equivalent to a constitutional amendment, said Yaniv Roznai, a law professor at Reichman University in central Israel.

The court has never struck down one of the basic laws, but has opined in various decisions that it has the authority to do so if the laws would alter the basic democratic character of the country.

Netanyahu’s Likud party criticized the court’s ruling, saying that “it is unfortunate that the Supreme Court chose to issue a decision at the heart of Israel’s social divisions, precisely when [Israeli] soldiers” from across the political spectrum “are fighting and risking their lives.”

Justice Minister Yariv Levin, considered the judicial overhaul’s chief architect, said the court’s ruling “takes away from millions of citizens their vote and the basic right to be equal partners in decision-making.” Levin has long argued that elected leaders should have more influence over the courts and their authority.

Opposition Leader Yair Lapid praised the decision as protecting Israeli democracy. “If the Israeli government again starts the fight over the Supreme Court,” Lapid said, then “they learned nothing on Oct. 7.”

The Netanyahu government’s judicial overhaul plan divided the country before war, with some arguing that it conveyed weakness to Israel’s enemies and influenced the timing of the Hamas attack.

The ruling coalition has several options if it chooses to oppose the ruling, say legal analysts. This includes passing a more nuanced version of the reasonability amendment or passing basic law legislation that would limit the ability of the court to strike down basic laws.

Barrons : Inside Saudi Arabia’s $3 Trillion Plan to Move Past Oil

Inside Saudi Arabia’s $3 Trillion Plan to Move Past Oil
The world’s largest oil exporter has a plan to transform its economy into a high-tech hub for global business. How investors can ride along.

Saudi Arabia has embarked on a grand experiment—a Middle East version of “if you build it, they will come.”

Facing an existential threat to oil, the country’s lifeblood, Saudi Arabia is spending more than $3.2 trillion to transform its economy by 2030. While oil remains essential, the country is trying to fashion itself as a high-tech hub and destination for global business and leisure, preparing for the end of the fossil fuel era.

Lurking in the background are the combustible politics and instability of the Middle East. The Israel-Hamas war has cast a pall over the region and frozen a much-anticipated peace deal between Riyadh and Jerusalem. Iran and its proxy militias in Lebanon and Yemen—the latter attacking ships in the Red Sea—remain a source of regional conflict.

But the instability doesn’t seem to be affecting Saudi Arabia’s investment outlook or its stock market: An exchange-traded fund tracking the Saudi market is up 11% in the past year, almost doubling the return of emerging markets broadly. More gains could come as the economic transformation takes hold. Non-Saudi companies like Boeing, Oracle, and Hilton Worldwide Holdings could get a boost to sales, along with Wall Street banks trying to tap into the action from a revitalized Saudi Arabia.

“No one believes me when I tell them what is happening in this country,” says Amy Oldenburg, head of emerging markets equity at Morgan Stanley Investment Management. “It’s rare in emerging markets that we see a country with such an aggressive plan—trying to achieve things that countries have done over 15 to 20 years within a shorter period of time.”
In the near term, oil will remain critical, accounting for 40% of economic activity and 70% of government revenue. The Saudis cut production recently amid worries about weakening demand from China and increased production from the U.S. Reflecting the pressure, the kingdom’s latest budget outlook projects modest deficits over the next three years versus previous forecasts for largely balanced budgets.

Over the longer term, global efforts to phase out fossil fuels threaten the economy, a reason the Saudis are investing aggressively to diversify. The government also needs oil to stay above roughly $80 a barrel to maintain a fiscal break-even point—while spending massively from its sovereign-wealth fund to subsidize new industries and projects.


The non-oil economy is now booming with spending by consumers, businesses, and the government, says economist James Swanston of Capital Economics. That should help reignite growth. Swanston expects Saudi’s economy to expand by 6.3% in 2025, making it one of the strongest emerging markets.

The core of the makeover is “Vision 2030,” a sweeping modernization plan launched in 2016 by the country’s de facto ruler, Crown Prince Mohammed bin Salman, known by his initials MBS. A globe-trotting millennial, MBS has been on a roadshow to promote Vision 2030—aiming to burnish the kingdom’s image and lure investment.

The changes are transforming Saudi’s economy. Riyadh recently hosted the Middle East’s largest pop music festival. Lucid Group started building electric vehicles in the country for both domestic sales and export. A $500 billion renewable-powered city project is going up in the desert. Even its oil industry is diversifying with a push into petrochemicals.

A big change is that the Islamic “morality police” have been sidelined. Women are now on the roads and able to socialize without a male guardian—a stark contrast to 2018, when women were jailed just for driving. Female labor-force participation has jumped from 18% in 2009 to 30%.

The overarching goal is to inject dynamism into a sclerotic economy and modernize a country where more than half of its 36 million people are under 35 and until recently had scant incentive to look beyond government jobs.

A welcoming face is on display and gaining traction. Films, music, and other forms of entertainment are no longer banned. Riyadh is hosting techno concerts, wooing celebrities like Gwyneth Paltrow to film festivals, and turning into a sports powerhouse: The Saudi-sponsored LIV golf league has lured top players; soccer superstars like Neymar and Ronaldo now play in Riyadh.

Global companies and leaders are coming, too. Just weeks after the Hamas attacks on Israel, a “Davos in the Desert” conference drew chieftains including Citigroup CEO Jane Fraser, BlackRock Chairman and CEO Larry Fink, and Goldman Sachs Group Chairman and CEO David Solomon. Oracle says that it plans to invest $1.5 billion to bolster the kingdom’s cloud infrastructure; Microsoft announced a $2 billion investment to do the same. HSBC Holdings plans to increase its workforce in the country by 10% to 15%.

