Tag Archives: globalisation

The invisible industry

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I’m not the only person fascinated by shipping containers.

Bill Gates named Marc Levinson’s [amazon_link id=”0691136408″ target=”_blank” ]The Box[/amazon_link] as one of the best books he read last year.

[amazon_image id=”0691136408″ link=”true” target=”_blank” size=”medium” ]The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger[/amazon_image]

Another such person is my correspondent Thomas Marnane, for the understandable reason that he worked in the industry, for Matson Navigation, for many years.

Capt. Marnane just wrote to me about Rose George’s book [amazon_link id=”1846272637″ target=”_blank” ]Inside Shipping, the Invisible Industry that brings you Ninety Percent of Everything[/amazon_link], which he says is, “A very readable and enjoyable book with a different and thoughtful slant.”

[amazon_image id=”1846272637″ link=”true” target=”_blank” size=”medium” ]Deep Sea and Foreign Going: Inside Shipping, the Invisible Industry That Brings You 90% of Everything[/amazon_image]

“I enjoyed Ms George”s insights on her time on a container ship–especially the crew relationships (or lack thereof)–a very different experience from any of my times on Navy and commercial ships (several countries).  I think without the camaraderie, sharing of diverse and common interests and card and game playing etc. that I enjoyed I would not have liked sea duty–and I did–even submerged.  Our Matson ships of today are a pleasure to be on–albeit all US crews.  Ms George provides good observations of ship operations as well and justifiably laments the good old days when port stops were longer (but turnaround longer and productivity less also).

“I felt that the sort of “environmentally indefensible” overtones were more for book selling rather than enlightening or compelling and were overdone–especially in the publicity for the book.  I admit to a bias toward ships and the people who own and sail them but my overall experience has been that sailors for the most work to take care of the sea, their ships, their public and their customers.  They work to improve productivity by reducing waste and pollution (nobody likes anything but an “economy haze” in the exhaust from their drive engines).  To paint the maritime industry as contaminating our waters, our air and our sound signatures has merit but only in the sense that any human activity such as driving cars, flying, etc. has– on a per ton miles moved and service to the world you can’t beat it.  She acknowledges this briefly later on in her book and notes the efficient energy expended to weight carried ratio enjoyed by ship transportation.  I think a survey of the large shipping lines will demonstrate a continual bias toward the environment and productivity (which in my mind are synonymous) and I am proud of the industry for that.”

He adds:

“I have just embarked on a new reading adventure [amazon_link id=”1782393552″ target=”_blank” ]The Sea and Civilization, a Maritime History of the World [/amazon_link]by Lincoln Paine.  At over 700 pages and relatively small print it is an adventure which I may not complete before the book has to be returned to the library  ……   I am afraid that for “containerization” aficionados you will have to wait until page 582 for gratification.  The book is actually very well done and for a naval architect and sailor it is quite absorbing and very readable.”

[amazon_image id=”1782393552″ link=”true” target=”_blank” size=”medium” ]The Sea and Civilization: A Maritime History of the World[/amazon_image]

Global governance by stealth

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Last night I attended the Dimbleby Lecture given by IMF Managing Director Christine Lagarde – it will be broadcast tonight on BBC1. Her theme was reinventing multilateralism for the 21st century. What global governance structures will ensure the international system delivers mutually beneficial co-operation rather than zero-sum competition, in the face of technologies that are creating an ever-denser web of decentralised connections, significant demographic change and long-term and other environmental challenges? She also underlined the serious challenge to stability posed by the current degree of income inequality. I think all reasonable people would agree with that, but how interesting to hear the head of the International Monetary Fund speak about it in such strong terms:

“Let me be frank: in the past, economists have underestimated the importance of inequality. They have focused on economic growth, on the size of the pie rather than its distribution. Today, we are more keenly aware of the damage done by inequality. Put simply, a severely skewed income distribution harms the pace and sustainability of growth over the longer term. It leads to an economy of exclusion, and a wasteland of discarded potential.”

