Archive for the 'Globalization' Category Page 2 of 2



John Le Carre, please call your office

For a small country devoid of hills, the Netherlands certainly generates a lot of drama.  Tomorrow’s Sydney Morning Herald has a fascinating story about a good-looking Dutch spy who allegedly left the reservation, becoming a double- or maybe triple-agent, engaging in money-laundering, Middle-East real-estate scams, and perhaps worse, and was held prisoner in her own flat in Dubai by other Dutch agents while her lawyers and their lawyers sought to reach a deal.   No deal reached, she is now in prison in Egypt for money-laundering and weapons-trading.  

You folks in the back of the room will have trouple keeping up when the story includes successive paras like these:

Dutch police observation teams had seen a woman in the company of a British man, Simon John ”Slapper” Cowmeadow. Only later did they realise she was Karoum. Cowmeadow was shot dead in an Amsterdam street on November 18, 2007.

Nadim Imac, a suspected heroin importer and the sponsor of a Dutch soccer team, Turkiyemspor, was thrown to his death from a moving bus on February 17 this year. Police found €223,000 in his home.




Anti-Krugman on free trade

By chance, I came across again an essay by Paul Krugman I first read 3 years ago,  in which he seeks to understand why anyone could be opposed to the claims of mainstream economics in favour of free trade, particuarly anyone intelligent and informed.   Unfortunately, Krugman fails at his self-appointed task, because he resorts to arguments which are essentially ad hominem attacks on the opponents of free trade theories.

In the context of the assessment of alternative public policies I view ad hominem arguments as invalid and irrational, a sign that a proponent cannot provide substantive justifications for his or her claims.  (Such personalist attacks are not necessarily invalid or irrational in all contexts.)  I believe economists do themselves and their profession a great disservice by dismissing arguments against free trade on the grounds of ignorance or insufficient intelligence, or any of the other ad hominem arguments Krugman uses.

There is a perfectly respectable intellectual argument, not based on ignorance, against Ricardo’s argument. This is that his theory ignores the single most important question in the debate, which is: Where does a comparative advantage come from? A national comparative advantage is almost never, despite what many free trade advocates seem to think, an act of God. It is almost always the the result of human actions, witting or unwitting. The Republic of Korea (South Korea) has no “natural” reason to be a world-leading steel-producer or world-class large-ship-maker. But successive ROK Governments intended the nation to lead these industries, and the nation has in consequence succeeded in doing so: through direct government investment; through subsidies to Korean companies; through discriminatary trade practices against foreign companies; and through large-scale, concerted, long-term public and private pressure on private Korean companies to invest in particular ways, and not in other ways.

So, imagine you are a political leader of a country with an existing large-ship-building industry faced with rising Korean competition, for example the UK in 1980. Your chief economic advisor tells you that free trade is an unmitigated good, and that your markets should all be open, because the economic benefits outweigh the costs. These economic benefits may outweigh the associated costs or they may not in any particular case, and they may well fall differentially upon different stakeholders with different political power.  Even if the economic benefits outweigh the economic costs, the social cost-benefit analysis may be very different (eg, long-term unemployment; increased crime as a result of unemployment; the destruction of local communities; the dispersal or loss of a skills base; the loss of defence-related industries and companies; etc).

Whatever the cost-benefit outcomes, what really sticks in my craw is that the advice from economists is to do nothing to protect local industrial capabilities, so that others who have ignored such advice (eg, the Government of the ROK) should prosper.  You would think that, of all people, economists would have learnt some game theory!

The argument here is not between the ignorant and the wise, as Krugman seems to think, but between people with conflicting sets of values. My values tell me that economic theory should include discussions of political power, discussions of social, cultural and institutional structures, and discussions of the reasons for and the consequences of differing preferences over outcomes; most mainstream economists do not think these issues are part of economic theory. To be called ignorant because I have different set of values to an economist is not only an insult, and not only disrespectful of my rights as a stakeholder in the society in which I live; it is also revealing of the vapidity of mainstream economics, busy building abstract theories which ignore all the most important questions.

Economists have heard these criticisms of free trade theory since at least the time of Marx.  Is it recalcitrance or malfeasance that allows mainstream economists to write articles as if ignorant of such criticisms?




Old, beardy revolutionaries wielding spreadsheets

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If you were aiming to model global, 21st-century capitalism, the obvious place to start would not be with a model of the firm based on mid-Victorian Lancashire textile manufacturing companies.   Firstly, the textile industry developed in Lancashire in the 18th century because only here (and almost nowhere else) was the climate sufficiently conducive for the then leading-edge technology to operate successfully.  (The air needed sufficient dampness, but not heat, for the cotton fibres not to be broken by the early textile machines.)   Technology in most industries has progressed so much in the two centuries since that very few industries are now tied to specific climates.     So industries are mostly not tied to place any more.

