Chapter 4. The Economic Realignment: Racing to the Bottom of the Pyramid

161. If our fifty members . . . Republic (VT) and Uzbekistan (WY).

This listing comes from a map ("US States Renamed for Countries with Similar GDPs") created by The York Group International; it can be found online (with neat annotation) at the Strange Maps site (strangemaps.wordpress.com/2007/06/10/131-us-states-renamed-for-countries-with-similar-gdps/).

The Undeniable Trajectory: Deng Chose Wisely

165. Deng's dream for China in 1979 . . . by the middle of the twenty-first century."

Michael E. Marti, China and the Legacy of Deng Xiaoping: From Communist Revolution to Capitalist Evolution (Washington, DC: Brassey's, 2002), p. xiii.

166. Deng's ultimate dream, as Marti notes . . . a Chinese system for an Asian union.

Marti, Deng Xiaoping, p. 3.

166. As Marti writes: "With a weak Russia . . . must be pushed to the limit."

Marti, Deng Xiaoping, p. 153.

167. But China is also nowhere near becoming . . . and remain a single-party state.

For the most dark view, see James Mann, The China Fantasy: How Our Leaders Explain Away Chinese Repression (New York: Viking, 2007).

The American System Perturbed: 3 Billion New Capitalists Register Their Demand

169. That's how Wal-Mart, the single biggest . . . export market), keeps its prices so low.

Burton G. Malkiel and Patricia A. Taylor, From Wall Street to the Great Wall: How Investors Can Profit from China's Booming Economy (New York: W. W. Norton, 2008), p. 254.

169. Now, thanks to significant flows . . . great majority of China's hardware IT exports.

See Malkiel and Taylor, Wall Street to the Great Wall, pp. 248-49.

170. China's explosive economic growth . . . suck in resources from all over the world.

For a good overview of this phenomenon, along with its long-term environmental impact, see Jared Diamond, Collapse: How Societies Choose to Fail or Succeed (New York: Viking, 2005), pp. 358-77. See also Edward McBride, "China's Quest for Resources: A Ravenous Dragon; China's Hunger for Natural Resources Has Set Off a Global Commodity Boom," The Economist, March 13, 2008.

170. As a longtime China-watcher, James Kynge . . . possess the natural resources of one.

James Kynge, China Shakes the World: A Titan's Rise and Troubled Future--and the Challenge for America (Boston: Houghton Mifflin, 2006), p. 133.

170. Take, for instance, China's relationship . . . Hezbollah as it faces Israeli forces.

For a sense of how such technology flows begin, see Parag Khanna, Second World: Empires and Influence in the New Global Order (New York: Random House, 2008), p. 208.

171. When bad things happen . . . you should fear, because it needs that oil.

See Anita Powell, "Ethiopian Rebels Kill 74 in Oil Attack," Associated Press, April 24, 2007.

171. You know that Thomas Friedman . . . America funding both sides of the "war on terror"?

See Thomas L. Friedman, "No Mullah Left Behind," New York Times, Feb-ruary 13, 2005.

172. According to longtime observer Edward Luce . . . like driving an unlicensed taxi.

Edward Luce, In Spite of the Gods: The Strange Rise of Modern India (New York: Doubleday, 2007), p. 47.

173. Shanghai already has twice as many skyscrapers . . . and plans another thousand.

See David Barboza, "China Builds Its Dreams and Some Fear a Bubble," New York Times, October 18, 2005.

173. There's also a sexual revolution . . . Father Knows Best to Sex and the City.

For examples, see "China Discovers Hot Sheets Motels," Newsmax.com, March 2, 2008, found online at www.newsmax.com/international/chinas_sexual_revolution/2008/03/02/77153.html; and Maureen Fan, "Too Much Information?: A Radio Advice Program Tests China's Taboo on Talking Sex," Washington Post, September 11, 2006.

173. As the writer and political scientist Ian Bremmer says . . . all those camera phones!

Ian Bremmer, The J Curve: A New Way to Understand Why Nations Rise and Fall (New York: Simon & Schuster, 2006), p. 18.

173. In terms of corruption, Beijing remains . . . nineteenth century, and that's not good.

For the best analysis of how corruption limits further economic development in China, see Minxin Pei, China's Trapped Transition: The Limits of Developmental Autocracy (Cambridge, MA: Harvard University Press, 2006).

173. Citizens are simply growing angrier . . . downtown Shanghai to the suburbs.

For example, see Howard W. French, "Shanghai Rail-Line Plan Fuels Middle-Class Protest," New York Times, January 27, 2008.

174. The Sichuan earthquake of 2008 . . . Communist Party scrambled to accommodate.

For example, see Andrew Jacobs, "Parents' Grief Turns to Rage at Chinese Officials," New York Times, May 28, 2008; and the New York Times online slide show found at www.nytimes.com/slide show/2008/05/28/world/20080528QUAKE_6.html.

