Maquilapolis, the City of Factories

What is the human price of industrialization? What is the price of globalization? Maquilapolis, the city of factories, highlights two problems at the ground level: those related to when capital comes into a town and those related to when capital leaves a town. The genius of this film is that it tells the story from the perspective of the women working in Tijuana’s factories in collaboration with the filmmakers.

It is understandable that the film and many of the people in the film conflate globalization with industrialization. If this (pollution, poverty, and joblessness) is globalization, I don’t want it, was the sentiment in the film. But the horrible problems that have occurred in Mexico, such as pollution causing babies to be born without fingernails or brains, aren’t unique to globalization per se. It is probably more accurate to say that these things are the awful pains that occur when a country goes through the wrenching social, economic, and environmental changes that correspond with an Industrial Revolution. Just ask America at the turn of the century or China at present.

While I was watching the film, I kept thinking: If these factories moved from Mexico to Asia, I wonder how bad conditions are in a place like China that doesn’t have the civil society mechanisms that are profiled in Maquilapolis and eventually brought about justice. The industrial dump that was contaminating the Tijuana neighborhood with lead and other chemicals was finally cleaned up, thanks to the women advocates.

The horrors of industrialization are nevertheless very real and very serious. One of the main characters, Carmen, spends all night working at a television factory only to come home to a shack built with discarded garage doors and a dirt floor. She suffers from kidney damage from the chemicals in her factory and only makes 6 dollars a day with which she must support her self and her three children. A young girl and a dog were electrocuted from electrical wires frayed in puddles. Raw sewage runs everywhere. After running through the rest of her harrowing schedule of taking care of her house, her children, and the factory job, she gets about one or two hours of sleep a day. In the end of the film, Carmen wins enough severance pay to cover the costs of paving her home’s floor.

The second problem in the film is more about globalization: When cheap labor became available in East Asia—after China’s accession into the WTO—many of these factories exited Mexico, leaving many Mexicans jobless and hopeless. The problem of capital flight in Mexico was analyzed in depth during our recent book talk with Kevin Gallagher. He spoke about Mexico’s enclave economy and the need to complement foreign direct investment with strategic domestic policies. From Gallagher’s essay, The Enclave Effect:

New research shows that although Mexico was initially successful in attracting multinational corporations, foreign investments waned in the absence of active government support and as China became increasingly competitive. Moreover, the foreign investment created an "enclave economy" the benefits of which were confined to an international sector not connected to the wider Mexican economy. In fact, foreign investment put many local electronics firms out of business and transferred only limited amounts of technology.

This evidence doesn't suggest that foreign investment or trade agreements are bad things. They suggest that the costs of lifting performance requirements and adopting draconian expropriation rules could very well outweigh the benefits of new treaties with such provisions.

One of the most thought provoking moments in the film is when Tijuana labor leader thinks aloud about the relationship between corporations and the government. With both the government and the companies shirking their responsibility to the communities, Jaime Cota asks, “Who is worse: The one who pays for sin or the one who sins for pay?” For a moment, the viewer thinks about the possible tradeoffs before realizing that this rhetorical question digs deep into the assumptions underlying the marriage of democracy and capitalism.

Like the film Black Gold, Maquilapolis uncovers some of the misery that accompanied the production of everyday goods like TVs or plastic bags. In Black Gold’s case, it is your daily cup of coffee. But the innovation in Maquilapolis was that the subject of the film, the factory women, produced some of the filming (like the documentary about Calcutta’s red light kids Born into Brothels), images, and sounds. The result is honest and profound.

Photo from California Newsreel.

Black Gold Shows Bitter Trade Problems

As I have argued in Policy Innovations, ethical trade policies would be based on the principles of freedom and fairness. Thanks to our friends at California Newsreel, I was able to view the extraordinary documentary on the coffee trade Black Gold. The film tells us that something is wrong in the global trading system. Consider these points from the film:

• Africa has become more dependent on aid than ever before.

• Over the past 20 years, Africa’s share of world trade has fallen to 1 percent.

• If Africa’s share of world trade increased by just 1 percentage point, it would generate a further 70 billion dollars a year or five times the amount Africa currently receives in aid.

Why can’t Africa access trade as a tool to generate wealth? The film, produced by British filmmakers Marc Francis and Nick Francis, follows the heroic story of Tadesse Meskela, an administrator of the Oromio coffee cooperative in Ethiopia. Meskela has devoted his efforts to securing a fair wage for his coffee farmers since the global price of coffee plummeted after the International Coffee Agreement, which stabilized prices, collapsed in 1989.

The big players in setting the global coffee price are companies like Kraft, Nestle, Proctor and Gamble, and Sara Lee. Nevertheless, Starbucks, which is also a minor coffee buyer in Ethiopia, is one of the main characters in the film. It is not clear why this is the case other than that Starbucks is so popular that it can possibly influence public opinion. The film also contrasts the situations at fancy cafes in Trieste and Seattle with the squalid health and living conditions in Ethiopia’s coffee growing communities. Who is at fault?

Is it the New Yorker drinking coffee at Starbucks? Is it the problem of the Italian barista? Is it the US Trade Representative’s fault for not securing a trade deal in Cancun? Is it the responsibility of Illy coffee’s board? How about the New York City commodities trader? All of these characters appear in the film, but I wonder why the American, European, or Japanese politician responsible for farm subsidies never made a debut. In a Syriana-esque way, the film suggests that the system itself is broken but no single person is in charge. Something is wrong in the global trading system and judging by the sinister music that plays during certain scenes, everyone in the supply chain holds some responsibility.

As consumers, we certainly hold power and responsibility. I was perusing the Black Gold's excellent website and found a link to a PBS page that tells you where your coffee came from. An interesting comment here from a page on Kraft’s Maxwell House:

As with their Yuban brand, Kraft does not use fair trade coffee beans with their Maxwell House products. Pat Riso, a spokesperson for the company, was quoted in an article as saying that “the reason we don't offer it is because consumer demand for fair trade products is quite limited.”

In other words, if consumers demanded more fair trade coffee, the company would follow their wishes. There is a lot to unpack there. Clearly, the level of moral responsibility a company has in society is a huge topic of debate. Many have argued that we shouldn’t necessarily expect companies to behave ethically all on their own, especially as long as their fiduciary duty is to maximize profit. But I would also argue that companies are just tools to organize people, and people absolutely have an ethical duty to act responsibly.

From a policy perspective, the problem is inequity in subsidies and other resources. Rich countries can send huge teams of lawyers to WTO meetings, far outflanking any team a poor country can send. Meanwhile, rich countries are subsidizing their farmers in the hundreds of billions of dollars each year. Now the United States is under WTO scrutiny for possibly exceeding the legal limit of farm subsidies. From Reuters:

Monday’s WTO probe of US agricultural support for wheat, maize, rice and other crops comes three days after the US Senate passed a $286bn farm bill, following a similar bill from the House of Representatives in July. The White House has threatened to veto the bills, saying they failed to overhaul crop subsidy rules.

The Canadian and Brazilian complaints to the WTO are about whether US support topped Washington’s limit of $19,1bn a year since 1999, except 2003, for the most trade-distorting support. “Canada estimates during these years the US exceeded its WTO commitment levels by billions each year,” the Canadian government told the WTO.

But there is some good news on the fair trade coffee front. From CNW:

Fairtrade Labelling Organizations International (FLO), the only certification model that guarantees a fair minimum price to farmers that meet strict social and environmental criteria, is announcing an increase of the guaranteed minimum washed Arabica coffee price to US$1.25 per pound, to take effect on 1 June 2008. This new minimum price will be valid through at least June 2010, when another price review will take place. The coffee price adjustment, consisting of an average increase of US$0.05/lbs, will benefit more than 250 producer organizations in countries throughout Asia, Africa and Latin America, representing almost 1 million small farmers and their families.