Secondly, large swathes of  work – even most work undertaken in companies described as manufacturers – is not anything a Victorian economist would recognize as manufacturing.  Rather it would be better described as symbol analysis and manipulation.  A relative of mine recently embarked on training as a surface-materials mixer for a road-building company – a great job, all done inside in an airconditioned office, mixing different ingredients and assessing the results, achieved by moving graphic objects around on a computer screen.  Of course, some person still has to be outside moving and switching on the automated machinery which actually lays the road surface once it has been created, so not every task is symbol processing.     But mixing is no longer done by eye, by a man using using a shovel in front of a furnace.  The relevant attribute of symbol manipulation – unlike, say the operation of a loom – is that this too is something no longer tied to place, thanks to our global telecommunications infrastructure and to digitisation.  Thus, the processing of US insurance claims can move from Hoboken, New Jersey, to Bangalore and Mauritius, and then maybe back again, if circumstances so dictate.

Thirdly, for companies whose sole business involves symbol manipulation – eg, banks, investment firms, graphics designers, media companies, software developers, consultancy companies, etc – the economics of traditional manufacturing industry no longer applies.  Information is a product whose value increases as more people use it, and whose marginal costs of production can decline to zero with multiple users.  It costs Microsoft  between US$1 and $2 billion to develop the first copy of each new generation of its Windows operating system, but less than $1 each for the second and subsequent copies;  the cost of producing these subsequent copies comprises only the cost of the media used to store the product (a DVD or a filestore).   (Of course, I am not including the cost of marketing and distribution in this statement of the cost of production.)  Similarly, a well-crafted, well-timed IPO and financial plan may raise (to cite the case of one IPO whose writing we led) US$5 billion on the world’s capital markets if successful, and nothing at all if less-well crafted or placed at a different time.  These information-economy attributes also apply to those parts of so-called manufacturing companies which undertake symbol manipulation:  the design team of Mazda cars for example, which relocated from Japan to the UK because London is a world-centre of art, design and marketing, or the 2-man in-house forex-trading desk which two decades ago first enriched and then almost bankrupted Australia’s largest defence electronics firm, AWA.

So, although I do not share the sentiment, I think it fine for someone to express a personal dislike of an alleged bonus culture in our banks and financial sector companies, as Alex Goodall has done.  But to argue against this feature of our modern world using a micro-economic model based on mid-Victorian manufacturing would seem inappropriate.   Much as I admire Karl Marx for his startling and still-interesting contributions to the 250-year-old conversation that is economic theory, for his insightful criticisms of the world he knew, and for his desire to make that world better for all, his model of the firm describes almost nothing about the world of 21st-century business that I know.




This is our moment. This is our time.

From the best public orator since John F. Kennedy and Martin Luther King Jr, President-elect Barack Obama’s speech in Chicago, Illinois, on election night 4 November 2008:

“If there is anyone out there who still doubts that America is a place where all things are possible; who still wonders if the dream of our founders is alive in our time; who still questions the power of our democracy, tonight is your answer.I know you didn’t do this just to win an election and I know you didn’t do it for me. You did it because you understand the enormity of the task that lies ahead. For even as we celebrate tonight, we know the challenges that tomorrow will bring are the greatest of our lifetime – two wars, a planet in peril, the worst financial crisis in a century. Even as we stand here tonight, we know there are brave Americans waking up in the deserts of Iraq and the mountains of Afghanistan to risk their lives for us. There are mothers and fathers who will lie awake after their children fall asleep and wonder how they’ll make the mortgage, or pay their doctor’s bills, or save enough for college. There is new energy to harness and new jobs to be created; new schools to build and threats to meet and alliances to repair.

It’s the answer told by lines that stretched around schools and churches in numbers this nation has never seen; by people who waited three hours and four hours, many for the very first time in their lives, because they believed that this time must be different; that their voice could be that difference.

It’s the answer spoken by young and old, rich and poor, Democrat and Republican, black, white, Latino, Asian, Native American, gay, straight, disabled and not disabled – Americans who sent a message to the world that we have never been a collection of Red States and Blue States: we are, and always will be, the United States of America.

It’s the answer that led those who have been told for so long by so many to be cynical, and fearful, and doubtful of what we can achieve to put their hands on the arc of history and bend it once more toward the hope of a better day.