174. A couple of decades ago, China's courts . . . more than 5 million cases a year.

Cited in Mure Dickie, "A Potential Threat to Stability?: The Government Has Created Popular Expectations Without Fulfilling Them," Financial Times, November 8, 2005.

174. Corruption already consumes upward . . . China's gross domestic product.

An OECD report estimate, cited in James Kynge, China Shakes the World, p. 201.

174. The 2008 Beijing Olympics was . . . they had sold to foreign broadcasters.

See Peter Burrows, "Why China Is Finally Tackling Video Piracy: Beijing Wants to Prove It Can Protect the Lucrative Broadcasting Rights for the Summer Games," BusinessWeek, June 9, 2008.

174. As sociologist Juan Enriquez writes . . . so many people out of poverty as quickly."

Juan Enriquez, The Untied States of America: Polarization, Fracturing, and Our Future (New York: Crown Publishers, 2005), p. 67.
The New Rules: China Breaks the Mold or Merely Recasts It?

175. As business academics William Baumol . . . four types of capitalism operating today.

See William J. Baumol, Robert E. Litan, and Carl J. Schramm, Good Capitalism, Bad Capitalism, and the Economics of Growth and Prosperity (New Haven, CT: Yale University Press, 2007), pp. 60-92.

176. In their book, Baumol et al. argue . . . once their innovations mature.

See Baumol et al., Good Capitalism, Bad Capitalism, pp. 85-92.

176. Thus, China's strategy seems clear . . . one-third of China's gross domestic product today.

Baumol et al., Good Capitalism, Bad Capitalism, p. 165.

177. This strategy of "incremental change . . . entrepreneurial small firms.

Baumol et al., Good Capitalism, Bad Capitalism, p. 165.

177. As Fareed Zakaria notes in The Post-American . . . that the country has defied this trend."

Zakaria, Post-American World, pp. 100-101.

The New Normal: Defaulting to the Beijing Consensus

177. Neo-Marxists have long argued . . . budget deficits over the course of the Cold War.

A classic recent historical account in this vein can be found in Giovanni Arrighi, Adam Smith in Beijing: Lineages of the Twenty-first Century (New York: Verso, 2007); see especially Part II: "Tracking Global Turbulence" and Part III: "Hegemony Unraveling" (pp. 99-274). To read it is to visit another universe of economic interpretation.

181. This is especially true for China . . . all those workers coming into the mix.

By 2030, China will have 400 million senior citizens, according to Chinese government estimates cited in Sheng-Wei Wang, China's Ascendancy: An Opportunity or a Threat? What Every American Should Know About China (Washington, DC: International Publishing House for China's Culture, 2007), p. 269. As for the job-creation estimate in the Middle East/North Africa, I attended a Jordanian FDI conference at the Dead Sea in February 2008, where that number was repeated by speakers more times than I can remember, indicating that--true or not--that's the expectation among business and political leaders.

183. Not surprisingly . . . and, in particular, al Qaeda's brutality.

See "Global Opinion Trends 2002-2007: A Rising Tide Lifts Mood in the Developing World; Sharp Decline in Support for Suicide Bombing in Muslim Countries (47-Nation Pew Global Attitudes Survey)" at the Pew Global Attitudes Project site, found online at pewglobal.org/reports/pdf/257.pdf. The general rule is, the poorer the country, the more positively globalization polls.

183. The World Bank recently recalculated the . . . 40 percent smaller than we imagined.

On this, see Walter Russell Mead, "The Great Fall of China: Revised GDP Calcula-tions Show That Beijing Isn't the Giant We Thought It Was," Los Angeles Times, December 30, 2007.

184. The so-called Washington Consensus of the 1990s . . . emulate our success of that era.

On this, see George Lodge and Craig Wilson, A Corporate Solution to Global Poverty: How Multinationals Can Help the Poor and Invigorate Their Own Legitimacy (Princeton, NJ: Princeton University Pres, 2006), pp. 37-38 and 122-25.

185. In many ways, then, the so-called Beijing Consensus . . . "consultative" approach.

On this, see Joshua Kurlantzick, Charm Offensive: How China's Soft Power Is Transforming the World (New Haven, CT: Yale University Press, 2007), pp. 1-12 and 56-58.

185. Some globalization experts, such as Parag Khanna . . . consensus-style rule.

Khanna, Second World, pp. xvi-xviii.

