Monday, November 17, 2008

Message from Brussels: Yes We Can!

It is amazing how much positive impact the election of a moral American president can have on world attitudes. I just returned from Brussels, attending a conference on ethics in business, ethical leadership, and the financial crisis, held at the European Parliament with the International Association for Human Values. For the first time in years, I was able to travel abroad without having to defend or argue about U.S. foreign policy. I imagine that my experience was similar to an American traveling abroad during the Kennedy years.

The themes I heard in Brussels were: the need for trust and ethical leadership; the financial crisis is an ethical crisis; the need for a global economy that is fairer and benefits more people; and "Yes We Can!" In fact, Barack Obama's phrase "yes we can" was uttered several times during the conference, much like "amen" might be uttered in a church.

Before I get into some of the things said during the panels, I want to mention the presentation made by the CCS World Youth Forum, a select group of young leaders that attended a training course on ethical leadership before the conference.

The young leaders (pictured above) made speeches, showed a film they made on the financial crisis, and sang a song. Here is an excerpt of the lyrics (the music was reminiscent of "Day by Day" or "Bless the Lord" in the musical "Godspell"):

Ideas to action not into words
Aim for the stars, have a dream
Change the world - you are free
We are the change the moment is now

Yes we can! Yes we can! Yes we can!

Keep your heart burning.
Be the change you want to see in the world... let's keep it real

Together we can!

Some other themes from the conference:

Ludo Bammens of Coca Cola's EU Group made a speech that prompted one audience member to ask him how he got to be so inspirational. Bammens said that there are two types of trust: the unconditional trust he feels with his child and the "transactional trust" between companies and stakeholders. Transactional trust is built on the following formula, he said:

Trust = Performance - Expectations

Where expectations are placed on how a company impacts "my community, my well-being, and the global environment." The rewards and punishments (teeth) by stakeholders include:

Do I buy your product? Do I buy your stock? Do I want to be employed by you? Will the government regulate you? And does the public believe you (your information)?

Performance is the ability to inspire and make a difference. And this factor is multiplied by time.

One person from the audience asked where do profits fit in the formula. Bammens answered that Coke was established more than 100 years ago when profits were everything. That is not the case anymore. A company needs to do more and offer more value to society to survive.

Rabbi Awraham Soetendorp also gave one of the most memorable speeches. He said the figure Abraham of the Hebrew Scriptures was tested by God to show if Abraham knew himself (or "Know Thyself," as famously written on the Temple of Apollo at Delphi, along with "Nothing to Excess"). Similarly, the financial crisis is testing the world to determine whether humanity can reach its potential. The emergence of a million NGOs is in the same spirit of 1948, the development of international systems in accordance with human values, dignity, and brotherhood.

A relevant phrase that was conjured by one of the speakers was: "A falling tree makes more noise than a growing forest."

Is the crisis "Made in America"? Sure, we have seen some commentary to this effect. But I was encouraged that the speakers and conversations were mostly non-ideological.

I (seated in foreground) was wondering if an anti-American view (see comments on earlier post in this blog) would come up during my trip to Brussels last week. Fortunately, it did not. During my speech on the future of capitalism, I asked the audience if anyone could identify the precise origin of the crisis, and not one person raised their hand. To the comment on American capitalism, I would just offer a couple of comments: One is that this crisis is global; no major economy--no matter its variation of governance--is invulnerable. Yes, the crisis had much of its origins in the United States, but the causes and impacts are global.

Second, the global economy has created more wealth and has raised more people out of poverty than could have been imagined 20 years ago. Finally, American capitalism has morphed many times over the past century. I might suggest we rediscover some of the first principles of capitalism: real, broader profit and real, long term prudence. I would agree that consumerism should be reexamined but, ironically, we will need fiscal and monetary stimuli to get out of the crisis. As Paul Krugman recently noted, any fiscal stimulus less than monumental will be insufficient.

The global debate so far to the crisis has been mostly non-ideological. This is promising: the world needs to cooperate and stay open.