It is clearly a complex issue that the film just brushes. But Black Gold deserves a lot of credit for highlighting the disparities along the coffee supply chain. We should be mindful of these gaps when we make decisions at the supermarket, company boardroom, or voting booth.

Photo by cgfan.

IEA's Nobuo Tanaka on Japanese Energy Policy

For a book chapter I am writing, I was able to get an interview with my former boss and the current head of the International Energy Agency Nobuo Tanaka. I was reading over the interview today and decided it was so insightful that it should appear in full on FG. Mr. Tanaka responded by email from the climate change talks in Bali last week.

How might Japan serve as a model for developing and developed countries in terms of energy policy and efficiency?

I want to suggest two points. The first point is consistency. Japan has been making efforts to improve its energy efficiency and use oil alternatives consistently after the 1970s oil shocks. This effort has created Japan's leading energy efficiency.

The second point is innovation. Japan has created and incorporated a mechanism to encourage innovation within its energy efficiency policy or regulation (top runner regulation, for example). This mechanism has helped Japan to achieve two goals at the same time: improve energy efficiency and industrial competency. Consistency in the application of the policy has also helped create a stable business environment to accelerate energy related innovation on the consumer side.

What is the role of Japanese public opinion in Japan's formulation of energy policy, especially nuclear energy policy?

Japanese people tend to be keen for energy security because Japan is an isolated island country with very few domestic energy resources.

This basic recognition among the people helps Japan to improve energy efficiency and increase oil alternative use (including nuclear energy use) constantly, regardless the level of oil prices.

Currently, the environment--or sustainable growth--is also on the top of the agenda for Japanese people. This is also helping Japan to make nuclear energy play a very important role.

How can Japanese energy policy help with regional cooperation?

Having realized rapid economic growth and energy demand growth as a result, Asian countries have understood their vulnerability to energy related crises, including high oil prices. And they are now very keen to learn how to improve their energy efficiency, increase the use of oil alternatives, and develop emergency preparedness measures.

Because of deep interdependence of Asian countries' economies, improving regional energy security is now a common target for all Asian countries and Asia as a whole.

Japan can support regional cooperation to solve this problem with its experience and technologies.

Furthermore, I personally expect Japanese energy industries to play a more important role in the more integrated Asian energy market if Japan adopts appropriate policies. However, there may not be much time for Japanese industries. Chinese industries, which are now fully occupied with their domestic energy demand, also will become interested in this integrated Asian energy market.

How has Japanese energy policy been affected by the international environment, such as oil prices, wars, and climate change?

First, I believe that the experience of World War II clearly has had substantial effects on Japanese energy policies, especially the focus on energy security.

Having said that, concerning consumer side energy policies such as energy efficiency and diversification of energy resources, Japan has been making efforts very constantly to ensure both, regardless of oil prices.

On the other hand, supply side energy policies (such as supporting domestic companies’ development and maintenance of oil and gas fields) have sometimes been influenced by oil prices. The restructuring of JNOC [Japan National Oil Corporation] is one example.

Finally, since the 1990s, climate change issues have been affecting energy policies. In particular, the Kyoto Protocol has had a big impact.

What is the best way for Japan to achieve energy security?

I want to suggest two points. First, Japan should reconstruct its energy policies or energy strategies by widening its range from the domestic market to the Asian region. Like the European energy market, the Asian market will be integrated as Asian economies experience deepening interdependence. Japan should reconsider how it can enhance its energy security and energy sustainability with other countries and further develop an integrated energy market in Asia.

Second, 30 years after the oil shocks, it might be a good time to review Japan’s energy policy, especially its mechanisms to accelerate innovation. There are good examples emerging in Europe and other Asian-Pacific countries, which have been developing more market-oriented measures. Japan can improve or refine its innovation mechanism by studying the experiences of others.　

But it is sometimes difficult to adopt new policies if previous ones have proved successful.

(Photo from IEA.)

Candidates tiptoe around trade

An unusual story from Bloomberg's Hans Nichols and Julianna Goldman this morning. Unusual how? Well, for starters, it treats trade as a complex issue with wide-ranging, and by no means uniform, consequences.

Democratic presidential hopefuls are tip-toeing around an inconvenient economic fact: Iowa and New Hampshire, the states hosting the 2008 campaign's first contests, benefit from free-trade policies that many residents nonetheless blame for lost jobs. Hillary Clinton, Barack Obama and John Edwards are seeking to avoid alienating workers from agriculture and other export- intensive industries while appealing to those from U.S.-focused businesses that have fallen behind, especially union members.

In the past I have accused presidential candidates from both parties of engaging in "Campaign Protectionism." I have also offered an explanation for the unsettling phenomenon of declining support for free trade in the U.S.. Namely, the benefits are disguised while the costs are highly visible. Opportunistic politicians have often exploited this perception gap to great advantage. Hillary Clinton, especially, has wavered on support for free trade, giving the appearance of a naked play for labor union votes. Along with Obama and Edwards, she opposed the U.S.-South Korea free-trade agreement. Now, in this Bloomberg report, some nuances emerge.

"You have winners and losers from trade,'' New York Senator Clinton said at a Dec. 13 debate in Iowa. People "are gaining because we're exporting,'' she said, while others have lost jobs.

The location of this remark is significant. Support for Edwards is strong in Iowa and he is known as a union favorite. Could this be the beginnings of a navigation back towards the center in anticipation a general election campaign?

Sometimes, as in New Hampshire, trade's 'winners and losers' live side-by-side, making it difficult to tailor the message to the audience. Moreover, the unique juxtaposition of the Iowa caucuses and New Hampshire primaries presents a difficult challenge to a candidate's desire for consistency. Nichols and Goldman cite poll numbers showing the two states are mirror images on free-trade: New Hamphire in favor, Iowa against.

Holding Charities Accountable

When author Michael Conroy spoke at the Carnegie Council recently about his book on the certification revolution that is changing the way corporations behave, I asked him a somewhat controversial but nonetheless pressing question in the nonprofit community: Governments are elected, corporations have stockholders, but to whom are NGOs accountable?

Conroy gave a thoughtful answer, referring to democracy and the markets. In an ideal world, he said, governments that are democratically elected would listen to civil society and the initiatives that this part of civil society is advocating.

Second, these initiatives are calling consumer and business-to-business preferences on a set of values. If civil society pushes for something that the population as a whole doesn’t support, it won’t have much impact. If these advocacy campaigns don’t ring true with consumers, it won’t have impact. It speaks to the democratization of information, he said.

I would add that nonprofits have other effective stakeholders as well: Their funders, their boards, and public opinion. If they aren’t doing good work, their funding will dry up, their boards will force change, and public opinion will exacerbate the first two phenomena. To be sure, as nonprofits become more powerful, it is important to make sure they live up to the values that they espouse.

You can listen to the conversation with Michael Conroy here.

This week, The Wall Street Journal published an insert devoted to the growing philanthropic sector worldwide, focusing on the effectiveness, the power, and the accountability of this happening. On the front page of the insert, Sally Beatty cites some sobering polls taken by NYU scholar Paul Light. Based on a 2006 survey of 1,000 respondents in the United States, the following percentage agreed with these statements: About 71 percent said that charities waste a great deal or a fair amount of money; 44 percent said that directors of charities are paid too much; and only 18 percent said charities do a good job running their programs and are fair in the decisions.

Beatty suggested a three-prong approach to improve charities: 1. provide more information about the challenges and successes of charities; 2. adopt higher standards and better ways of measuring results; and 3. adhere to those standards. She suggests that charities should be more open about the problems they have encountered and publish their travails online.

Speaking of the power of the individual, a chart derived from Giving USA 2007 shows that 75 percent or about $223 billion of giving in 2006 came from individuals. Foundations come in second at 12 percent, bequests third at about 8 percent, and corporations last at 4 percent. But companies are becoming more adept at stepping in to help charities when needed, for example in the case of disasters.

