The EconomistFebruary 20th 2021 Leaders 1112
I
ndia willsoon end China’s long run as the world’s most pop-
ulous country. But by some projections its workforce will not
exceed China’s until mid-century, even though Indians are much
younger. One reason is that so few women in India are in paid
work (see Asia section). The International Labour Organisation
says that only a fifth of adult women had a job or sought one in
2019, compared with three-fifths in China. The Centre for Mon-
itoring Indian Economy, a local research firm, put the share of
urban women in or looking for work at just 7% in November.
During the pandemic, women have typically been the first in
India to lose their jobs and the last to regain them. School shut-
downs have forced some to drop out of the labour force to look
after children who would normally be in class. Young women
who have been unable to study, train or work during the pan-
demic are being married off instead. That is a worrying develop-
ment. Whereas women in other countries often withdraw from
the workforce when burdened with a child, women in India drop
out when burdened with a husband.
Some would say that nothing should, or can, be done about
this. If Indian women choose not to work outside the home, the
argument runs, that is their business. Dropping out of the labour
force is a status symbol for upwardly mobile households, show-ing they are able to get by on the husband’s earnings alone.
But the dearth of working women in India is not simply a re-
flection of cultural preferences. Many women on the sidelines of
the economy are not there by choice. They say they would like to
work if they could. Were they all to get their wish, it would add
over 100m women to the workforce, by one calculation. That is
more than the total number of workers, male and female, in
France, Germany and Italy combined.
Moreover, Indians are not as hostile to women in work as the
employment numbers suggest. Their answers to questions like
“Should men have more right to a job than women?” are more
egalitarian than poll responses in Indonesia, where fully 53% of
women pursue work outside the home. Despite that, the share of
Indian women who actually find a perch in the workforce is a
shade lower than in Saudi Arabia, where 22% do. And in so far as
social attitudes do hold women back, they are not immutable.
Indeed, employing women is often a catalyst for social enlight-
enment, rather than a consequence of it.
The best thing the government can do to increase the supply
of female workers is to increase the demand for labour in gen-
eral. If growth is quick, hiring strong and labour scarce, then em-
ployers will have a powerful incentive to attract more womenMany hands, light work
A lower share of women are in work in India than in Saudi ArabiaIndia’s jobs marketwith it, raising a second round of cash from investors as it does
so. If you are a firm that wants to go public, a marriage with a spac
is relatively quick and certain.
The spac boom partly reflects a rebellion among Silicon Val-
ley types, who have long grumbled about having to go through an
ipo. Banks charge fees of 5-7% of the capital raised. Bankers man-
age the ipoprice, and stand accused of setting it artificially low
in order to give a “pop” to the pals they deal with routinely in the
public markets at the expense of founders and early backers. For
over a decade many exciting firms have stayed sheltered in priv-
ate markets, an option afforded them by well-funded venture-
capital investors like Son Masayoshi of Soft-
Bank. As a result, the value of cash raised by ipos
as a share of America’s overall stockmarket val-
ue had been in decline for years.
However, the pent-up demand to go public is
being unleashed at last. As well as spacs, some
firms are trying a third technique to go public
called a direct listing. Founders and employees
sell shares on an exchange for whatever inves-
tors are willing to pay—an option made possible by high-fre-
quency traders, like Citadel Securities, who helped Slack and
Spotify, two tech stars, to debut in this way.
There are two big dangers. One is that the spac boom becomes
a bubble. Financial markets show many other signs of froth, in-
cluding the recent GameStop retail-investor frenzy and the surge
in Bitcoin’s price. If interest rates were to rise suddenly as a result
of inflation (see Buttonwood), and the music were to stop in
markets, the spacboom might end abruptly. That is unlikely to
pose a risk to the financial system, but some firms would be left
stranded at the altar. And spac investors might be clobbered.The second danger lies within spacs’ design, which can range
from being efficient to being a rip-off. The typical spaccreator
receives “promote” shares—the median stake is 8% of the post-
merger equity—for a trivial cost, meaning they make decent re-
turns even if the merged firm’s shares sink after it goes public.
Warrants (the right to buy shares at a given price in the future) are
given to early backers as an incentive, and can also dilute the re-
turns of outside shareholders. The presence of a cohort of badly
designed spacs is one reason why, on average, spacs have under-
performed both firms that debut via ipo, and the broader market.
Fixing these problems will require investors to be vigilant.
They should demand that spac creators forgo
their fat promote shares in favour of shares or
warrants that pay out only once other investors
have seen returns. The incentives doled out to
early backers should be trimmed, and restricted
to those who are prepared to hold on to their
shares long after a target has been acquired.
These changes would both improve the long-
term returns for investors and also discourage
more dubious ventures from being set up. Some spacs, such as
the one launched by Bill Ackman, a hedge-fund manager, have
already adopted more sensible terms.
The spacboom has a whiff of the bubble about it—and some
projects will end in tears. But with the right design, spacs can be-
come a familiar and useful device for investors. They give firms
more options for going public and will encourage regulators and
bankers to improve the ipo process. Rational risk-taking by in-
vestors, capital-raising by exciting firms and the expansion of
public markets are all things that should be welcomed. Even if
some spacs crash and burn, the idea behind them is a buy. 7SPACs
Number launched, by IPO trading date
100500
2020 2021