March 2009 Archives

The May 2009 issue of The Atlantic features a 7,000-word article by Simon Johnson, former Chief Economist of the IMF. Johnson provides his own summary of how we have come to this, and draws interesting parallels between the US and other, developing, countries, who suffered from a sudden implosion of their financial sectors. He talks about the growth of America's financial sector into a business elite that dictates government policies across administrations and keeps getting bigger and bigger.

This business elite did not only bring the current crisis upon us, says Johnson, but it is also preventing the government from taking the necessary measures to get us out of it by fixing what's wrong. The solution he proposes is to temporarily nationalize all the ailing banks and financial institutions, chop them apart, heal them, and privatize them.

While Johnson's description of the excessive influence of America's financial industry is correct, he is mistaking the symptoms for the causes of America's current illness. The financial sector became as big as it is due to excess liquidity. Large amounts of artificially cheap money made the financial industry grow, and not the other way around. The reason for all this cheap money in America is China's habit of spending the proceeds from selling goods priced using an artificially low currency (RMB) to purchase US Treasury Bonds in order to ensure (artificially) low interest rates in the US. This arrangement, of course, was convenient for both China and the US, and each of them is equally responsible for it.
 

More photos from Sichuan here.

The global economic crisis rekindled the debate concerning the pitfalls of greed and competitiveness and brought back to fashion the notion of the "Capitalist Pig". I decided to try to trace the origins of this colorful term on Google Books. The earliest mention of it I could find was from 1931, in a book by Mary Briarly titled In His Own Image. I figured it was probably coined by one of continental intellectuals of the 19th century - Bakunin, Herzen, maybe even Marx - but failed to find any proof.  

And so, I did not manage to figure out the origin of the term, but I stumbled upon a book titled "America on Six Rubles a Day or How to Become a Capitalist Pig", written by one Yakov Smirnoff circa 1987.

Ukrainian-born Smirnoff emigrated to the US in the mid 80s and built a career as a comedian by drawing on the gaps between Soviet and American culture. His jokes portrayed the US from the standpoint of a somewhat gullible Soviet immigrant - a refined and politically correct precursor to Sasha Baron Cohen's "Borat".

A post by Viv about various definitions of narcissism and self-love prompted me to go back to my copies of Erich Fromm's Art of Loving and Escape from Freedom. In the first book (p.56), Fromm deals with various concepts of love - motherly, religious, brotherly - including the love for oneself.

Fromm, a social psychologist, differentiates between what he calls self-love, and selfishness or narcissism. He sees self-love as conjunctive with love for everything and everyone, a certain type of loving attitude that stems from allowing oneself to be creative and liberated (this was written almost 70 years ago, and might sound a little New-Agey today, but only because I am summarizing the man's work in one sentence).

Fromm dissects Freud's assertion that "the selfish person...had withdrawn his love from others and turned it toward his own person" and concludes that "selfish persons are incapable of loving others, but they are not capable of loving themselves either". This might seem common sensical to most (some?) people, but was somewhat of a revelation in the 1940s.

The way Fromm deals with this topic in Escape from Freedom - an analysis concerning political and social issues and not just personal feelings - is more interesting (p.116-117). There, Fromm discusses his concept of the Marketing Orientation, which he sees as the type of personality most common to individuals living in capitalist societies.

It's amazing what most people take for granted these days: that greed is an incurable biological tendency, that economic growth is the ultimate goal of humanity regardless of how (and if) it is shared, and that if we all don't spend 9 hours a day in the office, the world will fall apart. We'll deal with the first two later, but I just came across some interesting perspective on the last one.

In the book Doing Nothing, Tom Lutz brings a few examples from the work of Brittish historian E.P. Thompson. Thompson looked at working conditions in England and the US in the 19th century. He describes how the workers in a cigar factory in 1887 New York city came in and out as they pleased, and spent long hours reading the papers, chatting, getting drunk, and even going to the beach. The situation was quite common across various indisutries, and workers protested whenever their bosses tried to enforce regular hours or put limits on the their freedom to wander about during the day.

The US is nationalizing banks, China is fighting to maintain a strong USD. We live in interesting times.

The National Centre for Performing Arts in Beijing. More on my Flickr Archive.

The above was written by Karl Marx in his report for the commission to examine the activities of the Bakuninists in 1872.

Most people are not aware of the fact that Marx was a big opponent of Statism, the idea that the state should have substantial centralized control over social and economic affairs.

Marx believed that the state and political authority should be abolished, but that before this is done, political power must first be taken over by the workers, and then used to abolish the economic conditions that gave birth to the state to begin with. On this point, Marx was at odds with other popular socialist (and anarchist) thinkers of the time - such as Proudhon and Bakunin - who believed that the state and political authority should be abolished first.