A new entrepreneurial spirit is also percolating. Years ago, young Saudis went into cushy government jobs that paid well, avoiding the private sector and risk-taking. Today, there’s far more incentive to launch a start-up, along with success stories like grocery delivery firm Nana and ride-sharing app Careem.

In the old days, “you couldn’t wait to get out of there. It was dead and intellectually stale,” says Jon Alterman, director of the Middle East Program at the Center for Strategic and International Studies, who has visited the country for decades. “The mood now is different, with a sense that this place is on the move.”

Critics assert that the Saudi charm offensive is designed to deflect attention from ongoing human-rights abuses, including lengthy jail terms or death sentences simply for tweets. Despite the flurry of reforms, analysts say there’s virtually no movement to open up Riyadh’s political system—with power largely consolidated in MBS—while repression and surveillance have increased.

Riyadh is also trying to rehabilitate its image since the 2018 assassination of the Saudi dissident and journalist Jamal Khashoggi. U.S. intelligence pegged responsibility for the murder on Saudi authorities, including MBS. The Saudi government denied responsibility and prosecuted eight people it said were involved.

So far, none of this looks likely to derail the makeover. Assuming that the Israel-Hamas conflict doesn’t spread, Saudi’s economic plan should stay on course, says Ayham Kamel, head of the Eurasia Group’s Middle East and North Africa research team. The country’s geopolitical stature could also get a lift if it manages to de-escalate the conflict—part of a broader initiative by Saudi leadership to make peace with historic rivals, as it recently did with Iran.

“Saudi Arabia gave Iran considerable concessions,” says Marko Papic, chief strategist at Clocktower Group. “These concessions should convince investors that [the kingdom] is singularly focused on its dramatic economic transformation.” A detente between the historic enemies should act as a geopolitical anchor, stabilizing the climate for investment, says Papic, who has made several business trips to the kingdom this year.

Saudi Arabia’s rise reflects a shift away from China by global investors and companies. China’s growth is slowing as it struggles with an aging population, high debt burdens, U.S. trade frictions, and a global trend to “reshore” manufacturing. Foreign direct investment in China has dwindled and even went negative recently, exceeding $100 billion of outflows in the first three quarters of 2023, according to the Peterson Institute for International Economics.

While Saudi Arabia isn’t nearly big enough to replace China in investment or corporate portfolios, it stands in stark contrast in terms of the resources at its disposal. It has a young, increasingly educated population. Its economy is at an earlier development stage than China’s, and it has vast financial resources, fueled by a sovereign war chest of roughly $2 trillion and gushers of oil revenue, topping $228 billion in 2022.

Saudi oil money is now being redirected to a slew of new industries. Goldman Sachs estimates that the government could spend $1 trillion by the end of the decade in six sectors, including clean tech, petrochemicals, mining, transport, and logistics.

Manufacturing is on the rise. Riyadh in its initial Vision 2030 plan targeted lifting non-oil exports to 50% from 16% of gross domestic product. The government is wooing biotech and pharmaceutical companies with subsidies and other incentives, including $1 billion for treatments for aging. Riyadh is also using its petrochemical base to lure “dirty” industries that are being pushed out of other parts of the world or want to cut their reliance on China, Papic says. Even China is looking at Saudi Arabia to diversify its clean-energy manufacturing base, he adds.

The most eye-catching project is called Neom, a $500 billion futuristic city and business hub powered by solar and thermal energy. An offshoot island, called Sindalah, is being built as a playground for the global elite, including luxury hotels and shopping, high-tech golf, and ample marina space for “superyachts.”

In the long term, the goal is to challenge Dubai as a luxury tourism destination. Riyadh has set a goal for tourism to account for 10% of GDP by 2030, up from 6% this year. To help hit that target, the government is starting a second airline, aiming to challenge Persian Gulf carriers like Emirates and Etihad.

All of this is an unprecedented experiment. No country so dependent on oil has reinvented itself so fast. It took Dubai decades, at a much smaller scale. Norway has diversified but had the benefit before discovering oil of developed institutions, infrastructure, a university system, and an educated workforce—all of which Saudi Arabia still has to develop.

“This is a sea change in the region,” says Rabah Arezki, a Middle East specialist at Harvard University’s Kennedy School of Government. “The litmus test of reform will be if they attract foreign investment. It will take a few years to test, but this is the biggest economic experiment we have seen in a long time.”

Investing in Saudi’s Makeover
While the Saudis are pushing reforms, this is still an early-stage market. Foreign ownership of publicly listed equities is limited to 49%. Underlying asset owners need to be “qualified foreign investors” and obtain legal registration to own and trade securities, according to Vivian Lin Thurston, a manager for William Blair’s emerging markets growth strategy.

“Saudi stock markets are still in the early phase of growth and development,” she notes. Liquidity on the Riyadh exchange is low. Just a sliver of Saudi Aramco, the state oil company, trades publicly, and many of the newest equity listings are available only to locals.

Transforming the country’s bureaucracy is a work in progress. Legal, regulatory, and tax structures are in flux; some multinationals have been hit with large, surprise tax bills. So far, foreign direct investment accounts for just 1% of GDP, with the Saudis investing far more abroad than others are investing in the kingdom, according to the Institute of International Finance.

The plus side is that officials are open to hearing investors’ concerns, according to Morgan Stanley’s Oldenburg, who views that as a sign of momentum.

The most accessible instrument is the iShares MSCI Saudi Arabia ETF. The fund tracks the Saudi stock market, holding 120 companies listed on the Riyadh exchange. About 40% of it consists of banks, nearly a fifth is in materials, and 8% in energy.

That makeup is changing, though. Several dozen companies, many consumer-oriented, are poised for public offerings in the next year or two. The country is also increasing foreigners’ ability to own shares of local companies, which should help fuel investment.