Where does the money go? According to the same article, about 33 percent goes to religion, 14 percent to education, and 10 percent to human services. International affairs, our sector at the Carnegie Council, gets only 4 percent of the pie.

I would like to take this opportunity to show you our new donations web page for our program at the Carnegie Council here. We try to be as open, transparent, and accountable as possible. Please consider giving generously.

(Photo by TW Collins.)

Co-operative Food Ethical Policy

In this video clip from a Guardian climate change conference, Paul Monaghan, head of ethics and sustainability for the Co-op Group, speaks on how businesses can use long-term power purchase agreements for renewable energy, help scale up microgeneration of electricity, improve energy efficiency, get involved with public policy in a positive way, and use carbon offsets.

Monaghan's passion led me to investigate the Co-op Group a little more, and I found that they are developing a new member-led ethical policy for the food they sell. "Going forward the ethical and environmental priorities that underpin our co-operative products will be in line with members' concerns," writes Guy McCracken, Chief Executive for Food Retail at Co-op. They've developed a questionnaire to figure out what those concerns are and how to prioritize them. The questionnaire covers food quality, diet and health, environmental impact, ethical trading, community retailing, animal welfare, metrics for success, and future member consultations.

I'd say meeting half of these targets would be admirable. Does the co-op as an organizing principle give them an advantage?

Buy Low, Sell High?

Some giggle-worthy economic news from a highly unusual source.

Page Six, the gossip page of the New York Post, is reporting that the weakening dollar is having an unexpected impact on the price of high-quality marijuana in Manhattan.

"Most of the high-end marijuana sold here comes from Canada," our source in the herbal world reports. "With the Canadian dollar becoming more valuable against the US dollar, the dealers have had to raise prices about 25 percent." The commercial-grade weed comes from Mexico, and the peso hasn't moved as much. "But Canada has the real high-quality hydroponic stuff," said our stoner source, who is feeling the pinch.

Certification Systems as Risk Mitigation

Goldman Sachs has recently been lauded for its risk mitigation systems, taking actions months before the sub prime mess broke out. Some people have said that Goldman had a more integrated exposure risk mitigation system, while others attributed Goldman’s success to the use of realistic, hardnosed analysis, unclouded by rose colored glasses. What about companies trying to mitigate against brand risk? After all, brand is where much of the value of firms is tied up.

Economist and certification consultant Michael Conroy just spoke at the Carnegie Council about his new book Branded! How the ‘Certification Revolution’ is Transforming Global Corporations. The books and the seats at the lecture were both sold out.

Conroy said that a revolution in standards certification is underway and has been fueled by successful "market campaigns" by NGOs, the development of outside certification systems, the presence of champions for change within companies, and the growing market for ethical products. Market campaigns call attention to social and environmental problems in a corporate supply chain, problems that go beyond the jurisdiction of the WTO.

The growing power of corporate brands is two-sided. While a brand can help establish a company’s dominance in a particular industry, it also makes a company vulnerable to attacks from the public on that brand. A brand value can be estimated as the total value of a company minus its physical assets. Conroy estimated that McDonald’s brand is about 70 percent of its value and that figure is about 64 percent for Coca Cola.

Certification systems are a set of principles, criteria, and indicators negotiated by all stakeholders impacted by a company’s operations. The result of these negotiations is the highest politically accepted standard. These standards allow consumers and civil society to be more nuanced in signaling their preferences to companies—beyond just saying, “Stop what you are doing!”

The relationship between civil society and corporations allows companies to positively mitigate against brand risk. Certification systems are risk management systems against future attacks on brands, says Conroy.

It was a fascinating discussion and certainly a tribute to the growing power of NGOs. The audio from this event will be up on the Carnegie Council's online magazine Policy Innovations, a project that Conroy also was instrumental in helping to start.

Stay tuned.

Victoria's Dirty Secret?

Jonathan Tasini of workinglife.org blogged at dailykos.com about the National Labor Committee's new findings on sweatshop conditions and labor violations at a Jordanian subcontract factory that makes bikinis for Victoria's Secret. He uses this example to critique the U.S.-Jordan Free Trade Agreement, saying such deals "are primarily about protecting the rights of capital. You can never hope to enforce labor rights (or for that matter environmental protections) under a regime that is focused on profit first, and community second." The "free" in free trade probably doesn't mean much to the Bangladeshi worker who bought his way to Jordan only to find himself working 90-hour weeks and unable to leave the factory compound because his residency permit has been withheld.

Closer to home, there's a knitting factory in my building in Brooklyn. I popped in this past Saturday to grab the freight elevator and found about a dozen people working, Asian and Mexican immigrants, some of them wearing a thin mask stretched from ear to ear across their noses. It was pretty humid in there due to all the ironing. I don't know enough about that particular company to comment on its labor policies or whether it qualifies as a sweatshop, but it resonates with me when Tasini says "Why we would pretend that labor rights can be enforced as an after-thought, as a secondary issue, in countries around the world—when we can't even enforce basic labor rights here."

Tasini advocates writing to the CEO of the parent company of Victoria's Secret to pressure them to change behavior. I wonder if the Decent Working Conditions and Fair Competition Act would make such protest unnecessary.

Photo credit: Pink Bras by Emil Rensing (CC).

Campaign Protectionism

David Brooks offers a strong condemnation in today's New York Times of the current "protectionist drift" characterized by the thinking and prognosticating of Lou Dobbs &c. He has taken to calling this approach Dobbsianism, noting with fear that its popularity is increasing even now, during a period of relative economic well-being. "...you can imagine how attractive it’s going to seem if we enter the serious recession that Larry Summers convincingly and terrifyingly forecasts in yesterday’s Financial Times. If the economy dips as seriously as that, the political climate could shift in ugly ways."

Many of the presidential candidates have moved along with the shifting tide of Dobbsianism. I have begun to think of this as Campaign Protectionism. As Brooks notes, "Their speeches constitute a symphony of woe about lead-painted toys, manipulated currencies and stolen jobs," rather than the increases in living standards and improved environmental standards that globalization fosters. Campaign Protectionism is a cynical tact because it plays on innate fears and ignores empirically verifiable gains from trade.

...not every economic dislocation has been caused by trade and the Chinese. Between 1991 and 2007, the U.S. trade deficit exploded to $818 billion from $31 billion. Yet as Robert Samuelson has pointed out, during that time the U.S. created 28 million jobs and the unemployment rate dipped to 4.6 percent from 6.8 percent.

That’s because, as Robert Lawrence of Harvard and Martin Baily of McKinsey have calculated, 90 percent of manufacturing job losses are due to domestic forces. As companies become more technologically advanced, they shed workers (the Chinese shed 25 million manufacturing jobs between 1994 and 2004).

Paul Krugman is Brooks's colleague at the New York Times and a noted economist in his own right. While the two are rarely in agreement on political issues, they do concur, as Krugman recently told NPR, that politicians should "cool the rhetoric" on globalization.

So do we have to be protectionist to make workers' lives better? No. All the evidence says that you can be a full participant in the global economy while still paying good wages.

One Laptop Per Child Shows Nonprofits' Power

Nicholas Negroponte, the chairman of One Laptop Per Child and one of the founders of Wired magazine, was featured this weekend in the Wall Street Journal. In 2005, Negroponte unveiled his plan to design a 100-dollar laptop and get it in the hands of 150 million of the world's poorest schoolchildren. Read the transcript of his Nov. 2005 presentation "The $100 Laptop: The Next Two Billion People to Go Digital" to the Carnegie Council in New York City where he talks about open source, relating it to Wikipedia:

Open source is a very controversial subject. If you have not seen the Wikipedia, I urge you to do so. The Wikipedia is an open-source encyclopedia, written by the readers. When you do Google searches now, very often the Wikipedia entry comes up.

