Saturday, February 18, 2006

Unsexy article of the week: Why Big Money could mean Big Peace

At least five of the Taiwanese companies that make parts for Dell computers have factories in China: MSI, Quantra, Darfon, Asutek, Liteon. In order to function, these companies rely on good, open relations between China and Taiwan. Though tensions are always high between the two "countries," the more intertwined these countries become in commercial competition and not political quibbling, the less likely it is that China will ever use exercise its sovereignty over Taiwan.

This is a part of what Thomas Friedman called the Dell Theory of Conflict Prevention:
"no two countries that are both part of a major global supply chain, such as Dell's, will ever fight a war against each other as long as they are both part of the same global supply chain, because people embedded in major global supply chains don't want to fight old-time wars any more."
Friedman illustrates this by showing the process of constructing a Dell laptop he ordered, and comes to the conclusion that "involved about 400 companies in North America, Europe, and primarily Asia, but with 30 key players. Somehow, though, it all came together."

This idea of a supply chain bringing about a new sort of stability isn't new, seeing as it can be found in Kant's 1795 work Perpetual Peace:
The connections, more or less near, which have taken place among the nations of the earth, having been carried to that point, that a violation of rights, committed in one place, is felt throughout the whole, the idea of a cosmopolitical right can no longer pass for a fantastic exaggeration of right; but is the last step of perfection necessary to the tacit code of civil and public right; these systems at length conducting towards a public right of men in general, and towards a perpetual peace.
Yet, there is still the tendancy towards protectionism. On top of that concept of "China is stealing our workers and so on," there is the cry of how capitalism is inherently bad. This is very noticeable in France:
The French regard America as the epitome of liberal “Anglo-Saxon” capitalism. What sets their model apart from the individualist American one, they believe, are the values of equality and community. After a visit to America in the 1940s, Simone de Beauvoir wrote that she regarded “America as the country where capitalist oppression had triumphed in the most vile fashion.”
In France, capitalism, by and large, is bad. It abuses workers in third world countries, it sees nothing but dollar signs, and it places no dignity in humanity.

We are not denying that, rather we are saying that it's only have of the story. As a report on the evening news on TF1 the other night showed, turning the Clemonceau away was much lamented by the Indian shipyard workers who needed the work. So, yes, companies/countries do abuse workers in less developed countries, but at the same time, it has been shown time and time again that these people need the work also in order to make a better life.

That said, we hang largely on the idea that global commerce will stabilize the world, and that most companies don't want war, as it is bad for business. As mentioned in this article:
In the run-up to the Iraq war, some anti-war campaigners made the argument that capitalism and war go hand-in-hand. Because we are running out of resources, they said, the ever-increasing quest for oil and other raw materials would lead to more conflict.

In fact, nothing could be further from the truth. Firstly, we are not running out of resources. This is a counter-intuitive argument, but scarcity of resources, as measured by price, is decreasing. New resources are being found, new technology means that resources are used more efficiently. Higher prices for resources lead to investment in technology or new thinking about how to accomplish end products - leading to less scarcity. While oak furniture is often real wood, my sturdy Ikea bookcases are only Beech veneer because that's the way to make them cost-effectively. Cars of the future will run on hydrogen - not because we run out of oil but because they will be cheaper.

Secondly, while war may be in the interests of defence companies, it is not in the interests of business in general. War gets in the way of commercial interests. It leads to greater uncertainty and higher taxes...
The problem? Why is there still war? Mr. Friedman, would you like to take this?
Obviously, Iraq, Syria, south Lebannon, North Korea, Pakistan, Afghanistan, and Iran are not part of any major global supply chains, all of them remain hot spots that could explode at any time and slow or reverse the flattening of the world.
Friedman points to the only Middle Eastern company traded on the Nasdaq: Aramex. If there was a way to encourage this sort of developement in the Middle East, more Aramex's, we would see a huge change in the social conflicts in the world. In that case, one would think, competition would move from the oil fields to the stock exchange.

What can we do? That we don't know. How do you improve education in a region you've never been to? We'll work on it, but we'll have to get back to you later.

Technorati tags: , , , ,


Post a Comment

<< Home