It's over in Iran alright--for the theocracy as well

Triggered by a Global Post commentary via WPR's Media RoundUp.  

Yes, it's true that the Green Movement has largely been crushed in Iran, but the larger reality is that it was never the true target of the military putsch effected by the Revolutionary Guards--it was the excuse.

The real target of Ahmadinejad's years-long effort to create a president-centric political system in Iran was the mullahs and the no-longer-supreme Leader--now made more figurehead.  

The counter-revolution happened alright, and the mullahs no longer truly rule.  What remains is a single-party state or political mafia whose tentacles extend throughout the economy, under the false image of pious/ideological rule.

New package?  Hardly.  Not all that different from the old Soviet model.

The revolution has died.  What's left is the carcass and those who've cornered the market on picking over its remains.

Chart of the day: Battle-deaths in state-based warfare since 1946

From the Human Security Report Project's Mini Atlas of last year.

One of the many bases I cite for the argument that state-on-state war, when compared to the great expanse of human history, has pretty much gone away.

Correction on the interview podcast from "The Black Fridays"

Find the 45-min interview here.  It is a good summary of my thinking in general and where we stand in history today.

Judah Grunstein on my Obama column

Judah is my editor at World Politics Review.  He challenged me last week to move into some new territory and what resulted was the Obama piece.  Here's his commentary on that.

Joseph Nye: No Chinese century just yet

I have a soft spot for Mr. Soft Power for a number of reasons: he sat on my PhD diss advisory board, I taught for him in his famous Core course at Harvard, he gave me a kind WAPO review on "Blueprint," and--quite simply--he's just one of the nicest guys you'll ever meet. 

My wife even calls him the most handsome bald guy on the planet.

Enough love.

Here in this FT op-ed, Joe is his usual sensible self.

The "market Leninist" model, as he calls it, may provide soft power in authoritarian states, but "it has the opposite effect in many democracies."

A China that catches the US economy by 2030 would still be burdened with a huge impoverished countryside--easily equal (I would add) to America's total population).  

Plus, as countries mature economically, growth slows.  Assume 6% for China post-2030 and 2% for the US and China's per capita income doesn't match ours until sometime deep into the second half of the 21st century.

So don't cast China as the equivalent of Kaiser Germany passing Britain at the start of the 20th century.

As for the "advantage" of state capitalism?  

[China] will have difficulty raising its financial leverage by lending overseas in its own currency until it has deep and open financial markets in which interest rates are set by the market, not the government.

If anything, China's single-part state-dumb is a handicap relative to India:

Whether China can develop a formula that can manage an expanding urban middle class, regional inequality and resentment among minorities remains to be seen. The basic point is that no one, including Chinese leaders, knows how the country's political future will evolve and how that will affect its economic growth.

The danger?  Leadership generations change, forgetting the past and what go them there.  Plus, "appetites sometimes grow with eating."

But even if the Chinese leadership (or successive ones) were to grow aggressive, the military balancing function in Asia (a subject Joe knows well from his DoD and NIC stints) would simply kick in. Then there's the reactions of all these state that China depends upon for resources. Polls show most everybody likes China's economic rise but most everybody doesn't like its military rise. The two feeling can coexist quite nicely in terms of resulting policies.

In the end, Joe says, Bill Clinton's bit about the US fearing a weak China more than a strong one still holds.

Clip this one and reread as the China-rules-the-world books pile up.

Another old bit that holds up well via such analysis:  America created a world order that's easy to join and hard to overturn.

That's why our globalization is the end of history in a very real way, and the beginning of something so much better.

The "butcher of Beijing"--redux

graphic here

The Butcher of Beijing is a well-known hacktivist who blogs, tweets and uploads his way into the heart of the Chinese Communist Party.

He is one of the most daring of a growing band of full-time, internet-savvy, Chinese social activists who are beginning to take their calls for justice and transparency from the virtual into the real world.

Got tech and entrepreneurial background--no surprise.  Real name Wu Gan.

Focus:  defending downtrodden citizens who take on the might of the system, with a penchant for women's rights stories.  The 37-year-old radiates impending martyrdom in interviews.

The aha! moment for many of the newest netizen activists?  The 2008 government coverup on the milk scandal.

Very Upton Sinclair.

The drumbeat for US-Russia cooperation continues

WSJ story.

Okay, so not exactly unprecedented, but just like with the proposed joint production of an airlift platform, we're talking two powers that cannot easily muster the requisite resources for cutting-edge work on their own.

