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Archive for the ‘Economic Culture’ Category

Many have written over the years about the political risk arising from cultural values. Back in 1992, Benjamin Barber, in his popular book Jihad vs McWorld, visualized violent local politics (“jihad”) as a reaction to the cultural uniformity induced by globalization. Samuel Huntington took the idea to a widely-discredited extreme, when he argued that continental-scale cultural clashes will be the biggest source of political risk in the future.

Such broad culture-talk generates weak arguments because it takes politics out of the equation. Islamophobia is one instance. The conservative paranoia about the so-called “ground zero mosque” uses crass cultural imagery to not only deny constitutionally guaranteed religious freedoms but also portray the act of building a community center as the “triumph” of a foreign culture. The real issue, however, is not culture, but politics: election-season politics, foreign policy politics, and political risk in provoking far right ideologues.

Similarly, Westernophobia is a trick that the Chinese government has been using to deny basic human rights to Chinese citizens. This came to the fore with the award of the 2010 Nobel Peace Prize to Liu Xiaobo. China’s hostile reaction to that award is based on the premise that human rights are not universal, but culturally-defined, and represents Westernization. Here too, the real problem is not culture, but politics: Human rights and political freedom pose great political risk to the regime in power.

In globalization circles, broad culture-talk, i.e., East = X, West = Y, has been a useful ploy to mask the political sources of risk. Uninquisitive minds readily accept that Western Judeo-Christianic values are superior, are spread through globalization, and provoke primitive reactions in the form of “jihad” in the East because either “they envy us” or “they haven’t seen the light”.

Such talk perpetuates many historical inaccuracies. In a recent article in The Sunday Times, historian William Dalrymple points out some of them:

  • The “earliest known experiment in formal inter-religious dialogue” was not in the West, but in India, led by the Emperor Akbar of the Muslim Mughal Empire.
  • Akbar upheld freedom of religion at a time (16th century) when “in London, Jesuits were being hung, drawn and quartered outside Tyburn, in Spain and Portugal the Inquisition was torturing anyone who defied the dogmas of the Catholic church, and in Rome Giordano Bruno was being burnt at the stake in Campo de’Fiori.”
  • “Judaism and Christianity are every bit as much eastern religions as Islam or Buddhism. So much that we today value – universities, paper, the book, printing – were transmitted from East to West via the Islamic world, in most cases entering western Europe in the Middle Ages via Islamic Spain.”
  • The first ruler “to emphasise the importance of the equality of his subjects” was the Buddhist Indian Emperor Ashoka. This was in the third century BC.
  • The huge upturn in violent conflict in the last hundred years was not in the East, but rooted in the West: the World Wars, the ideologies of Marxism-Leninism, Fascism, Nazism.
  • Genocide began with “the worst excesses of western colonialism.”
  • “The European slave trade forcibly abducted 15m Africans and killed as many more.”

The list goes on. The point is, it is not only crude but historically false to portray the West broadly as a freedom-loving culture that is using globalization to spread superior values, and the East as reactionary, backward, developing, and emerging, with hiccups, into enlightenment. And it’s even more false to then predict a giant collision between the two.

Political risk does not come from broad cultural clashes, but from politics, which is about power. As analysts of political risk, we should be aware of cultural trends, but we should ensure that we assess the significance such trends by asking: what does this mean for the competition for power?

We should not assume that risk to Western investment in “emerging” markets is automatic, or endemic, or sourced in cultural assumptions such as, “they don’t understand the value of investment,” or “they’re backward and don’t get what free market means.”  There is no automatic jihad against McWorld. Risk arises because of the power politics that accompany such investment.

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I had a hamburger today. Not McDonald’s or Burger King, but one prepared carefully by a local restaurant. 100% American beef. I wanted to see if it tasted ok–I used to love burgers–and to test if I could finish it now. I went through three quarters of it, and have been regretting it since.

I think I’ve entered the phase in my life where I’m no longer attracted to hamburgers. Or rather, I have at last experienced personally the phase that the global food multinationals have ushered upon us.

This realization came accidentally. I just returned from a trip to Bangladesh. The taste of fresh ingredients, real fruits and vegetables, natural river fish and game hen, still lingers in my palate. And this is despite Bangladesh’s food quality problems: rivers are contaminated, pesticides are ubiquitous, and many sellers even inject formalin into fruit and fish to keep them appearing fresh.

In other words, globalized agribusiness has swept this part of South Asia with its chemicals and seeds, but not enough (as yet) to have thoroughly altered the nature, shape, and taste of food.

But free-market America is their full domain. Nearly all meat products here now come from miserable factory farms where chickens are “grown” in darkness to monstrous proportions, cows stand feet-deep in own manure through their lives, and fish that don’t naturally eat grain are force-fed cheap corn.

We, in turn, are fed the industrialized, globalized, hyper-marketed product passed as food. For the first time, I felt like I tasted it.

This is the side of globalization that is sick. Literally.

