Archive for February 2009

Oh What a Tangled Web do Politics Weave …

February 28th, 2009 — 2:55pm

A few days ago, I read a newspaper article on Secretary Clinton’s Asian trip. In China, she urged the Chinese to buy American debt, arguing that if they did not, China itself would be badly hurt: The recession-bound US economy would not be able to absorb Chinese exports. I found Ms. Clinton’s argument refreshing from one perspective: she eschewed the typical diplomatic mumbo-jumbo, admitting the US was in deep trouble. How the Chinese will react is an open question, particularly given President Obama’s budget. They may see merit in Secretary Clinton’s logic or may consider it as an invitation to throw good money after bad.

If American debt is a good investment, so are real estate and companies. National Public Radio recently ran two stories about organized groups of ordinary, albeit wealthy, Chinese who are visiting the US to buy real estate. So, that raises the question: how will the broader American political establishment react? For long, instinctive xenophobia has greeted investments from outside Western Europe. In the 1980s, the Japanese were demonized. More recently, the Chinese and Arabs were. Even Indians – who, like the Japanese, don’t pose obvious political problems for America – are attacked; a trivial example: The Taj Group’s purchase of Boston’s Ritz Carleton Hotel produced in the Boston media opinions that made me cringe. Never mind that Taj’s CEO is an American and its luxury hotels are among the best in the world!

Every economy should protect itself from harm. At the Darden School, I silenced Ayn Rand capitalists in a managerial economics class by pointing out that objective data showed that semi-open countries with mixed economies outperformed the US. Shouldn’t the US follow suit? Indeed, today, the semi-open, mixed Indian economy has (so far) escaped the worst ravages of this recession. So my concern is not with anyone questioning the worth of a foreign investment. I just want such questioning should to be based on objective criteria, not irrationality. Today, all of us should take on to ourselves the responsibility of injecting such objectivity into discussions we participate in.

The biggest challenge to our doing so is that we just don’t know enough about how the rest of the world thinks. Fareed Zakaria’s book, The Post-American World, (which I mentioned in my first post) can help. Mr. Zakaria brilliantly describes why America no longer dominates a unipolar world. While it still leads on virtually every important metric economic, technical and social metric, the rest of the world has risen. So, today world has other poles anchored on China, EU, India, Japan, Korea, Brazil and Russia. Americans should embrace and celebrate this, because it creates tremendous opportunities and indeed makes the world safer. This argument is well supported by multi-faceted – economic, political, social, technological and cultural – data and anecdote and is therefore very compelling. Unfortunately, Mr. Zakaria does not go far enough. He needed several more chapters addressing how each of the new “poles” see the important issues of the world. Where can the various poles agree? Where do they differ sharply? What principles, if adopted, could help the poles collectively resolve our huge challenges?

So, if you are a Chinese politician, bureaucrat or business person, what do you think of Secretary Clinton’s challenge? Why? This inquiring mind wants to know.

Comment » | Business Environment, Financial crisis, Politics

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