Failures and breakthroughs – exposed, reflected, considered

Archive for the ‘political failures’ Category

Singapore, Rousseau and the social contract

with 3 comments

In 1965, less than two years after joining Malaysia, Singapore was forced to leave the bigger country and declare its own independence.

Then its economy was in tatters. Lawlessness reigned. High levels of unemployment, lack of sanitation, short supply of potable water, and ethnic conflict were conditions that marred Singapore. About three million people, half of who were unemployed, occupied an island that was sandwiched between two large and unfriendly states: Malaysia and Indonesia. Ethnic Chinese and Malays were divided by race and language and often fought street battles.

Both economy and political situation were dire and mutually reinforcing.

1960s conventional wisdom in economics held that every nation, especially a small one, needed a hinterland to succeed. Singapore had none. The status-quo wisdom of development economists was that multinational corporations were great exploiters of cheap land, labor and raw material.

Forced to by all means to find work for their people, the leaders of Singapore engaged in promoting “globalization” before it became fashionable to do so.  The reason why Singapore embraced globalization one generation earlier than other third world countries was because it had no choice but go against the dependency theory that was the predominate economic thinking of then.

But globalization was but one sign of manifestation of a bigger picture. At the heart of the Singapore model is the social contract that was articulated between the ruling People’s Action Party (PAP) run government and the people of Singapore. In essence, it said that while the people were willing to accept more government control, give up some individual rights, and work hard, the government would create the environment that would deliver prosperity and a better quality of life.

The idea of social contract is not new.  Rousseau was among one of the most prominent theorists of social contract. In his view, the larger the bureaucracy, the more power required for government discipline. Normally, this relationship requires the state to be an aristocracy or monarchy (as far as he is concerned, both could be elected). Rousseau argues that the political authority (with which people are in social contract) will have two parts, sovereign (generic, legislative, representing the general will, which he defines as the rule of law) and government (particular, administrative day-to-day).

The autocratic dominance of the ruling PAP also provided confidence that national policies based on the social contract would remain stable in the short run, while continued efforts would be made to plan for Singapore’s long-term challenges.  And they did.

In the period of 1960-1999, Singapore had been able to achieve an average annual economic growth of 8%.  Singapore became one of the fastest-growing countries from 1970 to 2000, and the country has been classified as a ‘Growth Miracle’ and as an ‘Asian Tiger Economy’. As a result, World Bank officially classified Singapore as a “developed economy.”

The Singapore story is a thorn in the side of development specialists from the school of thought that Samuel Huntington has labeled as ‘convergence’ theorists, who believe that all desirable characteristics of national development (democracy, free markets, higher standards of living, etc.) reinforce one another. While democracy in Indonesia after Suharto and in the Philippines after Marcos has caused even more economic uncertainty and overall poverty, it has been the reign of an autocratic regime in Singapore that delivered economic development.

1. As the democratization of third world countries in Eastern Europe, Latin America and East Asia has shown over the last decade, being elected to office by the general populace provides no guarantee that national leaders will be free of corruption, effective, or dedicated to the national interest. In the case of even President Salinas of Mexico, a moderately respected elected president by Latin American standards, the national interest came second to his personal interest to keep the instability of the Mexican economy brewing while he changed jobs to become the head of the World Trade Organization (WTO). Contrary to the unanimous pushing by his economic advisors who were convinced that Mexican currency and financial markets could be saved from imminent collapse if an immediate devaluation of the currency was made before his retirement, Salinas did not act for fear of blotting his reputation. Like the Mexican example, the financial collapse of democratic Thailand and Russia in 1997 showed that elected leaders who come to power with substantial expectations on their shoulders after intense campaigning in which they promised significant national (social and economic) development, can never be immune from mortgaging the future of their people to finance grandiose if imprudent national projects that among other things, serve to enrich the cronies that helped in the outcome of the election in the first place.

2. Apart from effective governance, Singapore government exercises considerable discipline in managing its economic affairs. While PAP ran on a socialist platform to get elected, it was careful of which industries the government nationalized. Usually, the government did not intervene in markets it felt the private sector was doing a good job of meeting Singapore’s economical interests. This policy was outlined in a speech called “Survival” that former foreign minister, S. Rajaratnam, delivered in the early 1970s. In the speech, Rajaratnam told that the government supported state-run corporations like Singapore Airlines and Neptune Ocean Lines because the private sector did not have the ambition nor the financial backing to start such essential organizations that would make possible trade with the developed countries.

