Global Trade Falls Forward?

This is actually good news: Measurements show the volume of global trade has been falling since the start of 2016, global consumption and investment are slowing, and real incomes have stopped rising.

“Why the heck is this good news, Doug?” It’s good news because of what articles like this are saying in code and between the lines. (Anyone who understands these things better, please kick my ass if I’m misreading things, or if you see flaws in the article itself).

It’s good news if you believe in Creation and Trade as essential to our quality of life — if you think we all benefit where there are more people that are more free to be making/exchanging more things. Growth through inclusivity and innovation.

It’s good news because it says there’s something wrong with the current policies and current ways we’re exploiting resources. (That’s not “news” to “developing nations” and most African countries, btw. We’re just catching up.)

We are not getting the results we want.

Whether it’s health care, transportation, food, or electricity… we are not getting the goods and services we want, especially not at the rising cost (financial, environmental, social).

We’re not even satisfied with the way we measure and describe the way trade and economics works. We don’t even believe our policy makers understand how trade and economies work.

We shouldn’t even trust our own assumptions anymore. We need to move beyond capitalism, communism, anarchism, libertarianism and the like. We should apply the same skepticism to Bernanke and Piketty and Krugman that we throw at Kanye and Kant.

And this is a worldwide sentiment. Nobody wants the old model of full speed exploitation of low-cost labor and low-cost natural resources — not even China wants that model anymore, and they refined it to perfection.

We’re not satisfied with the way the system is affecting our relationships with our own bodies, our families, our neighbors, and people we’ve never met all across the globe.

Why should countries with billions of dollars worth of resources have populations that live on less than a few dollars per day? And why do we spend billions of dollars fighting amongst ourselves, when all we want is to be able to fairly work and trade with one another?

Let’s take trade back to its roots. Trade is about trust and risk and collaboration. Trade is organic. Atoms trade electrons. Animals trade favors. Humans trade everything.

I guess this is sounding like a call for Fair Trade Ferengi? (Someone help me launch that meme).


Save the White People

The irony of “White Saviors” in Africa is that if anyone needs saving, it’s White people.

That’s my reaction to TMS Ruge’s wonderfully provocative “Your White Savior Complex is detrimental to my development”.

Tiny Violin for the White American male

I say this as a member of the world’s Most Persecuted Minority — the White American male gun-owning registered Republican descendant of a Confederate war veteran — whose first African aid experience was a textbook “land grab”.

I say this as someone currently investing most of his time and money in African country startups.

I also say this as someone who thinks his children (or realistically, his friends’ children) will have a worse life if we don’t correct the “geopolitical imbalance” TMS talks about.

***

Forget human dignity and “we are the world” ditties. White people need saving because of what drives the unstoppable American and European interventions in African countries, and what makes African countries so vulnerable to those interventions.

What I’m talking about is a ruthless universe that would implacably watch humans reduced to dust by an asteroid, suffocated by ozone degradation, frozen by an absence of sun, or entirely consumed by organisms (likely tiny bacteria rather than massive reptiles).

You can call it Mother Nature. You can call it God’s judgement. You can call it Michael Bay’s next movie. TMS calls it the “geopolitical imbalance”, something that started geographically and continues politically.

Human migration since the African genesis (Source: http://ngm.nationalgeographic.com/ngm/0603/feature2/map.html)

The first humans in Eurasia and Africa started off with the same intelligence, fitness and biological impulses — heck, the first humans in Eurasia *came* from Africa. Temperature and terrain just helped the former get further, faster, then helped them exploit that advantage over the latter. Nations sent armies and administrators to secure the natural resources, slaves and strategic positions to enrich themselves and fight one another.

Some things have changed and some haven’t. Nations (sometimes even United Nations) still invade one another with soldiers and bureaucrats towards the goals of commerce and competition. Some of the intervention takes the form of aid. Arguably even with “aid” it’s Americans and Europeans, especially those with White skin, who reap most of the benefits of this system.

Left: European-held Africa before World War I. Right: The Roman Empire’s holdings in north Africa (Source: Google)

Left: Where the UN is or has been deploying troops (Source: Telegraph) Right: Where the OECD provides assistance as of 2005 (Source: Google)

***

You might ask why White people need saving if they’re benefiting from this system that excludes and handicaps everyone else. This is where “reciprocity” comes into play — what America/Europe are getting from African countries and vice versa. At best White Americans/Europeans aren’t benefiting as much as they would if this were a less imbalanced system, and at worst they’re facing extinction.