This difference comes from the fact that Marx and Engles believed that "state power is nothing more than the organisation with which the ruling classes, landlords and capitalists have provided themselves in order to protect their social prerogatives". So, while the anarchists saw the economic order as a result of the state and its power, Marx saw the "modern" (at the time) state as a system established to serve and protect the existing economic order by the owners of capital.

More on this in Martin Buber's Paths in Utopia, and Karl Marx's The Bakuninists at Work: An account of the Spanish revolt in the summer of 1873.

Albert Einstein once said that everything should be made as simple as possible, but not simpler. A couple of millennia earlier, Lao Zi taught us that those who know do not speak and those who speak do not know. We'll get back to these two in a minute.

As a regular user of most of Google's services - Search, Gmail, Analytics, Finance, Reader, etc. - I am often amused by the targeted ads I am served. The ads are a testament to how well Google knows me, and provide a general idea of the assumptions Google makes regarding people of "my kind".

Being a young western man in China, I normally receive ads promoting massage and escort services while reading my mail online or while searching for legitimate restaurants or government offices (as much as these are legitimate...). Such ads normally carry a standard format, stating the name of the vendor, their rates or hours of operation, and offering a link for further information.

China is full of massage parlors, KTVs, "hair" salons, and various other platforms that offer  sexual services. In such a competitive market, service providers that do not differentiate themselves get lost in the clutter. While checking my Gmail this morning, I came across one of the simplest and most elegant ads I have ever seen. It had three words - girl, beijing, shanghai. A click on the ad leads to a landing page with photos of beautiful Chinese girls and links to the web sites of massage and escort service providers in Beijing and Shanghai.

It seems that 21st Century China, eastern simplicity and western technology come together to create surprising results. And indeed, despite the ad's spare prose, it does not take an Albert Einstein to understand what services are being offered.

More than 1.5 billion people across the world have access to the internet, including about 220 million people in both China and the US. The number of mobile phone suscribers worldwide is approxmately 4 billion.

There is an ongoing debate about the effects of these new technologies on social relations and personal identity. The fact that most interpersonal communication in the Western world is done remotely, mediated by technology, gave rise to a variety of theories and observations. Some critics claim that the internet brings about personal isolation,  anxiety, and creates socially-awkward individuals that cannot foster any 'real' or 'meaningful' relationships with others. Others claim that the internet contributes to increased social activity, stronger personal ties, and an overall growth in social capital and trust levels. These are the general attitudes, with plenty of variations and combinations in between.

Moving on up at Incheon Airport, South Korea. December 2008. See more on my "Best of 2008" set.

Now that Bush is gone and blaming America for all of the world's troubles is (slowly) falling out of fashion,  more and more pundits recognize China's role in creating the mess we're in.

More accurately, the current financial crisis is a result of shared "efforts" by China and the US. China provided artificially cheap products due to an undervalued currency, the US provided willing buyers, China used the profits from these sales to buy US Treasury Bonds, and the US in turn kept its interest rates low and continued to buy Chinese goods. The results of these "efforts" were exacerbated by traditions in both countries: In the US - spend like there's no tomorrow; in  China - save like today is as good as it gets.

The combination of cheap goods and cheap money (low interest rates) created excess capacity in corresponding sectors in both China and the US, and gave rise to an interesting social phenomenon -  mis-allocation of talent.
 

An article in The Economist from this morning looks at how China's move towards privatisation of its strategic industries is being reversed. Many of China's largest corporations - including banks and airlines - received capital injections from the Central Government and/or had their shares purchased in the open market by China's sovereign wealth funds.

It is easy to liken this move to the recent nationalization of banks in the West. However, it is important to keep a few things in mind:

Over the last few years, I have been involved in branding, positioning, and marketing of retail projects in different parts of China. Recently, while most retailers and entertainment operators are scaling down their expansion plans and seeking better terms for new and existing locations, one group seems to be an exception - cinema operators.

The market is awash with a variety of cinema companies,  each hoping to open between 20 to 1,000 new cineplexes over the next 5 years. The list includes state-owned players (Zhongying, Shangying ) who plan to upgrade their existing locations and open new ones, private local players such as (Jingyi, Dadi, Stellar),  joint-ventures led  by operators from the region (Korea's CGV, Megabox, and Hong Kong's Golden Harvest), foreign-funded joint-ventures (APEX), as well as local media companies (Huayi Borhters) that plan to start operating their own venues, such as Huayi Brothers Media.

There are 3,200 photos in my Flickr archive, and this is the most popular one.

Yamanote line, Tokyo. Winter 2009.