It’s been a long time coming, but tonight, because of what we did on this day, in this election, at this defining moment, change has come to America.

I just received a very gracious call from Senator McCain. He fought long and hard in this campaign, and he’s fought even longer and harder for the country he loves. He has endured sacrifices for America that most of us cannot begin to imagine, and we are better off for the service rendered by this brave and selfless leader. I congratulate him and Governor Palin for all they have achieved, and I look forward to working with them to renew this nation’s promise in the months ahead.

I want to thank my partner in this journey, a man who campaigned from his heart and spoke for the men and women he grew up with on the streets of Scranton and rode with on that train home to Delaware, the Vice President-elect of the United States, Joe Biden.

I would not be standing here tonight without the unyielding support of my best friend for the last sixteen years, the rock of our family and the love of my life, our nation’s next First Lady, Michelle Obama. Sasha and Malia, I love you both so much, and you have earned the new puppy that’s coming with us to the White House. And while she’s no longer with us, I know my grandmother is watching, along with the family that made me who I am. I miss them tonight, and know that my debt to them is beyond measure.

To my campaign manager David Plouffe, my chief strategist David Axelrod, and the best campaign team ever assembled in the history of politics – you made this happen, and I am forever grateful for what you’ve sacrificed to get it done.

But above all, I will never forget who this victory truly belongs to – it belongs to you.

I was never the likeliest candidate for this office. We didn’t start with much money or many endorsements. Our campaign was not hatched in the halls of Washington – it began in the backyards of Des Moines and the living rooms of Concord and the front porches of Charleston.

It was built by working men and women who dug into what little savings they had to give five dollars and ten dollars and twenty dollars to this cause. It grew strength from the young people who rejected the myth of their generation’s apathy; who left their homes and their families for jobs that offered little pay and less sleep; from the not-so-young people who braved the bitter cold and scorching heat to knock on the doors of perfect strangers; from the millions of Americans who volunteered, and organized, and proved that more than two centuries later, a government of the people, by the people and for the people has not perished from this Earth. This is your victory.

The road ahead will be long. Our climb will be steep. We may not get there in one year or even one term, but America – I have never been more hopeful than I am tonight that we will get there. I promise you – we as a people will get there.

There will be setbacks and false starts. There are many who won’t agree with every decision or policy I make as President, and we know that government can’t solve every problem. But I will always be honest with you about the challenges we face. I will listen to you, especially when we disagree. And above all, I will ask you join in the work of remaking this nation the only way it’s been done in America for two-hundred and twenty-one years – block by block, brick by brick, calloused hand by calloused hand.

What began twenty-one months ago in the depths of winter must not end on this autumn night. This victory alone is not the change we seek – it is only the chance for us to make that change. And that cannot happen if we go back to the way things were. It cannot happen without you.

So let us summon a new spirit of patriotism; of service and responsibility where each of us resolves to pitch in and work harder and look after not only ourselves, but each other. Let us remember that if this financial crisis taught us anything, it’s that we cannot have a thriving Wall Street while Main Street suffers – in this country, we rise or fall as one nation; as one people.

Let us resist the temptation to fall back on the same partisanship and pettiness and immaturity that has poisoned our politics for so long. Let us remember that it was a man from this state who first carried the banner of the Republican Party to the White House – a party founded on the values of self-reliance, individual liberty, and national unity. Those are values we all share, and while the Democratic Party has won a great victory tonight, we do so with a measure of humility and determination to heal the divides that have held back our progress. As Lincoln said to a nation far more divided than ours, “We are not enemies, but friends…though passion may have strained it must not break our bonds of affection.” And to those Americans whose support I have yet to earn – I may not have won your vote, but I hear your voices, I need your help, and I will be your President too.

And to all those watching tonight from beyond our shores, from parliaments and palaces to those who are huddled around radios in the forgotten corners of our world – our stories are singular, but our destiny is shared, and a new dawn of American leadership is at hand. To those who would tear this world down – we will defeat you. To those who seek peace and security – we support you. And to all those who have wondered if America’s beacon still burns as bright – tonight we proved once more that the true strength of our nation comes not from our the might of our arms or the scale of our wealth, but from the enduring power of our ideals: democracy, liberty, opportunity, and unyielding hope.

For that is the true genius of America – that America can change. Our union can be perfected. And what we have already achieved gives us hope for what we can and must achieve tomorrow.

This election had many firsts and many stories that will be told for generations. But one that’s on my mind tonight is about a woman who cast her ballot in Atlanta. She’s a lot like the millions of others who stood in line to make their voice heard in this election except for one thing – Ann Nixon Cooper is 106 years old.

