Failures and breakthroughs – exposed, reflected, considered

Posts Tagged ‘economy

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.

Advertisements

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.

How and why America is declining

with one comment

“One man with courage is a majority.”  Thomas Jefferson

My last post was about the disarray in Europe. What about America?

Let’s start with some interesting statistics. The famous American “fruit” company, Apple, according to the latest financial report, now has more cash to spend than the American government. While in itself not a critical factor, this still poses a sort of dilemma – is business so much ahead of the government in America?

In the backdrop of the on-going debt debate, Barack Obama looks like a man who picked a fight he is unable to finish. But wait. Obama just announced that Republican and Democratic leaders reached an agreement on raising the US debt limit and avoiding default. The deficit reduction is meant to happen over the period of 10 years. And both sides went to a seemingly lose-lose compromise just to get the deal. Will it hold or even pay off?

The debt-related stand-off in Washington is political in nature, having been initially thrust upon incredulous investors. Increasing America’s overdraft (which, according to Government Accountability Office, GAO, has been increased 74 times over the past 50 years) beyond $14.3 trillion (or facing the very 1st default in its history) should have been relatively simple. But Republican congressmen, furious about big government, have recklessly used it as a political tool to embarrass Obama.

America’s fiscal problem is not now — it should be spending to boost recovery — but in the medium term. Its absurdly convoluted tax system (allegedly changed 579 times only during last year) is very inefficient, and there is speculation that ageing of its baby-boomers will push its big number of entitlement programmes into bankruptcy. Obama set up a commission to examine this issue and until recently completely ignored its sensible conclusions. For long time, Obama also held the illusion that the panacea to the deficit is to tax the rich (top 5% who already pay 60% of taxes).

The problem, in America like in Europe, lies not just in the weak/inconsistent leadership and inability to commit to radical economic measures necessary to cure the ailing economy, but also in the political structures. Just like in Japan, its dysfunctional politics were stemming from its one-party system, in American Congress, the (moderate) centre — conservative Democrats and liberal Republicans — has collapsed, in part because partisan redistricting has handed over power to the extremes, ushering it into a radical quasi-one-sided system, not unlike the Japanese.

But American politics is less broken than many think or allege. Since 2009, Congress has passed a huge stimulus bill, ARRA (although there are 1.3 million fewer private-sector workers today than when the ARRA was passed), aimed at economic recovery, evidence that the legislature is still able to get things done.

American economy is becoming increasingly vulnerable. New data continue to reveal just how weak growth was in the 2nd quarter of 2011. The economy has expanded at a 1.3% annual pace. Markets are declining, and businesses are building up cash reserves as insurance against the worst. After two years of pitifully slow recovery, while tens of millions of workers are unemployed (currently at about 14 million) and wages are flat, the government is doing little to get back to economic growth.

Some possible solutions to the ailing American economy include:

  1. Government size to be reduced (public sector, expenditures) in order to put a dent in this debt.
  2. Congress to accept cuts on entitlements.
  3. Government to create a favorable environment for job creation; the private sector does the rest (recently, McKinsey conducted a research asking, “What is the single most important step the U.S. should take to create more jobs” and published the responses here).
  4. Continue pursuing/following-up with taxes for the top 5% (to be invested, for example, in increasing financial aid for college students).
  5. Move some (according to certain criteria) of 46% of American population, who pay no Federal income tax, into the ranks of the remaining 54%.
  6. Impose a national sales/VAT tax. Tax consumption (not investment) and reward savings.
  7. Let the capitalism (supply and demand) solve the housing problem instead of introducing artificial measures.
  8. Let the zombie (aka bailed out) banks/firms go, which might result (for some of them at least) in chapter 11/bankruptcy and making them (in majority of cases) downsize and restructure rather than liquidate.
  9. Wind down American military engagements abroad (two wars, Iraq and Afghanistan, would save up to $150 billion/year in addition to withdrawing, at least partially, 53,000 military personnel from Germany, 36,000 from Japan and thousands more in another 133 countries).

I started by quoting Jefferson and so I shall finish, hoping that Obama and Congress will act before it is too late.

“I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them.” Thomas Jefferson

Transformation of Smith and his message

leave a comment »

“Adam Smith, the father of modern economics”, pleaded for leaving all economic activities to be regulated by market forces without any restraint from state or any other organized group. He believed, “the invisible hand” would coordinate them and run them without any violent ups and downs.”