The four multinationals that control most beef in America or the global agribusinesses that are flooding the system with corn syrup will claim that industrialized techniques have made food cheaper for people.

Maybe. But on the other side of the scale the costs have mounted. The conditions in which the food is grown have become hotbeds of strains of diseases that reach a staggering quarter of the population. The chemicals used to alter food affect millions more. The lab-crafted sugary stuff we’re sold — corn products, for instance, are ingredients in an incredible 80 percent of everything sold in large supermarkets — have contributed to America’s health crisis: one-third of children and adolescents now weigh more than they should. The transportation of industrialized food to far-flung places emits thousands of tons of greenhouse gases.

There’s a lot to celebrate about the global spread of local cuisine. But we need to shun the globalization of food content. We simply need to eat locally-grown or organic food to the extent we can, even if the product may be less shiny, less uniform.

And we need to listen more carefully to our taste buds. If they’re telling us that what’s going past them tastes unnatural and more like something to just stuff a hungry stomach with, they’re also telling us that with every bite we’re being sold blind by the global food-peddling businesses.

One last little irony. I brought with me to America a little pack of all-natural home-cooked beef. I duly declared it at customs, and they duly threw it out, stating, “you cannot import unlabeled meat products.”

If the government took up food labeling more seriously, that 100% American beef I ate today should have been labeled on the menu as 100% notional beef.

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The global recession is beginning to end. Asia is beginning to recover: South Korea, Taiwan, and India are doing very well. Some countries outside are also faring better, and we’re beginning to see commonalities as to why. In this post, I’ll point to two examples.

The first is from the Economist, Aug 8-14, on the strength of the German economy:

Germany’s economic machine is made of honest iron and steel, not subprime mortgages, collateralised debt obligations and other financial chicanery. Having been concocted in Wall Street and the City of London, the crisis, it is said, has proved the merit of Germany’s solid social-market economy.

The second insight is about Brazil, which was “one of the last [countries] to enter recession and now looks like being one of the first to leave it.” The ingredients are:

  • responsible economic policies, ignoring pressures from left-wing Workers’ Party.
  • insistence on “rational economics” and free trade, and.
  • “ambitious social policies have helped to lift 13m Brazilians out of poverty; searing inequalities of income are narrowing steadily.”

See any commonality? Social safety nets. Social policies–public support for good health, good education, minimum income, and crisis assistance. In fact, this insight is supported by decades of serious research. (I will write about that in another post.) And it’s not just policy (frequently and stupidly derided in the US as big government), but an economic culture that is thankfully more social-ist.

In America, of course, sustaining social support needs an astonishing amount of selling, so much so that the government finds it easier to bail out big investment banks and big insurance companies, whose criminally-negligent incursions into risky financial products helped create the crash in the first place, than extending funds for a sound healthcare system. Funds for public education, similarly, have been difficult to come by for years.

Yes, in the end big banks got us in the mess, and as Paul Krugman says, big government has saved us. But that’s true if “save” = “getting worse more slowly.” 

If saving = learning so that the next recession may be less of a surprise, then it’s another story. The American style of capitalism–the type that has prioritized home ownership over thrifty spending habits as the mark of success, and typically promotes the likes of Rumsfeld and Paulson as the main shapers of fiscal priorities–is sure to not learn well from this recession. The priorities of the economic culture of Brazil and Germany are quite different.

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Many analysts are putting trust in Asia to pull the West up from the slump into which it has fallen due to its profligate appetite for credit. In addition to production and trade, The Economist recently hoped that Asian consumers would become shopaholics, like their Western counterparts. Never mind that rampant credit-fueled consumerism was a major part of the problem facing the West.

But a dose of reality was injected recently by Minxin Pei, who doubted Asia’s ability to fill in for the West. Pei wrote in an article in Foreign Policy: “Even at current torrid rates of growth, it will take the average Asian 77 years to reach the income of the average American.”

The problem with most economist-driven expections of Asia’s ability to pull the world out of a slump is that such analyses ignore the crucial part that politics, and states, play in economic globalization.

But if lack of ability is one issue, so is a possible lack of willingness.

Political scientists and political risk analysts for decades have pointed out that international financial movements take place only within parameters allowed by states. Ian Bremmer of the Eurasia Group recently restated that observation, from the angle that post-financial-crisis state capitalism is now the main decision-making prism.

What this means is that competition between states will inevitably dampen Asia’s ability and willingness to clean up the mess left by the West. As I have argued in my book, India’s Open-Economy Policy, India’s political rivalry with China, whether in securing energy or in inward foreign investment, will be the first influence on its international economic policies. China’s assessment of the US and Japan will determine its foreign acquisitions. US interpretation of Chinese influence in the Middle East and Africa will also temper cooperation toward free markets.

On top, you have respective Buy American and Buy Chinese policies. These have stayed below maximum so far — but put all of these together and the expectation that Asian consumerism or dynamic growth will be West’s savior is just economic optimism, not political reality.

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