She was born just a generation past slavery; a time when there were no cars on the road or planes in the sky; when someone like her couldn’t vote for two reasons – because she was a woman and because of the color of her skin.

And tonight, I think about all that she’s seen throughout her century in America – the heartache and the hope; the struggle and the progress; the times we were told that we can’t, and the people who pressed on with that American creed: Yes we can.

At a time when women’s voices were silenced and their hopes dismissed, she lived to see them stand up and speak out and reach for the ballot. Yes we can.

When there was despair in the dust bowl and depression across the land, she saw a nation conquer fear itself with a New Deal, new jobs and a new sense of common purpose. Yes we can.

When the bombs fell on our harbor and tyranny threatened the world, she was there to witness a generation rise to greatness and a democracy was saved. Yes we can.

She was there for the buses in Montgomery, the hoses in Birmingham, a bridge in Selma, and a preacher from Atlanta who told a people that “We Shall Overcome.” Yes we can.

A man touched down on the moon, a wall came down in Berlin, a world was connected by our own science and imagination. And this year, in this election, she touched her finger to a screen, and cast her vote, because after 106 years in America, through the best of times and the darkest of hours, she knows how America can change. Yes we can.

America, we have come so far. We have seen so much. But there is so much more to do. So tonight, let us ask ourselves – if our children should live to see the next century; if my daughters should be so lucky to live as long as Ann Nixon Cooper, what change will they see? What progress will we have made?

This is our chance to answer that call. This is our moment. This is our time – to put our people back to work and open doors of opportunity for our kids; to restore prosperity and promote the cause of peace; to reclaim the American Dream and reaffirm that fundamental truth – that out of many, we are one; that while we breathe, we hope, and where we are met with cynicism, and doubt, and those who tell us that we can’t, we will respond with that timeless creed that sums up the spirit of a people:

Yes We Can. Thank you, God bless you, and may God Bless the United States of America.”




Social networking v1.0

Believers in the potential of Web 2.0, such as we at Vukutu, think it will change many things — our personal interactions, our way of being in the world, our social lives, our economic lives, even our sciences and technologies.   The basis of this belief is partly by comparison with what happened the first time social networking became fashionable in western society.   This occurred with the rise of the Coffee House in western Europe from the middle of the 17th century.

Coffee, first cultivated and drunk in the areas near the Red Sea, spread through the Ottoman empire during the 16th century.   In Western Europe, it became popular from the early 17th century, initially in Venice, becoming known to educated Europeans roughly simultaneously with marijuana and opium.  (An interesting question for marketers is why coffee became a popular consumer product in Europe and the others did not.)  Because of the presence there of scholars of the orient and scientists with an experimentalist ethos, coffee first arrived in the British Isles in Oxford, where it was consumed privately from at least 1637;  the first public coffee house in the British Isles opened in Oxford in 1650, called the Angel and operated by a Mr Jacob.  The first London coffeehouse was opened in 1652 by Pasqua Rosee; the same mid-century period saw the rise of public coffee houses in the cities of France and the Netherlands.  For non-marketers reading this, it is worth realizing that opening a coffee house meant first having access to a regular source of coffee beans, no mean feat when the only beans then grew in the Yemen and north-east Africa.

Facing competition, coffee houses soon segmented their market, and specialised in particular activities, types of conversation, or political positions (sound familiar,  bloggers?), and provided services such libraries, reading rooms, public lectures, scientific demonstrations and auctions. Educated people and businessmen would often visit several coffee houses each day on their rounds, to collect and trade information, to meet friends and colleagues, to commune with the like-minded, and to transact business.  The coffee houses were centres for learning and debate, just as blogs are today, as well as places of economic exchange.

What were the consequences of this new mode of human interaction?  Well, coffee houses enabled the launch of at least three new industries — insurance, fine-art auctions, and newspapers — and were the physical basis for modern stock exchanges.  For instance, English insurer Lloyds of London began in Edward Lloyd’s coffee house in 1688.  And these industries themselves enabled or facilitated others.  The development of an insurance industry, for example, both supported and grew alongside the trans-continental exploration undertaken by Dutch, English and Iberian merchant shipping fleets:  deciding whether to invest in  perilous oceanic voyages required some rigour in assessing likely costs and benefits if one wished to make a long-term living from it, and being able to partition, bundle, re-bundle and on-sell risks to others.

