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Expatriates Changing Societies: The Case of Russia

business travel, double exposure of passenger waiting in airport and modern city skyline

By V. Karacharovskiy, O. Shkaratan and G. Yastrebov

Expatriates are admitted to analytics, decision making or strategic control in foreign (or partially foreign) companies. In Russia, such companies account for roughly one third of domestic turnover. The article discusses the role expatriates play in transforming Russia’s business and work culture, and the complex character of cross-cultural interactions between expatriates and local workers

 

Russia and the West: The Pulse of Relationships

“We need Europe for a few decades, and then we must turn our back on it”1 – this phrase attributed to the famous Russian tzar Peter the Great perfectly characterises Russia’s approach to modernisation in the past. Ironically though, the history has proven that Russia’s crush with Western culture, Western institutions and technologies (in state administration, military affairs, industry and science) was not simply a temporary devotion, but a persistent feature of its many attempts in modernisation ever since Peter the Great.

Russia’s impressive economic growth in the beginning of the 20th century (in fact, the fastest at that time) was highly dependent on foreign capital and highly skilled foreign specialists. Many foreign companies, including Siemens & Halske, Siemens-Schuckertwerke, Rosenkrantz, Lessner, Parviainen, Langensiepen, set up their factories and offices in Russia. Many Russian military factories, such as Obukhovsky, Baltiysky, Izhorsky, Petrogradsky and others, also actively employed foreign engineers.

However, the revolution of the 1917 has forced many foreign companies and specialists to leave Russia. Between 1897 and 1926 the number of specialists from English speaking countries has decreased by almost 10 times, from France and Sweden – by 6-7 times, Germany and Italy – by 1.5-2 times.2 But the Soviet leadership has soon recognised that it needed Western technologies and expertise to conduct its massive industrialisation, and pragmatically benefitted from the Great Depression by “sheltering” many companies and specialists who were seeking opportunities outside of the Western world. Furthermore, after the end of the Second World War as part of post-war reparations USSR willingly adopted Western equipment and technologies that was necessary for advancing its industry.

Obviously, foreign influence on Russian society depended to a large extent on the state of relationships between the USSR, Europe and the USA. Surprisingly though, even during the mutual political isolation of the Cold War and Iron Curtain period, Russia and the Western world did not remain that far from each other. The Soviets strived to assimilate with the West not only in the technological domain: ordinary Soviet people endorsed Western and particularly American culture through movies, music and books. Ironically, the superficial taboos imposed by political elites could not withhold an idealised romantic perception of the Western civilisation among Soviet Russians.

As these taboos waned in the 1990s following Russia’s transition to market economy, the country was flooded with foreign mass culture, as well as foreign companies and expatriates. Later with the economic upswing in the beginning of 2000s and booming GDP growth (from 6% in 2001-2005 to 7% in 2006-2008) Russia became particularly attractive to foreigners. The number of expatriates continuously increased since 2000. Between 2000 and 2008 the number of expatriates from the US increased by 2.7 times, from UK, Germany, France and Italy by 3.4-3.7 times, and EU countries in general by 1.6 times.3 

 

In multinational companies, the clash of abstract romanticised values was replaced by the clash of specific labour and management practices. This forced Russians and expatriates to step over their habits and stereotypes, because in the context of competitive market economy economic efficiency was at stake.

And yet as the first decade of 2000s was coming to an end, the tendency has reversed again. Following the economic crisis and then the stagnation of economic situation in Russia, many expatriates fled the country. Since 2009 the inflow of expatriates from Western countries has been continuously decreasing (from UK and USA it decreased by 5-7 times, from Germany and France  by 3-4 times). And although in 2014-2015 the net outflow has again been replaced by the inflow of expatriates, the current number – around 12 thousand people from EU and US – remains far below even the level of 2000. The current cooling of political relationships and economic sanctions against Russia also work against this tendency.

As Samuel Huntington wrote it in his famous book The Clash of Civilizations, “initially, Westernisation and modernisation are closely linked, with the non-Western society absorbing substantial elements of Western culture and making slow progress toward modernisation. As the pace of modernisation increases, however, the rate of Westernisation declines and the indigenous culture goes through a revival.”4   Could this be exactly what is happening in Russia now? Or could it be that expatriates have already fulfilled their task of transforming the Russian society and that it is now following its own path of development? But what kind of path is it?

 

“Russians Are Not A Welcoming Society” Vs. “Russia Is An Adventure”: Heterogeneity Among Expatriates and Their Influence On Russians

We have identified three groups of expatriates in Russia, which differ in terms of their integration in the Russian society and their perception of Russians. This diversity also implies distinct relationship with the local culture, including the capacity to transform it. We labeled these three groups as “ideologists”, “utilitarians” and “modernisers”.

Ideologists. These are foreign professionals and managers who came to Russia usually with the specific purpose of implementing Western models of management and work organisation in Russian companies. They form a relatively isolated stratum of expatriates, who “stay out of the society” and strive to maintain their essentially Western identity. Interestingly, for them keeping identity and distance with the locals is not only a matter of personal choice, but sometimes a part of contract with employers. Such expatriates are characterised by what we labeled as Cold War type of perception: they perceive Russia largely as a hostile culture that needs to be rectified: “Russians are not a welcoming society. <…> Russians are aggressive generally” or “If they [the Russians] fear, they will do it, but if you ask them, they will think that you are weak” (UK, adviser to the chairman of the board of a bank).

