Trade & Globalization: All Articles and Books

How Detroit Went Bottom-Up

Erin Drankoski — Mon, 28 Sep 2009 10:47:00 -0400

In the spring of 2005, David Stockman at last reaped the reward of the monopolist.

Stockman, who once served as Ronald Reagan's budget director, spent two decades on Wall Street preparing for this moment. After stints at Salomon Brothers and the Blackstone Group, Stockman in 1999 set up his own private investment fund, Heartland Industrial Partners. He then used Heartland to shape a set of companies -- mainly in the automotive sector -- each dedicated to dominating a particular group of production activities.

Mexico Might Not Have the U.S. to Kick Around Anymore

Erin Drankoski — Wed, 12 Aug 2009 06:02:00 -0400

The United States hasn't prevailed in Mexico City since Ulysses S. Grant and Robert E. Lee fought alongside each other to vanquish Santa Ana, but the American soccer team will try again today as it takes on the Mexican national team in a key World Cup qualifying match in Azteca Stadium. Despite how fiercely competitive the U.S.-Mexico soccer rivalry has become in the last two decades, the Americans have never won in Mexico City.

Futbol Tragedy

Erin Drankoski — Tue, 11 Aug 2009 05:50:00 -0400

Barack Obama and a number of his cabinet members are only the second-most prominent American team to descend on Mexico this week (the U.S. president traveled to Guadalajara for the annual "Rodney Dangerfield summit," where Canada and Mexico try to get some respect from their disinterested neighbor). Most Mexicans are paying far more attention to the visit of a different delegation from north of the Rio Grande, the U.S. national soccer team that takes on Mexico in a crucial World Cup qualifying match at Mexico City's imposing Aztec Stadium on Wednesday.

The Next Big Thing: America

Cecille Isidro — Fri, 01 May 2009 07:33:00 -0400

What will the world look like when the present emergency has passed? The safest prediction is that the post-crisis financial sector will be downsized and more heavily regulated, nationally and internationally. The financial sector as a whole, which peaked at 40 percent of corporate profits in the United States in 2006, may shrink as much as 50 percent in the aftermath of the emergency.

What Turkey Can Teach Us

Cecille Isidro — Tue, 14 Apr 2009 11:37:00 -0400

Declaring Mexico a "failed state" has become the new mantra in Washington and among the media. Over the last two years, the country's drug wars have claimed 10,000 lives, many in grisly beheadings reminiscent of Iraq or the Afghan-Pakistan border regions. But we have been bad neighbors, too: American narco-dollars have made Mexico the main conduit for Colombian cocaine, and an estimated 90 percent of the weapons used by Mexican drug cartels come from the United States.

Rx for the Economy: Which Doctor Should We Believe?

Cecille Isidro — Tue, 07 Apr 2009 07:00:00 -0400

If the debate over the global economic crisis seems confusing, it's because the debate is confusing. Proponents of different cures can't even agree on the diagnosis of the disease.

The Next Progressive Era

Cecille Isidro — Wed, 01 Apr 2009 18:00:00 -0400

The Next Progressive Era provides a blueprint for a re-empowered progressive movement and describes its implications for American families, work, health, food, and savings.

Slumdogs, Millionaries

Cecille Isidro — Fri, 06 Feb 2009 16:33:00 -0500

Globalization has become so synonymous with our contemporary, interconnected existence that the word hardly merits usage anymore.

Obama Must Lead the Way on Global Financial Reform

Cecille Isidro — Sun, 01 Feb 2009 12:01:00 -0500

Beyond the Haze

Cecille Isidro — Fri, 30 Jan 2009 09:14:00 -0500

Even as my plane was landing in Jinan, the capital of China's heavily industrialized Shandong province, I could see cranes. By the time I got to the city center I'd counted 76 more construction cranes along the way. There were probably more, but in the city proper the smog was so thick I couldn't see any farther than the sidewalk. When I visited, just a few weeks before last summer's Olympic extravaganza kicked off, Shandong had just been named to the Chinese EPA's "green blacklist" for its

A Whole New Third World

Cecille Isidro — Mon, 26 Jan 2009 18:35:00 -0500

No More "Wars of Choice"

Cecille Isidro — Thu, 22 Jan 2009 09:50:00 -0500

When Mikhail Gorbachev came to power in the 1980s, he sought a truce in the Cold War, a breathing spell that would provide time for reformers to engage in "perestroika," or "restructuring," of the Soviet Union. In the aftermath of the Bush administration's hyperactive militarism and manic overextension, the U.S. needs a similar breathing spell in foreign policy that will permit concentration on rebuilding, not just reviving, the U.S. economy and its social contract. The Soviet Union

The Next American System

Cecille Isidro — Tue, 20 Jan 2009 15:23:00 -0500

The inauguration of Barack Obama as president of the United States, along with the deepening of the Democratic majorities in both houses of Congress, marks more than a shift in the pendulum swings of partisan politics. In these pages I have suggested that it marks the dawn of a Fourth American Republic, in the way that the New Deal marked the beginning of Franklin Roosevelt's Third Republic of the United States and the Civil War and Reconstruction began Lincoln's Second Republic.

