Thursday, July 28, 2005

Why did European economies suddely outperform Asian economies?

A fascinating book has recently been published on this subject, edited by Peter Bernholz and Roland Vaubel: POLITICAL COMPETITION, INNOVATION AND GROWTH IN THE HISTORY OF ASIAN CIVILIZATIONS (Cheltenham, UK: Edward Elgar. 2004. xii + 225 pp. $100 (cloth), ISBN: 1-84376-919-0).

The question explored by the book is: was political fragmentation in Europe the key reason why post-Reformation Europe grew at historically unprecedented speeds, outdoing Asian growth? The idea is that just as competition between firms improves economic performance within a country, so economic competition between countries might also improve the performance of that bloc of countries.

The question was originally raised by David Hume and Immanuel Kant in the eighteenth century. Recent expositions of the thesis are Jean Baechler's THE ORIGINS OF CAPITALISM and Eric Jones's _THE EUROPEAN MIRACLE.

The papers in this volume resulted from a conference held in Heidelberg in September 2002. Contributors include historians, sociologists, economists and a socio-psychologist. The thesis is tested by examining the four major Asian "empires" -- China, Japan, India, and the Middle East.

The book has three general essays on creativity and fragmentation, and four Asian case studies.

The introductory essay by the editors provides some background to the general arguments and the case studies in the book, arguing for the importance of geographic mobility, religious diversity, political stability, peace, and "institutional pluralism within the political units."

The social psychologist, D.K. Simonton, uses earlier estimates of Asian creativity, to argue for the importance of political fragmentation and of cultural homogeneity. Jean Baechler discusses the debate on the hypothesis claiming that it "is not a yardstick to be applied rigidly and mechanically ... but a hypothesis and a method of inquiry" (whatever that means!).

Deepak Lal's account of India and Timur Kuran's discussion of the Islamic Middle East agree that growth in these two societies was stunted by their monolithic nature. (I conclude that different belief-systems can be equally "monolithic" in relation to their effect on economic growth).

On the other hand, Pak Hung Mo's study of China argues the drawbacks of centralized control, and G√ľnther Distelrath's study of Japan describes the difficulties confronted by Japan at times of "total decentralization."

So: political fragmentation helps to explain bursts of creativity in some cases, but not in others!

Thinking through this book raises some rather simple questions:

1. Is there an optimum degree of fragmentation?

2. How come Reformed Europe hit upon precisely this degree of fragmentation?

3. In a global context, there was plenty of "political competition" between Northern Europe and Southern Europe, but also between Europe and the Ottoman Empire. The Ottoman Empire itself was in political competition with Africa to the South, and with other Islamic kingdoms to the East and the North. A similar picture can be painted of East Asia, with the struggle between India and China for hegemony there (as a result of which the area came to be divided into "Indian Asia" and "Chinese Asia").

4. If the hypothesis is correct, why was it that the transition in South America from a unified empire to separate countries in the early nineteenth century did not facilitate substantially speedier growth?

5. Finally, if political fragmentation encourages cultural and economic growth only under certain conditions, what exactly are these conditions? (No prizes for guessing my hypothesis: it has to do precisely with the cultural revolution that was the Reformation).

We know that the Reformation was not bloodless because the Unreformed parts of Europe not only resisted being reformed themselves, but also had a vested interested in trying to prevent any part of their previously relatively united "continent" from being reformed.

Northern Europe succeeded in being reformed only because thousands of common people were prepared to die for their beliefs.

This was bottom-up Reformation.

By contrast, top-down reformation (such as we see in China today, and we saw in recent history in Japan and Singapore, and in various African countries in the Sixties - and saw earlier for example in Marxist-Leninist Russia) does succeed for a time but usually only for one or two or a maximum of three generations (which I posit as being roughly 70 years). Why? Because an elite can "control" liberalisation for a certain length of time, so that the population benefits but the elite benefits even more…but there eventually comes a point where the country has to decide between the elite and the population. At that point, the country collapses into chaos (Africa), stasis (Japan) or dictatorship (Iran).

Only a genuine revolution in the hearts and minds of ordinary people ensures a bottom-up Reformation which transforms equally and simultaneously the social, educational, political, and economic structures. That is the only thing that has historically ever led to sustained growth.