Here we've got the Russian Deputy PM talking with our NASA boss about pushing for joint exploration past the expiration date of the International Space Station (round 2020 or so)--i.e., out into the solar system for real.

As it is, we're already dependent on the Russians for transport to low-earth orbit once we retire the Shuttles.

Ivanov's big sale?  It costs a lot to explore space.

I think this is good.  Let the Chinese conquer the moon and we go beyond with our old space pals.

The quintessential sign of a System Perturbation: rise in videoconferencing

FT story.

Never ceases to amaze me:  whenever there's a System Perturbation, you see the article on how videoconferencing is suddenly enjoying a boomlet.

Got 9/11?  More vid conferencing.

Got SARS?  More vid conferencing.

Got a Great Recession?  More vid conferencing.

Anything really bad hit?  Buy stock in vid conferencing companies!

Chinese men: looking . . . better

FT story.

Chinese men are going soft, shedding traditional notions of masculinity and getting in touch with their inner metrosexual, to L'Oreal's great benefit (27% growth last year and 40% this year).

Some experts point to the sex-ratio imbalance, but the piece argues that:

Chinese men are merely following the lead of their wives and mothers, say cosmetics experts, who note that the Chinese cosmetics market has long been dominated by skincare products, with make-up not widely used and frowned on or even banned for some occupations.

In short, the focus is just as much on getting ahead career-wise as getting a mate.  Nobody wants to look the peasant part anymore, meaning good skin is seen as modern/"with it".

More prosaically, it's the rise in disposable income that makes this even possible.

Great Recession did not equate to Great Diet WRT Western food styles

FT story.

Cargill CEO (see other post today) says the growing appetite for processed food, meat and dairy from Western sources has reversed fears that the Great Recession would trigger a significant drop.  The shift to a more Western diet over the past ten years held solid through the crash, unlike in other crashes where typically the locals turn to cheaper traditional staples.

Gregory Page called  the demand "remarkably resilient."

This time around contrasts greatly with the Asian "flu" of 1998-99, when a decade of dietary change was wiped out in 2 quarters.

Again, so much for deglobalization and the great distinctiveness of Asian tastes.

A glimpse inside one of the world's most important companies: Cargill

From an FT "analysis" full-pager, some sense of Cargill's reach (corresponding to graphic above):

1. The world’s largest cocoa trader, Cargill also processes the beans into cocoa liquor, butter and powder, the raw materials for chocolate

2. The world’s largest sugar trader, Cargill buys from countries such as Brazil and selling to Egypt, India, China, Russia, Ukraine and others

3. Cargill is developing a business focused on replacing petrochemical-based plastic products with soya-based products

4. Cargill produces sterols, plant compounds that help cut cholesterol levels, used in orange juice and other products

5. Cargill merchandises cotton worldwide, buying and sell cotton in North America, Europe and Asia and operates cotton gins in Africa

6. Animal feeds are supplied by Cargill to commercial dairy farmers in 28 countries across North and South America, Europe and Asia

7. The world’s largest corn processor, Cargill handles about 20 per cent of the US crop

8. Cargill Pork is involved in pork production in the US and export

9. Cargill Kitchen Solutions is a leading marketer of high value, processed egg products in the US

10. From seasoning used in processed foods such as baked beans to the kind used on frozen roads, Cargill produces more than 1,000 types of salt

11. Through its subsidiary, The Mosaic Company, Cargill is a leading producer of fertilisers, supplying fruit and vegetable farmers around the world

12. Cargill’s grain and oilseed subsidiary trades grains and employs 15,000 people in 50 countries, operating 324 silos and 31 import-export termin

More basics:

A decade ago, after profits halved, the company set out to offer more than just bids and offers for the farmers and food companies it serves as middleman. Instead of counterparties, Cargill now calls them customers – people with whom, as one executive puts it, “we need to be more open, transparent and vulnerable”.

In many senses, Cargill is one of the hidden companies of the global economy. As the world’s agribusiness leader, it sits at the nexus of one of the world’s biggest and most critical industries – a force of great importance to millions of farmers as well as to large food multinationals from Nestlé to Coca-Cola andKraft, though it is much less well-known as a name. Its significance – as the equivalent of ExxonMobil for the agriculture markets – is set to increase further as food demand rises in China, India and in parts of the developing world, and the use of biofuels grows in the west.

