Buy this book!
thomaspmbarnett.com
Dateline: Highlands Forum XXVI, Antrium 1844, near Taneytown MD, 2 May 2005
Saw brilliant presentation from C.K. Prahalad, author of The Power at the Bottom of the Pyramid, all about how you shrink the Gap and kill poverty through profits.
This presentation/book is full of stunning analysis of how globalization really spreads on a very ground-floor level.
His basic point: most big U.S. companies were built by selling to the poor, not the rich. Singer, for example, built it's whole company on lower classes buying their sewing machines (rich people had seamstresses and tailors), and they did this by pioneering buying on credit (e.g., $5 per month for 20 months).
People being poor isn't the problem, creating the economic connectivity to allow them to buy and sell is.
I bought the book on Amazon five minutes into his brief. Stunning, really. Can't wait to read it.
David Ignatius: the plug that keeps on plugging
Dateline: Highlands Forum XXVI, Antrium 1844, near Taneytown MD, 2 May 2005
Finally chat him up (David Ignatius of the Washington Post) and he says that he gives speeches all over the world at a fairly high frequency, and that in virtually every speech he calls PNM as his favorite book of 2004.
So he told me, that if his op-ed helped drive me out of the College, he was pretty sure he made back some of that money on book sales!
So I say thank you David (and yeah, he reads the blog, cause his first question to me was on how the attempted move to the Midwest was unfolding).
The Real Order of Business is: 1) North Korea; 2) Iran
¦"U.S. Weapons Envoy Pessimistic About Talks With North Korea," by James Brooke, New York Times, 30 April 2005, p. A8.
¦"U.S. Aide Sees Arms Advance By North Korea: Cites Skill to Fit Nuclear Weapon on Missile," by David S. Cloud and David E. Sanger, New York Times, 29 April 2005, p. A1.
¦"N. Korea, 6, And Bush, 0: Take my Quiz, and Shudder," op-ed by Nicholas Kristof, New York Times, 26 April 2005, p. A27.
¦"Iranians Seek Nuclear Deal in Meeting With Europeans in London," by Alan Cowell, New York Times, 30 April 2005, p. A9.
¦"Threats Shadow New Conference on Nuclear Arms: Iran and North Korea; A Deadlock Is Feared at Nonproliferation Talks Set for New York," by David E. Sanger, New York Times, 1 May 2005, p. A1.
¦"U.S. Denounces North Korea After Reports of Missile Test," by Brian Knowlton, International Herald Tribune, 2 May 2005, pulled off web.
Just getting back up to speed following my three-year slumber (Damn! Again, I keep confusing myself with Friedman!), I revisit the state of stopping WMD proliferation in the remaining two legs of the Axis of Evil.
Well, I remain pretty happy with my ordering principle of: 1) let's tackle North Korea sooner versus later; and 2) let's not tackle Iran now, since they seem more ready to deal.
I think that's the way it's going to go. The further we get past Iraq, watch this administration ramp up the info campaign against Kim. And no, it won't be propaganda, because all those horrific stories are all so horrifically true.
Here's a great segment from that wonderful crank, Kristof, who's cranky about the right things:
North Korea is the most odious country in the world today. It has been caught counterfeiting U.S. dollars and smuggling drugs, and prisoners have been led along with wire threaded through their collarbones so they can't run away. While some two million North Koreans were starving to death in the late 1990's, Mr. Kim spent $2.6 million on Swiss watches. He's the kind of man who, when he didn't like a haircut once, executed the barber.
Is this the guy we're going to negotiate with? This is the guy we're going to trust because he's signed a piece of paper? This is the regime we want accommodation with?
Meanwhile . . .
The head of the Iranian negotiators, Muhammad Javad Zarif, citing remarks by other Iranian officials, said: "We engage in these talks in order to make a deal, and not to break one. We are hoping for tangible progress on reaching an agreement."
As opposed to North Korea calling President Bush a "philistine" and a "hooligan" as part of their warm-up a "philistine" and a "hooligan" …
Well, We're Moving On Up! To the East Side!
¦"Living the Chinese Dream: Success Stories From the Poor Hinterland Help Share the Wealth," by Jason Dean, Wall Street Journal, 26 April 2005, p. A12.
¦"A Hundred Cellphones Bloom And Chinese Take to the Streets," by Jim Yardley, New York Times, 25 April 2005, p. A1.
¦"Give My Regards to Shanghai: Big Musicals Arrive in China, As Broadway Looks East; The 'Edelweiss" Singalong," by Blythe Yee and James Inverne, Wall Street Journal, 29 April 2005, p. D1.
First story has some great stats on China's rapid urbanization, which is the microcosmic experience of globalization, meaning it captures it in a nutshell.
China's rural population was at 80% of the total pop back in late 1970s to just under 60% now, so urban pop goes from about 1 out of every five in late 70s to 2 out of every five now.
Why is this so crucial to growth? Need the labor to industrial, so you have to get the labor, especially the females, OFF the farm and into the city.
But even more important, urban labor earns so much more, meaning more to tax for government revenue, thus more money for social welfare, infrastructure, etc. All that urban-based revenue likewise means more domestic demand plus probably lotsa "remittances" to the hinterland, meaning the wealth gets spread. Urban disposable income is close to $1,200 now (disposable means, after all the basic bills are paid), whereas rural disposable is slowly growing at around the 300 dollar range.
