Tuesday, June 24, 2008

Statistics versus Evidence and Detective Work in non-Western countries

A friend, who has been based in an extremely senior capacity with a commercial organisation, writes regarding that country: "we have no shortage of anectodal material (much of which is based on innuendo and quite frankly, half educated talk). Even after many years here, I find good and reliable unbiased evidence in remarkably short supply. We require not statisticians but high quality detectives here. Sherlock Holmes would have had a good career!"

Though he intended the comment only in relation to the specific country in which he is based, this is an observation that is accurate everywhere east and south of Europe and North America.

Readers of my blog will not need to wonder why - because they will know why. Sphere: Related Content

Compliance and Ethics in Asian Firms

A few weeks ago there was an article in the South China Morning Post (on 17 May, to be precise), where the head of a consultancy argued that the very notion of anyone with a responsibility for ethics and compliance (an Ethics Officer or a Compliance Officer) goes against Asian culture, where everything is done on the basis of relationships. The author was writing in a specifically Chinese context, so he refers of course to guanxi, which is entirely alien to rules-based ways of doing business - which are what enabled the West to begin to catch up with the East from the sixteenth century, and to outstrip the East from the eighteenth century.

Naturally, the job of the Head of a Consultancy is, among other things, to drum up business, so it is not suprising to find him arguing that if Chinese firms put Ethics and Compliance Officers in place, this will serve as a proxy for cultural change and so attract Western businesses and public sector organisations as clients and partners.

There is some truth to this, but if Chinese (or any other) firms appoint these Officers only for such a narrow-business purpose, they will soon discover that every business can play this game - and the suggested competitive advantage will disappear.

The real competitive advantage comes, as the West discovered after the sixteenth century, from driving ethical norms through an organisation, for the sake of the norms themselves because the norms give life and liberty and so empower the entire organisation. In other words, the norms do result in a competitive advantage, but putting the norms in place because of the advantage subverts the norms.

In fact, putting a norms-based culture in place is a gigantic task in national and regional cultures which are relationship-based. Principally because it is not easy for an individual entrepreneur or ruling clique to limit their power by appointing an Officer whose job is part fool, part prophet, part judge, part advocate and part business adviser: the Officer has to be able to challenge only the culture but also the individual(s) who are in charge.

However, there are a few examples of companies that have put in place a sufficiently rules-based culture within an overall relationships-based country or region. The Tata Group is probably the longest-lived and most outstanding but, as far as I know, nothing has been published on this particular aspect of the Group's experience (and they have never had a Compliance or Ethics Officer, to my knowledge, because that work was done by the Founder/ Chairman/ CEO rather than by someone else).

Clearly, Asian firms cannot become global leaders without transforming themselves so that they are newly based in ethics or norms. As Asian firms face that challenge, it will to be interesting to watch their journeys from being kingdoms, empires and oligarchies to becoming meritocracies based on the rule of law.

When a firm completes that task successfully, an even bigger challenge is how to prevent newly-rule-based-organisations in overall-relationship-cultures from sinking back into relationship-based-organisations once again. I don't believe there is any literature on how to prevent that, but there is at least some literature on how the phenomenon happens, for example studies of the degeneration of the Indian Administrative Service and the Indian defence services between British times (when they were rules-based) and now (when they seem to have become increasingly lax) Sphere: Related Content

Thursday, June 19, 2008

On Peter of Bruys, Henry of Lausanne, Claudius of Turin and other early Reformers

Someone very close to me queries my inclusion of some personalities among the early Reformers - e.g. Peter of Bruys, Henry of Lausanne, and Claudius of Turin.

For example, regarding Peter of Bruys he says "wasn't he an unsavoury character who was quite violent?".

Well, yes, he was and is considered an unsavoury and violent character - but only by Roman Catholics and their sympathisers - there is no evidence that he preached violence against people (though he certainly preached violence against idols) - violence was actually practiced AGAINST HIM by what became the Roman Catholic Church...

Regarding Henry of Lausanne and Claudius of Turin, the question that is raised is: whether it is right to include them among the "reformers" since the “Protestant Reformation” is generally thought to start only from 1519. Isn't it more accurate to call them "Pre-Reformers"?

