As a young idealist I was continually disturbed by the fact the the United States, despite its' "freedom" rhetoric almost always found itself supporting the "wrong" regime.
From Central to South America; across the ocean to Africa and up the continent to the Middle East and over to Asia, we never missed an opportunity to support a right wing dictatorship.
This was strange in that from an ideological political point of view it made no sense that a democracy would support a dictatorship.
Then I read Huntington's axiom that strong democracies and strong dictatorships have more in common than strong democracies and weak democracies and I began to understand the rational of Realpolitik in American foreign policy.
And Realpolitik, or Realism in foreign policy is what the United States, and therefore President Obama is currently exercising- and all the idealists and ideologues want to hang him for it.
That is what grated on me as an idealist and why idealists now grate on me. They are unwilling to accept some home truths.
Tyranny is better than anarchy. As bad as a Saddam Hussein was, the Iraqi's were better off in general under him than with the secular bloodbaths of the Islamic State.
Democracy takes years and institutions to be effective. Just because one institutes elections it does not follow that the rule of law is an automatic corollary. Bribery and corruption are everywhere, but are not everywhere held in contempt.
Every problem does not have a solution, and certainly not a good one. Often the answer lies in choosing the lesser evil. Assad is somehow preferable to the Islamic State. Sometimes doing nothing is better than doing something, even if it appears to be indecisive.
Interests come before values. The Arab Spring, although seemingly a revolt against royal and/or military dictatorships was not a democratic uprising, although idealists like to paint it as such. It removed semi-non-secular dictatorships and opened the doors to secular dictatorships-even if they were "democratically" elected.
Emotion has no place in policy making. Passionate pleas or demands to do something can quickly turn into accusations of flawed policy if the expectations voiced in the heat of the moment by idealists or the ideologues prove to have been unrealistic once you have already committed.
Thursday, 20 November 2014
Tuesday, 18 November 2014
How Tolerant of the Intolerant are we Supposed to Be
Recently the UAE Cabinet approved a list of 83 designated terrorist organisations including al Qaeda and the Islamic State. So far so good. They also included Muslim organisations based in the West that are believed to be allied with the Muslim Brotherhood movement. Prominent among them are two American Muslim groups: the Council on American Islamic Relations and the Muslim American Society.
Now my point is not to comment as to whether these two groups are terrorist organisations or not. To be honest designating a group as terrorist or not is a political expedient and is often merely a matter of perspective. I would even go so far as to agree that one man's terrorist is another man's freedom fighter. But that's not the hard part.
What is much more difficult is the fact that the more clever, dare I say sinister organisations are those that espouse democracy, or more importantly the democratic process but whose goals are anything but democratic.
The Muslim Brotherhood falls under this mantle.
Draping themselves with the trappings of democracy, seeking political redress in monarchical/dictatorial states while working within the system they appeal to the oppressed masses. And in this guise they are extremely effective providing social welfare within the community, focusing on health, education and promising employment.
Their method is to use the democratic process to get elected. Their goals however are to then dismantle the democratic process replacing it with a one-party state rule according to Islamic (Sharia) law.
It is a conundrum.
If a majority of a population were to vote for a political party whose goals were to change the style of government, even if it were by one vote, and the new government were then to "legally" dismantle the state in such a fashion that the minority would never have the opportunity to reverse the electoral decision then I question the sanity of allowing the political party to participate in the electoral process.
I started off discussing the Muslim Brotherhood, whose manifesto most definitely is to introduce a non-democratic state. But this is true for all political movements whose goals are the end of democratic institutions to be replaced by some sort dictatorship in whatever form it might be.
So how do we as a tolerant society deal with those wishing to exploit our tolerance to undermine our society?
It is an incredibly slippery slope.
Now my point is not to comment as to whether these two groups are terrorist organisations or not. To be honest designating a group as terrorist or not is a political expedient and is often merely a matter of perspective. I would even go so far as to agree that one man's terrorist is another man's freedom fighter. But that's not the hard part.
What is much more difficult is the fact that the more clever, dare I say sinister organisations are those that espouse democracy, or more importantly the democratic process but whose goals are anything but democratic.
The Muslim Brotherhood falls under this mantle.