This paragraph or one along the same lines is leveled at those who question wisdom and efficiency of so-called free markets associated with the name of Adam Smith, father of modern economics, who originally propounded the idea in his Wealth of Nation. However, many proponents of the theory seem to have either very scarce idea of the original context and intended message of Smith’s work or a specific aim to befit it to an agenda fitting their narrow socio-political and economic aspirations. Below (with few additional links) is an elaboration on misconceptions arising from a paragraph above.

Errors:

1 “Adam Smith, the father of modern economics” – a cliché of lazy economists who have not read Smith’s works and confuse quotations attributed to him with modern economics – a sub-branch of applied mathematics – that ignores people and reduces complex behaviours to only one (so-called self interest), it being easier to manipulate mathematical functions, and erects an entirely false image of Smith (the ‘Chicago’ Smith) in contrast to the real Smith (the ‘Kirkcaldy’ Smith). Smith’s legacy, with few exceptions, is at variance with what is said in his name.

2 “…pleaded for leaving all economic activities to be regulated by market forces without any restraint from state or any other organized group.”

It was not in Smith’s style to ‘plead’ for or against any particular policy. The Wealth of Nations was a report of his 12-year ‘inquiry in the nature and causes of the wealth of nations’. It was not a manifesto in support of a change in the way society was run. He pointed out the consequences of running it the way governments tended to legislate.

He was not an anarchist or libertarian, as any number of modern libertarians will tell you (see Murray Rothbard for a particularly bad tempered denunciation of Adam Smith for his manifest failings to descend to the temper of a fanatic about how society works). He accepted certain stabilising aspects of ‘modern’ 18th century society. He did not believe it was practical to change everything before you could change anything. He dealt with the world as it was by contrasting it with the way it could be; change the causes and you changed the consequences, but nothing would change if everything had to change simultaneously. The fanatic – ‘the man of system’, he called him – was ‘very wise in his own conceit’, which describes Rothbard’s polemical style accurately.

Smith was not against state intervention. Justice was administered by the judiciary, an arm of the state, and was essential to individual freedom. Defence was the ‘first duty of government’. Markets were a preferred choice where they worked; he was not against state-funded activities and he left the decision on whether they were administered by state commissioners or private contractors to a pragmatic test: which worked most efficiently, not to an ideological test for or against the decision.

Smith was not a laissez-faire philosopher; he never used the word, yet was familiar with its concepts and with its exponents among the Physiocrats. He did not believe that ‘merchants and manufacturers’ could be free of ‘all restraints’ on their behaviours – most rapidly turned into ‘monopolists’ when left alone. That did not mean he favoured state intervention, unrestrained by laws of justice.

4 “He believed, “the invisible hand” would coordinate them [‘market forces’] and run them without any violent ups and downs.”

…The so-called invisible hand was a lone metaphor he used once in Wealth of Nations (and once in Moral Sentiments), and in neither case was he talking about markets. That is a conflation from Chicago trained economists. He was talking of the unintended consequences of individual motivations. He also wrote of many counter examples where the outcomes of individual actions had malign, not benign, consequences.

The power of Smithian markets is not based on something outside them (visible or invisible) ‘co-ordinating’ them. That is precisely his point about the relationship between ‘natural’ and ‘market’ prices – markets are self-regulating and their workings are well understood. Nobody designed markets, nor ordered them into existence, nor foresaw their utility. They evolved socially over many millennia from the ‘necessary consequence of the faculties of reason and speech’ (long before markets took monetary forms). What Mishra means by ‘violent ups and downs’ is not clear, but markets can move ‘violently’ on occasion dues to external events – Smith’s example is of the dramatic rise in the price of black cloth when there is a general mourning in the UK (presumably white cloth in some countries).

Furtheron, Paul Volcker, the former Fed chairman, recently admitted that while re-reading the “Wealth of Nations” he “had just come across a curious section in the text. Smith was discussing the threat that large Scottish banks posed to the public; given how intertwined they were with the rest of the economy, the shock waves from the failure of any large bank would be devastating. His solution? Have a lot of smaller banks, so one bank’s failure could never bring down the entire economy.” He contrasted this idea with the ongoing policy in America whereby smaller banks (including Wall Street ones) are/were bought by bigger ones (Merrill Lynch acquired by Bank of America, for example) in order to to secure their survival, sustain financial markets and restore confidence in the banking sector.

One has to wonder whether the long-term benefits of having few big banks instead of numerous middle and small will not have a reverse course as predicted by Adam Smith and as witnessed during the recent financial crisis.