3. Importance that the government has attached to Singapore’s human resources development and the investments it has made in its own people. While the PAP ruthlessly crashed all independent labor unions and consolidated what remained into a union umbrella group called the National Trade Union Congress (NTUC), which it directly controlled, it did set up technical schools as well as paid foreign corporations to train unskilled workers for higher paying jobs in electronics, ship repair, and petrochemicals. For those who still could not get industrial jobs, the government enrolled the participation of the NTUC in creating labor intensive, “un-tradable” services, mostly for the purposes of tourism and transportation.

Written by Hayk

March 10, 2013 at 9:53 am

Chicken or egg: democracy vs economic growth – case Thailand

leave a comment »

With 2011, a wave of unrest descended upon the MENA. What became later known as “Arab Spring“ represented a ragged set of uprisings throughout MENA countries including Tunisia, Egypt, Libya, etc. The vision of those uprisings was but one, at least initially, as it could be heard on every street and square, shouted or screamed from mouths young and old. Freedom. Democracy.

Some of those uprisings turned ugly (civil war in Libya and Syria), others (Tunisia, Egypt) ushered in what many reformers/revolutionaries believed to be a new era.

Freedom, democracy. Of course, those high-pitched and loaded terms are as cliché by now, without much merit nor substance, rallying slogans for disillusioned and ignorant. What people really meant, or needed to mean, was “better life standards,“ “more and secure jobs“ (on social/personal level) and “economic growth“ (on national level).

Another cliché/stereotype associates democracy and economic growth. Many think that those two are interchangeable, i.e. occurrence of one will automatically imply or cause the other. Then there is “modernization theory,” predominant since the late 1950s onward, and which claimed that middle and other aspiring classes created by industrial capitalism would necessarily (and eventually) bring about accountable and democratic governments. Reality is less obvious that this foregone and simplistic conclusion.

Why so? There is an easily spotted pattern, in which democracies usually are among the economically developed countries. However, the paths to democracy are varied. One is tempted to think that lack of economic stability or growth, which implies increasing poverty levels, will trap societies in a vicious political circle of dictatorial reign and economic deterioration. While bonds of poverty cannot be dismissed, they are not inexorable. Countries such as Taiwan, South Korea, Japan, Singapore, Malta and Greece went from utter poverty into spectacular growth, some as much as quadrupling their per capita incomes. Dictatorships bloomed in Taiwan and Singapore during the entire and South Korea during most of this period of drastic economic transition and growth. Only Japan and Malta remained democratic throughout their respective periods of economic growth, and Portugal as well as Greece tattered between democracy and dictatorship, while growing economically.

There is no predictable pattern, but once a democracy is established, its survival depends on a few factors. Foremost among them is the level of economic development.

Let’s have a closer analysis of how a democracy caused an economic depression, with a study of Thailand’s recent history.

In the 1980s and early 1990s, nations from Indonesia to the Philippines embarked on their own democratic transitions, not unlike the 2011 Arab Spring. In Thailand, hundreds of thousands (middle class) came out into the streets of Bangkok in 1992 to bring down a military government. They wanted democracy and freedom. Thailand boasted a large, educated middle class, one of the best-performing economies in the world, and a relatively robust civil society. By the late 1990s, Thailand had held several free elections and passed a reformist constitution that enshrined greater protections for civil liberties and created a wealth of new institutions designed to ensure civil rights.

However, the “reformist“ frenzy started cooling off in the late 1990s, as many leading Thai reformers, who were behind the protests in 1992, backed off. They believed that Thailand had passed a threshold (of transition to democracy and economic growth), and as a result, many NGOs, media watchdogs, and organizations that were instrumental during and in the immediate aftermath of the 1992 uprising closed down. It only helped, with dawn of the Asian financial crisis in 1997, to put many of those idealistic-minded middle-class reformers into unemployment, making it even harder for them to spend time volunteering at organizations dedicated to reforms.

As Thai reformers slowly drifted off, a telecommunications tycoon Thaksin Shinawatra used his fortune to build a political party. He bought up politicians to join his party. To soften the blow and an at the same time trying to appeal to the larger part of the Thai society, the poor, Thaksin initiated a well-thought combination of entrepreneurial inducement and grassroots empowerment projects, including inexpensive health care schemes and loans to villages to start businesses.