Draping themselves with the trappings of democracy, seeking political redress in monarchical/dictatorial states while working within the system they appeal to the oppressed masses. And in this guise they are extremely effective providing social welfare within the community, focusing on health, education and promising employment.
Their method is to use the democratic process to get elected. Their goals however are to then dismantle the democratic process replacing it with a one-party state rule according to Islamic (Sharia) law.
It is a conundrum.
If a majority of a population were to vote for a political party whose goals were to change the style of government, even if it were by one vote, and the new government were then to "legally" dismantle the state in such a fashion that the minority would never have the opportunity to reverse the electoral decision then I question the sanity of allowing the political party to participate in the electoral process.
I started off discussing the Muslim Brotherhood, whose manifesto most definitely is to introduce a non-democratic state. But this is true for all political movements whose goals are the end of democratic institutions to be replaced by some sort dictatorship in whatever form it might be.
So how do we as a tolerant society deal with those wishing to exploit our tolerance to undermine our society?
It is an incredibly slippery slope.
Monday, 17 November 2014
Transatlantic Trade and Investment Partnership- In Whose Interest?
The Transatlantic Trade and Investment Partnership (TTIP) is the current free trade agreement being negotiated between the EU and the USA. It is not your run of the mill tariff-lowering agreement as a means of furthering trade.
It is about regulatory issues and non-tariff trade barriers like health, safety, the environment and consumer's and worker's rights. It is also about corporations trying to create their own rule of law.
Last night on German TV the focus of the negotiations was distilled down to two issues:
1.) The US technique of disinfecting chicken with chlorine might be introduced in Europe which the Germans/Europeans don't want.
2.) The laxer approach to bank regulation that has been followed in Europe since the Credit Crisis in contrast to the more draconian measures introduced in the US which the Americans don't want.
I actually think these two points are intended to keep the discussion away from a much more important point but I will come to that later.
Point #1. In the EU generally agriculture is geared towards the prevention of disease rather than focusing on how to prevent the further spread of disease once it has occurred.
In the EU the breeding/rearing of livestock is done in a manner designed to prevent as much disease as possible at every stage from breeding to feeding to slaughter and to distribution.
In the US, presumably because it is cheaper and thereby more efficient the focus is to get the livestock through the system as fast as possible accepting the presence of disease and then "washing" the disease away with a chlorine bath to eliminate bacteria at the end of the meat production chain.
Sounds like using chemicals to make up for inadequate hygiene standards in the meat industry....
Point #2 is also a diversion. Bank regulation is already managed by the Bank For International Settlements (BIS) and we are in the third edition of rules known as Basle III which slowly but surely are being instated across the globe. This is a regulatory issue,not a trade issue, and that is where Investor-State Dispute Settlements (ISDS), the more important point, kicks in.
My concerns about ISDS center on a few basic points:
a.) Currently under World Trade Organisation (WTO) legislation if a company feels that it has a case against a host (ie foreign) state it first has to convince its' own state that it has a case and the home state will raise the complaint on corporation's behalf. This is not the case under ISDS.
b.) A company wishing to sue a host state has the choice to sue the state under that state's laws or to move directly to ISDS counter to current law which moves cases to an international court or tribunal only after the domestic legal route has been exhausted.
c.) Only foreign companies can use ISDS ie a domestic company could "suffer" the same damages claimed by a foreign company but have no recourse to ISDS.
d.) International Tribunals, unlike domestic tribunals and international courts are private, confidential and essentially outside the domestic rule of law.
Now it may seem that a number of my concerns are in conflict with one another, and they are. Host States versus Home States; Foreign Companies versus Domestic Companies and Domestic versus International Law certainly provides for different views on the same subject depending on ones perspective.
Different political systems dictate different approaches to health, safety, the environment and consumer's and worker's rights. They also result in different regulatory environments.
The current buzzword is Harmonization which inevitably means lowering standards to the lowest common denominator- but at what cost?
Neither the USA nor the EU are Third World Countries which operate outside the rule of law.
They might disagree on some interpretations and there will be instances where a government decision in one bloc will have adverse effects on a company from the other bloc.
If these governmental decisions are neither capricious nor malicious then companies engaging in said countries, be they foreign or domestic, then such government decisions constitute part of the general risk of doing business which includes market and political risk.