Modern global elites insist on ignoring this simple fact. That is why the World Bank and related organisations have consistently failed in their attempts to encourage growth in so-called "developing societies": a focus on structures and mechanics is no substitute for the organic growth represented by changed beliefs and behaviours. Jesus of Nazareth compared this change to the way that yeast grows and the way a tree grows.

Those who refuse to understand these rather simple truths will never gain insight into what creates genuine growth as distinct from the artificially-engineered or manipulatory bubbles that fill out the globalised economy today.

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The Disputed Connection between Terrorism and Islam

Probably the sanest and most balanced short discussion of the subject I have seen so far is the article: THE MYTH OF MODERATE ISLAM by Patrick Sookhdeo

"The funeral of British suicide bomber Shehzad Tanweer was held in absentia in his family’s ancestral village, near Lahore, Pakistan. Thousands of people attended, as they did again the following day when a qul ceremony was held for Tanweer. During qul, the Koran is recited to speed the deceased’s journey to paradise, though in Tanweer’s case this was hardly necessary. Being a shahid (martyr), he is deemed to have gone straight to paradise. The 22-year-old from Leeds, whose bomb at Aldgate station killed seven people, was hailed by the crowd as ‘a hero of Islam’. "

To access the full article, please go to:

Do note that free registration is required (if you are not already registered) but it IS quick and easy.

And the publication gives you the possibility of voting on the article, so that you can express your agreement or disagreement with the author.

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On Short-Termism, Corporate Culture, CSR and Tax Regimes

A friend draws my attention to the following article ( and asks, "Do you think his assessment of short-termism (and suggestion on tax regimes) has value, and any prospect of happening?".

I provide my answer below, as it may be of wider interest, but please note that the acronym "CSR" stands for "Corporate Social Responsibility":

Dear Jonathan

Thanks for drawing my attention to this

If rhetoric is part of a systematic attempt to create a corporate culture that is focused on values, then it can work, but only then

Very few companies have anything like a systematic and comprehensive approach to creating the right corporate culture

He is right in noting that, before the 1980s, corporations had a social purpose - though this was not because of what we would today call CSR, it was because both owners and workers were better integrated into communities. As a result of the impact of the theory of evolution combined with the impact of technology, we live very fragmented lives today, and rarely have what might be called a genuine community (by which I mean a community consisting of varied political persuasions, economic status, and family background) - usually, we live in stratified ghettoes of gated communities (if we are seriously rich), or in middle-class suburbs, or in working class areas, or in the inner city and so on (though gentrification complicates the picture a bit if one is speaking spatially, the principle holds in terms of the actual lived experience of the people concerned)

Many other things changed in the 80s (e.g. legislation worldwide removed the remaining restrictions on charging interest and took the situation back to what it was before Christians abolished usury in the West)

Short-termism: he is entirely right in observing that " the causes of corporate malfeasance lie in managers' roles as short-term "profit maximisers". The role of maximising short-term profit is another of the things that accelerated in the 80s - earlier, most people kept their money in savings accounts. The 80s saw the beginning of the mass move to shares (and bonds) and loans-against-mortgages....and, as capital flowed into corporations, the pressure on them grew to "perform" short-term

Though some of this short-termism has begun to be countered at some level by the rhetoric of CSR, mostly CSR remains merely rhetoric, with some marginal things being done here and there as a sop to the conscience and to CSR.

Basically, we have a worldwide culture of individual greed and its corporate equivalent: corporate short-termism.

His three key recommendations are that:

* Boards of directors should be elected for a reasonably long-
term: shareholders should be permitted to vote only every five years, rather than annually.

* Taxes should be applied on short-term share trading and tax-
forgiveness encouraged with regard to long-term investing. Corporate tax regimes should be designed to meet financial needs of particular industries.

* Companies should treat investments in staff as corporate assets rather than expenses. He said this would disincentivise lay-offs as a means of boosting profits")

These would go a long way towards ameliorating the situation.

However, the chances of these and other such recommendations being implemented depend on the vigour with which the global public understands the urgency of the issues and presses for such changes. At present, I would put such chances at no more than 50-50 over the next 5 years, though you never know how quickly the climate changes one way or the other

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Sunday, July 03, 2005

Spirituality, Atheism and Business

A publication in India wants to do an interview with me on this subject, and asked the following questions. I provide my answers as they may be of interest to a wider group:

Q. Many of us fail to distinguish between religion and spirituality. Is there a difference between the two? What according to you is the difference between religion and spirituality?