Her focus on reform of global governance is understandable when the US Congress recently made America pretty much the only country in the world that has failed to ratify a first step IMF funding proposal. As Mohamed El-Erian wrote for Project Syndicate:

“This is an unfortunate and regrettable outcome for both the IMF and the international community as a whole. Congressional obstinacy is forcing the Fund to miss out on an opportunity to strengthen its finances at a time when most other countries have already approved the initiative. It is also being held back from addressing, albeit modestly, governance and representation deficits that have steadily eroded the integrity, credibility, and effectiveness of this important multilateral institution.”
Nobody I know of believes global institutions do not need reform. Apart from the challenges described by Mme Lagarde, the large, growing economies – the BRICs and then the MINTs – urgently need to have a voice that reflects the weight they already have in the world economy, as Jim O’Neill has argued in his book The [amazon_link id=”1907994130″ target=”_blank” ]BRIC Road to Growth[/amazon_link]. A forthcoming (May)  book by Ian Goldin, [amazon_link id=”0691154708″ target=”_blank” ]The Butterfly Defect[/amazon_link], looks specifically at how to manage the serious new systemic risks posed by global interconnectedness, such as pandemics or new financial catastrophes. These are just two of a whole sub-genre.
[amazon_image id=”0691154708″ link=”true” target=”_blank” size=”medium” ]The Butterfly Defect: How Globalization Creates Systemic Risks, and What to Do about It: How Globalization Creates Systemic Risks, and What ot Do about it[/amazon_image]
So the need is clear. But how to get from here to there? I’ve not yet heard or read about the specifics. My hunch is that if the minor reform of existing institutions is impossible, given the almost-everywhere increasingly dysfunctional politics of different nation states, we need to look at building new institutions that can perhaps start under the radar. It could be global governance reform by stealth or not at all.

The dollar, the unthinkable and the inevitable

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What is [amazon_link id=”0691161127″ target=”_blank” ]The Dollar Trap[/amazon_link]? In this book Eswar Prasad argues that the US grip on the global financial system has increased, not diminished, since the global (or North Atlantic, if you’re in China) financial crisis. The core of the argument is that foreigners (ie. non-Americans) have too much invested in dollar assets to permit a significant decline in the US currency. What Barry Eichengreen flagged in his book as the country’s [amazon_link id=”0199642478″ target=”_blank” ]Exorbitant Privilege[/amazon_link] continues (he too predicted there was nothing to knock it off its perch, despite the ‘rise and fall’ subtitle). The chart of the day in The Economist today, setting out the decline in emerging market currencies during the past nine months – accelerating just recently  – only underlines the asymmetry.

[amazon_image id=”0691161127″ link=”true” target=”_blank” size=”medium” ]The Dollar Trap: How the U.S. Dollar Tightened Its Grip on Global Finance[/amazon_image]

It can’t last, of course. Danny Quah’s research (pdf) shows that the world’s centre of gravity for economic activity has shifted from the Atlantic firmly into Asia. [amazon_link id=”B00I124BKO” target=”_blank” ]Jim O’Neill argues that behind the BRICs are coming the MINTs[/amazon_link], and even a near-term decline in the growth of emerging markets will not reverse the shift. Yet as Prasad concludes, “The situation is rife with paradoxes.” The US relative status in the world economy is inexorably shrinking, it is a fiscal mess, the monetary taper will cause havoc, yet despite this fragility, it is hard to see what can dislodge the dollar from its perch.

I’m certainly not going to risk a prediction. But I would observe that in general fragile systems can persist in that state for a long time, but when the end comes, it’s often a sudden and catastrophic collapse. The unthinkable can become the inevitable.

The uses of declinism

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The title of Josef Joffe’s new book tells you the argument: [amazon_link id=”0871404494″ target=”_blank” ]The Myth of America’s Decline: Politics, Economics and a Half Century of False Prophecies[/amazon_link].

[amazon_image id=”0871404494″ link=”true” target=”_blank” size=”medium” ]The Myth of America’s Decline: Politics, Economics, and a Half Century of False Prophecies[/amazon_image]

The first part of the book sets the scene with an entertaining history of American declinism through the decades, starting with the Sputnik shock and fear of the Communists in the 1950s, through the upheavals of the 60s, the impact of Vietnam and dire economic situation in the 70s, the Japan-bashing of the 1980s, a 1990s hiatus thanks to the end of the Cold War and the New Economy (as Joffe writes, “It doesn’t take much to vault from declinism to triumphalism when the geopolitics is right”), and the 2000s angst about the rise of China culminating in what the Chinese call the North Atlantic crisis of 2008.