In 2001, Thaksin became the elected PM, and showed little love for democracy. He used his power to threaten Thailand’s free media, eviscerate its independent civil service, and launch a campaign against insurgents in the Muslim south. He rewarded political allies and punished political enemies. In 2005, Thaksin was reelected, again with massive support from the poor, and largely thanks to the lackluster opposition of the Thai middle classes, which by then had grown disillusioned with democracy, believing it had delivered only elected autocracy. The reaction was prompt. Another row of street protests in 2006, whereby Thai middle class once again took to streets, hoping to topple the elected (autocratic) government. The result was a military coup of 2006. Thaksin fled into exile.

The military coup triggered an economic meltdown. Thaksin might have damaged the country’s weak democracy, but the military ruined it. It shredded the reformist constitution and set the stage for today’s Thai government, which unleashed massive force against demonstrators who gathered in the streets of Bangkok in spring 2010.

Thaksin is once more back to the country, in a proxy way, via the elections favoring his sister’s party and her as a PM.

How to avoid a similar democracy failure in MENA?  It is essential to create and keep independent government watchdogs, new and independent press outlets. Introduction of government policies to reduce economic inequalities is also vital, allowing an increasing transition from low to middle class. Lastly, while a charismatic (or not so much) leader is a good focal point for rallying reformists, a more important and longer-term reform is to induce a knowledge economy and infrastructure facilitating foreign investment and (especially foreign-owed) property rights/protection.

Written by Hayk

February 20, 2013 at 9:19 am

Top 10 ways to manipulate people (Chomsky)

leave a comment »

Noam Chomsky wrote the article entitled “top 10 ways to manipulate people.” Below is the reprint of this article.

1. The strategy of distraction

The primary element of social control is the strategy of distraction which is to divert public attention from important issues and changes determined by the political and economic elites, by the technique of flood or flooding continuous distractions and insignificant information.

Distraction strategy is also essential to prevent the public interest in the essential knowledge in the area of the science, economics, psychology, neurobiology and cybernetics.

“Maintaining public attention diverted away from the real social problems, captivated by matters of no real importance. Keep the public busy, busy, busy, no time to think, back to farm and other animals” (quote from text Silent Weapons for Quiet Wars).

2. Create problems, then offer solutions

This method is also called “problem -reaction- solution.”

It creates a problem, a “situation” referred to cause some reaction in the audience, so this is the principal of the steps that you want to accept.

For example: let it unfold and intensify urban violence, or arrange for bloody attacks in order that the public is the applicant’s security laws and policies to the detriment of freedom.

Or create an economic crisis to accept as a necessary evil retreat of social rights and the dismantling of public services.

3. The gradual strategy

Acceptance to an unacceptable degree, just apply it gradually, dropper, for consecutive years.

That is how they radically new socioeconomic conditions (neoliberalism) were imposed during the 1980s and 1990s:

• the minimal state
• privatization
• precariousness
• flexibility
• massive unemployment
• wages
• do not guarantee a decent income,

…so many changes that have brought about a revolution if they had been applied once.

4. The strategy of deferring

Another way to accept an unpopular decision is to present it as “painful and necessary”, gaining public acceptance, at the time for future application.

It is easier to accept that a future sacrifice of immediate slaughter.

• First, because the effort is not used immediately
• Then, because the public, masses, is always the tendency to expect naively that “everything will be better tomorrow” and that the sacrifice required may be avoided

This gives the public more time to get used to the idea of change and accept it with resignation when the time comes.

5. Go to the public as a little child

Most of the advertising to the general public uses speech, argument, people and particularly children’s intonation, often close to the weakness, as if the viewer were a little child or a mentally deficient.

The harder one tries to deceive the viewer look, the more it tends to adopt a tone infantilizing.

Why?

“If one goes to a person as if she had the age of 12 years or less, then, because of suggestion, she tends with a certain probability that a response or reaction also devoid of a critical sense as a person 12 years or younger.” (see Silent Weapons for Quiet Wars)

6. Use the emotional side more than the reflection

Making use of the emotional aspect is a classic technique for causing a short circuit on rational analysis, and finally to the critical sense of the individual.

Furthermore, the use of emotional register to open the door to the unconscious for implantation or grafting ideas , desires, fears and anxieties , compulsions, or induce behaviors …

7. Keep the public in ignorance and mediocrity

Making the public incapable of understanding the technologies and methods used to control and enslavement.

