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.