You say, how could that possibly work? Somebody can go in there and type complete garbage. But the truth is that it is self-cleansing. Somebody else reads it and finds out it's wrong and corrects it. It is so current and up-to-date that within 24 hours after Bush nominated my older brother for director of national intelligence, it was in my entry. It said, "Nicholas Negroponte, the brother of the nominee for director"—and I didn't put it there; he didn't put it there. How did it get there?

Encyclopedia Britannica can't compete. It is not that this is a free encyclopedia; it is a better encyclopedia. And that is what open source is about.

(By the way, you can read the Policy Innovations article here where we coined the phrase "Wiki Influence." That article has been one of the most popular articles in Policy Innovations this year.)

The Wall Street Journal article describes how companies such as Intel have been ramping up efforts to build a laptop that would compete for those emerging markets.

Blogger Matt Asay makes the case that open source means more freedom:

The good news, of course, is that developing nations win as competition ramps up, even if One Laptop Per Child isn't the organization ultimately selling the laptops.

The bad news, however, will be if these vendors use their cheap laptops to entrench themselves in developing markets, such that choice is dampened for decades. This is where open source needs to flex its political clout and stress that price is not the only consideration for countries looking to adopt technology for their children. Freedom should also be a critical factor. This means open source.

I think the cool story here is that a nonprofit, albeit one headed by a person with great ideas (Negroponte calls himself an ideas guy), influence, and contacts, was able to change the market, forcing the big technology companies to compete or lose out. This story is a great example of how NGOs and nonprofits are changing the world, just as Carnegie Endowment head Jessica Matthews predicted in her famous 1997 article "Power Shift" in Foreign Affairs. Here is a pertinent excerpt:

The most powerful engine of change in the relative decline of states and the rise of nonstate actors is the computer and telecommunications revolution, whose deep political and social consequences have been almost completely ignored. Widely accessible and affordable technology has broken governments' monopoly on the collection and management of large amounts of information and deprived governments of the deference they enjoyed because of it.

WSJ: More bad news for free trade

Free trade sure could use a little good PR. This page one story in the Wall Street Journal underlines my fear that the election season will drive another nail into the free trade casket. Deborah Solomon and Greg Hitt document the growing ambivalence over trade in a state, Iowa, considered a "big winner from global trade."

...over the last couple of years, workers and voters in this blue-collar manufacturing outpost -- and throughout Iowa -- have grown decidedly downbeat about globalization. Trade has become such a hot subject that Democratic presidential candidates seeking support in Iowa's influential Jan. 3 caucuses are turning into trade skeptics, and the issue is splitting traditionally free-trade Republicans.

It's impossible to factor out how much of this trade skepticism can be attributed to Iowa's unique place in the US electoral calendar. But anti-trade sentiment is undeniably gaining steam nationwide despite reports that the falling dollar is stimulating exports. Peter Goodman, writing in the International Herald Tribune this week:

As the United States heads into what many economists predict will be a substantial economic slowdown, the success of U.S. companies in building sales in countries around the world may cushion the blow. It could help prevent the economy from slipping into a recession.

So which presidential candidate is prepared to make the argument that what the US needs is more trade, not less?

Ethics in China Pioneer Sharon Hom

Our friend Sharon Hom, executive director of Human Rights in China, is named as one of the Wall Street Journal's 50 women to watch for 2007 published today:

Many companies already are consulting with her in private about how to forge ethical investment strategies and avoid scandals or even boycotts next year. She is involved in a continuing effort with technology companies--accused by critics of facilitating China's censorship regime--to tackle human-rights concerns.

"China is the most important market, that's true. But without greater transparency and openness, that market is not a stable or reliable one," says Ms. Hom.

Kite Runner Approach to Understanding Corruption

I spoke at NYU's Center for Global Affairs last week in the Woolworth Building on an anti-corruption panel. One big problem conceptually is that everyone has a different definition.

For example, at our recent workshop at the Carnegie Council on innovations for fighting corruption, AccountAbility's Steve Rochlin highlighted one of the difficulties surrounding discussions about corruption—defining the terms. The watchdog group Transparency International views corruption as a question of improper payments or bribery. The World Bank, the leading development agency, defines corruption as the privatization of public policy. This is a definition that makes many in the United States uncomfortable, Rochlin said, because it touches near the system of institutional lobbying that operates in American democracy. Representatives from Lockheed Martin, General Electric, and the World Bank also were on the Carnegie Council panel. You can read and listen to their comments on Policy Innovations here.

Essentially, corruption is a tax on bad governance or weak demand for good governance. As development progresses, demand for better governance tends to go up. But from the World Bank’s perspective, there is debate on the priority of economic development and anti-corruption measures, as the Bank’s mission is to promote development.

I offered what I called Kite Runner approach: All sins are a variation of theft, said the father in Khaled Hosseini's the book the Kite Runner. This is useful for a philosophical analysis as it makes it easier to grasp.

Ethicist Thomas Donaldson’s chapter “Moral Minimums for Multinationals” in Joel Rosenthal's Ethics and International Affairs reader argues that the power and weight companies have give them a responsibility to protect human rights. “Rights are the rock bottom of moral deliberation,” he writes. And the flip side of a right is a duty.

He looks at negative and positive rights and shows that the two are really not separate. Negative rights are that someone not do something—like the right to liberty. Positive rights require someone do something—like a right to sufficient food. The negative right of physical security requires positive actions such as maintenance of a police force, blurring the two. Donaldson gives us a powerful statement here:

“One’s freedom to speak freely is meaningless if one is weakened by hunger to the point of silence.”

For a company, the duty is not just to avoid depriving but also to help protect from deprivation. In the factory, a company’s duty to provide goggles is the classic example.

Looking at the ethics of lies, deception, or theft, it is clearly a bad result if these behaviors were universalized in the Kantian sense: "Act only on that maxim whereby you can at the same time will that it should be a universal law." In the context of protecting rights, it is reasonable to say that theft and deception are also inconsistent with protecting human rights, well being, and security.

Most of all, I simply don’t buy the cultural argument that corruption is acceptable. I do not know of one moral or philosophical tradition that condones lying or stealing. Human rights and moral codes against this behavior is in the most ancient of texts, including the Vedas, the Koran, Persia’s Cyrus cylinder, the Magna Carta, and the Confucian Analects.

Bryane Michael of Oxford University wrote an excellent piece in Policy Innovations called Suing Against Corruption. This is one type of stakeholder engagement.

Instead of pushing for criminalization (which creates a nation of criminals and reduces the incentive to report abuse), donors should support civil law remedies against corruption. These remedies, namely the ability to sue corrupt officials (and the government departments they represent), provide a powerful weapon against corruption. These provisions are, in the language of economics, "incentive compatible." At present, businesses have no incentive to denounce corruption because they gain little by blowing the whistle—and they lose a lot from the loss of favorable relations with government officials. But when businesses can win money from suing for damages from the solicitation of bribery, these businesses have an incentive to denounce corruption.

Branko Milanovic, a lead economist in the World Bank's research department, has written a provocative article on fighting corruption in the era of globalization here. A couple of excerpts:

Intensified trade and travel have enabled the rise of corrupt states that thrive on illegal businesses. Only by changing the rules of the same global trade that has allowed corrupt states to grow can one hope to remove this blot on globalization.

A different approach is necessary: legalize the currently illegal activities like prostitution and drug use and modify the often draconian US and European immigration laws that stimulate human trafficking. If prostitution and drugs indeed became like haircuts and candies, their production would obey the same rules: Countries that export beauty services and confectionary products are not notably more corrupt than others.