“The quality of education given to the lower social classes must be the poor and mediocre as possible so that the gap of ignorance it plans among the lower classes and upper classes is and remains impossible to attain for the lower classes.” (See Silent Weapons for Quiet Wars).

8. To encourage the public to be complacent with mediocrity

Promote the public to believe that the fact is fashionable to be stupid, vulgar and uneducated…

9. Self-blame Strengthen

To let individual blame for their misfortune, because of the failure of their intelligence, their abilities, or their efforts.

So, instead of rebelling against the economic system, the individual auto-devaluate and guilt himself, which creates a depression, one of whose effects is to inhibit its action.

And, without action, there is no revolution!

10. Getting to know the individuals better than they know themselves

Over the past 50 years, advances of accelerated science has generated a growing gap between public knowledge and those owned and operated by dominant elites.

Thanks to biology, neurobiology and applied psychology, the “system” has enjoyed a sophisticated understanding of human beings, both physically and psychologically.

The system has gotten better acquainted with the common man more than he knows himself.

This means that, in most cases, the system exerts greater control and great power over individuals, greater than that of individuals about themselves.

Written by Hayk

November 10, 2012 at 12:38 pm

Failure parallels between Mao Tse-Tung and Facebook

leave a comment »

What do an alleged 70 million death of Chinese population in peacetime and an online social network boasting 955 million members have in common? While Mao’s life and work were considered inspirational at the time, so is modern phenomenon Facebook sweeping domains and redefining frontiers of science, culture and technology. And there are some parallels that can’t and shouldn’t be ignored.

1) Put appearance and rhetoric of doing things for public good while in reality following his/its own agenda

  • Mao: Mao got into the Long March in 1934 not due to any ideological reasons. He was sick and was going to be left behind by Communist forces under the pursuit of Nationalists because of his activities undermining communist goals and his disobedience to orders from the Soviet Union. A combination of putting an appearance of a patriot fighting for the communist cause and a trickery of positioning himself at the point where the Communist army was to exit from, he managed to get himself picked up by the army, soon passing through a bridge, which bore him into the history.
  • Facebook:  The most valuable asset on Internet is data. User data, to be more specific, as it can be used (in some cases sold) for conducting all kinds of research – it’s invaluable for any organization that has part or all of its customer base online. Facebook has been introducing number of usually unpopular privacy setting changes that, for most cases, used its member information for its own agenda. A telling sign is its recent change of replacing the word “privacy” with “data use.”

2) Decisions are taken unilaterally and without concern for those affected – and when it goes out of control, some measures are taken in guise of public appearances and apologies

  • Mao: Mao, in the framework of his “Great Leap Forward.” ordered the nation to make steel. He made a target of 10.7 million tons of steel (as the previous year’s output was 5.3 millon tons, Mao asked his metallurgy minister whether that could be doubled for current year. The “yes-man” obliged). Steel mills and related industries like coal mines were ordered to go flat out to speed up the production. Rules and common sense were cast aside. Equipment overworked to the point of breakdown. In first few months alone, 30,000 workers were killed in various accidents. Realizing, the existing mills wouldn’t be able to meet the target, Mao ordered the nation to build “backyard furnaces,” which some 90 million people were forced to build. To feed those furnaces, the nation was coerced into donating virtually every scrap of metal they had including farm tools and even kitchen utensils. By the end of 1958, the target of 10.7 million tons was reached, but only 40% of which was good steel (all produced by mills). Estimates put death toll of starvation and overwork during the Leap (which lasted 4 years) to about 38 million.
  • Facebook: Not only it has been playing with privacy settings of its members in order to gain and retain user information, Facebook has also been, rather quietly, granting access to all kinds of user information to 3rd party applications. As its business becomes more and more app-oriented – unsurprisingly so, as apps account for 30% of its revenues for the moment – Facebook has been making changes, that would grant a more seamless, easy access of user info to apps. Check this post for some details. With subtle design changes, it went, for example, from a two-button procedure of granting (or not) access to that of one-button. You click an invitation from a friend and, unbeknownst to you, end up giving access to the app to gain your information. Or that in old design Facebook explained what sort of information an app could use. No longer so. Facebook, considering much past opposition to measures less significant for usage of member information, unilaterally decided to introduce changes that would benefit its bottom line. And last but not least, “We’re going public for our employees and our investors,” as Zuckerberg wrote in his IPO letter. Translation: we don’t care about our customers/members – we go public so our employees get the share of our riches and our investors feel satisfied.