Another lift could come from investors in emerging market funds. Saudi Arabia now makes up just 4% of the MSCI Emerging Markets index, but is poised to become the fifth-largest country in the index in a couple of years. The upshot: Any investor that uses the index as its benchmark will need to buy more Saudi stocks. “It’s on the cusp of being too large to ignore,” Oldenburg says.

Thurston sees opportunities in cosmetics, fitness, and healthcare companies. The country’s young population has considerable disposable income, thanks partly to government funding for things like education abroad. Credit growth is also picking up as consumers begin borrowing for things like cars and mortgages—signs of a growing middle class that make the country attractive for investment, says Thurston.

Multinationals will have to invest if they want a piece of the Vision 2030 action. Whereas companies for decades built regional bases elsewhere and viewed the kingdom as a stopover, Riyadh is requiring firms to locate regional headquarters in the country by 2024 to be eligible for government contracts. That includes Aramco and legions of firms building out infrastructure and manufacturing—lucrative sources of new revenue.

Boeing, for one, has secured a deal for 80 new 787 Dreamliners as the Saudis build their second airline. Hilton Worldwide plans to open more than 50 hotels across the country.

The Saudis are also making a big push into videogaming: the sovereign-wealth fund owns minority stakes in many gaming firms and doubled its position in Electronic Arts earlier this year as part of a $40 billion initiative to turn the country into a videogaming hub.

Investors should bear in mind a few caveats. Even as it tries to diversify, Saudi stocks tend to move with oil. The market isn’t cheap by emerging market standards, trading at 17.5 times forward 12-month earnings versus 12.3 for the broader emerging markets index.

Transforming the economy isn’t just about investing. The country needs to reshape its bureaucracy, educate a new managerial and worker class, and pass far more legal protections. “You have wealthy leadership that’s serious about bringing in the best and rewarding excellence,” Alterman says. “But there’s a lot to do.”

The upside in Saudi Arabia resides in MBS—an authoritarian leader who has shown no interest in opening up the political system. Dictatorships come with considerable risk, as investors in Russia and China can attest.

“If you are going to have an authoritarian regime, as an investor, you want to know at least who is in charge,” says Papic. The Middle East’s largest economy won’t be a democracy. Assuming it stays investor-friendly, it could lift many ships.

Barrons : How Japan’s Political Turmoil Could Spill Over Into Markets

How Japan’s Political Turmoil Could Spill Over Into Markets

Investors have had a muted reaction to Japan’s biggest political scandal in decades. The iShares MSCI Japan exchange-traded fund has dipped by 1% since Dec. 14, when Prime Minister Fumio Kishida sacked four cabinet ministers over allegations of campaign finance kickbacks. The red-hot S&P 500 gained 1% during that time. Japanese stocks remain up 15% for 2023.

Markets may need to pay more attention next year. Allegations of wrongdoing could spread and directly threaten the prime minister. “It’s even odds that Kishida will not survive this,” says Jesper Koll, Tokyo-based global ambassador for the Monex Group.

More alarming are the government’s disastrous poll numbers. Kishida, in power since October 2021, is down to a 22% approval rating, reports Yuko Nakano, who holds the Japan Chair at the Center for Strategic and International Studies. His Liberal Democratic Party is below 30% for the first time since 2012.

That reflects public disillusionment with the very “new capitalism” that has spurred fresh hope for Japan in financial markets. “The primary reason for disapproval was a lack of confidence in economic policy,” Nakano says.

Japanese politics is characterized by frequent personnel shake-ups—there have been 64 prime ministers since 1945—but steady policy based on consensus within the LDP and a powerful self-perpetuating bureaucracy.

Groupthink remains solid on one prong of the new capitalism: eliminating negative interest rates, which have tanked the yen 20% against the dollar over the past two years. Analysts expect the Bank of Japan to move from negative 0.1% to zero early next year.

“The coming removal of negative interest rates is not expected to meet with much resistance,” says Shigeto Nagai, head of Japan Economics at Oxford Economics.

The second prong, shifting reflationary impetus to the fiscal side with deficit spending, is more contentious. Kishida is pushing tax cuts even as outlays rapidly increase, driven by a doubling of defense spending and increased child credits to encourage population growth. In November his cabinet passed an $87 billion supplementary budget to be doled out by March.

Conservative bureaucrats upset by this free spending may be pushing back with the corruption allegations against government figures, Koll speculates. “It’s not a coincidence that the scandal broke after Kishida went against the ministry of finance to advocate tax cuts,” he says.

Whatever the underlying machinations, young Japanese are literally not buying Kishida’s reflation narrative and opening their wallets accordingly, Nagai says. “The weakness of consumption comes from a secular rise in precautionary savings by younger generations worried about future tax increases or diminishing pension benefits due to society’s rapid aging,” he says.

On the bright side, it isn’t just the government that has been driving Japan’s relatively bullish markets, Koll says. The Tokyo Stock Exchange lit a fire early this year, announcing it would demand “capital improvement plans” from listed companies trading below book value, which was close to half of them.

Corporate mergers and buyouts have hit record levels since then, a sign that managers are trying to respond. “The corporate metabolism is revving up,” Koll says. “New leaders want to create a legacy.”

It won’t help if Kishida’s legacy turns out to be disarray and disenchantment, though—or kicking the can down the road for one of the world’s oldest countries, with a historic aversion to immigrants.

“Kishida’s approval rating has declined because the public is fed up with his reluctance to confront fundamental problems,” Oxford Economics’ Nagai says.

WWD : Global Wellness Economy Soars to $5.6 Trillion in 2022 Amid Strong Recover

Global Wellness Economy Soars to $5.6 Trillion in 2022 Amid Strong Recovery Post-pandemic
The Global Wellness Institute's latest data reveals sustained growth over the next five years.

In the Global Wellness Institute’s latest Global Wellness Economy Monitor report, now in its fifth edition, researchers at the organization said the wellness economy reached a global total of $5.6 trillion in 2022 with a compounded annual growth rate of 12.1 percent.