Technology to boost transparency also helps. Firms mention tracking and accounting software to reduce the distance between headquarters and far-flung operations and suppliers. And finally, blogging – bloggers in China, for example, are using the Internet to expose corrupt real estate schemes, bringing these violations to the mainstream media around the world. Carnegie, Brown, Oxford, and Demos have started a project called the Ethical Blogger Project and an accompanying blog to advance the positive contributions blogs can make.

I summarized the Carnegie Council panel discussion like this. Five important elements are necessary for fighting corruption:

Cultural questions surrounding the definition of corruption—ethical behavior is not contextual but rather universal;

Multistakeholder engagement to build accountability inside and outside the organization;

Metrics designed to measure the success of anticorruption initiatives, adding a level of transparency;

Creating awareness in far-flung operations of what is considered ethical;

Serving as exemplars of good behavior when operating in ethically challenging environments.

Catching up is hard to do

Daniel Altman at Managing Globalization posits that China is learning the lessons of 20th century US economic history at the accelerated ratio of about 1 year per US decade.

...China seems to be rolling up the welcome mat a bit in several high-value ndustries, perhaps as an economically questionable preparation for a freer currency or a slackening of growth. The United States suffered the drawbacks of that approach many decades ago. If China is going through the same learning process now, you could argue that it’s traveling through economic time about 10 to 20 times more quickly. In the past year, the Chinese had the product safety scandals of the 1900s and 1910s. Next year, perhaps, they’ll experience the protectionism of the 1920s. Will a securities regulator and a social security program arrive in 2009, after a crash in an overvalued stock market?

If they can land a man on mars in 6 or 7 years, then I'll agree that we will all soon be speaking Mandarin. But there is an awful lot that will need to go right for the Chinese as they confront the scenarios outlined above. It was not foreordained that the US would emerge leaner, stronger and economically healthier either from the depression era or the 1970s. An awful lot had to go right.

Can China Lead?

The National Interest has just published a piece Joshua Kulantzick and I wrote based on our research trip over the summer to six Asian nations. Our main question was: What is the impact of China's emergence on Asian regionalism? We interviewed more than 50 senior sources.

Our findings were surprising as they seemed to verify my hunch that Southeast Asian policymakers would be forced to be more honest, and less cyncial, about their interests in the face of dramatic political change in Asia. Here is an excerpt for our article titled "Hu's on First?":

In nations like Vietnam, political elites have even begun to analyze the “China model” of development, assessing whether China’s combination of moderate economic liberalization and no concurrent political reform could be duplicated in Hanoi.

But Beijing’s charm may be reaching its limits.

While China has pursued more sophisticated diplomacy in the region, its own political system has hardly become more transparent. Just the opposite: Though many foreign governments hoped for substantial political reform when Hu Jintao came to power, studies by groups like Human Rights Watch actually show Beijing has backslid on political and social freedoms under Hu, with crackdowns on local media and civil-society organizations like China Development Brief (CDB), a prominent Beijing- based website that monitored Chinese non-governmental organizations (NGOs).

This summer, with little warning, the Chinese government shut down CDB. At the same time, China clearly has been upgrading its military, boosting defense spending by some 20 percent last year alone and beginning to develop a blue-water navy, but failing to coherently explain to its neighbors the rationale behind its build-up.

Worse, even as wealthier Asian nations are beginning to embrace environmental stewardship, better labor rights and corporate social responsibility, China’s companies, now beginning to invest abroad, remain plagued by low environmental standards, poor governance and little accountability.

As Xiaobo Lu, a Columbia University professor, says, China needs institutions to establish the ethical “rules of the game.” “Right now, it is everything goes—precisely because, yes, everything goes—no good credit checking system, no well-placed fear of violating good norms, one can get away with cheating, et cetera”, Lu told The Wall Street Journal.

Indeed, to many Southeast Asian nations, there seems no way to hold Chinese firms accountable for disasters ranging from clear-cutting in northern Myanmar to exports of tainted products to significant problems with Chinese joint venture partners.

Bird Flu Back in Britain

Earlier this year I noted the step-down in bird flu mania. Now, as the real heart of flu season approaches there is this news out of the U.K.:

Redgrave Park Farm in Suffolk is locked up and isolated after tests on turkeys found to have avian flu have confirmed the H5N1 strain. The highly pathogenic strain of the virus, the same as that found across Asia, was confirmed by government vets. All 6,500 birds are being slaughtered and a 3km protection zone and a 10km surveillance zone have been set up. (BBC)

This outbreak is particularly devastating to farmers coming as close as it does to the holiday season.

Luckily, human-to-human transmission remains an insurmountable barrier to this deadly pathogen. If and until such transmissions start happening, a killer bird flu pandemic is merely a hypothetical possibility. There has yet to be a confirmed case of H5N1 in the Western Hemisphere. But the progressive West-ward spread of H5N1, as illustrated by this interactive map, gives avian flu boundless new opportunities to mutate. Should the mutation occur, the nightmare scenario which garnered so much attention in 2005, could yet come to pass.

Dutch Disease and Democracy in Russia

I just got back from Tokyo, Kyoto, Osaka, Moscow, and St. Petersburg, completing a circumnavigation of the Earth.

One preoccupation in Russia was whether democracy is necessary for international legitimacy, prestige, and change. As one senior college student at St. Petersburg State University asked me: Do states need to democratize in order to globalize? I responded that democracy helps countries cope with the increased openness that is associated with globalization. I drew Ian Bremmer's J-curve on the blackboard (my interview with Ian about his book last year is here). Of course, the students wanted to know where Russia was on the J-curve.

Ian, a Russia specialist, devotes a whole section to Russia in his book: "Whether or not Putin's consolidation of power is the means to help Russia navigate the bottom of the curve and ultimately to make the transition from closed to open, left to right, remains to be seen."

Another big concern in Russia is the so-called Dutch Disease, which Russia has probably contracted. My presentation with Zhenia Bessonova in Moscow was about the effect of FDI on Russian industries. Companies that are competitive will respond to FDI by increasing efficiency while uncompetitive companies will exit. Russians are concerned about inflation and their heavily natural resource based economy.

Thinking about the bubble in the Shanghai real estate sector in China and the luxury condos between Bangkok and the airport in 1997, I noted that the road from the hotel to the airport in Moscow is dotted with new car dealerships--from Toyota to Ford to Audi. Is it bubbly in Russia too?

Trade Triangulation?

Hillary Clinton says she will support the Peru FTA but not agreements with Colombia or Panama. From Bloomberg:

Clinton said she's opposing the Colombia deal because she's concerned about violence against trade unionists in the country and can't support the Panama agreement because the head of the nation's National Assembly is a fugitive from justice in the U.S.

"I have long said that we need smart trade policies that advance labor rights, the environment and our economic standing in the world,'' Clinton said in a statement released by her campaign. "As president, in my first months in office, I will take a time-out from new trade deals to assess their impact before going forward.''

It looks like we are starting to see a clearer picture of the future of U.S. trade policy (read the Policy Innovations article on this topic here)--something like trade triangulation.

Beauty and the Buck

It's hard to tell if this is a leading or lagging indicator, but Brazilian supermodel Gisele Bundchen is refusing to be paid in dollars.

How long before Wen Jiabao demands the same?

Nos-RATO-damus?

Stocks got a pummelling this afternoon, in part due to uncertainty in international currency markets. From the New York Times:

Investors were alarmed by a report this morning that a top Chinese government official said China would shift its foreign currency reserves away from the “weak” United States dollar, further eroding confidence in the currency and sending it to a new low against the euro.

Just a few weeks ago, in one of his last speech's before handing the reigns of the IMF over to Dominique Strauss-Kahn, Rodrigo de Rato warned of a potentially unsettling plunge in the greenback's value.

Up to now, movements in exchange rates have been orderly and in line with fundamentals. But there are risks that an abrupt fall in the dollar could either be triggered by, or itself trigger, a loss of confidence in dollar assets.