The Brave New World of Global Finance

Cecille Isidro — Thu, 15 Jan 2009 10:30:00 -0500

When future historians look back at the major shift in power that came in the fall of 2008, they will focus not just on the election of Barack Obama. Less than two weeks after Obama's historic election, finance ministers and central bank governors from the G-20 nations convened in Washington at the height of a global panic to discuss the future of global finance.

Get Money Into the Economy Now

Cecille Isidro — Thu, 15 Jan 2009 10:13:00 -0500

Michael Lind is director of the American Infrastructure Initiative at the New America Foundation.

There are worrying signs that what may end up being a stimulus package of a trillion dollars or more is being turned into an ordinary piece of legislation, with its content to be determined by politics, special interests and ideology.

Redoing Globalization

Cecille Isidro — Mon, 12 Jan 2009 13:04:00 -0500

The great financial bubble of the Clinton-Bush years has ended in tears--in home foreclosures, bank failures and what promises to be the most severe global economic recession since the Great Depression. As President-elect Obama puts together his economic recovery program, he needs to understand that the economic crisis is the result not just of unscrupulous mortgage lenders and unregulated investment bankers on Wall Street but of the globalization of finance and trade that key members of his economic team set in motion when they were in the Clinton administration. The uncomfortable truth is that the current system of global commerce and transnational finance is inherently prone to crisis and is incompatible with Obama's goal of rebuilding the American middle class. Any sustainable recovery on the domestic front, therefore, will depend on his success in getting other countries to agree to fundamental changes in that global system.

A Glimmer In The Global Gloom?

Cecille Isidro — Mon, 15 Dec 2008 15:18:00 -0500

Over a long and satisfying string of holiday parties, I've been gauging the mood of friends and acquaintances in New York regarding the economic climate we've only half-jokingly come to call "The Depression." Because an unusually large number of my friends are in the arts, media, academia, the law and finance, I'm fully confident that I'm getting a badly distorted view of the coming crunch. These are, after all, the hardest hit sectors. One wag joked that we all belong to the "parasite class," and that the

The Policies That Ruined the Auto Industry

Cecille Isidro — Mon, 01 Dec 2008 16:03:00 -0500

A lot of people are angry at the Detroit Three automakers, including many members of Congress. And why not?

GM, Ford and Chrysler seem still too bloated and old-fashioned, their workers too pampered. For too long the carmakers have failed to design and bring to market the smaller and more fuel efficient vehicles we now want to buy. Yet it is important to put the blame where it really belongs, not on management or labor, but on Congress.

South Korea's Kimchi Deficit

Cecille Isidro — Mon, 03 Nov 2008 10:28:00 -0500

There's probably no nation in the world more emblematic of the pitfalls and challenges of rapid modernization than South Korea. South Korean society is a caldron of competition and contradiction, caught between respecting the past and striving for the future.

And now it seems this nation -- which worked its way from the Third World to the First World in a single generation, and whose people show the strain by working more hours, consuming more hard liquor, having more sex and committing more suicides than in any other country -- is facing another culture clash between traditional identity and a globalizing world: the kimchi deficit.

It's difficult to overestimate the cultural significance of kimchi in South Korean society. It's the national staple: cabbage fermented in garlic, chilies and vinegar. More than just food to Koreans, kimchi is a cultural icon and a national treasure. In Seoul, you can meander through a museum dedicated to promoting its history and beneficial qualities.

Earlier this year, when the first South Korean astronaut ventured into space, three government research institutes spent millions to develop bacteria-free kimchi to send with him into orbit. "If a Korean goes to space, kimchi must go there too," one scientist told a reporter.

Recently, the Ministry of Agriculture threw its weight behind a $40-million public-private campaign to make Korean cuisine as famous as French, Japanese, Thai, Chinese and Italian, and spreading the gospel of kimchi is no doubt central to the strategy.

In addition to establishing Korean culinary schools abroad, the goal is to quadruple the number of Korean restaurants around the globe by 2017.