The sectors include spas, thermal/mineral springs, wellness tourism, workplace wellness, wellness real estate, physical activity and mental wellness as well as personal care and beauty, healthy eating, nutrition and weight loss, public health, prevention and personalized medicine, and traditional and complementary medicine. The largest sector is personal care and beauty at $1.09 trillion, followed by healthy eating, nutrition and weight loss at $1.08 trillion.

The report was prepared by the organization’s key researchers, Katherine Johnston, Ophelia Yeung and Tonia Callender.

To give the data some context, the authors said that, like most industries, “the global wellness economy has experienced major shifts and disruptions over the last few years in the wake of the COVID-19 pandemic. Prior to 2020, the wellness economy was growing strongly, and faster than overall economic growth, for many years.”

In 2019, the wellness economy reached $4.9 trillion, but in 2020, “it fell by 9.5 percent to $4.5 trillion due to the pandemic,” the authors said. “By comparison, global GDP fell by only 2.7 percent in 2020. The year 2020 has become a watershed year that will forever divide history — and the wellness economy — into ‘before’ and ‘after’ COVID-19.”

The report stated that the wellness economy has since recovered. “The global wellness economy and all of the wellness sectors are poised for strong ongoing recovery and growth in the coming years, fueled by a long-term trend of rising consumer interest in and need for wellness, which has only accelerated since the pandemic,” the authors said.

As a result, the global wellness economy is poised to see a compounded annual growth rate of more than 8.6 percent in the next five years. By region, North America is in the spotlight.

“In 2022, North America surpassed Asia Pacific to become the largest regional wellness economy, a shift that has occurred due to relatively slower growth and recovery in some major Asian markets,” the authors said. “North America ($1.9 trillion), Asia Pacific ($1.7 trillion) and Europe ($1.5 trillion) together account for 90 percent of the entire global wellness economy.”

The report’s authors said it is noteworthy that “some of the wellness sectors are ‘export industries’ (i.e., selling services to people who are not residents of the country where the business is located). For example, about 26 percent of all wellness tourism expenditures are from international travel; a significant portion of revenues in thermal/mineral springs and some types of spas come from international visitors.”

WWD : Bernard Arnault Leads French New Year’s Honors Roll

Bernard Arnault Leads French New Year’s Honors Roll
The luxury magnate was awarded the Grand Cross of the Legion of Honor, France’s highest civilian decoration.

PARIS — Luxury magnate Bernard Arnault was awarded the Grand Cross of the Legion of Honor, France’s highest civilian decoration, in the annual New Year’s Day honors list.

The founder of the LVMH Moët Hennessy Louis Vuitton conglomerate, which owns brands including Louis Vuitton, Dior, Tiffany & Co., Guerlain and Dom Pérignon, previously had been made a Grand Officer of the Legion of Honor in 2011.

Chantal Gaemperle, executive vice president of human resources and synergies at LVMH, was declared a Knight of the Legion of Honor in the list published on Sunday, as was journalist and author Sophie Fontanel.

Others associated with the luxury world who were promoted to Knight included Marc Schwartz, chief executive officer of the Monnaie de Paris, France’s sovereign mint; Pascale Duchénoy, CEO of embroiderer Maison Duchénoy, and master tailor Marc de Luca. Meanwhile, pastry chef Pierre Hermé was made an officer.

(ZH) Rome Was Eternal, Until It Wasn't: Imperial Analogs Of Decay

Rome Was Eternal, Until It Wasn't: Imperial Analogs Of Decay

The tricky part is distinguishing the critical dependencies - those resources the empire literally cannot do without - from longer-term sources of decay and decline.
In response to my recent post What If There Are No Analogs for 2024?, an astute reader nominated the Roman Empire as a fitting analog. Longtime readers know I've often discussed the complex history of Western Rome's decay and collapse, for example, Why Rome Collapsed: Lessons For the Present (August 11, 2023).