3) No care or thought about needs and aspirations of subjects/members

  • Mao: On Feb 27, 1957, Mao delivered a 4-hour speech to the rubber-stamp Supreme Council announcing that he was inviting criticism of the Communist Party. The Party, he said, needed to be accountable and ‘under supervision.’ He sounded reasonable criticizing Stalin for his ‘excessive’ purges, and giving the impression there wouldn’t be any of those in China. In this context he cited the adage, “Let the hundred flowers bloom.” Few guessed it was a trap setup to invite people to speak, so that he could use what they said as an excuse ti victimize them. His main target were intellectuals and educated, those mostly likely to speak out. Most of criticism never reached public. Instead, Mao drafted a secret circular in which he branded between 1% and 10% of ‘intellectuals’ (those who spoke out amounting to about 5 million) as ‘Rightists.’ Denunciations, labor camps and executions followed.
  • Facebook:  Among other unilateral and unsolicited changes, Facebook decided to not only introduce its own email system, but silently replace members’ emails with its own @facebook.com email (only noticed by bloggers during a weekend). The step could have been well accepted, it Facebook took care of showing consideration of its members’ opinion or warned in advance. Backlash followed. Or its previous changes to News Feed, which ushered in a plethora of groups/videos with a theme “Change Facebook Back to Normal.”  As an example, Facebook group and a video demonstrating how to change it to normal are still up.

4) Everything can be and is sacrificed for achievement of set goals – no morality or etiquete or qualms

  • Mao: In 1953, Mao proposed a program to industrialize China. His obsession was to enter the league with Soviet Union and the US in economic terms. At that time, he was told that the program could be completed in 10-15 years. In 1957, celebrating the 40th anniversary of October, Khrushchev presented a target of surpassing the US in 15 tears. Mao was inspired and claimed China could surpass the UK in 15 years. And as China was already getting nuclear other cutting-edge technological help and knowhow from Soviets, Mao was told in 1958 that his industrialization program could be completed in 5 years instead. He fancied he could achieve this in one big leap, calling it “Great Leap Forward.” It boiled down to excessive food production and extraction from the people. Mao was squeezing his nation to produce fantastic amounts of food (grain, rice, pork, etc), which was exported in exchange for technology. Food was also used as a raw material for the nuclear program. Grain, for example, was turned into pure alcohol and used in missile tests, each of which consumed about 10 million kg of grain. Mao thought to industrialize form within by ordering construction of irrigation systems (dams, reservoirs, canals). Starting in 1958 for over 4 years, about 100 million people were coerced into such projects, and as he wanted instant results his slogan was “”Survey, Design and Execute Simultaneously.” Results are not hard to guess.
  • Facebook:  As Facebook moved ahead with its fresh design, it didn’t forget to, without asking opinions of members, make it easier to access the past activities with introduction of its Timeline. Timeline is conceived with ads, sponsored stories and marketing data gathering to be much easier, i.e. playing a hand for Facebook’s bottom line.  Launched in September 2011, Facebook’s Timeline claimed to be the online book of members’ lives showing events on a yearly bases. Initially, Timeline was an optional feature. But once accepted, there was no going back, which suggested the imminent (and permanent) nature of the change. By the end of January 2012, not content with the fact that many of its members still preferred the older design – Sophos’ polls showed about 52% worried about and only 8% liked Timeline – Facebook simply stated that in a week time everyone will have a Timeline. A flurry of petitions, anti-Timeline groups and a lawsuit ensued.

Let me be clear. I am not a hater of Facebook. I have a special admiration for Mark Zuckerberg and for Facebook. I can’t however discount all the above developments nor the logic of how Facebook advances towards its claimed goals and objectives.

I only wish that Facebook becomes more open, transparent and forthcoming, and what’s more important, more considerate towards its ever-increasing member base. If not, then, as the saying goes, “the higher you climb, the further you fall.

I bet many would hate to see Facebook fail/fall – as Mao fell.

Forward towards Middle Ages

leave a comment »

We fail to advance towards future. We advance not to the 22nd century but more to the period corresponding to 8th-15th centuries AD. Below a reprint of an excellent article providing the necessary reasoning.