The most interesting aspect of this first section is Joffe’s analysis of the political uses of declinism. For he convincingly shows it is used as a prelude to the promise of redemption. Ronald Reagan for one, John F Kennedy for another, used the claim of present decline very effectively in election campaigns to promise a brighter future. Joffe writes that declinist prophecies are intended to be self-averting: “Declinism is a political programme even though it comes in the guise of an empirical exercise such as counting guns or measuring growth.” He contrasts the 20th century declinist political philosophy with the Enlightenment tradition of optimism about the possibility progress, noting how feted pessimistic pundits are these days. (Though there are some optimistic ones – Matt Ridley’s [amazon_link id=”0007267126″ target=”_blank” ]The Rational Optimist[/amazon_link] is one, Mark Steven’s [amazon_link id=”1846683572″ target=”_blank” ]An Optimist’s Tour of the Future[/amazon_link], Charles Kenny’s [amazon_link id=”0465020151″ target=”_blank” ]Getting Better[/amazon_link] – and his new one, [amazon_link id=”0465064736″ target=”_blank” ]Upside of Down[/amazon_link]).

The next section of Joffe’s book turns to the empirical matters when it comes to comparing the US now with the challengers, especially China. He argues that direction of travel is irrelevant – the BRICs have grown rapidly but from such a low base that there is no challenger to the US: “It is size and weight that count.” A lengthy section runs through all the by now well-known arguments about China’s prospects. He is dismissive of the BRICs concept, arguing that the countries are too dissimilar to be relevant to each other, and a neat acronym has had too much purchase. It’s true they are not at all alike but I think this greatly underestimates the impact the concept has had in drawing attention to a genuine shift in the world economy – as I noted here recently writing about Jim O’Neill’s [amazon_link id=”1907994130″ target=”_blank” ]The BRIC Road to Growth[/amazon_link] and Danny Quah’s work.

The final section considers America’s prospects and status in the world, especially vis a vis China. Joffe concludes that if America’s relative decline continues, it will be self-inflicted. America’s demography is in its favour, he argues, its military might is vastly ahead of its rivals, it is still the most innovative country with free and flexible markets to bring innovations to fruition. He seems to think this will outweigh problems such as the disintegrating infrastructure, inequality and social problems and so on, but is it possible to predict how relative global growth rates will play out when there are such uncertainties on both sides of the Pacific? Writing in a country which did have the world’s leading empire and then did decline (the flavour so well captured in Corelli Barnett’s books such as [amazon_link id=”033034790X” target=”_blank” ]The Audit of War[/amazon_link] and [amazon_link id=”0330346393″ target=”_blank” ]The Lost Victory[/amazon_link]), but I’m not sure.

Inevitably, Joffe is selective in his evidence and fails to address the kind of questions many people have now about the American model. The gross inequality of income and wealth, and consequent accumulation and abuse of power, is just one aspect of it. There are questions about the US tradition of freedom, post-NSA revelations. In a time of generally polarised party politics, American politics stands out as particularly grotesque. Many people would also challenge’s Joffe’s rather positive view of how America is currently exerting its military power overseas.

It is interesting to hear his rather contrarian view. I would have preferred, though, more on the politics and philosophy of declinism, and the use to which it is being put, which is the best part of this book.

BRICs, MINTs and a disordered world economy

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Jim O’Neill, famous as the inventor of the idea of the BRICs, has moved on to MINTs – Mexico, Indonesia, Nigeria and Turkey. He has a series on BBC Radio 4 starting today on these countries.

We’ve become very familiar with the idea of the rising economic powers, and enmeshed in debate about whether their growth rates can be sustained, and where the next growth stories are – hence the interest in MINTs, and the recent ‘Africa rising’ theme in so much comment. So it’s easy to forget the dramatic impact of Jim O’Neill’s original report over a decade ago, capturing the idea of a shift in economic power in the memorable acronym. What is still overlooked – and this is one of the themes of his new book, [amazon_link id=”1907994130″ target=”_blank” ]The BRIC Road To Growth[/amazon_link] – is that this shift has already happened. Many of us commenting from the West still talk about it as something that is going to happen. But as Danny Quah of the LSE has mapped very carefully (and he is writing about the Great Shift East in his own forthcoming book), the world centre of economic gravity is in Asia *now* – here is his map.

This makes the other theme of Jim O’Neill’s book all the more relevant. He argues passionately that the structures of global economic governance need to change. A world economy whose governing institutions reflect patterns of growth and trade that no longer exist is going to be a disordered world economy. It’s an important message, and my impression is that nobody is doing anything about it.

[amazon_image id=”1907994130″ link=”true” target=”_blank” size=”medium” ]The BRIC Road to Growth (Perspectives)[/amazon_image]