Expatriates with such type of perception can be effective in implementing their tasks, especially if their companies explicitly set the goal to assimilate with Western business models for the purpose of attracting foreign investment, expanding on the international (Western) markets, etc. To fulfill this task “ideologists” do not need to establish the common grounds with the locals, rather they are required to impose a certain type of labour and management discipline according to a predefined template. The less connected are such expatriates with the local culture, the better they will be able to carry out their tasks. The disadvantage of this approach, however, is that it increases the risk of internal conflict between local and expatriate workers. Such conflict, often in a latent form, forces local workers to imitate rather than adopt the new Western discipline imposed by managers, and hence the intervention only has a temporary effect.

Utilitarians. These are expatriates who came to Russia for pragmatic reasons, i.e. as part of their effort in building careers in transnational companies or in search for new business opportunities: “Currently expatriates are here [in Russia] simply for the sake of earning money. They have no other goals. <…>. In the past, however, they were more open to other things like culture. <…> They were falling in love with Russia in the 1980-1990s. But now they seek nothing, but money” (UK, chief editor of a journal, citation translated from Russian). Unlike “ideologists” they more often positively evaluate their experiences in Russia or simply keep neutral: “It took me a long time to decide whether I really want to switch a stable good job in Germany for an ‘adventure’ in Russia” (Germany, top manager of a recruiting agency, citation translated from Russian). But even if they do recognise certain negative and inefficient aspects of the local culture, they are either reluctant to influence the situation or express pessimism about the capacity of the local culture for any positive evolution: “There are many ways to make it more efficient [speaking of business organisation]. But it is futile. This is not going to happen. It’s been like this over a thousand years.” (USA, analytical reports editor at a Russian bank).

“Russia is considered to be a promising market; there are business and career development opportunities here. I am here for this…”

“Utilitarians” can, nevertheless, succeed in transforming the local culture of companies and Russian workers they work with, if, rather than keeping distance, they try to keep a reasonable balance between their approaches to task solving and their understanding and knowledge of the local context (we called them the Balancing type). However, they rarely set an explicit goal of improving the system, especially when they see that they can be quite effective simply by exploiting their knowledge of the local specifics. In that sense their positive influence on the local culture is more an unintentional one.

A different, peculiar kind of “utilitarians” is represented by expatriates, who almost completely replace their Western identity with the Russian one (the Assimilated type). These, however, rarely include top managers and other higher rank expatriates in major companies, and mostly comprise of professionals and small entrepreneurs, most of which have already had connection with Russia in the past as part of earlier experiences (such as travels, education, romantic affairs, etc.). They often think and act almost like Russians and therefore have the weakest potential to influence the local culture. Nevertheless, they can be a source of positive influence for the locals in the sense that they set a certain benchmark of market conduct and efficiency for their competitors.

Modernisers. We found this the most valuable stratum of expatriates, which enables the true evolutionary transformation of the local culture. “Modernisers” perceive Russia neither as a static, nor as a corrupt system, rather they clearly recognise its specifics and try to approach them constructively. Instead of seeking pragmatic balances with the local culture (like “utilitarians”) or imposing Western worldview and mindset on the locals (like “ideologists”), they act both as teachers and learners with respect to the local culture, and seek out the ways, in which the strengths of Western and Russian cultures can be combined to create new, more effective models of work organisation.

They often positively perceive Russians and their experiences in Russia: “They [Russians] are drivers for results. If you give them a task, they will have it done” (USA, manager, research and development department, an FMCG company) or “I like it here. It was my choice. The country is interesting, and I find that the people are interesting, good, and kind. I am never bored here. The city is lively and the people are lively” (The Netherlands, head of the Russian office of a consulting company). Such expatriates also often perceive Russia as a more challenging environment as contrasted with the context of their countries of origin: “I think I will never live in America again. I love being American. I’m definitely American, I’ve been American all my life, but America for me is very boring” (USA, editor and columnist of an on-line newspaper).

Importantly, “modernisers” are not naïve idealists, because they do not expect the local culture to be easily transformable. Just like “utilitarians” they identify the culture’s weaknesses and adequately evaluate its capacity to resist external pressures. What makes them valuable though is that they endorse the challenge of changing it and changing themselves.

 

Changing-By-Collaborating: Does It Work?

The situation in multinational companies in Russia is characterised by a high level of ambiguity.

On the one hand, Russians and expatriates mutually criticise each other for possessing the traits that they find counter-productive. Expatriates often note that their Russian colleagues lack motivation, are unwilling to take initiative, have poor self-organisation and poor time management, and often push the guilt towards somebody else rather than accept responsibility and resolve problems on their own. In turn, Russians criticise expatriates for thinking in templates, excessively high self-opinion and assurance, and excessive reliance on pre-defined rules and regulations even when this is deemed inefficient and unreasonable. A frequent point of criticism is also such quality of expatriates as “impersonal” attitude to work, their unwillingness to consider various “personal circumstances”, as well as “personalities” when dealing with business. Interestingly, this situation is fundamentally different from the orthodox perception of “Western” values and “Western” experience as universal and absolute categories – a trend that had formed in Russian culture back in the 1990s.