ISDS is another insidious form of making corporate risks/losses public and keeping corporate profits private-at the cost of the taxpayer.
Call me old fashioned but I like a level playing field.
It is about regulatory issues and non-tariff trade barriers like health, safety, the environment and consumer's and worker's rights. It is also about corporations trying to create their own rule of law.
Last night on German TV the focus of the negotiations was distilled down to two issues:
1.) The US technique of disinfecting chicken with chlorine might be introduced in Europe which the Germans/Europeans don't want.
2.) The laxer approach to bank regulation that has been followed in Europe since the Credit Crisis in contrast to the more draconian measures introduced in the US which the Americans don't want.
I actually think these two points are intended to keep the discussion away from a much more important point but I will come to that later.
Point #1. In the EU generally agriculture is geared towards the prevention of disease rather than focusing on how to prevent the further spread of disease once it has occurred.
In the EU the breeding/rearing of livestock is done in a manner designed to prevent as much disease as possible at every stage from breeding to feeding to slaughter and to distribution.
In the US, presumably because it is cheaper and thereby more efficient the focus is to get the livestock through the system as fast as possible accepting the presence of disease and then "washing" the disease away with a chlorine bath to eliminate bacteria at the end of the meat production chain.
Sounds like using chemicals to make up for inadequate hygiene standards in the meat industry....
Point #2 is also a diversion. Bank regulation is already managed by the Bank For International Settlements (BIS) and we are in the third edition of rules known as Basle III which slowly but surely are being instated across the globe. This is a regulatory issue,not a trade issue, and that is where Investor-State Dispute Settlements (ISDS), the more important point, kicks in.
My concerns about ISDS center on a few basic points:
a.) Currently under World Trade Organisation (WTO) legislation if a company feels that it has a case against a host (ie foreign) state it first has to convince its' own state that it has a case and the home state will raise the complaint on corporation's behalf. This is not the case under ISDS.
b.) A company wishing to sue a host state has the choice to sue the state under that state's laws or to move directly to ISDS counter to current law which moves cases to an international court or tribunal only after the domestic legal route has been exhausted.
c.) Only foreign companies can use ISDS ie a domestic company could "suffer" the same damages claimed by a foreign company but have no recourse to ISDS.
d.) International Tribunals, unlike domestic tribunals and international courts are private, confidential and essentially outside the domestic rule of law.
Now it may seem that a number of my concerns are in conflict with one another, and they are. Host States versus Home States; Foreign Companies versus Domestic Companies and Domestic versus International Law certainly provides for different views on the same subject depending on ones perspective.
Different political systems dictate different approaches to health, safety, the environment and consumer's and worker's rights. They also result in different regulatory environments.
The current buzzword is Harmonization which inevitably means lowering standards to the lowest common denominator- but at what cost?
Neither the USA nor the EU are Third World Countries which operate outside the rule of law.
They might disagree on some interpretations and there will be instances where a government decision in one bloc will have adverse effects on a company from the other bloc.
If these governmental decisions are neither capricious nor malicious then companies engaging in said countries, be they foreign or domestic, then such government decisions constitute part of the general risk of doing business which includes market and political risk.
ISDS is another insidious form of making corporate risks/losses public and keeping corporate profits private-at the cost of the taxpayer.
Call me old fashioned but I like a level playing field.
Monday, 13 October 2014
The Locusts
Earlier this year KKR purchased over 90% of the outstanding equity of WMF, a south German tableware manufacturer, founded in 1853 in Geislingen an der Steige, Germany, by the miller Daniel Straub and the Schweizer brothers.
On August 21, 2014 WMF announced that the Group business performed at a stable rate in first-half 2014 achieving a gross revenue of EUR 462.6. Overall revenue grew by 3% and the realised operating profit (EBIT) increased to EUR 27.6 million in comparison with EUR 17.7 million in the prior year.
On August 28, 2014 Buyout group KKR said it had obtained more than 90 percent of WMF's share capital, putting it on track to gain full control of the German cutlery and coffee-machine maker and delist it.
KKR invested 586 million Euros. It announced that it intends to find savings of 30 million Euros a year requiring the firing of hundreds of employees and the likely divestiture of some parts of the business.