Answer: It is fashionable nowadays to try and make a distinction between "religion" as consisting in Buddhism, Christianity, Islam, and so on (that is, established and formal religions) and "spirituality" as consisting in attempts to relate to the Divine outside the established formalities of such religions.

In India, we have had a long tradition (since the first century before Christ) of a split between religion (as in temples) and spirituality (as in meditation, and so on).

However, in fact, there is no real distinction between "religion" and "spirituality" - or, if there is a distinction, it is a purely academic and theoretical one.

In actuality, all devotees of any religion are seeking to experience God and to be guided by Him. And everyone who is
"spiritual" is seeking exactly the same.

Q: What are the challenges faced by the world of business today? Can spirituality play a role in overcoming these challenges?

Answer: The main challenges faced by business are:
A. How to survive in a hyper-competitive world, and
B. How to deal with the increasing demands of regulation, corporate governance, ethics, corporate social responsibility, and so on.

Spirituality/ religion can indeed play a key part in this, in terms of motivation, fair play, and providing a means of understanding and relating not only to the world in general but also specifically to financial, economic, environmental, health and other challenges. This is too wide and complex a subject to go into in this brief space, but a Google search for my somewhat unusual name will indicate at least some materials with which to begin an exploration of some of these matters.

Q: Companies like ServiceMaster in the US states one of its company objectives as "To honor God in all we do", while Kyocera from Japan has its corporate motto as "Respect the Divine and Love People." Even leaders from Indian companies are speaking about application of spirituality in business. What is the reason behind this increasing interest in spirituality? Is it a fad?

Answer: It is a fad, but what is wrong with that? Fads can be good and useful as well as useless and even horrible! But at least some of the reasons for the fad are negative ones, in that the impact of evolution in the West tore many people away from their spiritual roots in Christianity and the Bible. Now the children and grandchildren of these people are discovering that atheism may be fine as a means of protest against hypocrisy and intellectual dishonesty, but atheism provides no answers regarding how to live as an individual or family or how to conduct business or political life - so spirituality is coming back…..

Q. Are concepts like 'spirituality at workplace', 'organisation renewal' etc meant only for mature organisations which have financial and human resources to support such activities? What about start-ups/ small scale industries etc?

Answer: In my experience, it does not matter whether companies are mature or start-ups: some of both sorts of companies welcome and nurture spiritual interests. By contrast, other companies (mature or start-ups) are hostile or negligent of spirituality.

Q. Are there experiments/studies to show that tapping spirituality at work has resulted in a positive impact on business? Can you cite examples of companies boldly engaging in spiritual dialogues inside and outside the organisation? Any specific examples you would like to share...?

Answer: The evidence is solid. Read books such as Jesus C.E.O. or Moses on Leadership (if you would like a more extensive reading list, please contact me and I will happily send it to you).

Moreover, the evidence is growing greater and spreading wider each week. Read publications such as Faith in Business Quarterly or Sojourners magazine or Business Ethics.

Companies: you mention ServiceMaster above - a fine example. Others include, in the USA, Herman Miller, PepsiCola, FedEx, and so on. In the UK, companies such as Barclays Bank and Shell have had "christian fellowship" groups for decades.

Q. Your messages to a business leader who would like to tap spirituality at her/his workplace?

Answer: First, go yourself personally to a relatively "neutral" or "non-threatening" or "safe" meeting, such as those sponsored by The Trinity Forum in Europe. Then explore the subject in some minimum depth yourself, in order to understand the most common pitfalls and mistakes made in this field, so that you can steer around these. Spirituality is powerful - even Hitler was highly religious! So don't mess around naively. Study the subject, and decide the best way forward before moving in public on it.

Q. Any other thoughts you would like to share?

Spirituality is not only for our private or individual lives. Spirituality has also historically shaped things that we take for granted today, such as democracy and literacy and science and technology and economic progress and company law and monetary practice and banking and women's rights and children's rights and animal rights and environmental concern.

Spirituality also shapes families, communities, businesses, economics and politics.

Atheistic views have slaughtered more people in the twentieth century alone than all the religious wars throughout history. Moreover, atheists have contributed little of positive value to any area of life.

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A Vision for our Century

I was asked to contribute my "personal vision" for one of the conferences in which I am participating. Here is what I have sent in:

Ever since the sixteenth century, when the Protestant Reformers sowed, for the first time in history, the seeds of education, political freedom, science, technology and economic progress, these seeds have sprouted and their flowers have spread far and wide, increasingly bringing blessings everywhere around the globe.