On the other hand, Russians and expatriates mutually evaluate many of each other’s business qualities as positive and worth adopting. For instance, Russians are frequently attracted by such qualities of expatriates as their persistent faith in success (as opposed to more wide spread skepticism and pessimism among Russians), exceptionally good organisation and time management, diplomatic skills and political correctness (even in the most routine business issues), high enthusiasm (as opposed to regarding work as an inevitable “burden”) and professional integrity (as opposed to oriental “professional cunning”). Furthermore many of them explicitly state that they try to adopt and develop these qualities in themselves. Expatriates also appreciate and try to adopt certain qualities of their Russian colleagues. These often include higher tolerance for stressful and extreme situations, ability to reach compromises, back-up planning, and more individualised and personalised approach to teamwork. Moreover, they find these qualities useful not only within the specific Russian context, but also for their future international careers.

However, not everything can be changed. Our analysis reveals that many current judgments of expatriates about the business qualities of Russians are consistent with much earlier observations by several other scholars about the qualities of an “average” Russian worker (dating back more than 30 years ago). We thus hypothesise that there exists an invariant set of characteristics, i.e. a specific core of the Russian work culture, which will continue to persist in spite of external influences. One such quality is Russians’ general passivity and indifference in carrying out routine work. This is, however, very different from the extreme enthusiasm, with which they approach problems of either very personal or very global (i.e. state or societal level) concern. Their second persistent feature is the emergency-style manner of work, which can actually explain the paradoxical combination of “laziness” and hard work: most of the times Russians prefer to remain idle, but they apply incredible effort to deliver their work on time in the last moment. Finally, Russians remain highly conservative in their attitudes towards power and authority in the sense that they are always “ready to be given direction” (as cited from one of our interviews with expatriates).

Unlike their Western counterparts Russians put far greater emphasis on individual interests than on collective ones.

More formal measurements of cultural differences (we relied on the CVSCALE approach, which is a variant of the famous Hofstede’s methodology) have also shown that a typical Russian professional is consistently different from typical Europeans and Americans. Unlike their Western counterparts Russians put far greater emphasis on individual interests than on collective ones (which is not surprising – the dualistic and syncretic nature of collectivism in Russia is already well studied in the literature). In addition to that, they are also characterised by a much lower level of uncertainty avoidance (i.e. disrespect for regulations and control) and a much higher power distance (i.e. respect for power). A formal analysis has also shown that this cultural profile also appears to be persistent irrespective of duration of cross-cultural interactions with expatriates.

 

The Fortunes of Westernisation

As history often shows, sooner or later westernisation comes across a stable core of the national culture, after which further change is deemed highly unlikely. However, we believe that the transformation of the local non-Western cultures does not necessarily end here; rather it sets the stage for new models of cross-cultural cooperation, and quite possibly – asymmetrical ones with respect to the classical westernisation scenario. By drawing on the case of cross-cultural interactions between Western expatriates and Russian professionals we have tried to show that it is indeed possible, as it appears to be already taking place in Russia.

 

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About the Author

Vladimir V. Karacharovskiy, Associate Professor, Deputy Head of the Laboratory for Comparative Analysis of Development in Post-Socialist Countries, National Research University Higher School of Economics.

Ovsey I. Shkaratan, Tenured Professor, Head of the Laboratory for Comparative Analysis of Development in Post-Socialist Countries, National Research University Higher School of Economics.

 

Gordey A. Yastrebov, senior research fellow at the Laboratory for Comparative Analysis of Development in Post-Socialist Countries, National Research University Higher School of Economics, deputy editor-in-chief of the Mir Rossii journal.

References

The results of original studies were published in Karacharovskiy V. V., Shkaratan O. I., Yastrebov G. Towards a New Russian Work Culture. Can Western Companies and Expatriates Change Russian Society? Stuttgart: ibidem-Verlag, 2016. It is based on a series of in-depth and structured interviews with expatriates and Russians working in multinational environments in several Russian cities conducted between 2013 and 2014 (see the book for more details on methodology). These studies were gratefully supported by Khamovniki Foundation for Social Research, the Russian Foundation for Humanities and the Basic Research Program of the National Research University Higher School of Economics in Moscow.
1. Cit. ex Gumilev L.N. From Rus’ to Russia: Essays on ethnic history. M.: Ecopros,1994. p. 287.
2. According to Russian censuses. Data taken from Demoscope Weekly (http://demoscope.ru).
3. From here onwards we rely on official statistical data published by the Federal Statistics Service.
4. Huntington, Samuel P. The Clash of Civilizations and the Remaking of World Order, New York, Simon & Schuster, 1996. pp.75–76.

 

TRUMPIN’ AND THUMPIN’ BACK TO THE 1930s

Norcross, GA, USA - October 10th, 2015: Presidential Candidate for 2016 Elections delivering a speech at a political rally near Atlanta, GA in Norcross.