Are we watching Rato's dire prediction unfold before our eyes? Events like today's add weight to Thomas Palley's call for managed exchange rates. If, as Palley suggests, the US is getting out-gamed by savvier players in currency markets (ahem, I wonder who that could be), then perhaps it's time to start considering "outdated" approaches. Especially if they can restore a measure of fairness to the current exchange rate system. Thus far, the pain of the credit crisis in the US has been somewhat offset by the continued buoyancy of financial markets. But there will be a rising chorus calling for change if the so-called "real economy" starts to get sucked under. That corner may have been turned today.

Globalization's Squeaky Wheels

What is the obssesion with giant ferris wheels?

Reuters is reporting that a $290 million "Great Wheel of China" is about to be built in eastern Beijing.

The giant ferris wheel will have 48 air conditioned observation capsules, each of which can carry up to 40 passengers, and on a good day even the Great Wall is expected to be visible in the mountains to Beijing's north.

The Singapore Flyer takes online reservations and the London Eye offers a Christmas package of mulled wine and mince pies at altitude. The Great Wheel Corporation is building or planning to build wheels in Berlin, Dubai, Orlando, and Qingdao.

Is this the new, must-have international status symbol? What happened to building and supporting world-class cultural institutions?

Rethinking "National Interest"

A question emerging from my current trip to Japan and Russia has been deceptively simple: In this era of global problems, what is "national interest?"

I got into a long discussion with a prominent Japanese political scientist in Tokyo after I asked him, is it in Japan's national interest to pursue the abductee issue with North Korea as a priority?

Clearly, this issue is extremely emotional. But even the Japanese Prime Minister has said recently that if it comes down to disabling North Korea's nuclear capacity and sticking to Japan's principled position on the abductees, Japan may have to redefine success or at least adjust expectations. The Japanese scholar told me that the abductee issue was in Japan's national interest indeed because it is so emotional. If a democratic polity is telling its leadership to pursue a particular policy, that should define national interest, he suggested.

But that then calls into question what leadership is. One scholar in Moscow told me this morning that--thankfully--the Russian public has little impact on policy. I would offer that leadership is looking beyond short term political interests to pursue long term benefit. That's the difficult, ethical discussion. Sometimes as politicians become trapped by their constituencies, bureaucrats, businessmen, and civil society can look to the longer term, pushing an agenda of peace. Broadening the concept of security can help us here. If we understand security as global security rather than national, we can develop a framework from which to to develop more ethical policies.

Which brings me to the session this morning in Moscow. We heard from U.S. Ambassador to Russia William Burns and Victor Kremenyuk of the Russian Academy of Sciences. A theme of their talks was finding common interests shared among the U.S. and Russia. We were told that when the United States suffers economic or political problems, many Russians become "euphoric." Exchanges between scholars, think tanks, NGOs, and others can facilitate the effort toward peace even when bilateral political relations are deteriorating.

In order to avoid conflict, a global "paradigm" must be found, suggested Kremenyuk. He suggested several areas in which the two countries might cooperate:

• Nonproliferation, particularly given the current instability in Pakistan
• Energy management to stabilize prices
  
• Climate change since Europe can't tackle it alone; we must avoid catastrophe
  
• Economic imbalances
• Combating terrorism

How do we define national interest today? Whose interest should governments pursue?

Globalization as Tea

I am just finishing a week in Japan on a Center for Global Partnership and Ministry of Foreign Affairs sponsored delegation. A major theme of the discussions we had here was whether globalization and traditional culture are compatible. Some argued that Japan may be the best example of a developed, globalized economy that maintains strong traditions. Nevertheless, a lot of anxiety persists about it.

A revealing essay appears in the Daily Yomiuri highlighting this anxiety titled "'Headless monster' changing society." The headless monster is societal revolution and change that can come about without leadership, such as the blog-fueled movement in China that forced the closure of the Starbucks in Beijing's Forbidden City. An interesting, if not ironic, excerpt is here:

History has been full of fads and trends. It has not been unusual to experience one major social change after another with a majority of society quickly latching on to these new phenomena. Rumors, popular songs and fashions of the past can be seen as the works of headless monsters. But a new type of monster is now affecting social issues and politics as well, a situation that may be a new phenomenon.

This new century has seen the emergence of factors that are increasingly favorable for this new monster. First, we are seeing the death of traditional ideologies, which means that human beings no longer have a stable guides to follow even though they are still prone being swayed by latent feelings of anger and disgust. In China, the state's enforcement of communist ideology has been waning. Japan's Marxism-inspired political parties do not even bring up the name of Karl Marx anymore.

It is curious that the writer associates traditional Chinese culture with communism rather than Confucianism.

Yesterday, we spent the afternoon at a tea ceremony in Kyoto. The hosts, the descendants and disciples of tea masters, said that tea ceremony of today in Japan would be unrecognizable to its practitioners of hundreds of years ago. Society changes, culture changes, and tea adapts. It is, like a stream, not at all like the way it started although its essence remains. One of the tradition's characteristics is to balance formality with relaxation, rigidity with flexibility, so that a balance is obtained.

It seems to me that Japan's approach to globalization is instructive to those who can afford to learn. Adaptation and innovation have found harmony with a sense of fairness and tradition.

Photo by El Fotopakismo.

Talk About Free Riders!

"[London]'s congestion pricing for drivers is heralded around the world for reducing traffic and pollution. It's also causing an unintended effect: a sharp jump in thieves stealing or counterfeiting license plates. Thieves are pinching plates by the dozens every day to fool the city's traffic cameras, which enforce the £8 ($16) daily charge to drive in central London as well as other traffic infractions."

- Niraj Sheth, Wall Street Journal, Friday 11/02/07, B1

An unfortunate, but acceptable byproduct of good policy? Or evidence that congestion pricing is merely a tax that clever drivers will find away around? These are important questions to consider as policy successes make their way around the world.

Sovereign Wealth Funds Take Center Stage

Sovereign Wealth Funds (SWF) were the big topic at the recent meeting of the Group of Seven (G7) industrialized nations. These pools of cash, comprised of proceeds from government current account surpluses (often related to gas and oil wealth), have ballooned in size over the last fifteen years. They currently control an estimated US$2.5 trillion - more than the combined valued of every hedge fund in existence. They could control up to $17.5 trillion in assets by 2017.

States normally invest foreign exchange reserves in low or no-risk investment vehicles like US Treasuries. But there is concern that some of these funds are now moving toward riskier equity holdings. This development worries governments in the US and Europe. Finance Ministers from the G7 recently asked some of the biggest funds to develop an explicit code of conduct for SWFs. Transparency is an issue here. So is national security. "Money is naturally going to gravitate toward dollar-based assets because of the strength of our economy," Treasury secretary, Henry Paulson Jr., recently said."I'd like nothing more than to get more of that money. But I understand that there's a natural fear that they're going to buy up America."

At the Carnegie Council last week, Daniel Altman downplayed those fears by noting that a similar sentiment surrounded Japanese real-estate purchases in the US during the 1980s. "My gut feeling is, that if you are going to offer securities for sale, you can't dictate who buys them," he said.

Bloomberg's Matthew Lynn is somewhat more direct in his defense of SWFs.

"Nobody minded when emerging economies recycled all those dollars, pounds and euros by putting cash on deposit in our banks, or buying bonds issued by our governments. So why should we mind when they start buying companies? They are just diversifying their holdings, like any prudent investor would. If we don't like them purchasing our equities, shouldn't we tell them to stop buying our bonds and currencies as well?"

Should we be scared of Sovereign Wealth Funds? Or are they no riskier than other investment vehicles that we are more familiar with?