Two business failures == third business success?

with one comment

Dot.com bubble witnessed many young, bright and entrepreneurial spirits launch themselves into the tech gold rush only to see themselves chasing the fool’s gold. Too many entrepreneurs wound up in searching for jobs in not-so-inspiring companies and earning not-so-high a salaries. But few found courage to continue their entrepreneurial march and found new beginnings, although not necessarily with happy endings. Eric Ries of IMVU, named as one of the Best Young Entrepreneurs of Tech in 2007 by BusinessWeek, is a case in point.

Eric, like many other talented and bright young men in America, had a rather typical start at Yale: have an idea/dream, find a soulmate, work on the idea.

While pursuing a degree in computer science at Yale, Ries took cues from young techies in Silicon Valley who had no problem getting VC firms to back their software dreams. So he and a roommate started CatalystRecruiting.com, an online database of student résumés, and lined up their own slice of the VC pie. “In retrospect it was not such a good idea for investors to give money to kids who just barely knew what they were doing,” Ries says. “They were just throwing money at these companies. But when the bubble burst we had no chance.”

This first idea failed along with ideas and dreams of many others in the same dot.com lot. His next go? There.com.

Soon another lesson would begin. Ries describes There.com as a “traditional VC-model startup,” characterized by high fixed costs, a focused marketing strategy—and an underdeveloped sense of what consumers want. “They start a marketing buzz and a beautiful PR launch,” he says of the strategy too often pursued by startups, There.com included. Ries rattles off other hallmarks: blow through cash by bulking up on staff, hire a vice-president of marketing “and the burn rate keeps growing.” The trouble is, “they never tested if there would be immediate consumer adoption,” Ries says. Worse, the company couldn’t easily adapt to change, he says. “It was rigid and top-down.” Neither Ries nor Harvey lasted long.

The second time failed as well. None of the two did not seem to be a killer startup and couldn’t not wither turbulent and volatile tech market conditions. He did not digest well the errors he has made during the first two gos. One pattern he could however clearly see in both of his failures was the perceived gap between the tech strategy and business strategy, i.e. the tech-centered approach versus the customer-centered one.

For Ries, try No. 3 would be a charm. After losing their jobs at There.com, Ries and Harvey began working on their own startup, IMVU. This time, Ries says, the lessons stuck. “I knew I couldn’t just be a tech entrepreneur,” he says. “The tech strategy needs to be determined by the business strategy, not the other way around,” he says. So the company’s first meeting was all about determining culture and values. “Startups don’t fail from lack of technology,” he says. “They fail from lack of customers.”

His discipline, creativity and determination led him and his partner-in-crime Harvey into founding IMVU. This time, he knew well how to organize his startup; he had learnt it a bitter way, but he did. This time he knew well what there was to know about founding a startup, he had two failures under his belt, and he was determined to succeed.

Early on in his tenure as IMVU’s chief technology officer, Ries audited a class at Berkeley’s Haas School of Business. The instructor, Steve Blank, was so impressed with Ries’ attention to strategy and understanding of business R&D, that he called Shawn Carolan, a managing director at Menlo Ventures, and advised him to invest. Carolan describes Ries as the guy who would go out and read a business strategy book the moment someone mentioned it.

Fruits of his protracted efforts, failures and unfettered passion for what he believed started showing up, the first sign being almost a lucky strike.

Menlo became a backer, as did Allegis Capital (IMVU also had angel investors). “In the consumer market you have to have humility to admit you don’t know exactly what the consumer wants, so that you can be proactive and test features and make changes,” Carolan says. “Eric has an unusual amount of humility and he is unique as a tech person in his ability to be strategic in his business.”

IMVU showed all signs of success early on. Ries started practicing a lean approach for his own startup. Lean startups are resources-, money- and energy-frugal from the very beginning, and as a result are poised better for sustainable growth and long lifetime.

Part of that strategy was taking the product to the customer for testing as early as possible and keeping site development costs low. IMVU.com had a beta version up and running within six months. By contrast, there hadn’t been a test of There.com in its first five years. To prove that the product resonates with customers, there is a small fee associated with participation, and so far, the test phase has met or exceeded the corresponding financial targets.

Additionally, Ries has helped keep expenses in check by adopting a low-cost, low-risk software development process that maximizes ways to improve the site.

IMVU turned out to be an ultimate success and so did Ries, who is not only a full-time in his own startup but serves on boards of other leading tech boxes like pbWiki, Causes and KaChing.

