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.

Language, the Great Communicator

I debated soft power with Joshua Kurlantzick last night at the Core Club in New York City.

One of the things I argued was that the United States is becoming less exceptional relative to other countries in the world. While Americans have seen themselves a part of an exceptional power--a city on a hill, a beacon of freedom--globalization and the international system have in fact empowered rival countries to become relatively more powerful. Fareed Zakaria makes a similar point in his new article "The End of Exceptionalism" in Newsweek.

Here is an excerpt:

"[A new Pew survey on global attitudes] highlights the fact that that the United States is becoming the odd country out. The most striking statistic in the survey has to do with trade. Thumping majorities everywhere said that growing trade ties between countries are "very good" or "somewhat good"—91 percent in China, 85 percent in Germany, 88 percent in Bulgaria, 87 percent in South Africa, 93 percent in Kenya and so on. Of the 47 countries surveyed, the one that came in dead last was … America, at 59 percent. The only country within 10 points of us was Egypt."

Brent Scowcroft makes the point in the National Interest in an article that asks whether the United States is becoming the dispensable nation:

"...we are not indispensable in the sense that those of us in Washington are the only ones who know what needs to be done for the good of the entire human race, and that the rest of the world can either join us or be against us. And we have discovered over the last decade that it is increasingly difficult for us to build together any meaningful sort of coalition acting on that belief. It doesn’t provide leadership and only engenders resistance."

Much of this shift is due to the changing nature of power (toward nonstate actors and to nontraditional combatants), the increasingly globalized nature of problems (climate change, pandemics), and the upside of globalization (states have tapped the global economic growth engine to narrow the gap).

Another question that came up last night was: What role will language play in the emergence of China as a rival power? Clearly, language does matter (this article says English speakers and Chinese speakers look at math problems differently).

But how does language relate to power? In terms of soft power, should we say that when more business is done in Chinese than in English, we have reached some kind of tipping point? Or when Chinese stop learning English and mentioning Western concepts like democracy (Hu mentions democracy 60 times in his speech this week), will we witness a new global order? I am betting it won't happen soon. More likely, we will see a convergence that embraces universal values.

The discussion reminds me of the recent concern about the death of many languages. Every 14 days, a language dies. (Here is a discussion on this trend in Global Voices in which many French speakers weigh in.) I have been following this topic and it seems that the argument for lamenting the disappearance of languages is that thousands of years of knowledge embedded in each language will be lost.

OK. But isn't language's primary function to communicate? When more people speak the same language, more communication is possible. Greater communication, in theory, reduces conflict. It also exposes human rights abuses and other problems word wide--as Nick Gvosdev argued in his excellent piece "Reversing Babel."

Finally, it is curious to note that two of the five hotspots for language disappearance are in North America and four of the five hotspots are in the G8.

Fairness on the Brain

Talking about ethics can be scary to some people. People wonder: Whose ethics? Am I ethical? Do I know what ethics is? When I give talks at universities, I therefore refer to the several studies that have shown that primates have an innate sense of fairness. Here is one article in National Geographic, "Monkeys Show Sense of Fairness, Study Says."

The Wall Street Journal reported on Friday on another study supporting this line of thought. The article, titled "Charting the Agony Of a Brain as It Struggles to Be Fair," says that neural analysis of the brain shows humans have a distaste for unfair situations. From the article:

To trigger the brain behavior, the 26 volunteers had to believe their decisions really would affect orphans being denied their seat at a groaning board of plenty where others feasted. So, the experimenters made them all study a 10-page brochure with pictures of 60 orphans.

In 36 rounds of testing, each subject had 10 seconds to choose the lesser of two evils: Allow some children to keep more than their fair share of meals or take away their food to eliminate inequity.

It was a measure of the economics of morality. Dr. Hsu made the inequities more or less severe by changing the number of meals donated to different groups of children. That provoked patterns of neural activation that revealed the brain's distaste for injustice and its willingness if the disparity was wide enough -- in one case, one child receiving five times more than another -- to punish the rich by putting them on short rations. To redress the extremes, people were willing to confiscate meals even when it hurt the orphanage as a whole, Dr. Hsu, now at the University of Illinois, reported recently at a meeting of the Society for Neuroeconomics in Nantasket, Mass.