The Global Accelerant: Rushing to Settle Frontiers

187. Europe, or more to the point . . . the United States, Australia, and New Zealand.

On the Dutch influence in early America, a fantastically entertaining history can be found in Russell Shorto, The Island at the Center of the World: The Epic Story of Dutch Manhattan and the Forgotten Colony That Shaped America (New York: Random House, 2005). During my last trip (June 2008) consulting with the national security elements of the Dutch government, I was given the book as a gift--and perhaps a none-too-subtle hint that I need to increase my appreciation for the Netherlands' role in creating American "exceptionalism" (especially on religious tolerance)!

187. In these sparsely populated . . . indigenous populations to assimilation or death.

On the original iteration of globalization, see Tim Blanning, The Pursuit of Glory: Europe 1648-1815 (New York: Viking, 2007).

189. Looking back over the spread of modern capitalism . . . lagging India by example.

On the Anglosphere concept, see James C. Bennett, The Anglosphere Challenge: Why the English-Speaking Nations Will Lead the Way in the Twenty-first Century (Lanham, MD: Rowman & Littlefield Publishers, 2004).

189. There are roughly 300 FTAs in the world today . . . negotiating upward of 30 FTAs.

Cited in the editorial "Trading Without America," Wall Street Journal, August 7, 2007.
190. By most calculations, China has . . . any nation has ever aged in human history.
Again, see Wang, China's Ascendancy, p. 269.

190. Toyota and Honda were forced . . . that source local, build local, and sell local.

Samuel Palmisano, "Multinationals Have Been Superseded," Financial Times, June 12, 2006.

191. If you tell me that Asian religious . . . let's facilitate that process the best we can.

See Rob Moll, "Missions Incredible: South Korea Sends More Missionaries Than Any Country but the U.S.: And It Won't Be Long Before It's Number One," Christianity Today, March 1, 2006, found online at www.christianitytoday.com/ct/2006/march/16.28.html.

191. If you tell me Chinese farmers . . . homesteaders once helped trigger in America.

See "Landless Chinese Farmers Migrate to Africa in Search of Agricultural Op-portunities," BioPact, December 2, 2007, found online at biopact.com/2007/12/landless-chinese-farmers-migrate-to.html.

191. Finally, if you tell me the global economy . . . globalization's networks faster.

See Sarah Childress, "Investors Go to Treacherous Places Seeking Returns: Funds Pour Money into Zimbabwe on the Theory Mugabe Can't Rule Forever, Nation Will Rebound," Wall Street Journal, November 17-18, 2007; Joanna Chung, "Investors in Push into Africa: Commodities Boom Flags Growth Potential; Private Capital Flows Triple Since 2003," Financial Times, November 19, 2007; and Joanna Chung, "Investors' Enthusiasm Grows for the New Frontiers," Financial Times, November 20, 2007.

191. So can greed save Africa, as one BusinessWeek story asked a while back?

Roben Farzad, "Can Greed Save Africa: Fearless Investing Is Succeeding Where Aid Often Hasn't," BusinessWeek, December 10, 2007.

192. Economist Paul Collier, for example . . . more than periodic "profit-taking" exercises.

Paul Collier, The Bottom Billion: Why the Poorest Countries Are Failing and What Can Be Done About It (New York: Oxford University Press, 2007), pp. 99-123.

192. As far as where to direct . . . that specifically targets those issues is most warranted.

See Jeffrey D. Sachs, The End of Poverty: Economic Possibilities for Our Time (New
York: Penguin Press, 2005), pp. 188-209.

193. Longtime aid expert William Easterly . . . difficult choices up to Africans themselves.

William Easterly, The White Man's Burden: Why the West's Efforts to Aid the Rest Have
Done So Much Ill and So Little Good (New York: Penguin Press, 2006), pp. 249-58; on aid "vouchers," see his point on pp. 376-79.

193. As Francis Fukuyama has argued . . . attract foreign direct investment.

Francis Fukuyama, speech to annual Society for International Development conference (Washington, DC, chapter), February 6, 2007.

193. As Easterly notes, China once had all the same . . . efforts to shape events there.

Easterly, White Man's Burden, pp. 351-55.

193. Deng, as Easterly describes him, was a natural "searcher" instead of a "planner."

On the difference, see Easterly, White Man's Burden, pp. 3-7.

193. As Deng's famous maxim put it . . . the cat is black or white, as long as it catches mice."

Wang renders the same saying as "Black cat, white cat, all that matters is that it catches mice"; see China's Ascendancy, p. 45.

193. The simplest definition of good government . . . pothole fixed in front of your house.

Easterly, White Man's Burden, p. 173.

194. So if we look at Jeffrey Sachs's list . . . (e.g., property and contract laws).

They are human capital, business capital, infrastructure, natural capital, and public institutional capital; see Sachs, End of Poverty, p. 244.

194. Let the business capital (including the 40 percent . . . P2P programs like Kiva.

The 40 percent estimate comes from Collier, Bottom Billion, p. 92. On the attractiveness of P2P models, see Easterly, White Man's Burden, pp. 376-77.