By Dan Steinbock

With the Trump White House, America and a global economy will enter a highly divisive period – as evidenced by the debate about his economic, trade and infrastructure plans.

 

As long as Republicans sustain some unity in and between the White House, the Senate and the House of the Representatives, Trump will benefit from an unprecedented execution power.

To get the economy back on track, Trump’s economic objective is to create 25 million new jobs in the next decade, return to 4% annual economic growth, lower and reform US tax codes. But truth to be told, the growth objective will be undermined by his own trade, tax and immigration policies.

To former President George W. Bush, American security meant that “either you are with us or against us”. US economy has the same significance to Trump – his trade policy is an extension of his domestic economic policy.

 

Trumping Trade – and the Fed

The Trump administration’s “America First” mantra is predicated on a withdrawal from the Trans-Pacific Partnership (TPP) and a renegotiated North American Free Trade Agreement (NAFTA). If Canada and Mexico cannot see Trump eye to eye in the coming talks, the President will simply give notice of the US intent to withdraw from NAFTA.

The new White House intends to crack down all nations that violate trade agreements, as the Trump team sees it. Working together with his top trade executives – who are vehemently against free trade and tend to hold strong anti-China views – Trump has already targeted the biggest US deficit contributors, particularly China, Japan, Canada and Mexico.

The new White House’s trade initiatives have major consequences not just internationally, but for US domestic economy.

According to US Treasury data, major foreign holders of US treasury securities – China, Saudi Arabia and Russia – have reduced their holdings by almost $250 billion since last March. The effect of foreign selling of US treasuries looks like the kind of foreign liquidation that Washington has feared for years. It is also adding to the Fed’s challenges.

 

Here’s the dilemma: If Trump will trigger a $1 trillion debt tornado, which is required by his infrastructure program, when the Fed hopes to accelerate tightening with three new 25 basis points rate increases in 2017, he can no longer rely on the Fed to ease and thus to monetise the debt issuance.

Trump needs trade wars to keep US dollar lower than the Fed would like.

 

Impending Circles of Vicious Nationalism

Nevertheless, as world trade and investment have plateaued, globalisation has ground to a halt. As a result, the proposed Trump tariffs increase the potential of elevated global risks.

The new White House’s trade initiatives have major consequences not just internationally, but for US domestic economy.

There is a historical precedent. In 1930, the US Congress passed the notorious Smoot-Hawley Tariff Act, which sharply raised the cost of foreign imports. While it seemed to work initially, it soon caused other nations to retaliate, which paved the way for the Great Depression and, eventually, for another world war. Such precedents should make us all cautious.

In the coming months, most Trump initiatives – including the administration’s proposed tax cuts, trade policy, manufacturing plans, infrastructure investment, stricter immigration, climate change reversals, balancing power games, military spending and so on – are likely to contribute directly or indirectly to elevated global risks.

The early signs suggest that the Trump administration will, at least initially, shun sober realism and walk the talk. And that, unfortunately, translates to a series of potential shocks to a world economy that can only bear so much.

The original, slightly shorter commentary was released by Shanghai Daily on February 7, 2017.

 

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About the Author

Dan Steinbock is the founder of the Difference Group and has served as the research director at the India, China, and America Institute (USA) and a visiting fellow at the Shanghai Institutes for International Studies (China) and the EU Center (Singapore). For more, see http://www.differencegroup.net.

 

 

Is Trump’s True Agenda Starting to Show Shades of Brown? – The Million Dollar Question

By Peter Koenig

What is really on President Trump’s agenda, what is trustworthy, and what is sheer farce and eventually killed by its own weight of controversy? The million-dollar question on where President Trump is headed is still a door to a dark room.
Where is Mr. Trump coming from and where is he going to? What is really on his agenda, what is trustworthy, and what is sheer farce and eventually killed by its own weight of controversy? – While out there, the different agenda items are spun around by the presstitute as anti-Trump and pro-establishment propaganda. Left and right do no longer exist. The so-called liberal elitist intellectual “left” has sold its soul to the neocons, they may not even realise to what extent. The benefits they cash-in have blinded them to the disaster politics being propagated by the globalist-Atlantists. They are now fully in the realm of the Netanyahu-and-his-Zionist-cronies directed western mass-media. After all, the lush western comfort zone is difficult to leave – while it lasts; key sentence – “while it lasts”. Thereafter the deluge – which may mean eradication of life on earth as we know it.

In comes Trump, thinking he doesn’t need the establishment; a multi-billionaire who doesn’t need the approval or the money from the establishment. In a symbolic gesture, he renounced his salary as President of the United States. – If it only were that simple.

In a historic move, President Trump has signed in the first ten days in Office an impressive number of Presidential Decrees and Executive Orders, has initiated long phone calls with friends and foes – and even received the Prime Minister of Washington’s closest ally, Mme. Theresa May from the UK. To be sure, she came with her own agenda, a trade deal and a promise to keep NATO alive. In the light of everything else that is going on, did she get what she came for, or is it yet another make-believe propaganda event?