Zoellick makes case for fairer globalization

I couldn’t help but notice that the title of World Bank President Robert Zoellick’s speech to the National Press Club on Wednesday bore some similarity to a certain blog. His remarks, “An Inclusive and Sustainable Globalization,” outlined the Bank’s vision for the next few years. Increasingly this looks like movement away from the anti-corruption focus of the Wolfowitz era and toward building support for the benefits of globalization.

I appreciate that his definition of “sustainable” globalization extends to both environmental and political sustainability. Here in the US, the political sustainability of globalization has lately been much in the news. As Congress considers punitive action against China and presidential candidates from both parties score easy points with protectionist rhetoric, it is worth remembering that, as Zoellick points out, globalization has lifted 300 million people out of grinding poverty over the last two decades.

Globalization offers enormous opportunities…we shouldn’t try to stop it or shut it down. But we do need to try to channel it and manage it. We need to help those that would otherwise get left behind.

Mind you, he’s not talking about Americans in manufacturing districts being left behind. He’s talking about “indigenous people, women in developing countries, Africans, the rural poor, and their children.” In turning our backs on globalization, we might just as easily be turning our backs to the people on that list.

Protectionism may be politically sustainable, but it hardly seems fair.

Jim Weber's Basics for Building a Corporate Ethics Program

Jim Weber recently summed up some of the basic steps for developing a corporate ethics program. He also spoke of the "emerging connection between being ethical and being profitable." Dr. Weber directs Duquesne University's Beard Center for Leadership in Ethics.

• First, build a strong ethical work climate—a culture that fosters and integrates ethical decision making into the employees' daily thought processes and behaviors at work. It is important for senior management to consistently discuss the importance of ethics at work, as well as to model that commitment in their actions and thus reinforce the ethical culture.


• Second, an organization often seeks to codify the values that top management believes to be guides for employees at work—thus an ethics policy statement is promulgated. The policy needs to be distributed periodically to all employees, translated into multiple languages if the organization operates in multiple countries and allow for employees to contribute to the revision of the policy.


• To reinforce the policy, an organization often constructs an employee ethics training program, where real situations are presented for employees to analyze and resolve, often using the organization's ethics policy as a guide.


• Finally, an organization needs to develop effective implementation mechanisms to reinforce its ethics program. These mechanisms vary from establishing an ethics office and officer within the firm, to creating an employee help line for workers to use when they have questions about what is the right thing to do or to report alleged unethical actions, to including ethical values in employee performance appraisal evaluations. (Duquesne University magazine, Fall 2007)

Most of these principles—the importance of breeding ethics into the corporate culture, the role of senior management, training, and distribution of the ethics policy in employee handbooks—match up exactly with what GE and Lockheed Martin reported at our recent Workshop for Ethics in Business.

Schools as Shapers of Culture and Ethics

I was reading Peter Berkowitz's op-ed in the Wall Street Journal "Ethics 101" about the duty of universities to consider the ethical issues surrounding education. The (very pointed) ethical questions he gives include the following:

• Is it proper for university disciplinary boards, often composed of faculty and administrators with no special knowledge of the law, to investigate student accusations of sexual assault by fellow students, which involve crimes for which perpetrators can go to jail for decades?
• Should universities have one set of rules and punishments for students who plagiarize or pay others to write their term papers, and another -- and lesser -- set for professors who plagiarize or pay others to write their articles and books, or should students and faculty be held to the same tough standards of intellectual integrity?
• How can universities respect both professors' academic freedom and students' right to be instructed in the diversity of opinions?
• What is the proper balance in hiring, promotion, and tenure decisions between the need for transparency and accountability and the need for confidentiality?
• What institutional arrangements give university trustees adequate independence from the administrators they review?
• Is it consistent with their mission for university presses to publish books whose facts and footnotes they do not check?
• In accordance with what principles may a university bar ROTC from campus because of the military's "don't ask, don't tell policy" concerning homosexuals, while inviting to campus a foreign leader whose country not only punishes private consensual homosexual sex but is the world's leading state sponsor of terrorism, and who himself denies the Holocaust and threatens to obliterate the sovereign state of Israel?