There has been a lot of discussion in Germany since the financial crisis focusing on the so-called "locusts" of private equity.
The thinking is that these financial investors are only concerned in returns. They represent no social value. They don't possess a moral compass and have no compunction in destroying companies and the communities that rely upon them.
They raise funds with the stated goal to find companies that are not maximising their potential, purchase them, and through either divestiture or cost cutting, a euphemism for cutting employees, maximise the return and then sell the more valuable company on, often to another financial investor.
This is the hard end of capitalism.
It is why there is a need for regulation.
30 Millionen Euro will der neue Eigentümer KKR jährlich sparen, hunderte von Arbeitsplätzen abbauen
Wie funktioniert das Ganze? Ein Finanzkonzern wie KKR leiht sich Geld, etwa bei Banken oder Pensionskassen, um einen Fonds zu gründen. Damit kauft er Firmen wie die WMF. In nur wenigen Jahren werden die Unternehmen auf Erfolg getrimmt. Durch Verkauf einzelner Sparten oder den Abbau von Arbeitsplätzen. Das Ziel: mehr Profit. Dann wird die Firma weiter verkauft, der Fonds aufgelöst und die ursprünglichen Geldgeber werden ausgezahlt.
On August 21, 2014 WMF announced that the Group business performed at a stable rate in first-half 2014 achieving a gross revenue of EUR 462.6. Overall revenue grew by 3% and the realised operating profit (EBIT) increased to EUR 27.6 million in comparison with EUR 17.7 million in the prior year.
On August 28, 2014 Buyout group KKR said it had obtained more than 90 percent of WMF's share capital, putting it on track to gain full control of the German cutlery and coffee-machine maker and delist it.
KKR invested 586 million Euros. It announced that it intends to find savings of 30 million Euros a year requiring the firing of hundreds of employees and the likely divestiture of some parts of the business.
There has been a lot of discussion in Germany since the financial crisis focusing on the so-called "locusts" of private equity.
The thinking is that these financial investors are only concerned in returns. They represent no social value. They don't possess a moral compass and have no compunction in destroying companies and the communities that rely upon them.
They raise funds with the stated goal to find companies that are not maximising their potential, purchase them, and through either divestiture or cost cutting, a euphemism for cutting employees, maximise the return and then sell the more valuable company on, often to another financial investor.
This is the hard end of capitalism.
It is why there is a need for regulation.
30 Millionen Euro will der neue Eigentümer KKR jährlich sparen, hunderte von Arbeitsplätzen abbauen
Wie funktioniert das Ganze? Ein Finanzkonzern wie KKR leiht sich Geld, etwa bei Banken oder Pensionskassen, um einen Fonds zu gründen. Damit kauft er Firmen wie die WMF. In nur wenigen Jahren werden die Unternehmen auf Erfolg getrimmt. Durch Verkauf einzelner Sparten oder den Abbau von Arbeitsplätzen. Das Ziel: mehr Profit. Dann wird die Firma weiter verkauft, der Fonds aufgelöst und die ursprünglichen Geldgeber werden ausgezahlt.
Thursday, 9 October 2014
Employment is the Goal
I read two conflicting articles yesterday about the levels of unemployment in Europe. The one focused on the "Participation" rate as an explanation that things aren't maybe as bad as they appear. The other suggested that changing labour laws to make it easier for employees to be fired would be the solution to Europe's unemployment dilemma.
First of all the discussion around the Participation rate essentially says that in looking at unemployment figures it is not only a question of how many people are employed but also measures the number of people either employed or actively looking for work as a share of the working-age population. Simply put if large numbers of people who could work have stopped looking and more importantly have stopped registering as unemployed then they fall off the radar and the unemployment numbers go down.
This is happening in the US apparently, while in Europe the participation rate is increasing ie more people are actively seeking employment and so even if the number of actively employed were to stay constant as a percentage of the employable population the unemployment rate would increase.
In any event all the article actually proves is that the statistics are eminently massagable depending on what you want to prove. For those of you who care the writer of the first article works at a major UK fund manager and their sources, Bloomberg, claims that the particpation rate in Europe is rising while in the US it is falling.
The second article was written by an American geopolitical thinktank. Their angle is that unemployment is the single most dangerous challenge the European Union faces and that the unemployment figures are understated as many Europeans are no longer looking for employment.