Among the Executive Orders, Presidential Decrees and Controversies, is the objective of achieving a peaceful alliance with Russia, jointly fighting terrorism in the Middle East, notably eradicating ISIS and affiliated terror groups like Al-Nusra, Al-Qaeda and other belligerent mercenaries, eventually to finding peace in Syria, Iraq and the Middle East as a whole – as well as in Ukraine.

Mr. Trump also considers NATO “obsolete” and outdated – and rightly so. Since 1991, the official role of NATO, to defend Europe from a possible intrusion of the Soviet Union has disappeared. Never mind, that NATO has since then be reborn, namely as a constant aggressor of Russia, against all agreements made between the “allies”, winners of WWII in 1991, expanding its military bases from 12 in 1991 to over 30 today, all encircling and threatening Russia – willingly provoking possibly an all-devastating WWIII. It is clear that western promises, agreements and diplomacy count for nothing. The US/Western military industrial complex calls the shots – or enunciated differently: lucrative destructive military production and war overrule peace; they buy politicians and diplomats.

 

The “obsolete NATO” statement, was quickly interpreted by his cabinet appointees and military advisors as meaning that Europe has to chip in more – reminding of Obama’s request that European NATO members should contribute with at least 2% (of GDP) military budget, thereby reducing the funding gap which now stands at 70% US vs. 30 % other members.

Trump’s campaign pledges were genuinely addressing the peoples’ concerns. Not only of the American people, but the vast majority of the world’s population wants peace. Contrary to what one would believe, reading, listening and watching the MSM.

While Mr. Trump talked on Saturday, 28 January, for over an hour with Mr. Putin on the phone (https://www.rt.com/news/375416-putin-trump-telephone-call/), seeking harmonious relations, establishing a person-to-person contact between the two leaders, even projecting a personal meeting soon for closer discussions on how to address Syria, Ukraine – the fight against (Washington-made) ISIS and other associated Middle-Eastern terror groups, the ever ongoing anti-Russia drum-beat must be ringing in his ears.

Mr. Trump’s own Cabinet appointees were berating and demonising Russia, following the establishment’s (Deep State) script, with false and toothless accusations. These are the proclamations of Mr. Mattis, Secretary of Defense – “I would consider the principal threats, starting with Russia”; Rex Tillerson, Secretary of State-designate: “Russia today poses a danger”; Mike Pompeo – the new Tea-Party Republican CIA Director: “Russia has reasserted itself aggressively”. Of course, no evidence, just negative propaganda.

All the while, Madame May is warning Mr. Trump on the risks associated in dealing with Mr. Putin and that utmost caution was in order. This may have been one of the reasons for not talking about lifting of sanctions during his conversation with Vladimir Putin. There were serious rumours circulating that in a good will gesture, Mr. Trump may lift the useless and illegal sanctions against Russia.

Of course, this may have made Europe look ridiculous, including the UK under Theresa May, holding on to sanctions which were imposed in the first place only because as vassals to Washington they were unable to resist and refuse the sanctions mandated by Obama, three years ago – and which were doing more harm to Europe than to Russia. And now, what to do, if Trump abolishes them? Do they, the Master puppets of Europe also rescind them, showing publicly that they are nothing but a spineless bunch of stooges?

Also, the only reasoning for the sanctions were two gross and flagrant western lies, (i) Russia interference in Ukraine, and (ii) Russia annexation of Crimea. Lifting the sanctions would mean the justification for them has gone – basically admitting to the lie. The west has literally dug itself in a hole of worms, or worse, a nest of tarantulas.

Now, where does Trump stand? – Here are some of the controversial decrees and executive orders, domestic as well as international.

 

Keystone XL and Dakota Access Pipelines

As part of the many decrees he signed last week, Mr. Trump reversed Mr. Obama’s ban on the Keystone XL pipeline, as well as the Dakota Access pipeline. It is an abrogation of the native Americans’ civil rights living in this area.

As part of the many decrees he signed last week, Mr. Trump reversed Mr. Obama’s ban on the Keystone XL pipeline, as well as the Dakota Access pipeline. It is an abrogation of the native Americans’ civil rights living in this area. He said there would be renegotiation, between whom and whom was not clear. The pipeline projects would follow a quick environmental assessment process. But the main reason for doing so, he said, was creating jobs – creating jobs building the pipelines, but also in manufacturing the steel pipes in the US.

The Sierra Club and other environmentalists immediately denounced Mr. Trump’s decision and announced huge protests, much larger than those which brought Obama to put a freeze on these controversial projects.

According to the Native Online News (http://nativenewsonline.net/currents/trump-white-house-takes-native-americans-web-page-website/), Mr. Trump took down the Native Americans Web Page from the White House web pages, as well as the web pages on civil rights, people with disabilities and climate change, all of which were part of the White House Intranet during the last eight years of Obama’s White House. – Is this indicative on how Mr. Trump feels towards minorities?

