QUAYSIDE, a 12-acre (4.8-hectare) stretch of flood-prone land on Toronto’s eastern waterfront, is home to a vast, pothole-filled parking lot, low-slung buildings and huge soyabean silos—a crumbling vestige of the area’s bygone days as an industrial port. Many consider it an eyesore but for Sidewalk Labs, an “urban innovation” subsidiary of Google’s parent company, Alphabet, it is an ideal location for the world’s “first neighbourhood built from the internet up”.
Sidewalk Labs is working in partnership with Waterfront Toronto, an agency representing the federal, provincial and municipal governments that is responsible for developing the area, on a $50m project to overhaul Quayside. It aims to make it a “platform” for testing how emerging technologies might ameliorate urban problems such as pollution, traffic jams and a lack of affordable housing. If things go well, its innovations could eventually be rolled out across an 800-acre expanse of the waterfront—an area as large as Venice.
First, however, Sidewalk Labs is planning pilot projects across Toronto this summer to test some of the technologies it hopes to employ at Quayside; this is partly to reassure residents. If its detailed plan is approved later this year (by Waterfront Toronto and also by various city authorities), it could start work at Quayside in 2020.
That proposal contains ideas ranging from the familiar to the revolutionary. There will be robots delivering packages and hauling away rubbish via underground tunnels; a thermal energy grid that does not rely on fossil fuels; modular buildings that can shift from residential to retail use; adaptive traffic lights; and snow-melting sidewalks. Private cars are banned; a fleet of self-driving shuttles and robotaxis would roam freely. Google’s Canadian headquarters would relocate there.
Undergirding Quayside would be a “digital layer” containing sensors tracking, monitoring and capturing everything from how park benches are used to levels of noise to water use by lavatories. Sidewalk Labs says that collecting, aggregating and analysing such volumes of data will make Quayside efficient, liveable and sustainable. The data would also be fed into a public platform through which residents could, for example, allow maintenance staff into their homes while they are at work.
Similar “smart city” projects, such as Masdar in the United Arab Emirates or South Korea’s Songdo, have spawned lots of hype but are not seen as big successes. Many experience delays because of shifting political and financial winds, or because those overseeing their construction fail to engage locals in the design of communities, says Deland Chan, an expert on smart cities at Stanford University. Dan Doctoroff, the head of Sidewalk Labs, who was deputy to Michael Bloomberg when the latter was mayor of New York City, says that most projects flop because they fail to cross what he terms “the urbanist-technologist divide”.
That divide, between tech types and city-planning specialists, will also need to be bridged before Sidewalk Labs can stick a shovel in the soggy ground at Quayside. Critics of the project worry that in a quest to become a global tech hub, Toronto’s politicians may give it too much freedom. Sidewalk Labs’s proposal notes that the project would require “substantial forbearances from existing [city] laws and regulations”.
It is not yet known what business model Sidewalk Labs is planning for Quayside. Rohit Aggarwala, the firm’s head of urban systems, said at a public meeting in March that it is “frankly a little unclear” what it will be. Mr Doctoroff says the firm might make money by licensing the products and services that it develops in Toronto and selling them to other cities. It is uncertain whether Torontonians who contributed data to hone such services would share in the revenue.
Privacy concerns will doubtless arise—over what data the sensors at Quayside will hoover up, who will own them, where they will be housed, how they will be safeguarded and so on. For now, Sidewalk Labs has said it will not use or sell personal information for advertising purposes and that the data will be subject to “open standards”, allowing other companies and agencies to make use of it. Sidewalk Labs and Waterfront Toronto have brought in a former federal privacy commissioner and a former privacy commissioner of Ontario as advisers.
But privacy experts call such assurances insufficient, because Canada’s legal frameworks for data privacy and security lag behind the latest innovations from tech firms. “You can always choose whether or not to download an app on your phone,” says Kelsey Finch at the Future of Privacy Forum, a think-tank. “You can’t easily opt out of the community that you live in.”