Dozens of other posts on the topic stretch back to 2009: Complacency and The Will To Radical Reform (February 12, 2009)
What conclusions can we draw from recent research and the voluminous work done by previous generations of historians? Our first conclusion is simply to state the obvious: it's complicated. There was no one cause of Western Rome's decay and collapse. A multitude of factors generated feedback loops and responses over hundreds of years, some more successful than others.
Indeed, we cannot help but be struck by how many times impending collapse was staved off by brilliant leadership and policy adjustments.
Our second conclusion is to distinguish between the erosive forces of decay and critical vulnerabilities that can trigger collapse. Many authors have pointed to moral decay and fiscal over-reach as sources of Rome's eventual fall, but there were far more pressing dependencies that created potentially fatal vulnerabilities.
In the case of Western Rome, these included:
1. The depletion of the silver mines in Spain (and the eventual loss of Spain to the Visigoths). Once you run out of hard currency, your free-spending days are over. This dependence on large quantities of hard currency to fund your armed forces is a trigger for collapse.
2. Dependence on revenues from foreign trade with India, Africa and central Asia. Western Rome's income was highly asymmetric, depending heavily on import duties from foreign trade funneling through the Red Sea and the Roman ports in Egypt. Many of Rome's far-flung provinces were net drains on the imperial coffers; rather than generate income, they were costs
3. Military defeats. In his recent book The fall of the Roman Empire: a new history of Rome and the Barbarians, historian Peter Heather persuasively argues that the Roman Empire was neither on the brink of social or moral collapse, nor fatally weakened by resource depletion. What brought it to an end were the Barbarian invasions from what is now Germany and Eastern Europe, mass tribal movements triggered by the Huns pushing into Europe from the east.
Heather argues Rome's great success eventually led to its undoing, as the small, loosely organized Barbarian tribes learned from the Romans how to form larger, more cohesive and thus more powerful social and military organizations.
We must also note Rome's many defeats at the hands of Attila the Hun. It is not coincidence that Attila died in 453 AD and the Western Roman Empire expired in 476 AD, unable to recover from the losses incurred by the Huns, Visigoths and Vandals.
4. Dependence on wheat from North Africa. Rome depended entirely on the bread-basket of North Africa to feed its populace. Once the Vandals swept through Spain and conquered North Africa, cutting off Rome's supply of wheat, the empire was doomed.
5. Incompetent leadership. Western Rome--and every empire, if we look closely--was critically dependent on competent leadership when faced with existential threats to the Empire's cohesion. We can cite Marcus Aurelius and Constantine as two examples of many.
When the leadership was weak and/or incompetent, defeats and failures piled up and things fell apart.
We must also note the role of the great tidal forces of demographics, disease, climate change, regional rivalries and cultural sclerosis in weakening the empire's ability to respond to polycrisis. The rise of the Barbarian tribes led to Rome's successful melding of diplomacy, bribes and military victories, a strategy mirrored by the Han Dynasty in China at the same time.
(I'll have more to say on the Han Dynasty this weekend for my subscribers.)
Rome successfully Romanized the Barbarian tribes, but made the critical cultural error of dismissing this new cohort of productive Roman citizenry as second-class. Romans who happened to have been born in Gaul (France) or Germany eventually chafed at these institutional biases, and this contributed to their eventual replacement of Italian leadership and its centralized control.
Indeed, the Roman Empire did not disappear in 476 AD as much as break apart into Barbarian-led pieces of what they reckoned was a continuation of the Imperial era. This complex history is ably addressed in the remarkable volume The Inheritance of Rome: Illuminating the Dark Ages 400-1000.
In some ways, the Catholic Church replaced the political-military empire as a centralized authority in western Europe. In the Eastern Roman Empire (the Byzantine Empire) that continued on for another thousand years, the Orthodox Church played a central role in its coherence.
The Antonine Plague of 165 to 180 AD weakened the empire. Generally ascribed to smallpox, the plague killed millions and decimated the Roman military. Rome recovered, but arguably never quite to the same level.
Empires tend to do just fine until climate change disrupts their agriculture and water supplies. Climate change--cooling weather across the prime agricultural regions--weakened both Rome and the Han Dynasty. Historian Kyle Harper describes the gradual and eventually consequential changes in his book The Fate of Rome: Climate, Disease, and the End of an Empire.
The centuries-long rivalry with the Persian Empire also drained the Empire of resources, even as new challenges from Barbarians and Huns demanded increasing military expenditures.
We would be remiss not to include the internal decay wrought by clinging to the alluring fantasy that past success guarantees future success, without any nasty sacrifices by the ruling elites. Historian Michael Grant addressed this in his book The Fall of the Roman Empire:
"Enmeshed in classical history, all he can do is lapse into vague sermonizing, telling the Romans, as many a moralist had told them throughout the centuries, that they must undergo an ethical regeneration and return to the simplicities and self-sacrifices of their ancestors.
There was no room at all, in these ways of thinking, for the novel, apocalyptic situation which had now arisen, a situation which needed solutions as radical as itself. His whole attitude is a complacent acceptance of things as they are, without a single new idea.
This acceptance was accompanied by greatly excessive optimism about the present and future. Even when the end was only sixty years away, and the Empire was already crumbling fast, Rutilius continued to address the spirit of Rome with the same supreme assurance.
This blind adherence to the ideas of the past ranks high among the principal causes of the downfall of Rome. If you were sufficiently lulled by these traditional fictions, there was no call to take any practical first-aid measures at all."
Roman elites in Gaul were still writing letters to one another complaining of the breakdown of everyday life right up until the system collapsed. Their letters complaining of the collapse were never delivered, it seems. Their estates continued to exist for a time at the behest of their new Barbarian overlords, but power shifted away from old elites to new elites.
Lastly, let us note how cycles tend to impact empires. Systems arise due to their superior performance, reach their limits and then become obsolete as new selective pressures are met with half-measures and doing more of what's failed.
There are many Imperial Analogs of Decay. The tricky part is distinguishing the critical dependencies--those resources the empire literally cannot do without--from longer-term sources of decay and decline.

CrunchBase : 5 Top Trends In Tech And Startups We’re Watching In 2024, From AI T

5 Top Trends In Tech And Startups We’re Watching In 2024, From AI To IPOs

Between the rapid ascendance of AI and the often dramatic downfall of startups large and small, 2023 was an action-packed year for tech and venture.

In many ways, we expect 2024 to be the year when things settle down a bit. The buzz around AI will likely wane, but so, hopefully, will layoffs. The IPO markets may make a tepid comeback and we expect that after nearly two years of falling funding, venture investment will level off.

Here’s a look at five trends Crunchbase News’ editors and reporters are watching in the new year.

The AI buzz wears off
Perhaps the most interesting thing to watch in 2024 will be what happens to AI and more specifically, AI investment.

While $100 million-plus rounds were the norm this year, many investors are at least talking of a potential pullback in the market as valuations have continued to skyrocket and many question how many winners there will be in the generative AI market.

Sure, the OpenAIs and Anthropics likely will continue to be able to get nearly any valuations they want, but FOMO seems to be wearing off for investors in the space and many think other changes in the industry could affect investor sentiment.

Even as 2023 wore on, many investors seemed less and less interested in marketing or sales platforms that just wrapped AI around their platform.

Some VCs expect the legal and regulatory dilemmas AI companies could face in both the U.S. and overseas to lead to a slowdown in the flood of AI funding startups saw during 2023.

Others point to the fact that when the mobile revolution occurred more than a decade ago, the biggest winners when it came to the foundational infrastructure layer ended up being well-established tech companies. Sure, there were startup winners — like Twilio — but many Big Tech companies benefited the most from the last wave.