No Time for Celeb Activists

Gideon Rachman, the FT's chief foreign affairs columnist, offers a humorous and insightful take on the proliferating role of celebrities in development, debt-forgiveness and poverty reduction. George Clooney, Bono, Graydon Carter and Angelina Jolie all take hits from Rachman's wickedly poisonous pen.

"There is something unedifying about an unelected celebrity intimidating politicians," he writes. Indeed. Especially when, as Rachman notes, "they see things in the stark and simple terms favoured in Hollywood movies, rocks songs and the speeches of US president George W. Bush."

Isn't it just a little too easy for Bono or Brad Pitt to tell us what the solution is to complex issues such as underdevelopment? I think it is. On the other hand, I find my respect increasing exponentially for Mia Farrow. She has for many months been writing insightful and passionate op-eds in the Wall Street Journal and elsewhere on the atrocities in Darfur and China's connection to the Sudanese regime.

"As Khartoum's largest and closest business partner, China has provoked outrage from the international community for underwriting genocide in Darfur. In recent months, Beijing has responded with steadily increasing talk about its commitment to promoting peace in the region. But it has taken no meaningful action."

This is good stuff. Unlike some celebrities, who seem to fit their advocacy in between film premiers and shopping for yachts, Ms. Farrow seems to have devoted herself entirely to this issue. Perhaps that's why Gideon Rachman leaves her out of his column? And I say good for her -- keep it up (and show the rest how it's done!).

Making the Internet Connection

"Innovation is possible literally anywhere that the internet is in operation," says Vint Cerf, Google's "Chief Internet Evangelist," in an interview with Andrew Edgecliff-Johnson of the Financial Times. Of the 6.5 billion people in the world, however, only 1 billion have access to and use of the internet. What does that say about the untapped potential for global innovation?

Cert highlights some of the challenges to extending internet connectivity to greater numbers of people around the globe. These range from infrastructure and capacity building (such as electricity and training) to security and privacy concerns.

"If we ever move into a regime where the providers of basic internet service have any control over what users can put on the network as an application, then I see a potential hazard to innovation. At the present time, this is still a very open system."

As Evan O'Neil points out elsewhere, there are ethical issues related to the process of extending connectivity that may not be immediately apparent. Getting laptops into the developing world is a noble venture. But what if development is not the only motive?

Gaps Abound

Last week, Daniel Altman, of the IHT and publisher of the blog Managing Globalization, came to the Carnegie Council to talk about his new book Connected: 24 Hours in the Global Economy. I asked him what people are interested in who read his blog: What stories is the world interested in but the mainstream press isn't covering?

His reply was that people around the world are engaged in a debate about the best way to organize economically. The Washington Consensus is not the world consensus. Other ways of managing economies--land reform, export-driven growth, or authoritarian capitalism--are also appealing to many.

I am in Tokyo this week at a program organized by the Ministry of Foreign Affairs and the Japan Foundation Center for Global Partnership. One of the themes that I am hearing is the many gaps in the world--perception gaps, income gaps, and values gaps.

Despite the common wisdom that Japan and the United States share common values (I would agree that the two countries do share a belief in universal values), one commentator said he felt that Americans are too concerned about terrorism. While Japan and the US are closer than ever through trade flows and security arrangements, he sees a divergence in what our respective publics care about. In Japan, the core concerns are gaps--between the rich and poor, countryside and cities--and demographics.

Global surveys depict these gaps worry many publics worldwide. Is the United States unique in that its culture accepts gaps between the rich and poor or the factory worker and the CEO or salaries commensurate with merit, as this Japanese commentator suggested?

Small is Beautiful Among Globalization's Top Dogs

For the last 7 years Foreign Policy magazine, in partnership with A.T. Kearney, has published the Globalization Index rankings. The wonderful part about these rankings is that they reflect quantitative figures on trade and FDI, but also some less easily measured "globalization variables" like technological connectivity, political engagement and remittances. Any attempt to measure this complex process should include a qualitative component. Globalization is about removing barriers to the movement of goods, services and people across borders. The first two are easy to measure. It's the people part that often gets lost in the mix.

The top ten most globalized countries this year (drawn from 2005 data - the latest available):

1. Singapore
2. Hong Kong
3. the Netherlands
4. Switzerland
5. Ireland
6. Denmark
7. United States
8. Canada
9. Jordan
10. Estonia

As the accompanying story points out, the countries on this list are notable for their size (or lack of it). These are very small countries.

"And if you’re living in a small country, reaching out beyond your country’s borders may be the only way to find new opportunities. Not surprisingly, six of this year’s tiny globalizers also ranked in the top 10 on the personal dimension of globalization, which measures international phone calls, travel, and remittances. People in small countries boosted their countries’ rankings by chatting it up on the phone, or in the case of Jordan, by sending large sums of money home. It all goes to show that mini can be mighty."

And that globalization isn't just about reciprocal concessions, non-tariff barriers and structural adjustment. It's also about people.

NY Times: Japan Is, Like, So Weird

On Saturday on my way back to New York I picked up a New York Times at the Providence Amtrak station. I know Saturday newspapers are less read but the silliness on the front page cannot go without comment. Two articles about Japan that day were:

"Fearing Crime, Japanese Wear the Hiding Place" on the front page, written by Martin Fackler.

and

"A Font of Commentary Amid Japan's Taciturn Royals" was Saturday's profile, written by Norimitsu Onishi.

What is the average reader to make of this country Japan?

The hiding place article describes a Japanese clothing maker who fashions outfits to resemble vending machines and mailboxes so Japanese can hide from criminals. Notice the headline is "Japanese wear the hiding place" just like ninjas. Is this ninja behavior a widespread trend? No. Although the designer has sold only 20 costumes, it merits a front page article. The point of the piece? The designer "said that while her ideas might be fanciful, Japan’s willingness to indulge the imagination was one of its cultural strengths." I can picture the Times editors fishing for a point.

The royals article profiled Japan's Prince Tomohito of Mikasa. Onishi portrays the prince as an alcoholic nihilistic recluse. The prince's duty? "The royals, he said, could fulfill their duties simply by 'waking up in the morning, eating breakfast, eating lunch, eating dinner, then going to sleep, repeating that 365 days a year.'" I don't know many people in Japan who know or talk about the prince. But I know people were reading these articles because they were both among the top ten most emailed list on Sunday. The oddball stereotype of Japan is alive and well.

Now, I understand that these two fluff pieces are meant to entertain. They were a lot of fun, but I could put them in context because of my firsthand experience with Japan. I also find it ironic that one of the themes of the Brown University conference I was returning from was that mainstream media treats its readers like simpletons. (If you want to read quality reporting in English about Japan, read Sebastian Moffett of the Wall Street Journal.) It makes me worry about the countries I don't know much about. Can I trust newspapers to give me an accurate portrayal?

I just hope newspapers aren't creating a nation of Vinnie Barbarinos, the TV personality famous for his insight, "It's like so weird."

Putting the "We" in "We Are at War"

We just heard at the Watson Institute: Matthew Gutmann, Brown University "Breaking Ranks: An Oral History Project on Iraq War Veteran Dissent;” Erin Solaro, author "Women in the Line of Fire: What You Should Know About Women in the Military;" Greg Gardner, served with the Coalition Provisional Authority in Iraq as Chief of Staff for the Senior Advisor, Ministry of National Security and Defense, Iraq vet, military analyst for FOX News.

A major theme of this conference, “Front Line, First Person,” is the disconnect between the American public and what is really happening in Iraq. Experiencing the photos, interviews, sounds, images, profanity, love, and fear can bring us a little closer to understanding. I kept hearing soldiers urge more Americans to seriously ask more returning soldiers for reflections on their experience.

The power of this meeting is the level of discussion. Sometimes conferences fall into jargon and sound bites, empty of meaning and responsibility. Here, people are speaking with feeling and passion, and in language that is plain, unvarnished, and poetic. Note to self: This is how to do a great, meaningful meeting.