Monday, November 10, 2008

Market Capitalism Questioned

Despite Barack Obama's presidential victory in the United States, the financial crisis will erode the ability of the United States to promote market capitalism, it seems. Richard Haass wrote an excellent op-ed over the weekend called "What the Recession Means for Foreign Policy." Not only did he predict the reduction of U.S. foreign policy tools such as defense spending and foreign aid, but he also said U.S. capitalism will come into question:

One other adverse consequence merits mention. The appeal of free markets is much diminished. The ability of U.S. officials to preach persuasively on the virtues of market reform is all but gone. The backlash against markets will almost certainly go too far, with adverse results for economic recovery and democracy around the world.

We are already seeing increased anti-Americanism, the result of perceptions that the global economic slowdown had its roots in the U.S. mortgage market. Globalization itself is further tarnished. What we can expect is heightened state intervention, protectionism and mercantilism as governments look to enter into arrangements that guarantee preferential outcomes.

Susan Aaronson wrote a similar argument in Policy Innovations last week in her popular article "Financial Crisis Hurts U.S. Soft Power." Like Haass, she predicts traditional policy tools will be weakened and, like Hasss again, U.S. market ideology will take a hit:

First, America's global standing is, to a great extent, reflective of how it projects its power, relates to other countries, and keeps its commitments to them. If the global financial meltdown makes life worse for the world's poor, many people may link the U.S. model of democratic capitalism with global misery. They may be less receptive to economic and political strategies presented by U.S. diplomats and NGOs. Meanwhile, the financial crisis will make American taxpayers less able to provide generous levels of foreign aid to help the world's poor.

Second, although many countries will be desperate for investment, U.S. investors could come under considerable pressure to create jobs at home. U.S. tax policy is likely to favor domestic job creation and investment in the U.S. market. Meanwhile, U.S. investors may be less welcome abroad than, for example, Chinese or Indian investors—Americans and Europeans are more likely to demand transparency, accountability, and human rights.

Will people associate U.S. power with "global misery" or with the opportunity and pluralism that Obama's victory represents? Perhaps both. I am speaking at a conference with the European Parliament in Brussels this week called "Ethics in Business - Corporate Culture and Spirituality." In February, I am speaking about a very similar topic in Tokyo. There is clearly a demand for reflection on the future of market capitalism.

Thursday, November 6, 2008

The Globalization Dialectic

French intellectual Laurent Cohen-Tanugi visited the Carnegie Council in New York City last month to present his new book The Shape of the World to Come: charting the geopolitics of a new century. In true French philosophical fashion, Laurent presented globalization as a paradoxical phenomenon with conflicting consequences.

The geopolitics of today, with the rise of non-Western powers, such as Russia, China, and India, the “rise of the rest,” is the result of the positive aspects of economic globalization. That is the good news, according to Laurent. The bad news is the potential for conflict, partly as a result of economic globalization. Laurent sees potential enduring conflict between the “Arab-Muslim word and the West,” as well as from rising nationalism and resource competition—or a return to traditional geopolitics.

Laurent takes aim at Thomas Friedman’s description of a flattened world and offers a more complicated view. “Between integration and fragmentation, nationalism and multilateralism, dialogue and clash of civilizations, the shape of the world to come will depend to a great degree on the use the new economic giants make of their power and on the ability of Western democracies to preserve their dynamism, their cohesion, and their influence for the common good.”

With the recent election of Barack Obama in the United States, the policy implications seem clear: seize the consensus on the urgency of today’s problems to build new global public goods, such as energy cooperation, climate change mitigation, and longer-term investment strategies, tapping into what makes market capitalism a force for good. As Al Gore and David Blood wrote yesterday in their excellent Wall Street Journal op-ed: “At this moment, we are faced with the convergence of three interrelated crises: economic recession, energy insecurity and the overarching climate crisis. Solving any one of these challenges requires addressing all three.”

In Laurent’s analysis, the West has lost influence in multilateral institutions since these institutions are out dated for today’s world. The notion of democracy promotion is also challenged in many quarters, such as Russia and China, says Laurent. Laurent is courageous and correct in saying that today’s multi-polar world is not just more equal but also more unstable, contrary to the European hope of equalizing relations with the United States. Nationalism is returning and we are “moving away from the post-modern ideal of global governance,” and we are witnessing a return of “19th Century geopolitics.”

Nevertheless, the world is one, and we all face the same big problems—climate change, financial instability, etc. “We are all in the same boat,” Laurent says. The new paradigm for the world will be paradoxical: harmonizing through integration and fragmentation through competition. The question is: Which trend will prevail?