And coffee-houses even supported the development of a new science.  In the decade around 1665, the modern idea of mathematical probability arose, seemingly independently across western Europe, in what is now Britain, France, Italy, the Netherlands and Switzerland.   There is still some mystery as to why the mathematical representation of uncertainty became of interest to so many different people at around the same time, especially since their particular domains of application were diverse (shipping accidents, actuarial events, medical diagnosis, legal decisions, gambling games).  I wonder if sporadic outbreaks of the plague across Europe provoked a turn to randomness.  But there is no mystery as to where the topic of probability was discussed and how the ideas spread between different groups so quickly: coffee houses, and the inter-city and inter-national information networks they supported, were the medium.

What then will be the new industries and new sciences enabled by Web 2.0?

POSTSCRIPT: Several quotes from Cowan, for interest:

“No coffeehouse worth its name could refuse to supply its customers with a selection of newspapers.  . .  . The growing diversity of the press in the late seventeenth and early eighteenth centuries meant that there was great pressure for a coffeehouse to take in a number of journals.  Indeed, many felt the need to accept nearly anything Grub Street could put to press.  . . . Not all coffeehouses could afford to take in every paper published, of course, but many also supplied their customers with news published abroad.  Papers from Paris, Amsterdam, Leiden, Rotterdam, and Harlem were commonly delivered to many coffeehouses in early eighteenth-century London.  The Scotch Coffeehouse in Bartholomew Lane boasted regular updates from Flanders on the course of the war in the 1690s.   Along with newspapers, coffeehouses regularly purchased pamphlets and cheap prints for the use of their customers.” (pp. 173-174).

“Different coffeehouses also arose to cater to the socialization and business needs of various professional and economic groups in the metropolis. [London]  By the early decades of the eighteenth century, a number of separated coffeehouses around the Exchange had taken to catering to the business needs of merchants specializing in distinct trades, such as the New England, the Virginia, the Carolina, the Jamaica, and the East India coffeehouses.  Child’s Coffeehouse, located conveniently near the College of Physicians, was much favoured by physicians and clergymen.  Because such affiliations were well known, entry into one of these specialized coffeehouses offered an introduction into the professional society found therein.” (pp. 169-170).

“The numerous coffeehouses of the metropolis were greater than the sum of their parts; they formed an interactive system in which information was socialized and made sense of by the various constituencies of the city.   Although a rudimentary form of this sort of communication circuit existed in early modern England (and especially London) well before coffeehouses were introduced in places such as St. Paul’s walk or the booksellers’ shops of St. Paul’s churchyard, the new coffeehouses quickly established themselves at the heart of the metropolitan circuitry by merging news reading, text circulation, and oral communication all into one institution.  The coffeehouse was first and foremost the product of an increasingly complex urban and commercial society that required a means by which the flow of information might be properly channeled.” (p. 171)

 

References and Acknowledgments:

My thanks to Fernando E. Vega of the USDA for pointing me to the book by Cowan.

Brian Cowan [2005]:  The Social Life of Coffee:  The Emergence of the British Coffeehouse.  New Haven, CT, USA:  Yale University Press.

Ian Hacking [1975]:  The Emergence of Probability: a Philosophical Study of Early Ideas about Probability, Induction and Statistical Inference. London, UK: Cambridge University Press.

Fernando E. Vega [2008]: The rise of coffee.  American Scientist, 96 (2): 138-145, March-April 2008.




A cosmopolite in a cafe

One of O. Henry’s short stories has a character who refuses to say where he is from:

“I’ve been around the world twelve times,” said he. “I know an Esquimau in Upernavik who sends to Cincinatti for his neckties, and I saw a goat-herder in Uruguay who won a prize in a Battle Creek breakfast food puzzle competition.  I pay rent on a room in Cairo, Egypt, and another in Yokohoma all the year round.  I’ve got slippers waiting for me in a tea-house in Shanghai, and I don’t have to tell ’em how to cook my eggs in Rio Janeiro [sic] or Seattle.  It’s a mighty little old world.  What’s the use of bragging about being from the North, or the South, or the old manor house in the dale, or Euclid Avenue, Cleveland, or Pike’s Peak, or Fairfax County, Va., or Hooligan’s Flats or anyplace?  It’ll be a better world when we quit being fools about some mildewed town or ten acres of swampland just because we happened to be born there.”

Of course, this being an O. Henry story, the guy later gets into a fight because someone criticizes Mattawamkeag, Maine, the dorp where the guy is actually from!

O. Henry: “A cosmopolite in a cafe”, pp. 11-15, The Four Million. The Complete Works of O. Henry, Volume 1. (Garden City, NY: Doubleday, 1953.)