Officially, we may be Eastern Orthodox, Roman Catholic, Hindu, Muslim, Buddhist, and so on but, in practice, we are all culturally Protestant now, since we are committed to education, political freedom and all the other cultural fruits of the Reformation.

However, the Darwinist Revolution (which started in the 1860s and became powerful in Europe from the 1880s onwards, and in the USA from the 1930s onwards) has also spread worldwide, resulting in the spread of purposelessness, anomie, individualism, social fragmentation, sensationalism, overwork, over-exploitation of natural resources, and the maximisation of profits for the few who own productive assets worldwide.

The reason that Darwinism became (and remains) popular have nothing to do with science and everything to do with humankind's desire to evade accountability. We would rather like to be free to live our own lives, make our own decisions and go our own way without having to consider the consequences for ourselves, for others, for humanity, and for nature.

With the rise of the latest technologies (now known macabrely as GRIN - Genetics, Robotics, Information and Nanotech), the necessity and identity of humankind is at stake. These technologies form as potent a threat to humankind as nuclear bombs did in the Sixties.

My vision is that we will together be able to find ways to harness these technologies, so that they are instruments for good rather than means of evil. But that will only happen if we are willing to look into our own hearts to locate the sources of greed, lust, power-hunger, fear and other such negative emotions - *and* if we are willing to look clear-headedly at the institutions we have created which embody these negative emotions and amplify their effect - institutions such as the limited company, fiat money, and usury.

Naturally, we also need to find the solution to these negative emotions, and the motivation to work for the continued reformation of society. As a Hindu, I have found both the solution and the motivation in my relationship with Jesus of Nazareth, the Guru and the Lord, who forgives me, cleans me, and energises me.

Regardless of beliefs (or lack of them), I welcome everyone who wishes to join me on the journey to the core of the heart, which is also a quest for the fulfilment of the vision of a humane future.

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India versus China in the World Economy

A friend has just sent me a copy of the paper, "China and India in the World Economy", which will be presented on 7 July 2005 to the International Conference of Commercial Bank Economists in Bahia, Brazil, by the Chief Economist of ANZ Bank in Australia, Saul Eslake.

Quite simply the best and most comprehensive paper on the subject that I have seen so far, it makes for uncomfortable reading by Indians. For example, Eslake points out that "growth rates (in China and India) are rapid by historical standards, but they are by no means unprecedented for economies at China’s and India’s stage of economic development….Despite … impressive growth, China and India are still relatively poor countries. China’s per capita GDP (in US$ at PPP) in 2005 of $5,642 places it in 95th position among the IMF’s sample, while India with $3,029 ranks 120th".

Even in 2015, when (assuming that the long-term consensus projections compiled by Consensus Economics earlier this year are vindicated), China will have just overtaken the United States as the world’s largest economy, and India will have moved past Japan into third place, "China and India will still be relatively poor countries in 2015, despite their size….China’s per capita GDP will be barely more than one-fifth that of the US (cf. about one-seventh in 2004) and slightly less than one-third of Japan’s (cf. a little over one-sixth in 2004); while India’s per capita GDP would be about one-tenth that of the US (cf. about one-thirteenth in 2004) and about oneseventh of Japan’s (cf. about one-tenth in 2004)".

Eslake seems to be more sanguine about China than about India: " While India does enjoy an advantage over China in regard to its relatively large number of English speakers, in other respects it seems difficult to argue that India is better placed than China to compete internationally in this field. China spends 5.3% of its GDP on IT, compared with India’s 3.7%; China has 27.6 personal computers per 1000 people, as against India’s 7.2; and China has 63 internet users per 1000 people, compared with 17 in India. More generally, China has 633 R&D researchers per million people, more than five times as many as India’s 120 per million, publishes almost twice as many scientific and technical journal articles per million people, and spends half as much again of its GDP on R&D (1.2% against 0.8%)".