And you know what? All that disposable income buys a lot of cell phones (they're everywhere in the cities), and all that connectivity, which is hugely horizontal (meaning it connects people to one another, not giving the government any increased control over individuals but certainly reducing it), speaks to an economics-driven pluralism that ultimately becomes a politics-driven pluralism.
My point is this: the successful movement from the rural to the city is the key to making China work, to shrinking the Gap, to making globalization truly global. These are some of the big themes of Blueprint for Action.
Finally, the sign of the big city coming into its own is the same sign of the former Gap country coming into its own: here comes the foreign entertainment that now views big cities in China as potential cash-cow territories. Broadway feeling a bit down? Why not send road shows to China? This cite goes into an existing note in BFA.
Posted by Thomas P.M. Barnett at 03:00 PM Evoked? Provoked? Ask Tom
Follow the Yuan, Follow the Yuan
¦"A Currency Afloat (for All Of 20 Minutes)," by Keith Bradsher, New York Times, 30 April 2005, p. B1.
¦"The Global Savings Glut," op-ed by Robert Samuelson, Washington Post, 27 April 2005, p. A23.
¦"China Sets Bank IPO in Motion: Injections of $15 Billion Into ICBC Is Viewed as a First Installment," by Andrew Browne, Wall Street Journal, 26 April 2005, p. C16.
¦"China Heads List of Problems for New Trade: Congress Is Pressing Battle on Piracy," by Elizabeth Becker, New York Times, 30 April 2005, p. B3.
¦"Currency Game, Yet Again, Focuses on Yuan Revaluation," by Craig Karmin, Wall Street Journal, 29 April 2005, p. C1.
The biggest uncertainty/certainty in the global economy today is that China's yuan is too cheap vis-à-vis the dollar, to which it is pegged, thus increasing our massive trade deficit with them (the biggest source in the global economy today of our overall trade deficit).
Recently, all the talk and effort in the system was about engineering the slow fall of the dollar, which is occurring. Now, with that accomplished, all attention in the system turns toward China and the inevitability that it must revalue the yuan.
Why this matters: the fundamental imbalance of the world today is that Americans spend too much and save too little, and there is the tendency to assume it's all our fault, when in reality it reflects the larger global environment in which the Asians tend to save too much and spend too little. If they're not doing that, then guess what? It's a whole lot harder for Americans to continue spending too much and saving too little.
This weird imbalance reflects the tipping point we're at now: the New Core pillars (like China), which have integrated themselves into the global economy over the past couple of decades, have reached the point where their savings/investment focus needs to shift somewhat to allow domestic spending designed to create domestic markets and domestic demand. Otherwise, the global economic system as a whole gets perverted into a sort of specialization where the Old Core (U.S. especially) consumes and they (the New Core) produce, leading to this irrational fear that the global economy will somehow lock into that dynamic forever!.
So again, lotsa speculation on when China will finally revalue the yuan, which is just a single-point version of a float, where the currency would adjust on a daily basis according to currency exchange markets. Ultimately, we want the yuan to float, as do the Chinese, but for now, keeping it pegged works well for the Chinese to keep their exports cheap, plus it gives them time to create the other types of currency and market controls needed to make having a floating currency be a good thing rather than a bad thing (good = it becomes another mechanism to control the economy in a macro-sense, by not letting the currency get too strong or too weak; bad = it allows pressures to infiltrate the economy that might overwhelm it if there aren't other mechanisms that allow adjustments). The U.S. lets its dollar float, but we have a lot of other mature mechanisms that allow the government to steer the economy in a rough sense, like restricting or expanding the money supply, the Fed raising or lowering interest rates, the Treasury selling bonds or buying them back by reducing the debt, etc.). China doesn't have all those mechanisms yet, and until they do have a critical mass of them (how much? Good question), it's not in their best interest to let the yuan float.
Still, keeping the yuan pegged artificially to the dollar at roughly 8 yuan to 1 buck ad infinitum can't work either, especially as China racks up huge trade surpluses with a number of states-especially the U.S. All those surpluses generate political pressure in their trading partners for protectionism vis-à-vis China. This is growing now in the U.S., and China, being smart enough to know that some surplus is better than none, even if they're not maximizing their possible short-term gains.
So China's been signaling all over the dial that it's ready to do it sometime soon, and experts expect it will happen on the eve of a major holiday segment over in China, so it would fall on low business-activity days.
Well, on Friday, the yuan actually seemed to float for about 20 minutes, trading a tiny bit more expensively (6 one-thousandths of a yuan). And baby, did it spook some markets for those twenty minutes, since next week is a major holiday sequence in China, meaning all the close watchers figured, "baby, this is it!"
Well, maybe it was and maybe it wasn't.
But clearly it's coming. It's coming because China can't afford a protectionist response from the Old Core, because they're expecting that "old money" to progressively invest in their banking industry so as to help China reorganize all those bad loans (roughly _ a trillion). Getting banking up to snuff is a key component to having the yuan float in the future.
So for now, to buy time, China will revalue to get our Congress off their trail, and on to something really scary, like outsourcing to India!
Yeah baby! Get off the China economic threat and shift over to the Indian economic threat!
Friedman would be proud. |