Agriculture and the big food trading houses have been drawing increased attention from policymakers following the price spikes and supply uncertainties of the 2007-08 global food crisis, the first in more than 30 years. Food security, long a topic merely for agriculture ministers, is now hotly debated among leaders of the Group of Eightindustrialised countries.

Amid all this profound change surrounding its business, Cargill has had to do more than just alter its language. It has spent several years expanding down the supply chain from its large-volume, thin-profit business of trading bulk agriculture commodities – instead transforming some of the raw materials into ingredients it could sell at a premium.

In addition, the group is nowadays much more than a grain trader. An industrial side that mines salt, makes plastic from plants and includes a majority stake in Mosaic, the fertiliser company, provides a chunk of the profits. The company holds dozens of patents, including one recently granted for a process to prevent scrambled eggs from turning mushy.

Cargill didn't get here by accident.  After a weak earning year in the late 1990s, it launched its "farm to fork" vision to bring it exactly to this point by 2010--the best earning year in Cargill's 145-year history.

America's biggest private-owned company founded in 1865 with a single Iowa grain elevator, Cargill is now one of globalization's most crucial players as its vast middle class emerges and desires more caloric intake.  Per my "Great Powers" history of the US, it doesn't get much more emblematic than this.

You want to take about a globally integrated enterprise?  138k employees across 63 nations, the hallmark of their vision is, according to CEO Gregory Page, "end-to-end awareness connectivity"--as in, don't just see a supply chain but understand the everything else to which it is connected.

As in the past, Cargill has started by changing its language.  While previously it talked about internal collaboration, which had a voluntary aspect, today it speaks of connectivity.

Naturally, I admire that kind of thinking when it comes to globalization.

Great piece.  Worth reading.

Asia's demand triggers frontier integration in Africa via mining co's

FT story.

The basics:

Six of the world’s biggest mining and steel companies have converged on an unprecedented scale on a mineral-rich corner of west Africa beset until recently by civil war. 

The companies plan to spend billions of dollars in Guinea, Liberia and Sierra Leone, where some of the world’s richest deposits of iron ore, the raw ingredient of steel, are found. 

The groups are Vale, the Brazilian iron ore miner, Rio Tinto and BHP Billiton, the Anglo-Australian mining houses, ArcelorMittal, the UK steel company, Russia’s Severstal, and Chinalco, the state-owned Chinese mining company.

Buoyant demand for steel has lifted iron ore prices, intensifying global competition for Africa’s hitherto little exploited deposits, and pushing companies into increasingly risky territory.

Liberia and Sierra Leone emerged only recently from civil wars, while Guinea has been teetering on the brink of conflict since the death of dictator Lansana Conte prompted a military coup in 2008.

As yet there is little infrastructure to facilitate mineral exports from any of these countries, whose governments want to use the multinational corporations to fund the ports, roads, and railways needed to lift their struggling economies.

Last month, Vale agreed to spend between $5bn-$8bn on building mines, ports, and railways in Guinea and Liberia by 2020. By comparison, the gross domestic product of Liberia is under $1bn (€800m, £700m).

Done well, this can be a big boost to local economic development.  The hoped-for key difference with the past is the sustained, boom-like demand from Asia, which constitutes a socio-economic revolution all its own for Africa.

Takeaway:  compared to our tiny Africom effort, this is SysAdmin work on a grand scale.

The good news:  America's role in shrinking the Gap shrinks by the day.  The bad news?   TBD.

Another sign of China's growing dependency of PG energy

Recently we hear that the Saudis now send more oil to China than to the U.S.  Now we discover that China will become Qatar's top gas buyer, if a new deal passes.  

Doesn't get much more symbolic than that.

Current dealmaking by Qatar also foresees big uptick in exports of gas to India.  Both deals will counter depressed demand from US and Europe.

Chart of the day: Mismatch on importance of deepwater rigs & lack of disaster plans for same

Classic but sad tale:  Look at the incredible rise in deepwater oil production in the Gulf since the early-mid-1990s.  Just taking 1995 as a base year still gets you a 9-fold increase, meaning deepwater Gulf oil pumping has rapidly become a critical asset of our overall oil production.

And yet the piece declares:

A huge jolt convulsed an oil rig in the Gulf of Mexico. The pipe down to the well on the ocean floor, more than a mile below, snapped in two. Workers battled a toxic spill.