Now the world is facing a recession, the worst one since the Great Depression. But entrepreneurial world is not necessarily crying doom and end to new ideas and initiatives. While some do, others are more moderate by providing an advice/how-to and still others are outright optimistic for launching a startup especially during this recession.

Make your choices.

Written by Hayk

October 27, 2008 at 11:37 am

China: change of policy in 15th century

with 7 comments

The Greek name for the Chinese was Seres, from which the Latin word serica derives, meaning silk.

China has always viewed itself as being at the centre of its world, traditionally. The modern word for the country, Zhong guo (Central Realm), seems to say it all.

Writing materials such as rolls of silk came from the 2nd century BC, and paper from the 2nd century AD (Cai Lun, 105AD). Printing too was a Chinese invention: fixed blocks were cut to print whole pages (Feng Dao, 932AD), and movable type was introduced from the 11th century AD (Bi Sheng, 1041AD). China was the first to establish the enduring institution of public service examination (founded under Sui Dynasty, 605, till its abolition in 1905).

Additionally, Chinese advances in iron and steel manufacture were several hundred years ahead of Europe. Coal was being mined from 8th century and used in furnaces producing high quality iron and steel. Chinese are also credited for inventions of saddle and stirrup (5th century), compass (possibly 20-100AD), gunpowder (Taoist monks in search of “elixir for immortality,” 9th century) and porcelain (under Tang Dynasty, 7th century).

Maritime inventions credited to Chinese also include the anchor, the drop-keel, the capstan, canvas and pivoting sails.

By medieval times, China became the most intellectually sophisticated and technologically advanced country in the world.

Then came the year 1405 under the Ming dynasty (1368-1644).  Fleets of hundreds of immense Chinese ships  (28,000 people sailing on 300 ships. It was a fleet whose size and grandeur would not be matched until World War I) headed by admiral Zheng He traversed from the China Sea past Sumatra to Ceylon, India, Arabia and East Africa. Seven epic Chinese naval expeditions from 1405 to 1433 explored and brought under the Chinese tributary system the vast periphery of the Indian Ocean. However, less than a century after this Chinese maritime high water mark, it was a crime to even go to sea from China in a multi-masted ship.

The economic motive for these huge ventures may have been important, and many of the ships had large private cabins for merchants. But the chief aim was probably political, to enroll further states as tributaries and mark the reemergence of the Chinese Empire following nearly a century of barbarian rule. The political character of Zheng He’s voyages indicates the primacy of the political elites. Despite their formidable and unprecedented strength, Zheng He’s voyages, unlike European voyages of exploration later in the fifteenth century, were not intended to extend Chinese sovereignty overseas. The question therefore begs how could such a policy (containing enormous potential for growth and prosperity), started in 1405, come to an abrupt halt and reversal by 1433.

There is no definite answer to that question. However, few possible explanations were postulated.

  1. Political power struggle between two factions of the Chinese Imperial court (between the Confucian courtiers and the palace eunuchs), combined with an overwhelming demand for political centralization and unity.
  2. There was an Imperial decree to decommission decision the great navy over the whole of China, reasoning behind such a decision possibly that renovation turned into stagnation, and that science and philosophy were caught in a tight net of traditions smothering any attempt to venture something new. This decision became irreversible due to the loss of shipyards capable of turning out ships that would prove the folly of that temporary decision.
  3. There was an internal Chinese court policy struggle between competing theories of the commercial and technology benefits of foreign trade, against the benefits in social purity of isolationism. Isolationism won.
  4. The navy had become dependent in the 15th century on a meager set of maritime missions that were overly fragile and thus the Chinese navy was vulnerable to relatively minor changes in the strategic situation. The completion of the Grand Canal as a more efficient and safer means of grain transport became an important factor, which engendered the demise of the Chinese ocean-going navy.
  5. Maritime threats (piracy) were always considered secondary in China to continental or land-based threats, and thus in difficult economic and political times (threat to revival of Mongol power on the northern steppe) during the Ming period, the maritime solutions to national security (navy) lost resources to the continental solutions (army).

Perhaps several factors separately or their combination caused a Chinese rejection of sea trade and seapower in the mid-15th century. We can never know for certain.

What we do know is that traditional ethnocentric and culturally well-cultivated Chinese were ever so anticipative. It is no secret that a following maxim has been a byword of not only Chinese warfare but also other strategic maneuvers throughout the ages.

“Steal the beams, change the pillars” (from  “36 Strategems”).

China is on rise again. Let us see how far it will go this time.

Written by Hayk

September 28, 2008 at 9:26 am