 

Transpacific Partnership (TPP) Trade Agreement

One of the new President’s first moves was canceling the Obama-negotiated TPP. This was just a formality, as the trade deal between 11 Pacific countries and the US was already dead during the last months of Obama’s White House tenure. Nothing new there. But this “formality” could pave the way for an equal or even more important trade deal prevention, the TTIP (Transatlantic Trade and Investment Partnership) with the European Union – the deal that would be so bad, it needed to be negotiated in secret and behind closed doors. The same for TiSA, the Trade in Services Agreement that involves 50 countries (49 + US) and would lead the way to privatising all service systems, from water supply to health, to education and on by international corporations, mostly American corporations.

Cancelation of these trade agreements is a good thing. They are all lopsided in favour of American corporations’ rent-seeking activities abroad. They are nefarious for Europeans and Americans alike, if their puppet leaders accept them, like the submissive Brussels technocrats, and their tooth- and spineless member countries. However, that was not Mr. Trump’s worry. His worry is, “America First” – bring back these overseas jobs and manufacture at home, creating jobs at home. This conforms with the deglobalising principle of “local production for local markets, creating local jobs…” – actually supporting the American working class which has been miserably neglected over the past few decades of relentless outsourcing to cheap-labor countries..

 

The Mexican Border Wall

Trump had promised throughout his campaign he would build a wall (Israel style) along the Mexican border to stem the flow of illegal immigrants – and that the cost of the wall had to be borne by Mexico. Mexico’s President, Enrique Peña Nieto said Mexico would not pay for the border wall. Escalating the conflict, President Trump accused Mexico of “burdening the United States with illegal immigrants, criminals and trade deficit”. If Peña Nieto would refuse, The US would pay for the wall with a 20% import levy on all goods and services from Mexico. The argument has come to a standstill, as Mexico’s President, under public pressure, has come forth strong, canceling the meeting with Donald Trump scheduled for this week in Washington.

In his anti-immigrant zeal, Trump did not consider the economic disaster a ban on (illegal) immigrants would mean for western US economies that depend on them – agriculture, hostelries, and small manufacturing.

On the other hand, inventive Mexican business wizards are circulating rumours that Mexico might want to convert the wall into a tourist attraction, equipped with hotels, restaurants, parks, shops and even a museum telling the visitors the true story of the piece of land where the United States has built a wall, to whom that land originally belonged and who stole it and under what circumstances. A bit of history along with the wall could indeed do no harm.

 

Banning Immigration from Muslim Countries

President Trump also signed a controversial Executive Order banning immigration notably from Middle East countries, like Afghanistan, Iraq, Libya, Pakistan, Syria and Yemen.

President Trump also signed a controversial Executive Order banning immigration notably from Middle East countries, like Afghanistan, Iraq, Libya, Pakistan, Syria and Yemen. This created havoc at airport border controls throughout the US and the world, as hordes of refugees and travellers from Middle Eastern countries were blocked, after Trump’s signing of the Executive Order. According to the NYT, a Brooklyn judge ruled to prevent the government from deporting some of the refugees back into their home countries, as they might be exposed to harsh and inhuman treatment. He stopped short, however, from declaring Trump’s action as constitutionally illegal – and did not go as far as letting the stranded crowds into the country. So, the chaos prevails. – What else is new? The Masters of Chaos just added a new dimension to the never-ending chaos of the war on terror.

 

Syria Safe Zones

President Trump last week gave the Pentagon and the State Department 90 days to come up with a plan to establish “safe zones” within Syria. This is akin to the Obama / Hillary desire, implying “no-fly zones” (for Syria military) and potential mid-air conflicts between Russian and US/NATO planes, both allegedly “fighting” terrorists. According to Trump, the “safe zones” were meant to “protect Syrian war-stricken refugees”. This latest idea is a stark departure from his earlier campaign pledge to “make peace” in Syria and cooperate with Russia in eradicating ISIS and other terrorists, and to abandon the policy of US foreign interference. Needless to say, neither Syria or Russia have been consulted. – Kremlin spokesman Dmitry Peskov called on Washington to reconsider such a move in a “conflict-ridden Syria, where both sides are engaged in aerial military campaigns.”

Is it possible that this latest Trump contradiction is in response to Netanyahu’s request and long desire to destabilise Syria and to establish “safe zones” – so that gradually Syria could be infiltrated with US, NATO and Israeli ground troops to “protect” the Syrian population – and eventually advance towards Damascus to force a “regime change”?

With this order to his Pentagon colleagues, Trump breaches his campaign promise of non-interference in other countries. Is he poised to become a traitor only few days into his Presidency?

Surprisingly, Britain’s Foreign Secretary, Boris Johnson has said that “Syrian President Bashar al-Assad should be allowed to run for re-election in the event of a peace deal in Syria.” This is a drastic reversal of the UK position which until recently was a carbon copy of Washington’s “regime change” objective. Johnson added, “We have been wedded for a long time to the mantra that Assad must go, and we have not been able at any stage to make that happen, and that has produced the difficulty we now face. We are getting to the stage where some sort of democratic resolution has got to be introduced … and if there is a political solution, then I don’t think we can really avoid such a democratic event. I think that is the way forward.”

Let’s see how that chives with Mr. Trump’s idea to please Mr. Netanyahu.