Point taken.

But the incorporation of ethics into professional schools' curricula is still lacking. I came across a gem of a New York Times op-ed written by Robert Shiller (author of Irrational Exuberance) in 2005 titled "How Wall Street Learns to Look the Other Way." The "how" is in the lack of ethics training in business schools.

A couple of nice excerpts:

And, as with any situation in which we are puzzled by how a group of people can think in a seemingly odd way, it helps to look back to how they were educated. Education molds not just individuals but also common assumptions and conventional wisdom. And when it comes to the business world, our universities - and especially their graduate business schools - are powerful shapers of the culture.

That said, the view of the world that one gets in a modern business curriculum can lead to an ethical disconnect. The courses often encourage a view of human nature that does not inspire high-mindedness.

Consider financial theory, the cornerstone of modern business education. The mathematical theory that has developed over the decades has proved extremely valuable in general. But when it comes to individuals, the theory runs into some problems. In effect, it portrays people as nothing more than "maximizers" of their own "expected utility." This means that people are expected to be totally selfish, constantly calculating their own advantage, with no thought of others. If the premise is that everyone would steal the silverware if he knew he could get away with it, and if we spend the entire semester developing the implications of this assumption, then it is hard to know where to begin to talk about ethics.

Ultimately, the problem at the university level is a tendency toward overspecialization. Each professor gains expertise in a certain kind of research skill; that is how subject matter is defined. The specialty of financial theory has largely come to be defined by skills manipulating a narrow class of mathematical models of purely selfish behavior. Business ethics is just another academic specialty, and can seem as remote as microbiology to those studying financial theory.

New Survey Sends Mixed Messages on Globalization

According to a new survey by the Pew Research Center, Western attitudes toward globalization are hardening even as the developing world is eager for more.

In the US and Europe, faith in free markets remains strong but respondents expressed growing skepticism about unrestricted free trade. However, among the publics of China, India and many African nations, support for globalization is nearly universal. Some countries with over 90% of the population holding positive views of free trade: Senegal (95%), Ivory Coast (94%), Kenya (93%), Ukraine (91%), Malaysia (91%), China (91%), Bangladesh (90%).

A rare glimmer of hope for the development-through-trade crowd? Or do the findings suggest that globalization's winners are looking to close the door behind them?

Creeping Protectionism

A stunning new Wall Street Journal-NBC News Poll portends a sea-change in U.S. trade policy. According to John Harwood in today’s Wall Street Journal:

Six in 10 Republicans in the poll agreed with the statement that free trade has been bad for the U.S. and said they would agree with a Republican candidate who favored tougher regulations to limit foreign imports.

This makes Matthew Slaughter and Kenneth Scheve’s prediction in Foreign Affairs look even more prescient. This summer they wrote:

U.S. policy is becoming more protectionist because the American public is becoming more protectionist and this shift in attitudes is a result of stagnant or falling incomes. Public support for engagement with the world economy is strongly linked to labor-market performance, and for most workers labor-market performance has been poor.

All of this should be of concern because, as Slaughter recently told Policy Innovations, globalization adds between $500 billion and $1 trillion to annual US income.

The leading Republican candidates for president are all still solidly pro-trade. Will they begin to change their tune in light of this emerging trend among the party base? And what about the Democrats? The new poll claims that a majority of Democrat voters believe that free-trade hurts the US. Hillary Clinton is looking less and less like her free-trading husband. She recently opposed the US-South Korea free trade pact. Will the trading stance of a Clinton presidency look more like the 1990s or the 1930s?

More to the point, if both parties start sounding the protectionist horn, what effect will that have on US incomes and growth rates around the world? Are we headed for a return to the disastrous Smoot-Hawley era of the 1930s?

Say it aint so.

- Matthew Hennessey