The “best case” argument is a matter of principle. We all benefit when more people are more able to make and trade things — art, scientific advances, food, goods, services, etc. If air conditioning and vaccines aren’t argument enough, then take computers. You can imagine a world where someone besides Jobs and Gates “invented” the computer, but where would we be now if we didn’t have computers at all?

The “worst case” argument is an even worse off world than one without Twitter and Xbox. When the next Ebola or strain of untreatable flesh-devouring MRSA comes, do you want more scientists with more technology…or fewer?

Do you want to see more wars and refugees…or fewer?

When the next Global Financial Crisis comes, you want an economy that’s more diversified and resilient…or less?

When another would-be Al Qaeda or Daesh/ISIS or Boko Haram or Al Shabab starts advertising, do you want them finding more recruits and more opportunities to carry out attacks worldwide…or fewer?

When the next Qaddafi or Kim Jong (or Trump) clone makes a bid for power, do you want them challenging a stronger liberal democracy and a more economically well off citizenry…or not?

***

Changing this “geopolitical imbalance” and making it work more towards everyone’s advantage is a “kind of change” that matters, to borrow again from TMS. As part of the nascent Austin, Texas social enterprise scene (6,000 nonprofits and counting, God help us), I think it’s a “kind of change” worth paying attention to.

Filmmaker Cassandra Herman and others are looking at the inefficiencies of the aid narrative: the ideas that “Africa is a country”, that poor Africans need someone to “give them a voice”, that Africa should be the first destination for an idealistic young American, etc.

My starting point is acknowledging this: that my being able to invest time and money in another country is indeed a privilege, and that this privilege is a result of what my parents did and what country I live in and where my genetic ancestors did some thousands of years ago.

If I was going to be reductionist, my simplification would be that “trade” is more important than “aid” because “aid” is itself a business and an exchange of goods and services. It’s all part of the same international market as oil and salmon and iPods. That market is very inefficient and distorted and it needs improving.

If time and money are things everyone has available to trade — and if White Americans/Europeans have a competitive advantage there — let’s make ways to invest and trade those things for better outcomes.

A few other notes:

  • The halo around “nonprofits” and devil horns on “for profits” are bogus. This framework incentivizes people to launch nonprofits that should be for profit ventures, and launch nonprofits that are harmful, poorly planned and/or unhelpfully redundant.
  • It shouldn’t be easier for me to get a $10,000 grant for printing Bibles than to raise $5,000 to invest in a good African startup. The United Nations, USAID et al. shouldn’t be spending millions on aid programs that subsidize the worst habits of bad governments. I shouldn’t be able to fly 8,000+ miles and get a job teaching children in a country where trained local teachers are unemployed. A bright college educated Ugandan shouldn’t depend on a foreign NGO for employment.
  • “Patient capital” and “social impact investment” sound good, but if you tell people their options are to do something good or make money, you’re building an unhelpful bias into your system. We need a more inclusive and descriptive definition of “social impact”. There are good businesses in African countries whose social impact is providing quality goods/services and steady employment (and “steady” means without dependence on donors or grants).
  • Empowerment sounds nice, but we need to distinguish between “here’s a goat and a micro-loan” power and “here’s making your vote actually affect the country’s financial system and here’s a local bank that you can actually afford to borrow money from” power. Micro-lending and micro-enterprises are nice, but unless you’re talking about semiconductors and nanobots, is anyone really getting rich or even less poor at the “micro” level?
  • Look at how much money gets spent on “buy one give one” products like Tom’s Shoes, projects like Jeffery Sachs’ Millennium Villages, misguided products like the Play Pump or Socket, and the Fair Trade premium paid for goods like coffee. What if we took the same privileges and motivations that make those investments possible, and gave people an option to directly invest in a shoemaker’s company in Zambia or a solar generator mechanic in Mali?
  • How do we make this privilege of being able to invest more of a “norm” — i.e. more common rather than the prerogative of White Americans/Europeans?

Land Grabbed is Land Wasted

The Old Ways of land investment+development don’t work in the non-Western world, and neither does the land grab/land rush paradigm. We’re throwing good money into bad projects. Let’s address that instead of consuming more Netflix Journalism about victims, villains, and the morally ambiguous.