The middle of the 21st century will resemble nothing so much as the Middle Ages of the 8th to 15th centuries, from the sacking of Rome by the Visigoths, in 410, to the fall of Constantinople, in 1453. This was a long and uncertain period and thus an ideal metaphor to characterize our times. It was an age of plagues and progress, commercial revolutions, expanding empires, crusades, city-states, merchants, and universities. It was multipolar, with expanding empires on the Eurasian landmass, and apolar, with no one global leader. The new Middle Ages—synonymous with the age of globalization—have already begun.

First let us take the empires. Charlemagne’s efforts to resurrect the Roman Empire have been succeeded, over a millennium later, by the multipronged armadas of Brussels Eurocrats steadily colonizing Europe’s periphery, in the Baltics, the Balkans, and, eventually, Anatolia and the Caucasus. The Eurocrats’ book is not the Bible but rather the acquis communautaire: the 31 chapters of the Lex Europea, which is rebuilding EU member states from the inside out. By 2040, even depopulated Russia, with any luck, will be an EU member and the West’s front line against the far more populous East.

By then, a rebranded, globalizing China will be just a decade shy of the centennial of its civil war’s end, in 1949; the Communist Party has long declared that 2050, not 2008 (the year of the Beijing Olympic Games), will mark the country’s real coming-out party as a superpower. A half century from now, China may still be the world’s most populous country, and if the exploits of its 15th-century explorer–statesman Zheng He are any guide, its demographic, commercial, and strategic presence from Africa to Latin America—to say nothing of its diplomatic and cultural dominance in East Asia—will have substantially increased.

The world’s third center of gravity will be the United States, demographically stable but also more thoroughly amalgamated with Latin America. Almost a century after John F. Kennedy’s Alliance for Progress, the country will have rediscovered its southern neighbors, especially Brazil, for an industrial partnership to boost the Western hemisphere’s competitiveness against Asia—and to achieve energy independence from the Middle East.

What then of the Middle East, the current center of geopolitical travails? Monarchies may still support dreams of a caliphate, but a unified Islamic ummah, such as the Abbasid empire attempted, is unlikely to emerge. Global energy resources will be more diversified than they are today, so oil and petrochemicals will sustain only a modest degree of Arabian cultural expansionism, even if they still support a few Islamic crusades. With something of a reformation under way in parts of the Muslim world, one of the most practiced religions on Earth will be ever more fractured and embedded in diverse geographies, much as Christianity is today.

Meanwhile, the resurrection of the city-state, the most prominent medieval political unit, will continue. To the current list of global cities—Dubai, Hong Kong, London, Los Angeles, Miami, New York, São Paulo, Shanghai, Singapore, and Tokyo—we may add additional globalized nodes, such as Alexandria, Istanbul, and Karachi along major trade routes. Now, as then, city-states are commercial hubs all but divorced from their national anchors, reminding us that corporate actors will be paramount well into the future. City-states will pay for protection as global security privatizes further into corporate hands—the 21st century’s knights, mercenaries, and condottieri. Today’s sovereign-wealth funds, fused with city-state savvy, will be tomorrow’s Hanseatic League, forming capital networks that disperse the newest technologies to nearby regions. Not Oxford and Bologna, but rather Silicon Valley, Singapore, Switzerland, and their like will be the standard-setting centers.

The Middle Ages witnessed a number of innovations—from the cannon to the compass—that were geared to intensified global exploration. In the 21st century, the speed of communication and transport will bring us ever closer to simultaneity. As the ranks of billionaires soar beyond Gates, Branson, and Ambani, mega-philanthropists will become the postmodern Medicis, financing explorations in outer space and the deep sea alike and governing territory and production in the manner of medieval princes.

And, as in the Middle Ages, humanity faces diseases and invasions in the decades ahead. AIDS, malaria, SARS, and other maladies could become plagues like the 14th-century Black Death. What will be the impact of the coming migratory hordes, potentially unsettled by wars and environmental disasters? Who will be the next Mongols—small, concentrated hordes who violently establish their own version of peace, law, and order? How will contemporary diasporas—the millions of Chinese, Indian, Turkish, and Arab peoples living outside their home countries—blend into European, African, and American societies?

Finally, the fundamental reality of the Middle Ages was feudal social stratification, whose return the global economy may be accelerating. In medieval times, diverse power structures—religious, political, military, and commercial—all vied for control in shifting alliances. All of this is true again today and will remain so until a dominant form, like the nation-state in the 16th century, finally emerges. For now, the state is still in flux: declining in the Near East, resurgent in Asia, and almost nonexistent in Africa. Establishing a new system of global governance will take centuries, hence the uncertain leadership and complex landscape of the mid-21st century. The next Renaissance is still a long way off.