But last week, a report to the South Korean parliament revealed a flaw in the nation's culinary ambitions: the country's kimchi trade deficit.

It seems that growing domestic demand for cheap, Chinese-made fermented cabbage has led to a 376% surge in imported kimchi from 2004 to 2007. For those three years, South Korea's kimchi trade deficit reached $77.3 million. The national symbol -- what one writer called "the palpable expression of the country's feisty spirit" -- is now more likely to be made in China than at home.

Everyone knows that eating is not just about satisfying a physiological need. It also serves a psychological and social function. Food plays a primary role in how people create and maintain their identities. We define each other by the foods we eat. As one scholar has put it, food binds "taste and satiety to group loyalties. Eating habits both symbolize and mark the boundaries of culture."

But just as much as it binds us to an identity and a place, food is transportable and even mutable. For good and ill, once I find out about your favorite food, I can cook it and eat it myself. I might even put my own stamp on it. I might even sell it back to you. You might like my version better than yours.

In the U.S., ethnic food consumption has risen dramatically over the last quarter of a century. Sociologists disagree about what significance this "internal tourism" has for our society -- does a growing hunger for foreign foods make us all budding internationalists? And if we're eating kimchi, will it, as the South Korean government seems to believe, translate into greater influence and respect for South Korea?

So far, the debate over the cultural consequences of globalization has been primarily about the evils and benefits of "McDonaldization" (stultifying homogenization) or, in novelist Salman Rushdie's term, "chutneyfication" (glorious mixture). But South Korea's concern over its kimchi deficit points to a much more subtle and potentially menacing dynamic of modern life. What happens when that which you consider to be yours exclusively begins to come from somewhere else?

If you think this is a silly question, just remember that it was a feeling of cultural displacement that helped fuel the fundamentalism of Egyptian student Mohamed Atta in Germany. In times of great change, people tend to cling to what they think are the fundaments of their culture and religion.

South Korea's kimchi deficit could point to a future in which we are all acutely aware of how intertwined we are. But it could also presage increased personal confusion, displacement and anxiety, and a provincial cultural retrenchment.

Chinese-made kimchi could carry the pungent smell of a contentious future.

Capital in the Capitol

Cecille Isidro — Fri, 17 Oct 2008 06:40:00 -0400

If anyone doubts the increasing importance of finance as a tool of foreign policy, one need look no further than Iceland, a NATO member, which this past week announced that it is in negotiations for a 4 billion euro bailout from Russia. Iceland's prime minister was blunt: "We have not received the kind of support that we were requesting from our friends, so in a situation like that one has to look for new friends."

While denied by the Icelandic government, there have been suggestions that one area of discussion is the possible use by Russia of a former--NATO military base on its soil. Others suggest that Iceland may be prone to more favorable consideration of future Russian claims to the resource-rich arctic. Regardless of how this turns out, the use of financial resources to achieve international goals is the latest example of a rising trend that we call the financialization of foreign policy. The United States government is woefully unprepared for this convergence.

Perhaps the current financial crisis could serve as a much needed wake-up call to Washington that it needs to better understand and integrate financial thinking into its overall policymaking apparatus. Current events have already jolted policymakers into acknowledging that the federal government can no longer operate business (or politics) as usual. Treasury's role as a $700 billion portfolio manager is only one aspect of what ought to be a wholesale rethink of our government's understanding of finance. At a minimum, there must be significantly greater cooperation between the Treasury and State Departments, and the national security apparatus. Foreign policy separate from financial policy is no longer an option.

An important lesson learned over the past several weeks is that U.S. strategic thinking about the foreign-policy considerations and consequences of finance and market issues has been inadequate. The current crisis presents an opportunity for the United States to reshape how our government responds to these new economic realities.

Upon taking office, the next president will confront a world far different from that of his predecessors. The new administration will face a more complex global landscape, where American financial pre-eminence is no longer taken for granted and where other nations use their own increased financial resources to further their national interests. The United States will certainly remain a major center of global finance, but has been weakened. The so-called "exorbitant privilege" of the United States to print the world's de facto reserve currency--and thus operate beyond the financial constraints that apply to other nations-- may have become a bit less exorbitant.

Today, the United States is no longer capital rich. Rather, America is a significant international debtor with a sizeable portion of that debt held by central banks in China, Japan, Russia and the Gulf states. This wealth transfer from the United States to other nations is significant and appears likely to continue. The current banking crisis demonstrates that American financial institutions are becoming increasingly dependent on capital from foreign sources, such as central banks and sovereign wealth funds. One of the probable outcomes of the current crisis is the acceleration of the development of alternatives to American financial markets, capital and currency.