Not that the stories about land grabs can’t be informative, provocative and entertaining — as illustrated by Tom Burgis’ FT article about a Saudi company’s $100 million investment in 14,000 hectares (~14 square miles) of Ethiopian land:

Saudi Star’s proprietor, a Saudi-Ethiopian tycoon named Mohammed al-Amoudi, has spent more than $200m turning a swath of bush into a farm the size of 20,000 soccer pitches. That puts the sheikh, as he is known, in the vanguard of the global land rush.

Forget the ethics and social cost. The main problem with these investments is their occurrence in a dangerously distorted market. Those distortions misdirect human and financial capital, leading to destructive collisions. Instead of creating wealth from nature, this market is creating conflict, famine and a mess of social-political upheaval.

I know what I’m talking about because I’ve experienced all the above firsthand. I was part of a company that stumbled into a “land grab” in an African country (take my word for it — it was ineptitude more than malice). I received the barrage of NGO rage and journalistic inquiries. I worked to try and turn that investment to the landholding community’s favor. I watched more inept and more malicious land deals get good people killed and drive that African country into another civil war. Through all that, I began a lifelong search for a viable put-the-community-first agricultural business model.

I’m still searching. And in case you’re with me, that means figuring out what we’re looking *at* in addition to what we’re looking *for*.

— — — —

Land deals like the Saudi Star investment in Gambella happen for good reasons.

On the investor side, companies go where the money is and their governments have a national interest in securing food, timber, fuel (e.g. feedstock) etc. China isn’t spending billions on African projects because they love to gamble.

There’s a telling quote in the FT article from Jemal Ahmed, Ethiopian co-founder of the Saudi Star company, who knows he could have made more money at less cost than investing in his own country’s agriculture:

“If I had invested $200m in Thailand, we could easily have produced more rice…Why do we do it in Gambella, with no roads, no electricity, no skilled workers? Because if we don’t, no one else will.”

Put another way, it’s a difficult investment and he’d rather put his resources somewhere else, so you can’t fault Mr. Ahmed’s motivations as being purely greed even if his reasoning is shallow. (Why would “no one else” invest in Ethiopian agriculture? Doesn’t the reason for there being “no roads, no electricity, no skilled workers” matter?)

On the landholding side, the nations hosting these land investments need the investment dollars along with the resources the land can produce — especially food. At the community level, people may have enough food but they’re more vulnerable than they’d like; they want want more and better food, jobs, access to markets, etc.

So far so good. This should be a simple matter of comparative advantage, of Globalization’s moving capital from one country to another.

Unfortunately, the host nations also have governments heavily disrupted from within (corruption, inefficiency) and from without (weak or ill-informed laws, poor physical infrastructure, armed opposition groups). Many authorities may have good intentions, but in these situations the wealthy Elite exert overwhelming power over the lives and property of the rest of the population (much less wealthy and much less powerful).

To keep things fun there’s some historical and geographical determinism added to the mix. The lands in question sit in areas of fluctuating natural environment and climate. The same conditions that (a) make the land so desirable and its acquisition/development such a buyer’s market (favoring the investors) also (b) set the stage for the earlier colonial interventions that, among other things, contribute to the landholder countries’ challenges. [Note: If you want to ask Jared Diamond about this, you can take a geographical-historical safari tour of Africa with him.]

— — — —

There is no good outcome in such conditions. But a bad method is better than no method for the main parties involved — investors, landowners and the respective governments. So some of those main parties make money. Some NGOs and authors make small change documenting and rallying against the injustice of it all.

Never mind the human cost of those vulnerable communities caught in between. And never mind that these conditions make the investments so incredibly risky.

We’re not just talking about “I lost my money” risk. Mismanagement of land at this scale means mismanaging the production of food and essential natural resources on a global scale. That means that if we’re not killing people outright (e.g. starvation, drought) we’re really pissing them off — touching off civil wars (Syria, South Sudan) and widespread militant uprisings (Daesh/ISIS, Al Shabab, Boko Haram).

We’re talking about wasting money, time and lives on bad projects when we should be bringing every mind and body to its full potential. We need every resource available to come out on top of the next pandemic, the next natural disaster, etc. The global economy needs more people more freely creating and exchanging goods and services.

— — — —

Is there a way out of this mess, where good money is being thrown after bad land projects that destroy lives and property? Yes. Why do I think this?