194. Easterly calls this phenomenon . . . but it's a truism for any frontier environment.

See Easterly, White Man's Burden, pp. 81-82.

194. This is the so-called bamboo network.

See Easterly, White Man's Burden, p. 83.

195. Most Western businessmen . . . never known the premarket system.

I got this idea from Fred Laurenzo, who sits on the board of Enterra Solutions LLC and has conducted business overseas, but particularly in China. I first used the concept in "The Chinese Are Our Friends: . . . Despite Everything You Hear from the Fearmongers at the Pentagon. Don't Listen to Them. The Sino-American Partnership Will Define the Twenty-first Century," Esquire, November 2005, found online at www.esquire.com/features/essay/ESQ0207CHINA.

195. Economist George Ayittey makes similar arguments . . . clarity and objectivity."

George B. N. Ayittey, Africa Unchained: The Blueprint for Africa's Future (New York: Palgrave MacMillan, 2005), pp. xix-xx.

The Inescapable Realignment: Remapping Fake States

196. Easterly's research on artificial states . . . with squiggly natural borders.

Easterly, White Man's Burden, pp. 290-93.

197. Collier says that fifty-eight countries . . . those recent globalizers.

See Collier for the basic characteristics of the bottom billion, in Bottom Billion, pp. 3-13 and 79-96. Collier does not identify his fifty-eight states. Of the bottom billion, Collier says 73 percent have recently suffered a civil war, 29 percent are resource-deprived, 30 percent are landlocked and resource-deprived and have bad neighbors, and 76 percent have suffered long periods of bad government.

197. Only one percent of the Functioning Core's . . . simply don't become countries."

Collier, Bottom Billion, p. 57.

197. As the former director of research for the World Bank puts it . . . they are falling apart."

Collier, Bottom Billion, p. x.

197. As Easterly pointed out in his magnificent book . . . literacy, and clean water.

Easterly, White Man's Burden, pp. 292-93.

198. According to Easterly's research . . . some colonial master took a ruler to a map.

See Alberto Alesina, William Easterly, and Janina Matuszeski, "Artificial States," National Bureau of Economic Research Working Paper 12328, found online at www.nber.org/papers/w12328.

199. If applied prophylactically . . . marines courageously proved in Sierra Leone in 1999.

On this story, see "British Marines Leave Sierra Leone," BBC News "On This Day," June 15, 2000, found online at news.bbc.co.uk/onthisday/hi/dates/stories/june/15/newsid_2512000/2512669.stm.

The Better Normal: Racing to the Bottom of the Pyramid

202. Prahalad's description . . . fascinating on many levels.

C. K. Prahalad, The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits (Upper Saddle River, NJ: Wharton School Publishing, 2005).

202. First, he alerts us to the growing reality . . . thanks to globalization's advance.

See Prahalad, Bottom of the Pyramid, pp. 3-12.

202. Second, Prahalad reminds us that . . . couldn't afford your standard large purchase.

See Prahalad, Bottom of the Pyramid, pp. 65-66; the Singer example comes from the talk I attended several years back.

202. How to get the product in front of "media-dark" . . . traveling salesman.

See Prahalad, Bottom of the Pyramid, pp. 12-13.

202. Third and most important to American grand strategy . . . democracy inside the Gap.

See Prahalad, Bottom of the Pyramid, pp. 109-12.

202. By tapping into this "latent market . . . by the state.

See Prahalad, Bottom of the Pyramid, pp. 77-98; the quote comes from p. 5.

203. The bottom of the pyramid . . . the essence of the economic frontier setting.

Prahalad, Bottom of the Pyramid, p. 54.

203. One example Prahalad cites in his book . . . create cheap but highly absorbent diapers.

Prahalad, Bottom of the Pyramid, pp. 48-49.

204. As Prahalad sums up: "Innovation in bottom . . . pyramid markets is increasingly critical."

Prahalad, Bottom of the Pyramid, pp. 27-28.

204. We will add about one billion people . . . percentage share of the world population.

See Naim, "Can the World Afford a Middle Class?"

205. According to a new World Bank . . . markets, i.e., the West.

See Harry G. Broadman, Africa's Silk Road: China and India's New Economic Frontier (Washington, DC: World Bank, 2007), pp. 1-40.

206. Yes, in the grand scheme . . . far more than resources."

Broadman, Africa's Silk Road, p. 2.

206. China and India have become . . . overlapping free-trade areas.

Broadman, Africa's Silk Road, pp. 177-83.

206. World trade has more than tripled . . . globalization's rapid advance around the planet.

Lodge and Wilson, Corporate Solution to Global Poverty, pp. 12-13.