That was 2003—seven years before last month's Deepwater Horizon disaster, which killed 11 people and sent crude spewing into the sea. And in 2004, managers of BP PLC, the oil giant involved in both incidents, warned in a trade journal that the company wasn't prepared for the long-term, round-the-clock task of dealing with a deep-sea spill.

It still isn't, as Deepwater Horizon demonstrates and as BP's chief executive, Tony Hayward said recently. It's "probably true" that BP didn't do enough planning in advance of the disaster, Mr. Hayward said. There are some capabilities, he said, "that we could have available to deploy instantly, rather than creating as we go." 

It's a problem that spans the industry ...

The connectivity extended, the regulators apparently didn't bother keeping pace with new rules, not mandating preparation for disaster recovery at these depths.

And so, like so often happens in history, the new rules wait on the right disaster to trigger their emergence.

Get ready for US-Russian joint military production

Center of Economic Planning site story via Charles Ganske of Russia Blog.

Unbelievably to many, inevitable to me.

The United States is considering a Russian proposal on the joint production of An-124 Condor heavy-lift transport aircraft, a Russian deputy prime minister said.

The An-124 was designed by the Antonov Design Bureau in 1982, and was produced in Ukraine's Kiev and Russia's Ulyanovsk plants until 1995. Although there are no An-124s being built at present, Russia and Ukraine have reportedly agreed to resume production in the future.

"We have discussed a full-scale project, which includes the joint production of the plane, setting up a joint venture, shared rights, sales to Russian and American customers - both civilian and military - and the creation of a scheme for post-production servicing," Sergei Ivanov told reporters in Washington.

The An-124 is similar to the American Lockheed C-5 Galaxy, but has a 25% larger payload.

The aircraft has a maximum payload of 150 metric tons with a flight range of around 3,000 kilometers (1,864 miles).

An-124s have been used extensively by several U.S. companies. Russian cargo company Volga-Dnepr has contracts with Boeing to ship outsize aircraft components to its Everett plant.

Why inevitable?

Simply the rising costs associated with big platforms.  There ain't enough Leviathan work to go around that justifies great powers each producing their own major platforms--the old Norm Augustine bit.  Russia itself is only producing 20 through 2020 for its own military, and the platform has a long and good history with US customers, including our own Pentagon on a leased basis (currently through 2016).  

This proposal simply ups the cooperation to joint production.

Taxing soda like alcohol?

Via David Leonhardt column in NYT, say it isn't so!

And yet I would welcome it.  Too much soda comes into my household, the excuse being it's just so damn cheap.

Here's why:

The price has been kept unusually low.  Meat and cheese, fine enough, but soda?  Especially when water is finally getting some realistic pricing?

A good target for cash-strapped states.

The Gulf blowout makes Canadian oil sands look more acceptable

The gist from NYT story:

Oil sands are now getting more scrutiny as the Obama administration reviews a Canadian company’s request to build a new 2,000-mile underground pipeline that would run from Alberta to the Texas Gulf Coast and would significantly increase America’s access to the oil. In making the decision, due this fall, federal officials are weighing the environmental concerns against the need to secure a reliable supply of oil to help satisfy the nation’s insatiable thirst.

The gulf accident adds yet another layer of complexity. Regulators and Congress are weighing new limits on drilling off the coastline after the Deepwater Horizon catastrophe, increasing the pressure to rely more heavily on Canada’s oil sands. At the same time, political consciousness of the risks has grown.

Canadian oil sands are expected to become America’s top source of imported oil this year, surpassing conventional Canadian oil imports and roughly equaling the combined imports from Saudi Arabia and Kuwait, according to IHS Cambridge Energy Research Associates, a consulting firm.

In a new report, it projects that oil sands production could make up as much as 36 percent of United States oil imports by 2030.

I recently was harassed, congenially enough, by an older guy from the investment world (after a talk) who was convinced the US imported 19mbd and that 9-10 came from Saudi Arabia alone, therefore the PG was THE source of US oil.  I run into such ill-informed notions all the time, when the truth is the PG ranks after Africa after LATAM after NORTHAM after the US (or 5th place overall).

The Chinese have announced more investments in the Canadian sands fields, making you wonder if the US isn't eager to lock down a certain amount of access while the getting is good--and the enviro damage is "over there."

Growing Chinese investment in US economy takes new turn

WSJ story:  China's Anshan Iron & Steel Groups says it will invest in as many as 5 US production mills owned by a Mississippi company.