Of course, those Big Tech firms are already playing a large role in AI, investing billions of dollars in a variety of AI startups. The likes of Nvidia, Salesforce , Microsoft and Google have been wildly active and that could continue to propel AI funding into the new year.

It is important to remember AI is expensive. Startups need data, computing power, talent and a variety of other resources — all things Big Tech companies can provide.

If they stop and VCs pull back on cash, 2024 could get cold for many hot AI startups.

— Chris Metinko

Venture fund slowdown
While many expect to see an uptick in startups shuttering due to changes in the funding landscape (see Convoy), what about VC firms themselves?

The OpenView news seemed to rock the venture world a little when it broke in December, and its uncertain future is likely to be watched by many.

However, folks in the VC world expect similar types of headlines in 2024.

The salad days of 2020 and 2021 birthed a lot of new firms, many of which are seeing their investments down on paper after a good number of startups have had to slash valuations. These firms will not be able to raise new funds, forcing some to close up shop and possibly even sell their current stakes in companies early.

Even some large, well-established firms had to change fundraising plans to adjust to the evolving market this year, as both San Francisco-based Founders Fund and New York-based Tiger Global announced cuts to their new funds.

Expect more of that. Venture capital seems like a fun business when money is cheap, but when a recalibration happens, its risks become apparent.

— Chris Metinko

Tech layoffs have slowed but aren’t over
With at least 300,000 tech workers in the U.S. alone who’ve lost their jobs since we started tracking tech layoffs in early 2022, we wish we could say we’re expecting the job cuts to end in 2024. But with startups continuing to shut down in late 2023 and large companies even making cuts leading into the holidays, it doesn’t look like layoffs are ending just yet.

Yes, we fortunately haven’t seen the scale of layoffs we saw in November 2022 and January 2023 — when large tech companies including Amazon, Alphabet, Microsoft, Meta and Salesforce cut jobs by the tens of thousands — but a quick look at The Crunchbase Tech Layoffs Tracker (and our LinkedIn feeds) makes it clear there’s still plenty of pain in the tech workforce. While some of the layoffs are strategic trims, others are massive cuts across the board.

Couple that with a still lackluster outlook for the 2024 IPO market and a difficult fundraising for startups, and we expect layoffs to continue to pile up at least for the foreseeable future.

— Marlize van Romburgh

The end of the ‘everything is down’ narrative
As we’ve discussed, 2023 was a year of negative comps. Startup investment across pretty much every sector, stage and geography was down considerably from 2022 and even further below the 2021 peak.

In 2024, however, it’ll be much easier to craft a positive narrative for year-over-year funding. In sectors like, say, consumer products e-commerce, where investment has shriveled in recent quarters, it won’t take much to proclaim a sharp upturn.

We’re also hopeful that overall startup investment will tick higher in 2024. With tech stocks up in recent weeks, buoyed by hopes of Fed rate cuts, we’re also likely to see a return, finally, of some IPOs.

— Joanna Glasner

Don’t expect an IPO boom, though
We may see a return for some IPOs next year, but don’t expect the market for new listings to come roaring back.

That’s the updated outlook we’re hearing from those who watch the markets closely, especially given the tepid performances of 2023 listings Klaviyo and Instacart, the only two major venture-backed IPOs since late 2021.

In the current environment, public-market investors are pickier about which companies they want to see IPO, insiders have told us. Namely, they’re more interested in profitability than growth at all costs, and they’re often looking for larger, more established companies that can sustain a robust market capitalization.

That means companies that can delay an IPO may do so until 2025 or later.

Then again, there are close to 1,500 private companies with valuations of $1 billion or more currently on The Crunchbase Unicorn Board — and they all have to go public or otherwise exit at some time.

WSJ : Powerful Earthquake Hits Japan, Causing Tsunami and Fire

Powerful Earthquake Hits Japan, Causing Tsunami and Fire
The 7.6-magnitude quake struck on New Year’s Day and led to a 4-foot wave

TOKYO—A powerful 7.6-magnitude earthquake struck an area along the west coast of Japan, causing a tsunami wave of at least 4 feet as well as home collapses and a large fire.

A government spokesman said authorities were responding to at least six cases in which people were trapped inside a collapsed home. The National Police Agency said two people suffered cardiopulmonary arrest.

Footage from news helicopters showed a fire engulfing at least several blocks in the city of Wajima near the earthquake’s epicenter at the tip of the Noto Peninsula.

The New Year’s Day quake struck at 4:10 p.m. as many people were visiting family for the holiday or making the traditional New Year’s visit to a temple or shrine.

The Japan Meteorological Agency said the main earthquake had a magnitude of 7.6 and was followed by many aftershocks of smaller magnitude. It said the biggest tsunami reached at least 1.2 meters, or about 4 feet, with smaller tsunamis hitting a swath of the Japan Sea coast.

As of early Tuesday, a tsunami warning remained in effect. Officials said there was still a risk of further tsunamis. Most of the damage was centered in Ishikawa, Toyama and Niigata prefectures nearest the epicenter.

Television footage showed violent shaking that caused items to fall off store shelves and people to reach for support to stay standing. Some roads collapsed, and flights and trains to the area were canceled.

Lorraine Nickerson, 59, a missionary from Canada who lives in the Noto Peninsula with her family, said the shaking was so intense that she fled out the back door of her home.

“Let’s say my cupboard is empty of dishes,” she said. “We had everything smashed. All the pictures fell off the wall.” Nickerson said she and her family weren’t injured, and she spent the evening trying to clean up the mess.

Prime Minister Fumio Kishida said he spoke to two mayors in the region who told him that roads were cut off and they needed relief supplies sent by air or sea. Kishida said he ordered military, police and fire units to use all means necessary to get the area quickly and help with rescue and relief efforts.