My answer is that it is sympathisers with the Roman position who usually call such folk "Pre-Reformers".

My point of view is, briefly, that there were efforts to reform the united Western Church throughout its history - it was a contested space! - but the so-called "Reformation" (or, more precisely the "Magisterial Reformation") succeeded only because some reformers took up arms to resist the Romans and to establish a space free of Roman domination - and succeeded (though many of course did not succeed).

Eventually, it was the bits of the united church that turned their face permanently against reformation that became what is today called "The Roman Catholic Church".

So it is the (unreformable) Roman Church that starts in the 16th century, as well as the so-called “Protestant churches” (which are the Magisterial ones).

The "Radical Reformers" preceded the Magisterial reformers, suffered non-violently, and (some) eventually escaped to North America (though some of them later participated in or benefited from other forms of violence - e.g. against the Native Americans/ Canadians/ Latin Americans).

In any case, it was the radicals (Anabaptists, Amish, Mennonite and so on) who actually ended up doing the most in terms of faithfulness to the Bible, were spiritually effective, and ended up influencing first the Magisterials and then (marginally) the Romans....

The Radicals can be defined as those who not only took the Bible seriously as the only source of authority in spiritual matters but also (therefore) did not compromise with the power of the State

What about the Methodists and Presbyterians you may ask: well, they were primarily influenced by the Anabaptists et al (though also to some extent by the Magisterials, depending on which brand of Methodists and Presbyterians you mean)

The fundamental move towards reform in the church always came (and comes) ultimately from sources that can only be classified as Radical; the Magisterial-types basically sought to create a sort of "safe" compromise where state and church could co-exist (in this they were like the Romans - only in various ways more Biblical than the Romans to some extent or the other). Sphere: Related Content

The sick society produced by American capitalism

One in 32 American adults is either behind bars or on probation or parole, according to the the results of a Pew Charitable Trust report released in February 2008, quoted from http://www.breakpoint.org/listingarticle.asp?ID=8007

Professor Stephen Marglin would perhaps say that this is only to be expected. See my post on his book, THE DISMAL SCIENCE: HOW THINKING LIKE AN ECONOMIST UNDERMINES COMMUNITY (Harvard University Press, 2008).

One of his colleagues tells me that "no one" from the Department of Economics at Harvard speaks with him. He is a brave man and has written a brave book. He will be proved right by history, rather than the majority who continue to feather their own nests by promoting a sick system.

He has tenure so he can't be pushed out by Harvard. But many others who take unfashionable positions have been and are now being pushed out even from tenured positions in US universities.

That is a further sign of how sick the United States has become.

Give me European capitalism any day.

Though the most preferable would be what I call "world capitalism" - based on:
- the best of the human-capitalist tradition of Europe,
- the risk-friendly capitalism of the USA and UK, and
- the new requirement for social justice and for environmental and emotional care worldwide. Sphere: Related Content

Wednesday, June 18, 2008

On the "strong" Anglo-American economic system

A family friend who is Indo-American has just published a very short piece reflecting on the "strength" of Anglo-American economic system.

He says: "Time and again I see articles in Business magazines that financial systems in Asian Countries are not well organized and we need to make them strong as American and Western Financial System. Work made me live in Asia, Middle East, Europe and America and I really wonder sometimes as to what is a Strong Financial System. What kind of strong American Financial systems do we want to impose on Asian Countries?
- One which leads to sub prime crisis and foreclosures creating havoc for the housing market.
- System where the Americas savings rate is in negative percentage.
- Strong Financial markets where stock crashes from 150 Dollars to 5 Dollar leaving old people’s pension vanishing overnight.
- Strong System where the Govt. is in Trillion Dollars Debts.
- One where even essential commodities are not regulated by Govt. and oil companies can make a profit of 40 Billion while public has to buy gas on credit cards.
- Strong Credit System where every stage of an adult person is dependent on credit - From 18 to 80 years living on debt (Student loan at 18 years to Reverse Mortgage at 80 years).
- Where Majority of large corporations pay no income tax.
- Rich farmers get millions in livestock compensation while teacher’s compensation is at $30,000 dollar a year for their hard work.
- Basketball stadiums are being built with millions of dollars and schools are being closed for lack of funds.
- Minimum wage has not risen in the last 10 years while cost of living has increased three to five times.
- World’s richest country – with limited resources ever for healthcare.
What kind of strong financial system is this?"