  1. This current land investment+development model sucks. Given how important it is to have a reliable supply of food and land resources, who could be satisfied with the current model’s high costs and higher risk of violent failure? (This is the No Such Thing as Free Lunch idea, i.e. you always pay more in a bad market, if not the price tag then in social or environmental costs)
  2. You can’t meet the level of demand for food/resources with an exclusively “organic” (no GMO/GEO, no industrial chemicals) and small-scale model. Nor can you “turn off” the profit motive or motive to trade. So we have to make land deals more fair, more efficient and more productive. That means connecting more money with the right people — i.e. we need to expand the market and create wealth.
  3. The wonderful thing about money is that money’s a wonderful thing (sorry A. A. Milne). Money is an excellent motivation (when the whole mass suffering of your fellow humans isn’t drive enough). It’s also a handy tool. Between the Saudis, the Buffet family, China, and the Bill and Melinda Gates Foundation alone there are billions of dollars available.
  4. Humans have a pattern of finding new and better ways to develop land. This includes ways of collaborating for mutual benefit. What normally disrupts this isn’t a local unwillingness to compromise but an outside-empowered military interest — the warlord who wants to muscle in.

“Ok that’s nice,” you might think, “But principles aren’t plans.” True enough. These principles do show the opportunities for better plans, though. Technology matters. Yields matter. Supply chains matter. Transport logistics matter. The manner of financial transactions (sales, banking, etc.) matters. More than that, the money-backed demand for solutions is there.

What if the African country community with land had a way of directly interacting with an international customer — if they could make a financial transaction, produce the desired good and had a way of transporting it to the buyer?

To scale up that business, what if more African country communities had more ways of productively collaborating— pooling their land and resources in a legally protected way— and getting more yield from their land?

What if — instead of donating or purchasing from “buy one give one” vendors (e.g. Tom’s Shoes) — people in North America and Europe could directly invest in those community-led agriculture/forestry ventures (and actually achieve returns)? Or if they still would rather donate, to directly donate instead of through a go-between NGO?

What if the end-users for foreign-sourced agriculture/forestry products like soy, beef, palm oil, sugar and cocoa had more choices for what they bought, i.e. what if there was an acceptable product/price alternative to “land grab” supply chains?

The crux is that economic development isn’t “a switch you can turn on or off” (to quote economist Angelos Angelou). We have to make the plans and invest accordingly over years, starting about 300 years ago.

So let’s make up for lost time.

American Engagement with African Countries: No Frame, No Gain

Here’s a question missing from the U.S. presidential candidate debates: Why should Americans involve their money, political capital and other resources in an African country’s challenges when there are so many problems at home demanding attention?

As Americans, we’re inundated with images of hungry African children, but what about the plight of children in this country? Our child poverty rate is at its highest level in 20 years, with nearly one in four children living in homes without enough food. Among our homeless population, there are nearly 2.5 million children. [T]he staggering rate of incarceration for African-American men […] is nearly six times the rate for white men.

The excerpt above comes not from a concerned American taxpayer but from Cassandra Herman’s upcoming documentary “Framed”, in which Kenyan activist Boniface Mwangi asks an American college classroom what attracts them to ‘save’ Africa when they have their own crises at home, whether their international do-goodery is just an exclusive hobby or career for privileged White Americans, and whether their beloved “interventions” do more harm than good. (Source: “An African’s Message for America”, https://t.co/baV2uhdasF)

Why work on an African country’s problems instead of American problems at home? I enjoy this question every time it’s put to me by plenty of folks from American states and African countries. My answer is always the same: economics.

I don’t care about “saving Africa”, I don’t work and invest in African countries for charitable reasons, and I don’t think USAID and any major U.S. charity does either. I’ll leave it to scientists to untangle the necessary self-interest from an individual’s motives of altruism, faith or moral orientation.

I want to work with my partners in African countries to make or do something we can all get paid for.

More than that, I truly believe that all of humanity benefits when there are more people who can more freely create and exchange more things: art, ideas, goods, services, etc.

When that happens then even domestic problems of jobs, economic growth and social services become easier, not harder. Tell me what today’s telecommunications, art, medicine, renewable energy, transportation etc. would look like without the participation of China and India, South America and Asia, or an America-bound immigrant family from Syria.

And on the flipside I believe that the fewer people with less freedom to do the above (and the longer we go without it), the more humanity risks the a global catastrophic destruction of lives and property. Economic and social/political exclusion means minds and resources and bodies that *cannot help us* stay ahead of the game Nature is constantly playing against us — disease, environmental changes, food availability, etc.

That’s a much stronger imperative and a more reliable moral compass than a cultural convention to “be charitable”.