An earthquake and tsunami on March 11, 2011, killed more than 20,000 people on the Pacific coast side of Japan and led to the meltdown of three reactors at the Fukushima Daiichi nuclear-power plant.

Since then, Japan has been slow to reopen nuclear-power plants in other parts of the country, including the still-offline Kashiwazaki-Kariwa plant in Niigata prefecture, less than 100 miles from Monday’s epicenter.

The Niigata plant’s operator, Tokyo Electric Power, also operated the Fukushima Daiichi plant. It said it didn’t experience any problems at the Niigata plant from Monday’s quake.

On Dec. 27, Tokyo Electric Power said regulators removed restrictions that had been imposed after the discovery of security lapses at the Niigata facility. That could open the door for the company to reopen two of the plant’s seven reactors, as it has sought to do for years.

However, it has yet to win approval from local authorities, which is considered a de facto requirement for operating a nuclear power plant in Japan.

FT : US office owners face $117bn wall of debt repayments

US office owners face $117bn wall of debt repayments
Pain likely to be widely spread as landlords struggle to refinance at current interest rates

Billions of dollars of debt will fall due this year on hundreds of big US office buildings that their owners are likely to struggle to refinance at current interest rates.

There are $117bn of commercial mortgages tied to offices which either need to be repaid or refinanced in 2024, according to data from the Mortgage Bankers Association.

Many of those were taken out a decade ago in an era when interest rates were far lower. Since then, commercial mortgage rates have nearly doubled, while the performance of many buildings has sunk, raising the prospect of billions of dollars of losses for investors.

“It’s going to be a problem to get some of these refinancings done,” said John Duncan, who heads the real estate finance practice at law firm Polsinelli. “We’re seeing deals where even sophisticated borrowers are calling it a day and asking their lenders whether they would like to take the keys.”

Unlike US home loans, commercial mortgages are almost entirely interest- only. That means developers of large properties tend to have low monthly payments, but face a balloon payment equal to the original loan the day the mortgage comes due.


The expected losses at this point are on a much smaller scale than during the 2008 housing crisis. But soured loans could cause billions in losses for investors, wipe out some property developers — such as the unravelling of Austrian property owner Signa — and lead to forced sales in the already struggling office market. In December, Signa’s insolvency administrator put the company’s ownership of half of New York’s Chrysler Building up for sale in order to raise urgently needed cash.

“We are in the very beginning of trying to weather the office market downturn,” said Richard Hill, the head of real estate strategy at Cohen & Steers. “This is not driven by fundamentals; this has everything to do with financing costs going back up.”

Interest rate expectations have moderated since the start of November, when investors feared inflation was proving stickier than expected and the US Federal Reserve would adopt a policy of “higher for longer”. That has provided a chink of light for some office owners.

Even as investors wait for the Fed to start cutting rates again, refinancings are getting done, eventually. Last month developer Aby Rosen secured a deal for New York’s iconic Seagram building, which stands set back from Park Avenue 10 blocks north of Grand Central station, following months of negotiations and after the $760mn of mortgage debt on the building had already been extended once.

About two-thirds of the soon-to-be due mortgages are held by banks. Delinquencies on those loans — which tend to be backed by higher-quality or lower-leveraged buildings — are rising, but are still very low. Data from the Federal Deposit Insurance Corporation shows it remained at a rate of just 1.5 per cent at the end of the third quarter.

Despite the low default rates, losses on those loans could be significant. In December, a group of US economists found that 40 per cent of office loans on bank balance sheets were under water, potentially causing problem for dozens of regional banks holding them.

“People should realise that regional banks are still very much exposed to the troubles in commercial real estate,” said Leo Huang, head of commercial real estate at Ellington Management.

The rest of the expiring loans on office properties are funded with commercial mortgaged backed securities (CMBS), a type of bond that typically pays more than government debt or similarly rated corporate bonds and are held by insurance companies, pension funds and individual investors.

There are now roughly $800bn in CMBS in the US. Delinquencies on office loans financed by CMBS topped 6 per cent at the end of November, up from 1.7 per cent a year earlier, according to real estate data firm Trepp.

“The CMBS market has done a good job of spreading out the risk,” said Huang. “But that means there will be pain to go around.”


Of the 605 buildings with mortgages expiring soon, there are 224 that Moody’s Analytics estimates owners will have trouble refinancing this year, either because the properties carry too much debt or because their rental performance is poor.

The former Sears Tower in Chicago, the tallest building in the world for more than two decades after its completion in 1974, is one of those on the list.

Now known as the Willis Tower, there is $1.3bn in debt secured against the building due in March. Its recent annual income before interest payments was 7 per cent of its debt. Moody’s predicts that, in light of higher interest rates, owners of buildings not generating at least 9 per cent of their debt in annual income will have trouble refinancing this year.

Although some of the financial troubles of office buildings and their owners are due to the Covid-19 pandemic and the resulting increase in office vacancies, aggressive underwriting in earlier years has also been a factor.

The Seagram building generated $56mn in net operating income in 2012, the year before it refinanced into its current loan. Yet when its lenders underwrote the $760mn mortgage the following year, they estimated the building could bring 30 per cent more a year, or $74mn in annual revenue.

It never has. Profit before interest payments and renovations peaked in 2018 at $69mn, and have fallen since, hitting a low of $27mn in 2022. Since then, Rosen and his firm RFR have added a 35,000-square-foot gym and conference space in the basement, including a 22-foot climbing wall, a multi-sport arena with seating for 150 and a spinning studio.

Even before Rosen secured his refinancing deal last month, brokers said the building remained desirable to tenants and was 92 per cent full as of the middle of the year. But the $54mn in earnings before interest and renovations it was on track to generate for 2023 is about the same amount as in 2012.