Written by Hayk

December 27, 2011 at 9:54 am

Berlusconi: successful businessman who screwed his country

leave a comment »

After 17 years, the buffoon of Italy is finally gone. But who was he in reality?

Berlusconi was born to a middle-class family of a bank employee in Milan. In primary school, young Berlusconi wrote homework assignments for his classmates in exchange for morning snacks. In high school, he played the double bass and sang with a band. He attended Milan State University, from which he graduated in 1961 with an honors degree in marketing. While at university, he signed on to cruise ships as a musical entertainer. Since his university days, he was accustomed to party and fun, treats that he would showcase regularly throughout his business and political career.

A twenty something, party-lover, self-motivator, Berlusconi started up in the construction industry. He would buy and sell land in and around Milan. His break came when he acquired a vast stretch of empty farmland near the Milan airport. His fortunes turned when the landing pattern was changed and that patch of land, obtained for pennies, became an overnight fortune.

He didn’t stop at construction. Being a musician, a performer and an extrovert by nature, his attention was naturally drawn to TV. Local TV stations, limited in number, were forbidden by law to become national, avoiding competition with state-owned RAI networks. Defiant Berlusconi & Co set up local TV stations and dispatched motorcycle riders to main cities disseminating news pre-recorded on tapes.

In the end of 80s, Berlusconi and his family/friends were heading a conglomerate of companies in media, publishing and broadcasting obtained through mergers and acquisitions. Coincidentally – this contributed to Berlusconi’s soaring fortunes – Italy was on a sharp economic rise during the same period; in 1987 it became the 5th economic power in the world, with its GDP rising by more than 18%. Berlusconi crowned himself the king of Italy by becoming the owner of a star soccer team of AC Milan.

As of 2011, Berlusconi is worth an estimated $6.2bn (according to Forbes, 3rd wealthiest in Italy, 118th wealthiest in the world in 2011).

Notwithstanding his business acumen and success, Berlusconi’s fortunes in politics were not quite on par with his business achievements. On his political count there were three election victories (1994, 2001, 2008), two defeats (1996, 2006), more than 23 judicial investigations (mostly related to corruption), more than 51 votes of confidence in his government (since 2008).

Inside Italy, Berlusconi inspired awe, disgust and respect at different times. Internationally, his idiosyncratic character earned him friends and accolades in quarters where no European was previously seen. His close friendships with Russia’s Putin Lybia’s – now defunct – Qaddhafi and, at the same time, America’s Hillary Clinton were considered controversial.

Berlusconi seem to have always intermingled personal and professional relationships.

One example is information revealed by WikiLeaks about Berlusconi’s politically disguised business activities: deal arrangements on a Gazprom-Eni joint venture bringing gas from Russia to Europe; Berlusconi’s unconditional support of Putin during the Georgia-Russia conflict in 2008; decisions on Italy’s foreign policy to be based on Berlusconi’s inner circle and business associates rather than the country’s foreign interests.

Another example is his relationship Socialist PM Bettino Craxi (Berlusconi’s political mentor) who became godfather to one of Berlusconi’s children. Mr. Craxi’s brother-in-law was a mayor of Milan, which was also power center of Berlusconi’s business empire. In 1994, the recently deposed Tunisian leader Ben Ali – whose rise to the presidency was directly supported by Italy – provided refuge to Mr. Craxi.

But Berlusconi has been vocal in pointing out his political achievements to all and any who would listen. Thanks to his fiscal policies – as he boasted in international conferences in front Germany and France – Italy avoided the housing bubble, its banks did not go bust and its unemployment rate hovered around 8.5% (>20% in Spain). The budget deficit in 2011 is estimated to be circa 4% of GDP (6% in France).

However, these numbers are deceptive. The Economist’s special report revealed that only Zimbabwe and Haiti had lower GDP growth than Italy in the period of 2000-2010. GDP per head in Italy fell, and the public debt is still 120% of GDP.  Berlusconi’s Italy is 83rd in the World Bank’s “Doing Business” index, below Belarus and Mongolia, and 48th in the WEF’s competitiveness rankings, behind Indonesia and Saudi Arabia.

Thus Berlusconi leaves behind an embittered, inert and economically-degraded Italy.