Go figure.
But their underlying assumption is that it is essentially a question of labour law regulations. In one breath they support austerity and claim that reforming labour laws to allow companies to fire employees easier will boost employment.
To be fair, the argument is that if an employer knows that they can fire an employee if the market turns against him then that same employer might be more willing to take on a new employee in the first place.
And they are probably right.
But it puts a lot of hope in the ethics of employers not to abuse the system.
My next post will look at a class of employers for whom ethics are beyond the pale.
First of all the discussion around the Participation rate essentially says that in looking at unemployment figures it is not only a question of how many people are employed but also measures the number of people either employed or actively looking for work as a share of the working-age population. Simply put if large numbers of people who could work have stopped looking and more importantly have stopped registering as unemployed then they fall off the radar and the unemployment numbers go down.
This is happening in the US apparently, while in Europe the participation rate is increasing ie more people are actively seeking employment and so even if the number of actively employed were to stay constant as a percentage of the employable population the unemployment rate would increase.
In any event all the article actually proves is that the statistics are eminently massagable depending on what you want to prove. For those of you who care the writer of the first article works at a major UK fund manager and their sources, Bloomberg, claims that the particpation rate in Europe is rising while in the US it is falling.
The second article was written by an American geopolitical thinktank. Their angle is that unemployment is the single most dangerous challenge the European Union faces and that the unemployment figures are understated as many Europeans are no longer looking for employment.
Go figure.
But their underlying assumption is that it is essentially a question of labour law regulations. In one breath they support austerity and claim that reforming labour laws to allow companies to fire employees easier will boost employment.
To be fair, the argument is that if an employer knows that they can fire an employee if the market turns against him then that same employer might be more willing to take on a new employee in the first place.
And they are probably right.
But it puts a lot of hope in the ethics of employers not to abuse the system.
My next post will look at a class of employers for whom ethics are beyond the pale.
Monday, 6 October 2014
Seeking Truths from Facts
I was recently in the US for my summer vacation and one of my small pleasures is to read the title stories of magazines such as the National Enquirer just to see what weird ideas their editors come up with to sell their magazine.
In addition to the usual "I was abducted by aliens" stories there were any number of bizarre claims about the lives of the rich and famous running from what some fourth rate soap star is doing to what's going on in the White House.
I found it hard to believe that anyone actually takes anything of what they read in such publications to be true, but then as I tried to watch the news and flipped through various news websites I begin to think that I might just be demonstrating my naivety couched in a blanked of intellectual snobbism.
Now some people might maintain that I have been outside the US too long and have not lived through the decline of the media to the point that it is difficult to know what to believe regardless of the source.
But watching the reporting on the Ebola epidemic and the amount of scare mongering in the press it is clear to me that there is no interest in reporting constructively but rather every possible opening for sensationalism is mined to provide headlines a la National Enquirer even from what I had previously held to be respectable publications.
One of my more disappointing realisations was that the Huffington Post, once a viable provider of alternative views on significant news items has essentially morphed into a Fox National Enquirer mishmash.
I am not sure who is feeding whom but the focus of the news and the polarisation of American society seem to be woven together in such an unhealthy symbiotic relationship that it is impossible to know what facts can I trust in analysing a situation to try and distill some acceptable version of the truth.
In addition to the usual "I was abducted by aliens" stories there were any number of bizarre claims about the lives of the rich and famous running from what some fourth rate soap star is doing to what's going on in the White House.
I found it hard to believe that anyone actually takes anything of what they read in such publications to be true, but then as I tried to watch the news and flipped through various news websites I begin to think that I might just be demonstrating my naivety couched in a blanked of intellectual snobbism.
Now some people might maintain that I have been outside the US too long and have not lived through the decline of the media to the point that it is difficult to know what to believe regardless of the source.
But watching the reporting on the Ebola epidemic and the amount of scare mongering in the press it is clear to me that there is no interest in reporting constructively but rather every possible opening for sensationalism is mined to provide headlines a la National Enquirer even from what I had previously held to be respectable publications.
One of my more disappointing realisations was that the Huffington Post, once a viable provider of alternative views on significant news items has essentially morphed into a Fox National Enquirer mishmash.