 

Torture and Water Boarding – Plus

Already back in February 2016, Trump said, “torture works, water boarding will be back; it will be soft in the light of other interrogation enhancement tactics – we will do much worse – water boarding is fine, but it is not really tough enough.”

Under a three-page draft order, titled “Detention and Interrogation of Enemy Combatants”, Trump would also bring back “rendition” and dark prisons (i.e. CIA’s “black sites”), which Obama banned. If signed, the draft order would also revoke Mr. Obama’s directive to give the International Committee of the Red Cross access to all detainees in American custody. The new Trump rule might lead to a blatant infringement against the Geneva Convention of Prisoners of War.

“These practices of torturing detainees and ‘disappearing’ them in “black sites” are serious crimes which must never be repeated,” Ian Seiderman, Legal and Policy Director of the International Commission of Jurists (ICJ) stated.

Much worse, according to Michel Chossudovsky (http://www.globalresearch.ca/trump-bans-muslims-from-entering-the-united-states-launches-holy-war-against-radical-islam/5570770), Mike Pompeo, the new head of the CIA, favours the reinstatement of “waterboarding, among other torture techniques”. He views Muslims as a threat to Christianity and Western civilisation. He is identified as “a radical Christian extremist” who believes that the “global war on terrorism” (GWOT) constitutes a “war between Islam and Christianity”.

War and destruction are highly profit-oriented; believe it or not, the US economy depends on it. If there was peace tomorrow, the US economy would collapse.

The GWOT is not just fought abroad; it will continue being a major task for the Homeland Security Department, hence guaranteeing their work for years to come. – It is already now hard to believe that anything regarding the absurdly paranoid US security position will change under Trump. He receives orders from above. And the “above”, or the “Deep State” has an absolute interest in preserving the status quo. This is the one way towards the extremely lucrative aim of Full Spectrum Dominance. War and destruction are highly profit-oriented; believe it or not, the US economy depends on it. If there was peace tomorrow, the US economy would collapse.
Moving the US Embassy from Tel Aviv to Jerusalem

Early on in his campaign – and obviously pleasing one of his Deep State masters, Israel’s Netanyahu, Mr. Trump let it be known that he intends to transfer the US Embassy from Tel Aviv to Jerusalem.

As recently reported by Al Jazeera and Information Clearing House (ICH), and against all historic background, preparations are well under way for that move which would be a disaster for US diplomacy, not just in the Middle East but all over the world. The last shred of US credibility would be flushed down the drain.

When France and Britain signed the Skype-Picot Agreement a hundred years ago (May 1916), dividing Ottoman territories among themselves, Jerusalem’s status was designated as an international area, due to its shared religious significance. That status was adhered to throughout the 70 years of almost continuous Israeli – Palestinian conflict.

Trump, under pressure from pro-Israeli Zionist lobbies, also says he may cut funding to the UN, if the international body recognises Palestine. It is clear, Netanyahu pulls the strings on puppet Trump.

And why does Mr. Trump, the strong-minded, financially, politically and, yes, morally independent new President of the United States, voted for by the people, by the common people, by the working-class people, those who have had enough of the promises and lies of the Washington establishment – why does he fall to the pressure of the Zionists?

These are but some of Mr. Trumps starkly controversial and often contradictory policy decisions; many of them pleasing some, but terrifying others – and this not just domestically, but throughout the international arena. The million-dollar question on where President Trump is headed is still a door to a dark room.

One worthwhile agenda item, not yet mentioned but should be considered by Mr. Trump – as suggested by Paul Craig Roberts (http://www.veteransnewsnow.com/2017/01/29/1013784-the-media-is-now-the-political-opposition/), is “breaking into hundreds of pieces the six mega-media corporations that own [and control] 90% of the US [and western] media and selling the pieces to separate independent owners who have no connection to the ruling elites. Then America would again have a media that can constrain the government with truth rather than use lies to act for or against the government.”

This might actually fit Mr. Trumps own outrage with the “fake news” MSM. It might help cutting the monster octopus’s tentacles that currently span and usurp the globe, by feeding the people the truth. However, the monster’s tentacle-amputations would need to be sealed off with a collective consciousness, so they could never grow back.

 

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About the Author

koenig-webPeter Koenig is an economist and geopolitical analyst. He is also a former World Bank staff and worked extensively around the world in the fields of environment and water resources. He lectures at universities in the US, Europe and South America. He writes regularly for Global Research, ICH, RT, Sputnik, PressTV, The 4th Media, TeleSUR, TruePublica, The Vineyard of The Saker Blog, and other internet sites. He is the author of Implosion – An Economic Thriller about War, Environmental Destruction and Corporate Greed – fiction based on facts and on 30 years of World Bank experience around the globe. He is also a co-author of The World Order and Revolution! – Essays from the Resistance.

 

The Issue is Not Trump, It is Us

Close up view of Mount Rushmore with a blue sky

By John Pilger

On the day President Trump is inaugurated, thousands of writers in the United States will express their indignation.  “In order for us to heal and move forward…,” say Writers Resist, “we wish to bypass direct political discourse, in favour of an inspired focus on the future, and how we, as writers, can be a unifying force for the protection of democracy.”