It's a small move by a big (#6 in world) player, "but the deal appears to carry political overtones, coming as Beijing puts emphasis on outbound investment as a spark for economic activity elsewhere."

That's the lesson Japan had to learn years ago, and China appears to be moving in this direction with much faster speed.  It's a real credit to them and a good sign overall.

I've told this story on China for a couple years now in the brief: Japanese cars used to be keyed in Indiana parking lots years ago. Why? This is Big 3 production territory. It doesn't happen today. Why? Toyota and Honda have IN plants now.

Read this from the print story:

Last week, a government official in Beijing suggested China's steelmakers could learn from Japanese auto makers, which in the 1980s responded to complaints about their imports by opening U.S. plants.  Jia Yingson, of the Ministry of Industry and Information Technology, said Chinese steel production in the U.S. would help the industry sidestep rising trade barriers . . .

And from the online version:

In the 1980s, Japanese car makers faced the kind of political and popular resentment about imports in the U.S. that much of Chinese industry is up against today. To ease some of the tension, Japan engineered a considerable higher yen exchange rate while companies such asToyota Motor Corp. built U.S. plants so their cars could be labeled "Made in America, by Americans."

Our pushback forced Japanese companies to evolve from national flagships to truly globally integrated enterprises (IBM CEO Sam Palmisano's term).  No doubt the same learning curve happens here.  Bigger question is whether Africa can do the same vis-a-vis China.  But even there, I remain optimistic.

Again, very pleasing to see.  You go around spouting this stuff for years, wondering when it'll happen or if you'll be proven "naive," and then the economics shapes the political decision-making and even deeper economic connectivity and evolution results.

And everything old is new again. 

More evidence of the myth of de-globalization: outsourcing to India rebounds dramatically

WSJ story:  India's three top outsourcing firms (TCS, Infosys, Wipro) all experience big rebounds in revenue for work outsourced from West.  Each had negative first and second quarters in 2010 and each will have 10-20% boosts happening in 2010's 4Q.

Doesn't mean everything goes back to what it was; it never does.

The turn of events marks a reversal from a year ago, when Indian firms were reeling from a steep drop in orders for software services. But the tech-services sector differs now from the Indian firms' boom years of 2003 to 2007, and new hurdles have arisen. 

Long-term challenges include rising labor costs, sliding billing rates and currency-exchange risks. The upshot is that despite optimism in Bangalore and Mumbai spurred by the recent turnaround, the companies likely won't be able to return to 30%-plus annual revenue growth without restructuring their business models and the types of services they provide.

"Is there a revival? Certainly. But is it a return to the go-go days of offshoring three years ago? No," said Sid Pai of Houston-based outsourcing-advisory firm TPI.

Pricing will be a long-term issue. Indian firms cut billing rates 5% to 10% during the downturn to keep clients, and many analysts say increasing prices now won't be easy.

"There'll be niche services where you can charge a premium, but in other areas, the pricing pressure is only going to continue," said Forrester analyst John McCarthy.

Meanwhile, as they grow bigger, the top Indian companies are beginning to confront a problem that larger competitors like International Business Machines Corp. and Accenture Ltd. have struggled with for years: how to increase revenue faster than head count.

A sign that the outsourcing sector in India is moving off the easier challenges of extensive growth to intensive growth.

It happens to the best; it happens to the rest.

[name the movie by David Mamet in which that line appears!]

Google working around low internet connectivity in Africa

WSJ story.  Looking at the internet-penetration rates, not so good.  But already, in terms of cellphones, we're talking 30-40% penetration everywhere in Africa save the deep interior.

So Google apparently not waiting on the former to rise and instead targets the latter media device.  Mobiles are a party of everyday life in Africa, but the Internet is not (4% average).  Unfortunately, mobile costs are relatively high in Africa, and internet costs are even worse.

Google clearly takes the path of least resistance, and its aims are noble enough:  increase Internet usage by offering mobile text-based services as the lure.

An industry player is quoted as saying, "There is a tremendous pent-up demand for connectivity and access." This is why tech companies the world over are targeting Africa and its emerging middle class now--again, taking the shortest route and keeping it as practical as possible.  Five years ago, detailed online maps of African cities were nonexistent.  Now Google offers their usual stuff for 51 African countries (out of 55).

I will confess to being excited to use my new Motorola/Google Android phone with Google maps.