More at:
http://www.indogram.com/?centerpiece=ar-294&city=pdx Sphere: Related Content

Wednesday, June 11, 2008

US energy markets watchdog agrees that speculation is contributing to the record oil price

I am interested to see that the US energy markets watchdog seems to agree with my analysis that speculators are contributing to the record oil price, and wants to introduce limits on traders' positions http://link.ft.com/r/9ULF66/XVV1V/ASDO/TTJYU/A53R2/GX/t

Whether they will come up with sensible regulation is a different matter.

In my view, limits on the activity itself is the wrong way to go about what is needed. Activity should be unlimited but subject to certain norms that help the market.

Here are sensible ways to regulate.

Traders should be free to trade, provided they hold all their positions for a certain length of time - the length of time being different for different activities depending on the structure of the industry involved. Trading in the shares of financial services companies could be say half an hour after purchase because financial services companies are involved in a very wide range of activities and so their fortunes might go up and down in that sort of time-frame, but trading in the shares of industries with a rather different structure (aerospace, for instance) should be held for at least one month. The case of energy companies is similar - if one ignores natural disasters and terrorist possibilites, the supply side takes up to 10 years to influence, while on the demand side the long-term trend is predictable with temporary changes probably depending most on weather fluctuations. Much more precise study will be needed regarded the natural life of each industry so that regulation is appropriate. This is therefore the more long-winded if more precise alternative. The easier but more blanket alternative is the next one.

Traders should be free to trade, provided they hold a certain percentage of each of their purchases (say 50%) long term - by which I mean three years.

No doubt other such mechanisms can be debated so that the most appropriate way of dampening speculation can be found which simultaneously avoids cramping liquidity in global markets.

BTW, the framework for any such regulation needs to be global in geography and comprehensive in terms of the industries involved, otherwise liquidity flows to the regulated industry will be negatively impacted, thereby providing distortedly large liquidity flows to all industries which remain unregulated. Sphere: Related Content

Monday, June 09, 2008

Global rules for global banks?

When I first started speaking out several years ago about the need for global rules, I was regarded as a hopeless idealist.

I am glad to see that some top personalities have now come around to seeing the sense of this (at least in terms of the financial markets, if not yet in relation to manufacturing and other services).

Professor The Lord Desai (London School of Economics and the House of Lords in Britain), has come out in favour of global regulation of speculative activity, and I am interested to see that Timothy Geithner, the President of the Federal Reserve Bank of New York, has now urged that "Banks and investment banks whose health is crucial to the global financial system should operate under a unified regulatory framework with appropriate requirements for capital and liquidity”:
http://link.ft.com/r/8P1R88/XV6V9/042P/9481R/Q322U/82/t Sphere: Related Content

Sunday, June 08, 2008

Where does Obama actually stand on spiritual matters?

While some will no doubt respond with a sharp intake of breath, others will breathe a sigh of relief.

The position of the US Presidential Candidate Barack Obama, so far from being that of a follower of Jesus the Lord, is actually pretty close to that of most Indians!

That is to say, he believes in charms, luck and idols.

The question is: does that make him a better or worse Presidential candidate?

I am assuming that the following report is authentic: http://www.time.com/time/politics/whitehouse/photos/0,27424,1811278,00.html Sphere: Related Content

Saturday, June 07, 2008

The cultural roots of lawlessness, in Russia and elsewhere

"Legal nihilism" is a term that describes widespread disrespect for the law at all levels of Russian society. The term has been coined by the country's just-elected President Dmitry Medvedev. A former law professor, President Medvedev has also promised to make law and order a top priority.

For example, he has called for legislation to rein in "reiderstvo" (the lucrative business of paying a publicly known scale of "fees" in order to bankrupt or take over a company - that scale is apparently $20,000 to $50,000 to the police to open a criminal investigation against a company , around $30,000 to the police/ paramilitary/ detectives for a raid on a company's headquarters in order to seize records and paralyse functioning, and only $10,000 to $200,000 for a favorable court ruling).