Getting the Stories Out: Who's Betraying Whom?

I am at the second day of the Watson Institute’s “Front Line, First Person.” This morning we heard Charles Monroe-Kane (producer, NPR) To The Best of Our Knowledge, Tara McKelvey (journalist, author) “Monstering: Inside America’s Policy of Secret Interrogations and Torture in the Terror War,” Brian Palmer (embedded photographer, journalist, filmmaker), Trish Wood (journalist, author)”What Was Asked of Us: An Oral History of the Iraq War by the Soldiers Who Fought It.” Moderated by: James Der Derian.

I have never seen a conference room so emotionally touched. Half the room was weeping after hearing the first person narratives about people trying to make sense of and do the right thing in the Iraq war.

James Der Derian asked how we might look at this situation objectively. Charles from NPR said objectivity is a farce. Another question came from Matthew Burden (publisher, Blackfive) about whether documentary filmmakers betray their subject. Brian Palmer showed a clip from his documentary on the war while he was embedded. The most striking thing is the context—something you never see on the daily news, even in the wire services. The soldiers were doing their jobs to the best of their ability; the journalists are doing their best to capture the experience to tell the narrative. But many of these stories don’t make it to a large audience. The news is essentially a market, Palmer said.

Is it the editors’ faults? Is it the fault of media executives worrying about their bottom line? Is it the fault of the television audience, not demanding or possibly not wanting to know the whole story?

One participant concluded: "The media is betraying this republic. Drop the Britney Spears and talk to us like we are intelligent citizens."

Blogging from the Battlefield: "Front Line, First Person"

I am at Brown University's Watson Institute today and tomorrow, attending a fantastic conference, "Front Line, First Person: Iraq War Stories," on soldiers blogging from the battlefield.

The first day's talks are just ending now. Here are a few of my notes from a very emotional and relevant discussion (I am paraphrasing what some of the panelists say below):

Colby Buzzell (blogger, author My War: Killing Time in Iraq) tells his story of how he was deployed in Iraq in 2004. With his blog he was able to tell what really happened despite news stories with contrary information. His blog was turned into his book as well as animated stories for PBS. Relating to our project, blogs certainly strengthens the truths. He wishes more books and more accounts were written about the war because “it becomes more real.”

Senator Lincoln Chafee retells the story of voting to go to war to Afghanistan days after 9/11. He said things were happening so fast Congressmen were unclear whether they were voting on funding for NYC or war in Afghanistan. After Afghanistan “all of a sudden the drums are beating for Iraq.” People weren’t even deliberating on what a WMD was. Carl Levin asked for the debate to slow down but that failed by the same vote level that authorized the war shortly later. “If the administration wanted to remake the Middle East, let’s have that debate. It didn’t happen.” When visiting Iraq right after the war, Chafee saw people put their hands on their hearts as a sign of respect. A year later, Chafee couldn’t get past the airport road.

Matthew Burden (veteran, blogger, Blackfive; author “The Blog of War: Frontline Dispatches from Soldiers in Iraq and Afghanistan”) – I tried to stay connected to my some 200 friends stationed in Iraq to get to the truth. I started Blackfive to tell the stories that weren’t getting told by the media. The first colonel was supposed to review a soldier’s blog but that was pretty lenient. But there are more violations of operational security on the DOD website than on solders’ blogs. The problem we have now is the speed of the information—that scares some. I would like to have military bloggers have the same restrictions as embedded reporters. Many of the people in my book stopped blogging because of the restrictions put on them. You don’t hear enough of the acts of kindness. Blogs help give a sense of balance to reporting.

Eric Rodriguez (veteran, Brown student) – How do we understand something as horrible as war? My family started the second largest gang in California. I wanted something different. I was born in LA but I wasn’t seen as American as others were. After being homeless, I wanted to join the Army so that people wouldn’t be able to look at my family and wonder if we were American. I believe in service to country, and nothing can change that. My transition to the military was easy because I didn’t have to worry about meals, I got a roof over my head, and I was getting paid. After Iraq happened, I decided to go—I ended up in a Chinook getting shot at. Going to Iraq made me a better person in terms of building character. My dream was to go to college. When I was in a minefield facing death, what was important to me became clear—service to country, getting home and going to college. I wrote a 15-page essay called “Straight Out of My Car” to make sure I didn’t fall victim to my abandonment, my sister’s pregnancy, and other pieces of my past. A few colleges got ahold of it and invited me. I brought my friends and mom to college. I hope from my story you see a humanistic side of the Iraq war. There are a lot of good people over there. It’s not black and white. It is a big, gray, scary area. This morning, I taught a high school sex education class, rewrote my economics paper, and prepared for a quiz. Now I am here talking to you.

SFC Toby Nunn (author, Northern Disclosure, soldier currently serving in Iraq) - I have an ethical obligation to tell the story of my buddies. The result is to try to instill a betterment, a better faith of humanity. There is more to armed conflict than the actual violence. It’s not just the action you see, it is the impact you make—delivering school supplies, developing infrastructure, etc. I am from Canada and am trying to become an American citizen because I want to be part of something great and earn my place in society.

Deborah Scranton showed a clip from her film "The War Tapes," showing how U.S. soldiers tried to save Iraqis after a suicide bomb went off, contrasting with the media reports, which did not show these acts of heroism.

Achtung stalling, baby!

Doing his best to keep debt forgiveness on the front burner, U2 frontman Bono yesterday called the International Monetary Fund's failure to keep its promise to write off $800 billion in Liberian debt an "IMF-ing outrage." Speaking to the Financial Times, the singer went on to lambast a system that requires developing nations to "waste time fighting with IMF modalities, 'bureaubabble' and unaccountable distant red tape in DC".

I like Bono a lot, and I can see the that the real value of a statement like this is that it is embarassing to the IMF. Questions of legitimacy are never far from the minds of these bodies and they should be called to task when their promises are not kept. In this case, it seems clear that a commitment was made and has not been fulfilled. But, the ramifications of loan forgiveness are complex. Bono might just as easily offer to take care of Liberia's debt out of his own pocket. That would solve this problem too, after all. But he won't, of course, and he shouldn't -- it wasn't his money that was lent in the first place. And that's it in a nutshell. States are equally, if not more, prone to moral hazard than individuals. If debt is to be written off, it must be handled in a way that avoids encouraging other borrowers to default. It would be nice if the IMF was taking its time in order to get this tricky balance right.

Alas, this is not the case. As the FT story points out, the foot dragging all boils down to the question of "Who's gonna pay?"

"The delay is aggravated by a three-way split inside the IMF, according to people familiar with the discussions. Managers at the fund are insisting shareholder governments need to put up more cash to meet the full cost of the relief. Middle-income countries argue richer members should be contributing more, while wealthier countries argue the fund itself has the resources to meet the gap."

The Economist: Innovation helps poor and rich countries alike

The latest issue of the Economist features a special report on innovation and the global economy which is well worth a look. In it you will read about the efforts of India's Tata motors to produce a $3,000 "people's car" and small biotech firms that are figuring out ways to produce generic drugs without trampling on Western patents.

"With manufacturing now barely a fifth of economic activity in rich countries, the “knowledge economy” is becoming more important. Indeed, rich countries may not be able to compete with rivals offering low-cost products and services if they do not learn to innovate better and faster. But even if innovation is the key to global competitiveness, it is not necessarily a zero sum game. On the contrary, because the well of human ingenuity is bottomless, innovation strategies that tap into hitherto neglected intellectual capital and connect it better with financial capital can help both rich and poor countries prosper. That is starting to happen in the developing world."

Click here to read about how so-called "open innovation" is transforming the corporate attitude toward intellectual property rights (in the public realm this is often referred to as "policy transfer").

See this graph for a nifty visual of the relationship between innovation, labor, capital and productivity growth in the US.