I am not sure who is feeding whom but the focus of the news and the polarisation of American society seem to be woven together in such an unhealthy symbiotic relationship that it is impossible to know what facts can I trust in analysing a situation to try and distill some acceptable version of the truth.
Wednesday, 1 October 2014
Victors, Vanquished and Who Writes History
I recently had the pleasure to celebrate my 30th wedding anniversary where, somewhat under the influence of alcohol, I entered into a discussion of my July 3rd post "From the Outside Looking In" with some of my friends. The following is a response to them in letter form:
Hi Guys.
I have returned to London and after recovering from jet lag and partying I re-read the blog from July 3rd. I think I understand why you thought it might have been difficult to determine my nationality given the perspective from which I write.
To be frank I think over the years whenever I write about Germany I try to make a distinction between good Germans and bad Germans with an eye to their recent history and my relationship to it.
For if indeed history is written by the victors we run the risk of not only allowing the victors to write the history of the wars, but to also allow them to rewrite the entire history of the vanquished. That is what I was trying to present in the blog using the English take on the American Revolution. As we discussed I am sure that the Vietnamese take on the Viet Nam war is very different from ours. Indeed, the next time you go on a golf outing go to Bayeux in Normandy and check out the French take on William the Conqueror's "trip" to Hastings.
Recently I inherited a book from my father-in-law written in 1901 entitled "A Century of German Victories". They had no sense of guilt or shame but rather pride in their military prowess. And yet when one thinks of the modern German state we invariably find the seeds of the Third Reich in the creation of Prussia.
I am not pretending to suggest that there is no connection. But I think however that it is along the lines of the minority report-an excellent science fiction book and ok film-where even if the majority of predictions presume result 'x' there will be a report which predicted result 'y' which was never allowed to come to fruition.
History is not a straight line although the concept of manifest destiny goes a long way to suggesting that there are geopolitical themes which are almost inevitable. That doesn't have to result in genocide, though there may be a case to be made given the slaughter of the Indians in America's charge to the West and the destruction of European Jewry encapsulated in Germany's Drang nach Osten.
But that is not what I was writing about on July 3rd. I was trying to give a voice to a nation's history "before the deluge" that is not normally granted to it.
I would hope that all nations are given the opportunity by third parties to understand not only how the world sees them-but to also get a glimpse as to how they see themselves.
It could give a new meaning to the idea of globalism.
Regards,
mz
Hi Guys.
I have returned to London and after recovering from jet lag and partying I re-read the blog from July 3rd. I think I understand why you thought it might have been difficult to determine my nationality given the perspective from which I write.
To be frank I think over the years whenever I write about Germany I try to make a distinction between good Germans and bad Germans with an eye to their recent history and my relationship to it.
For if indeed history is written by the victors we run the risk of not only allowing the victors to write the history of the wars, but to also allow them to rewrite the entire history of the vanquished. That is what I was trying to present in the blog using the English take on the American Revolution. As we discussed I am sure that the Vietnamese take on the Viet Nam war is very different from ours. Indeed, the next time you go on a golf outing go to Bayeux in Normandy and check out the French take on William the Conqueror's "trip" to Hastings.
Recently I inherited a book from my father-in-law written in 1901 entitled "A Century of German Victories". They had no sense of guilt or shame but rather pride in their military prowess. And yet when one thinks of the modern German state we invariably find the seeds of the Third Reich in the creation of Prussia.
I am not pretending to suggest that there is no connection. But I think however that it is along the lines of the minority report-an excellent science fiction book and ok film-where even if the majority of predictions presume result 'x' there will be a report which predicted result 'y' which was never allowed to come to fruition.
History is not a straight line although the concept of manifest destiny goes a long way to suggesting that there are geopolitical themes which are almost inevitable. That doesn't have to result in genocide, though there may be a case to be made given the slaughter of the Indians in America's charge to the West and the destruction of European Jewry encapsulated in Germany's Drang nach Osten.
But that is not what I was writing about on July 3rd. I was trying to give a voice to a nation's history "before the deluge" that is not normally granted to it.
I would hope that all nations are given the opportunity by third parties to understand not only how the world sees them-but to also get a glimpse as to how they see themselves.
It could give a new meaning to the idea of globalism.
Regards,
mz
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