Tax Havening your Cake and Eating it Too

So here’s an article about tax havens (with a cameo by Thomas Piketty). It omits a summary of (1) why tax havens are bad things (“problem” is Sunstein’s preferred word) and (2) why they are used. That omission a mistake.

But whatever your political party, you are unlikely to approve of the illegal use of tax havens. As it turns out, a lot of wealthy people in the United States, Europe, and elsewhere have been hiding money in foreign countries — above all, Switzerland, Luxembourg, and the Virgin Islands. As a result, they have been able to avoid paying taxes in their home countries. Until recently, however, officials have not known the magnitude of that problem.
Source: Parking the Big Money by Cass R. Sunstein
http://www.nybooks.com/articles/2016/01/14/parking-the-big-money/

What do ya’ll think is the context for a negative estimation of tax havens?

It it morality or a belief that more tax revenue makes a more effective government? Both are debatable.

Is it that tax havens are illegal?Not entirely (“[Tax avoidance by multinational corporations] is typically done without violating a national law”).

Whatever the reason, there is a “physics of money” to consider. Money gets spent one way or the other. The company may spend it on executive salaries, but those executives will surely spend it on goods and services (someone buys those diamond-plated iPhone cases). Same for the individual account holder — if they don’t spend it then their heirs will (and statistically, spend it poorly).

So in the context of a “physics of money”, perhaps the most problematic aspect of tax havens is how they directs the money they hold.

What I mean is that money works best when it flows freely, when the person with the money has the most options to spend it on goods and services. And I’d say this includes “prospective” goods and services, i.e. investing in ideas, experiments and creation. That in turn means information and imagination.

So think of tax havens as just one more set of goods and services competing for money. Anyone know what kind of money tax haven managers make? What kind of benefits do tax haven countries reap?

Regulations like what Sunstein and Piketty propose are just ways of raising the cost of spending money on tax havens. But we also want to increase the benefit (or at least perceived benefit) of spending the money on alternatives to tax havens.

The fact is that companies and rich folks are willing to pay the fees for using tax havens. They believe they can use their money better than the government would use it.

Surely they can be given an alternative to tax havens that still directs their money in a world-enriching direction. That’s partly the logic behind 501(c)3 contributions, or setting up an Endowment or a grant-making Foundation. Or one can go the direction of Zuckerberg, Gates, Musk et al. — putting money into profitable but world-changing ventures.

Then again Gates, Zuckerberg, Musk et al. are able to invest their money the way they do because of an effective government (even if government *inefficiencies* are also a strong motivator).

Anyway, I feel like Sunstein’s article could have at least touched on this complexity. Instead we start from the simplistic assumption “Tax Havens Are Bad”. That assumption weakens the entire effort to find something more moral and economically effective.

We’re in the Stone Age of African Development Economics

Great interview with economist Morten Jerven about what’s screwy about how world powers and major institutions measure, invest in and define policy responses for African countries.

You wouldn’t know it from the “starvation — war — disease” news cycle but people in African countries are enjoying the same progress as the rest of us: more goods, more services, more access to education and health care, more opportunities for a better quality of life, etc.

We’re might even be getting better at measuring this.

Unsurprising to anyone who knows the East African origin of human tool-making for use and trade (i.e. the first capital assets and exchanges), African countries are actually really good at creating wealth: making and trading goods and services.

The rest of the world is really good at interfering in ways that disrupt/distort that creation or destroy that wealth. Bad decisions piled on top of one another. Enslavement. Crushing local industries. Colonial rule. Anticompetitive trade policies. Crippling national debt. Proxy wars. Supporting bad governments.

Never mind the policies that both help and hurt at the same time. If you send that bad government billions of dollars in aid, you might see schools, infrastructure, and economic growth. You will definitely see more political and economic power centralized in an exclusive group that enforces its will through violence.

That might give you Singapore in one situation. Somalia in another. Even economically successful African countries like Nigeria, South Africa, Ethiopia and Kenya seem perpetually at that Singapore/Somalia fork in the road.

We in the rest of the world *need* African countries to create wealth. Physical wealth — more stuff — as well as human wealth — ideas, art, science, technology.

Without that happening, the world isn’t only poorer but more vulnerable. The major threats to Africa’s populations are the same that affect us all: an unstoppable disease, a natural disaster of genocidal proportions, global nuclear war.

So just as humanity emerged from the Stone Age when tools and the knowledge of how to make them flowed from the African continent to the rest of the world., our 21st century civilization can only advance through free trade with African innovators and entrepreneurs.