On that basis, it costs somewhere around $300,000 dollars for the "administrative" work involved in bankrupting or taking over a company. What is not known is how much has to be paid to politicians and others. And if it is the politicians themselves doing the takeover, presumably they have to share at least some crumbs with others in the system. Presumably, the crumbs have to be relatively large if the company is the size of Yukos or TNK-BP or Hermitage Capital Management.

But even relatively small companies, on Russia's scale, must be tempting - according to the Russian Chamber of Commerce & Industry, some 8,000 companies a year are targets of such lawsuits or investigations intended to bankrupt them or take them over.

What is President Medvedev's solution to such rampant mainpulation of the law by political, criminal and business groups? Well, among other things, the Russian Parliament is now debating a 20-year jail sentence for raiders who acquire companies illegally. It is not clear that any legislative measure is going to address and ameliorate a disease that is deeper than mere legislation - a disease that is, in fact, cultural.

In other words, the question that President Medvedev does not ask is: what are the cultural roots of Russia's lawlessness?

As long as he does not ask that question, as long as he does not find sufficiently insightful answers and as long as he does not put in place a thereby effective programme to combat those roots, he has no hope of actually doing anything about cultural lawlessness, however noble his intentions (the way to hell is paved with good intentions, someone once said).

So what are the roots of a whole culture that is lawless? Clearly, in Russia's case, the other-worldly tradition of the Orthodox Church has something to do with it, because it failed to instill a culture of respect for the law. That is to put it generously. Critics might say that the Church actively colluded (and continues to collude) in creating that culture of lawlessness.

A second contributor to Russia's cultural lawlessness is its Communist heritage. The "law" was whatever the current clique in power SAID was the law. And this continues to be the situation.

A third contributor to cultural lawlessness is the sort of capitalism Russia has sought to put in place: a Darwinist or jungle capitalism arising primarily from the ideology of theorists such as Milton Friedman, and not from any overwhelming sense of morality, justice or what is humane.

No doubt there may be other significant contributors to "legal nihilism" in Russia and other such countries.

In countries outside that ambit, there are equally doubtlessly highly different reasons that are either responsible or contributory. For example, in India, it is the "Hinduism" typified by the VHP; in countries such as Sri Lanka, Myanmar/ Burma, Thailand and Cambodia, it is the quiescent and other-worldly Buddhism of the majority population; in the Philippines, it is the Romanism of ITS majority, and so on. In Africa, it is primarily tribalism and the other-worldliness of the local religions.

You will perhaps have noticed my repeated attack on "other-worldly religions". The reasons for my attack are documented (probably insufficiently!) elsewhere.

However, you may wonder about the role of a "this worldly religion" (Islam) and why THAT does not seem to end up delivering the rule of law in any sense that results in human flourishing.

Exloring this matter requires a rather full discussion. For the moment, let me just say that, as Islam cavils at the essential point of whether morality is absolute or relative in relation to the spread of Islam, muslims have made various compromises in terms of law, ethics and morality in order to spread Islam (just as the Roman and Orthodox and Anglican churches have, and have Hindu, Jain and Buddhist traditions). Once Islam is established in any society, it has so far shown a tendency towards stasis (just as have the other traditions that I named in the last sentence). It is only in the last few decades that there has been any widespread attempt at self-criticism and reform (not always in a desirable direction, principally because such self-criticism and reform have been in response to what Muslims have perceived as the "threat" of modernity - or, in our terms, Protestantisation). That seems to me the principal reason why the actual results of contemporary Muslim reform movements have been either a mixed blessing or overall negative so far, though they could have ended up being positive.

Examples of non-Protestant traditions (though all influenced by the Bible in various ways) that provided some minimal respect for law at least for a time, have been:
- Maoism in China,
- the "catching up" movement, starting under the Tokugawa Shogunate and the Meiji oligarchy in the eighteenth century but more fully under direct American tutelage after World War II, and
- simple nationalism (such as in India under the influence of Mahatma Phule, Mahatma Gandhi and Dr. Ambedkar).