He seems to me to underrate or ignore some key factors and questions

1. However clever the rulers of China may be, they can only make decisions on the basis of the information that reaches them - and systems (both in politics and in business) have a way of ensuring that unlikeable information is not sent as a matter of preference to people in power. In addition, people (whether or not in power) themselves do not like to look at information that is disagreeable to them or confronts their prejudices. The result is that systems tend to brainwash themselves in line with their own prejudices. Sometimes, this is called "tunnel vision".
An open culture is the only safeguard against this kind of "boxed-in thinking".
That is why the open system of democracy and a free press, though in the short- and medium-term slower and more unsatisfactory than a benign dictatorship, is so much better in the long run. Everyone in a democracy can see the problems, issues and challenges quite clearly, can check the facts, propose solutions, put pressure on those in power, and so on. Let's take a simple point: how much of Pudong is let at all? How much is let on commercially viable rates? Who knows? Who can find out?

2. One-pary rule makes sense if it is entirely meritocratic (Singapore's system went a long way towards this under Lee Kuan Yew), but such a system is also open to abuse (as we have started seeing alread in Singapore).
One-party rule also makes some sort of sense where it is driven by an ideology (as in Maoist China and Mullah-run Iran). What sense does it make in a China which has decided to integrate into the world economy? The "Party" now consists only of those who have a vested interest in controlling the system - to their own advantage of course (even a preliminary investigation of the purchases and investments made by Party members outside China is very revealing).

3. If bank loans amount to 160% of GDP, as in China (according to Eslake, the highest in the world), can that really be considered a stable economy? In a closed polity, where these loans are still made on the basis of political considerations, how much of the economy consists of bad loans? Who knows? Who can check?

4. Eslake acknowledges that the money supply is controlled by the People's Bank of China, but he does not tell us whether and to what degree the money supply is manipulated by the Bank in such a way that the outside world can have confidence in its ability to handle downturns in the world economy. In other words, how much of a bubble is the Chinese economy?

For Indians, the most interesting question raised by Eslake's paper is: If India was really the world's largest economy till the 14th or 15th century AD, what caused it to begin to lose that position? Eslake suggests (in line with Jared Diamond) that the Chinese were more technologically innovative than Indians. And if that is so, does that say something about the Chinese character as against the Indian one? Or is it possible that the rise of Vedantic philosophy and specifically Tantra made us more gradually more and more unworldly than the Chinese, allowing us first to be increasingly plundered by foreigners and then to be ruled more and more by foreigners - which, in turn, increased the corruption and venality of our ruling classes in line with the increasing rigidity of the caste system?

India's problem was, and remains, principally that of a corrupt political elite that wants to continue political and economic controls primarily because that is to its own benefit. The people want change but the rulers don't.

China, by contrast, has a political elite determined to build the country even, where necessary at the cost of its own advantage.

The challenge for China is that its elite has credibility but little legitimacy. The challenge for India is that its elite has legitimacy but little credibility. Both countries need to move to more open markets as well as a properly open polity.

The final question Eslake raises, in terms of possible power struggles between China and the rest of the world is a worrying one. However, he mindlessly echoes Lee Kuan
Yew's view that , “in 20 years time the centre of gravity of the world will shift from the Atlantic to the Pacific and Indian Oceans”. Yew, and Eslake, ignore the essential question of who owns and who will own these economies (assuming they undertake sufficient political reform to stay stable in the meanwhile). We live in an increasingly interdependent world, in which Europe, China, India and other developing countries own an increasing part of the United States economy, at the same time as Americans (including Chinese and Indians resident in the US) own increasing proportions of China's and India's economies. That is the best guarantee of peace, even though it does not guarantee that the political elite in China will move sufficiently quickly to prevent internal chaos or collapse, much to the discomfort of the world economy.

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Saturday, July 02, 2005

About skeptics and Sceptics: Theism as scepticism regarding Atheism

Today, a correspondent draws my attention to the following site:

I am posting my response as it may interest others:

Dear XXX

I do know the site AND much of the material....

Atheism is fine as a negative - as a sort of intellectual and emotional cocoon - as long as things are going well with us physically and financially....

However, apart from the question of truth and Truth (which is always interesting to debate), the issue with not acknowledging a higer being than ourselves is that such lack of acknowledgement:

- tells us nothing about how we should live

- shows us nothing about how or with what values to bring up our children

- gives us nothing with which to cope with sickness or bereavement or indeed our own mortality

- does not tell us how to rebuild our nation - or why we should or how we can work to improve our world...

So it is not surprising that I am sceptical about atheism.

A reading of Alister McGrath's THE TWILIGHT OF ATHEISM: THE RISE AND FALL OF DISBELIEF IN THE MODERN WORLD (published in 2004 by Doubleday) is recommended.

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