“Everyone will blame Covid [for] the losses,” said John Griffin, a professor at Texas university. “But Wall Street’s aggressive underwriting of commercial mortgage debt is going to make the situation a whole lot worse than it would have been.”

FT : Landlords in a bind as France imposes tough new emissions rules

Landlords in a bind as France imposes tough new emissions rules
Owners of historic apartments among those affected by green standards

Michelle Bassano owns a desirable asset: a top-floor studio apartment she rents out in an almost 200-year-old building in the historic Marais district of central Paris.

But she is now thinking of walking away as the issue of trying to meet France’s strict new energy efficiency standards is proving too challenging. “It is a nightmare,” said Bassano. “I’m thinking of just selling.”

Bassano’s neighbours in the jointly owned building refuse to ratify the roughly €100,000 needed to replace and insulate the zinc roof. Adding insulation to the stone facade outside is banned by historical preservation mandates — yet insulating the inside would mean losing precious space in the 25 square metre flat and cutting into its resale value.

Landlords across France are grappling with looming restrictions on renting out poorly insulated apartments and homes under strict new rules that phase in gradually from 2023. They aim to incentivise owners to renovate roughly two-thirds of France’s 37mn homes by 2050.

President Emmanuel Macron’s government argues that widescale renovations are needed to address a big source of greenhouse gas emissions: buildings account for almost half of French energy consumption and one-third of carbon emissions, while two-thirds of that total comes from homes. Experts say his government’s intervention is unique in Europe.

The new rules pose a particular problem for apartment buildings and historic homes like many in Paris, along with picturesque villages from Provence to Alsace. Homes in the Marais are doomed to remain in the bottom half of the government’s energy rating system even with renovations, say experts.

Critics are already warning of unintended consequences: they say the policy may worsen France’s housing shortage and could even spark social unrest as high inflation also hits households.

Jean-Claude Bassien, deputy chief executive of property group Nexity, thinks the government’s approach is the right one but that the timetable is “unrealistic and absurd”.

“We will need more time if we want to do this well and avoid a repeat of the gilets jaunes,” he added, referring to protests, named for the yellow jackets worn by demonstrators, that rocked France in 2018 over a proposed carbon tax on petrol.


To incentivise renovations, owners are required to get properties rated for energy efficiency, classifying them from A (best) to G (worst), before they can be sold or rented out. The regulations offer both carrot and stick: poorly insulated homes will gradually be excluded from the rental market over the next decade, but public money is available to help pay for insulation, new windows, or upgraded heating.

Landlords of F and G-rated homes may no longer raise rents, and as of this year, the worst of the G-rated properties cannot be rented to new tenants.

By 2028, 5.2mn homes rated F and G, or 17 per cent of total housing stock, will become ineligible for rental. By 2034, all E properties will also be excluded, amounting to around 40 per cent of homes.

Even some in Macron’s camp worry that the approach is too draconian. Finance minister Bruno Le Maire hinted that he supported softening the rules, but was then forced to backpedal.

While countries across Europe are trying a range of policies to decarbonise and boost the energy efficiency of homes, none have tried what France is doing, said Boris Cournède, a policy expert at the OECD.

“Everyone is looking at the French example, to see how it plays out,” he said. “It’s a good idea on paper even if it’s a bit early to judge the results.” 

In Germany, the government has taken a different approach, including banning gas boilers — a politically contentious measure — and creating a carbon dioxide tax on home heating. Belgium and Austria have tweaked regulations to facilitate renovations of multi-owner apartment buildings.

France has pledged to increase subsidies for home renovations to almost €5bn from €3.4bn last year. But a Green party-led Senate report argued much more funding was needed — one estimate puts the requirement closer to €25bn a year.


Accessing the cash available is not always easy, with a long application process and complex rules. Gilles Lambert has applied for about €10,000 in subsidies to renovate a 1980s building he owns with four rental apartments in a leafy Paris suburb.

“The application has been a complicated obstacle course,” said the 62-year-old. In the meantime, two of his flats have been banned from the market.

Real estate agents and property management companies have warned that the rules may aggravate housing shortages in cities such as Marseille, Bordeaux and Lyon by shrinking the pool of homes to rent.

Édouard Philippe, Macron’s former prime minister and now mayor of Le Havre, said excluding low-rated homes would “mechanically reduce rental options for low-income people”.

Another concern is that rent control rules in key cities will make it difficult for owners to garner an acceptable return on renovations where they do carry them out.

In Paris, renovations have become a flashpoint within jointly owned apartment buildings, known as copropriétés, because costly projects require majority approval, while a unanimous vote is needed to take out loans.

Laure Gallard has been lobbying her neighbours in a 10-unit, 1920s building to hire an expert to map out the renovations it needs, but has had little success.

“I think they are in denial because they do not want to know and are afraid of the cost that lies ahead of us,” said the 34-year-old architect. 

Some owners of F or G-rated homes are simply trying to sell. According to real estate website Se Loger, almost 20 per cent of the homes for sale in the first half of 2023 were poorly insulated ones, double the level in 2021.

Thomas Lefebvre, data scientist at Se Loger, said there was no guarantee that buyers would renovate. “If we’re just removing homes from the rental market without spurring renovations, then it’s not really a win for the environment,” he said.

Jacques Baudrier, a deputy mayor in Paris in charge of construction, refuses to despair. The city has spent some €2.5bn in 10 years to renovate public buildings and schools, and plans to update all low-income housing by 2050.

“We’ve made a lot of progress in the public sector, but in the private housing market, things are going far too slowly,” he said. 

The city has been holding monthly workshops in town halls to inform people about subsidies and offer advice. At one event in June, some 600 people came to trade tips on insulation, shutters, and heating and cooling systems.

“Initially people were really worried,” said Baudrier, “but now they are getting into it.”