However, a glance at the 2006 "Rule of Law Index", which measures the extent to which agents have confidence in and abide by the rules of society shows that, even in our own day, North America, Europe, Australia and New Zealand are the only areas that are most substantially under the rule of law. Sphere: Related Content

Thomas Friedman's pregnant questions for Palestinians, Israelis and the "peace process"

For the complete set of Friedman's questions and the concerns he raises, see: http://www.spiegel.de/international/0,1518,558086,00.html

What struck me most were these questions: After Israel quit the Gaza Strip in 2005, why did Palestinians, build a Somalia there instead of a Singapore? Instead of focusing on how to make microchips in what was now officially their own territory, with reasonable dollops of international aid continuing to come in particularly from the EU, why did the Palestinians instead make rockets and then actually hit Israel, thereby guaranteeing a strikeback - and the situation that exists today? Sphere: Related Content

Does the Senate Committee Report on the Iraq War constitute the truth about the War?

I am responding to a news report (http://www.spiegel.de/international/0,1518,558224,00.html) .

Apparently, the US Senate Intelligence Committee's recent Report on the events leading up to the Iraq War, argues that "that President Bush should have known that important claims he made about Iraq did not conform with intelligence reports".

Well, the Senate is a political body, and its conclusions are party political conclusions. One can easily see that if the composition of the Committee had been different, the conclusions too might well have been different: the Committee was composed of eight Democrats and seven Republicans - and the report is as it is only because all the Democrats voted in favour of the existing conclusions as did two of the seven Republicans.

From a non-US perspective, the report simply demonstrates the extent to which Americans are obsessed with themselves.

The Committee does not seem to have asked, nor do I know of any other American who asks, the fundamental question: if there really were no chemical, biological or radiological weapons in Iraq, why did the Iraqi regime so convincingly continue to pretend that it did actually have them?

On the basis of the evidence of Iraqi government behaviour, I am inclined to be highly skeptical of the Report. Against all political correctness, American as well as non-American, I continue to look for evidence that the weapons and weapons programmes in fact existed but were sold, either just before or just after the war started, to some interested party. In my view, the work that the then-Iraqi government did in the field continues to exist and is being nurtured somewhere in the world.

I will stop looking for such evidence and believe the Report, as soon as someone explains convincingly the indubitable and politically incontrovertible evidence of Iraqi government behaviour up to and after the start of the Iraq war. Sphere: Related Content

Wednesday, June 04, 2008

Another prediction fulfilled

Some readers will recollect my post of April 28, where I said, "the dollar must be at or near the bottom (watch for the US authorities to intervene as soon as equity and/ or bond prices start being affected by the slide of the dollar - which can't be very far away)".

Well, folks, the day has arrived!

I quote the FT summary:
Dollar surges as Bernanke speaks out
Jun 03 2008 19:05
The dollar surged while oil and gold tumbled after Ben Bernanke surprised markets by making clear the Federal Reserve does not want the US currency to weaken any further because of the risks to inflation

However, this is still in the realm of talk. The Fed has to be judged by its actions, and it remains to be seen what it can and will do. I have no doubt that it will try its best to put a floor under the dollar. What remains to be seen is whether that exercise will work in the short-, medium- or long-term.

For reasons that I have written about elsewhere, the ability of central banks to influence such things has been gradually fading since the day when Soros made his billion by breaking the Bank of England in 1992. However, anyone who has humanity's interests at heart must hope that the Fed succeeds. Sphere: Related Content

Tuesday, June 03, 2008

Soros agrees that there is an "oil price bubble"

Readers who recollect my post of 9 May may like to read the following or related posts on the latest statement by George Soros:

Soros agrees that there is an "oil price bubble":

Soros sounds alarm on oil 'bubble'
Jun 03 2008 05:06
Billionaire George Soros is to tell US lawmakers that the ability of investment institutions to invest in the futures market through index funds is exaggerating price rises
http://link.ft.com/r/ZE9K33/N1IGC/SCBQ/Y6E6X/A5R6H/9A/t Sphere: Related Content