His businesses are running as usual and his macho attitude and chase of women continues to date with late-night parties, which have affected his health dramatically and irreversibly.

Berlusconi’s is thus a rather sad story of how a successful businessman wouldn’t – he most probably could have if only he tried –  do the same for his country as for his businesses. I guess this makes him the most unpatriotic and un-Italian of all Italians.

As for Italy, things look grim. If the newly appointed PM Monti does not get his game together fast, Italy might yet turn to be another Greece.

Written by Hayk

November 15, 2011 at 9:23 am

Musings on Marx, capitalism, austerity and future

leave a comment »

All that is solid melts into air, all that is holy is profaned.

This is Marx quoting in The Communist Manifesto. It seems to describe well what is happening now in the world.

Occupy Wall Street is the visible symptom of societal sickness induced by “bad” capitalism. It highlights the fact that more and more people are starting to think Karl Marx was right about unregulated/loosely regulated markets. An image below does a pretty good notional mapping.

Marx welcomed capitalism’s self-destruction. He was confident that a popular revolution – a grassroots revolution of proletariat spreading from city to city – would occur and bring about a communist system, an egalitarian and fair system where everyone will have his/her chance to be heard, get an employment and lead a happy life.

He understood well how capitalism destroys its own social base, the middle-class. A self-sustaining middle-class is essential for any healthy and happy society. That was the greatest contribution of Henry Ford, who created the middle-class America.   As economists realize, middle-classes are the ones being most affected by bad economic practices on corporate/institutional levels and it is their movements that are currently showing their lion’s head.

Marx considered capitalism as the most revolutionary economic system in history. Hunter-gatherers persisted in their way of life for thousands of years, while agricultural and feudal societies have been in existence many hundreds of years. In contrast, capitalism (with its early roots in 9th century Muslim world) is evolutionary. It transforms everything it touches, making and unmaking societies,  industries, markets and companies.

Most importantly, capitalism also destroyed the very way of life which it preached and depended upon. In the UK, the US and other developed countries over the past 20-30 years, industries have stalled, markets stagnated, job security gone away and jobs outsourced or discontinued.

More and more people live from day to day, with little idea of what the future may bring. 18th-19th century middle-classes used to think their lives unfolded in an orderly progression. It seems no longer to be the case with middle classes of 21st century. There seems to be no upwards stairs. We’d be happy if we could stay on the same level.

While capitalism created and accelerated the industrial revolution, its detrimental effect, especially during last few decades, has given to most people unstable, precarious lives. Admittedly, middle-class incomes are higher then 100 years ago, but there is little effective control over the course of our lives/careers.

Unfortunately, Western governments are quite reactive. Their panacea to the crisis is austerity. Even rich from the West now ask for austerity. They don’t realize one important thing. In Victorian times, the rich could afford to relax provided they were conservative in how they invested their money. It is no longer possible in 21st century, where even the rich get bankrupt from one day to another even without any risky undertakings.

Austerity is a band-aid, a short-term relief against current economic and social sickness afflicting most of the developed world. In a time of zero-interest rates, spending/consuming cuts, melting savings, rising prices, and contracting industries, thriftiness and austerity will yield a negative return on money and over time erode the accumulated/preserved capital.

In a society that is being continuously transformed by market forces (capitalism), one cannot abide by or get used to traditional values (and life standards) for long time, risking to end up on the scrapheap. It’s a person who borrows heavily, who starts a business, who goes on creating jobs and initiatives that survives and prospers. That is the foundation of Schumpeter‘s ideology.

Being sympathetic to Marx’s cause but going one step further, Schumpeter realized the inherent self-destructive nature of capitalism and preached entrepreneurship and disruptive innovation to counter this effect by creating and recreating new economic values, in turn resulting in societal values and traditions. Schumpeter, while thinking that capitalism will cause its own demise, didn’t think it would be by means of communism. His idea, “creative destruction,” explains well why grassroots instability takes place and what the potential cure might look like.

Our single-minded focus on the expectations market will continue driving us from crisis to crisis to ruin—unless we act now.

Says Roger Martin, author of Fixing the Game. Perhaps, he is right. Perhaps, we need to lower our expectations. Perhaps, we need to love what we already have rather than want what we don’t. That and “creating incentives for individuals to act in mutually beneficial and productive ways” (Schumpeter would agree) is what might save the Western world.

Perhaps, there is still hope.