While the future course of how these issues will develop remains uncertain, the strategic considerations that they raise are likely to be permanent features of the global political, financial and national security landscape. Earlier this year, for the first time, the director of national intelligence's annual threat assessment included financial issues as one of the leading security threats facing this country. Director McConnell cited "concerns about the financial capabilities of Russia, China, and OPEC countries and the potential use of their market access to exert financial leverage to achieve political ends." That was well before the current financial upheaval.

Issues of this magnitude require more than operational tweaks--they compel a fundamental structural overhaul of the way our government integrates financial issues into its foreign-policy thinking.

The need to modify the organizational structure of the White House and executive branch to integrate financial policy considerations in the shaping of foreign policy has been undertaken at key turning points in the last half-century. In 1945, recognizing that the world had fundamentally changed after the Second World War, the Truman Administration retooled the federal government and created the National Security Council and other new structures to address the challenges of the Soviet Union, the spread of communism, decolonization and the new map of post-war Europe. This period saw the creation of the Bretton Woods system, the Marshall Plan and the establishment of the World Bank and International Monetary Fund.

Similarly, following the collapse of the Soviet Union and the onset of globalization, the Clinton Administration established the National Economic Council (NEC) as a counterpart to the National Security Council. The creation of the NEC was a positive step. But it has not proven able to confront the economic issues facing our country today.

The government must undertake a realistic appraisal of the global economy, noting the strengths and weaknesses of America's role in that economy and how other nations may seek to gain advantage through the financial tools increasingly at their disposal. In our relationships with international allies, competitors and potential adversaries, financial and economic components must be an integral part of our strategic and conceptual thinking.

To that end, we believe that the State Department and National Security Council need to be far more engaged in the world of international finance and economics--a competence which has, until now, been ancillary to its core capability. But, perhaps equally important is an enhanced strategic role for the Treasury Department.

At the State Department, the Office of Policy Planning (OPP) reserves a hallowed space where policymakers from across disciplines come together to "anticipate the emerging form of things to come, to reappraise policies which had acquired their own momentum and went on after the reasons for them had ceased, and to stimulate and, when necessary, to devise basic policies crucial to the conduct of our foreign affairs." Members of the OPP act as a liaison with those outside of the government.

The Treasury Department has no such space. Treasury's OPP, which currently functions as part of its office of communications, should be upgraded, refocused and should engage in a formal working relationship with the State Department's OPP to provide input on the long-term strategic implications of shifts in power in the world's financial system. The office should be structured to reach beyond Washington to serve as a liaison with market participants in the global financial system on matters relevant to U.S. foreign and domestic policy, including other states' use of capital to achieve political goals, the dollar's strategic role as a reserve currency and the America's role in the international financial system.

For the two departments to operate more cooperatively, it is important that each have the requisite level of cross-disciplinary expertise to pursue new avenues in international affairs. To that end, senior officials should have experience and training in both foreign policy and finance.

Twenty-five years ago, trade in goods and services accounted for roughly 90 percent of all cross border financial activity. Things have changed. Today, financial flows unrelated to trade now account for over 90 percent of cross-border activity--an astounding inversion. Investment flows not only dwarf trade flows--they continue to grow almost twice as fast. While trade remains a significant component of the world's financial system, international investment is much more substantial. For example, in 2006 foreign purchases of long-term securities from American residents totaled $52 trillion compared to $3.6 trillion in U.S. exports of goods and services.

Given the enormity of this shift, hiring individuals with solely trade, as contrasted with broader financial, backgrounds is not ideal. For example, three out of four national security advisers for international economic affairs in the current administration were previously trade lawyers. In the next administration, relevant positions should be filled by individuals with not just trade experience, but with international investment or economics experience as well.

Specific recommendations for bureaucratic reform are only meaningful if there is a broader commitment and investment in the underlying framework behind it. U.S. financial dominance was a key aspect of the global balance of power until just a few years ago. The shift of global capital away from its dependence on the United States has already altered the position of the United States vis-à-vis allies and adversaries. The current financial crisis has only accelerated this trend. Some of these shifts may be zero-sum, but others are not. Unless the organizational structures and the placement of key officials and advisers are both reconfigured, these questions are not likely to be properly addressed and policy will suffer as result. From crisis, we must seek opportunity. Today's financial upheaval provides an opportunity for the next administration to use innovation and creativity to think anew about structures and systems that have been in place for more than sixty years.