Japan still has great influence on global financial markets
IT IS the summer of 1979 and Harry “Rabbit” Angstrom, the everyman-hero of John Updike’s series of novels, is running a car showroom in Brewer, Pennsylvania. There is a pervasive mood of decline. Local textile mills have closed. Gas prices are soaring. No one wants the traded-in, Detroit-made cars clogging the lot. Yet Rabbit is serene. His is a Toyota franchise. So his cars have the best mileage and lowest servicing costs. When you buy one, he tells his customers, you are turning your dollars into yen.
“Rabbit is Rich” evokes the time when America was first unnerved by the rise of a rival economic power. Japan had taken leadership from America in a succession of industries, including textiles, consumer electronics and steel. It was threatening to topple the car industry, too. Today Japan’s economic position is much reduced. It has lost its place as the world’s second-largest economy (and primary target of American trade hawks) to China. Yet in one regard, its sway still holds.
This week the board of the Bank of Japan (BoJ) voted to leave its monetary policy broadly unchanged. But leading up to its policy meeting, rumours that it might make a substantial change caused a few jitters in global bond markets. The anxiety was justified. A sudden change of tack by the BoJ would be felt far beyond Japan’s shores.
One reason is that Japan’s influence on global asset markets has kept growing as decades of the country’s surplus savings have piled up. Japan’s net foreign assets—what its residents own abroad minus what they owe to foreigners—have risen to around $3trn, or 60% of the country’s annual GDP (see top chart).
But it is also a consequence of very loose monetary policy. The BoJ has deployed an arsenal of special measures to battle Japan’s persistently low inflation. Its benchmark interest rate is negative (-0.1%). It is committed to purchasing ¥80trn ($715bn) of government bonds each year with the aim of keeping Japan’s ten-year bond yield around zero. And it is buying baskets of Japan’s leading stocks to the tune of ¥6trn a year.
Tokyo storm warning
These measures, once unorthodox but now familiar, have pushed Japan’s banks, insurance firms and ordinary savers into buying foreign stocks and bonds that offer better returns than they can get at home. Indeed, Japanese investors have loaded up on short-term foreign debt to enable them to buy even more. Holdings of foreign assets in Japan rose from 111% of GDP in 2010 to 185% in 2017 (see bottom chart). The impact of capital outflows is evident in currency markets. The yen is cheap. On The Economist’s Big Mac index, a gauge based on burger prices, it is the most undervalued of any major currency.
Investors from Japan have also kept a lid on bond yields in the rich world. They own almost a tenth of the sovereign bonds issued by France, for instance, and more than 15% of those issued by Australia and Sweden, according to analysts at J.P. Morgan. Japanese insurance companies own lots of corporate bonds in America, although this year the rising cost of hedging dollars has caused a switch into European corporate bonds. The value of Japan’s holdings of foreign equities has tripled since 2012. They now make up almost a fifth of its overseas assets.
What happens in Japan thus matters a great deal to an array of global asset prices. A meaningful shift in monetary policy would probably have a dramatic effect. It is not natural for Japan to be the cheapest place to buy a Big Mac, a latté or an iPad, says Kit Juckes of Société Générale. The yen would surge. A retreat from special measures by the BoJ would be a signal that the era of quantitative easing was truly ending. Broader market turbulence would be likely. Yet a corollary is that as long as the BoJ maintains its current policies—and it seems minded to do so for a while—it will continue to be a prop to global asset prices.
Rabbit’s sales patter seemed to have a similar foundation. Anyone sceptical of his mileage figures would be referred to the April issue of Consumer Reports. Yet one part of his spiel proved suspect. The dollar, which he thought was decaying in 1979, was actually about to revive. This recovery owed a lot to a big increase in interest rates by the Federal Reserve. It was also, in part, made in Japan. In 1980 Japan liberalised its capital account. Its investors began selling yen to buy dollars. The shopping spree for foreign assets that started then has yet to cease.
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