 

And:  “We urge local organisers and speakers to avoid using the names of politicians or adopting ‘anti’ language as the focus for their Writers Resist event. It’s important to ensure that nonprofit organisations, which are prohibited from political campaigning, will feel confident participating in and sponsoring these events.”

Thus, real protest is to be avoided, for it is not tax exempt.

Compare such drivel with the declarations of the Congress of American Writers, held at Carnegie Hall, New York, in 1935, and again two years later. They were electric events, with writers discussing how they could confront ominous events in Abyssinia, China and Spain. Telegrams from Thomas Mann, C Day Lewis, Upton Sinclair and Albert Einstein were read out, reflecting the fear that great power was now rampant and that it had become impossible to discuss art and literature without politics or, indeed, direct political action.

“A writer,” the journalist Martha Gellhorn told the second congress, “must be a man of action now… A man who has given a year of his life to steel strikes, or to the unemployed, or to the problems of racial prejudice, has not lost or wasted time. He is a man who has known where he belonged. If you should survive such action, what you have to say about it afterwards is the truth, is necessary and real, and it will last.”

Her words echo across the unction and violence of the Obama era and the silence of those who colluded with his deceptions.

That the menace of rapacious power – rampant long before the rise of Trump – has been accepted by writers, many of them privileged and celebrated, and by those who guard the gates of literary criticism, and culture, including popular culture, is uncontroversial. Not for them the impossibility of writing and promoting literature bereft of politics. Not for them the responsibility to speak out, regardless of who occupies the White House.

 

Today, false symbolism is all. “Identity” is all. In 2016, Hillary Clinton stigmatised millions of voters as “a basket of deplorables, racist, sexist, homophobic, xenophobic, Islamaphobic – you name it”. Her abuse was handed out at an LGBT rally as part of her cynical campaign to win over minorities by abusing a white mostly working-class majority. Divide and rule, this is called; or identity politics in which race and gender conceal class, and allow the waging of class war.  Trump understood this.

“When the truth is replaced by silence,” said the Soviet dissident poet Yevtushenko, “the silence is a lie”.

This is not an American phenomenon. A few years ago, Terry Eagleton, then professor of English literature at Manchester University, reckoned that “for the first time in two centuries, there is no eminent British poet, playwright or novelist prepared to question the foundations of the western way of life”.

No Shelley speaks for the poor, no Blake for utopian dreams, no Byron damns the corruption of the ruling class, no Thomas Carlyle and John Ruskin reveal the moral disaster of capitalism. William Morris, Oscar Wilde, HG Wells, George Bernard Shaw have no equivalents today. Harold Pinter was the last to raise his voice. Among today’s insistent voices of consumer-feminism, none echoes Virginia Woolf, who described “the arts of dominating other people… of ruling, of killing, of acquiring land and capital”.

There is something both venal and profoundly stupid about famous writers as they venture outside their cosseted world and embrace an “issue”. Across the Review section of the Guardian on 10 December was a dreamy picture of Barack Obama looking up to the heavens and the words, “Amazing Grace” and “Farewell the Chief”.

The sycophancy ran like a polluted babbling brook through page after page. “He was a vulnerable figure in many ways …. But the grace. The all-encompassing grace: in manner and form, in argument and intellect, with humour and cool… [He] is a blazing tribute to what has been, and what can be again … He seems ready to keep fighting, and remains a formidable champion to have on our side… The grace… the almost surreal levels of grace…”

I have conflated these quotes. There are others even more hagiographic and bereft of mitigation. The Guardian’s chief apologist for Obama, Gary Younge, has always been careful to mitigate, to say that his hero “could have done more”: oh, but there were the “calm, measured and consensual solutions…”

None of them, however, could surpass the American writer, Ta-Nehisi Coates, the recipient of a “genius” grant worth $625,000 from a liberal foundation. In an interminable essay for The Atlantic entitled, “My President Was Black”, Coates brought new meaning to prostration. The final “chapter”, entitled “When You Left, You Took All of Me With You”, a line from a Marvin Gaye song, describes seeing the Obamas “rising out of the limo, rising up from fear, smiling, waving, defying despair, defying history, defying gravity”. The Ascension, no less.

One of the persistent strands in American political life is a cultish extremism that approaches fascism.

One of the persistent strands in American political life is a cultish extremism that approaches fascism. This was given expression and reinforced during the two terms of Barack Obama. “I believe in American exceptionalism with every fibre of my being,” said Obama, who expanded America’s favourite military pastime, bombing, and death squads (“special operations”) as no other president has done since the Cold War.

According to a Council on Foreign Relations survey, in 2016 alone Obama dropped 26,171 bombs. That is 72 bombs every day. He bombed the poorest people on earth, in Afghanistan, Libya, Yemen, Somalia, Syria, Iraq, Pakistan.

Every Tuesday – reported the New York Times – he personally selected those who would be murdered by mostly hellfire missiles fired from drones. Weddings, funerals, shepherds were attacked, along with those attempting to collect the body parts festooning the “terrorist target”. A leading Republican senator, Lindsey Graham, estimated, approvingly, that Obama’s drones killed 4,700 people. “Sometimes you hit innocent people and I hate that,” he said, but we’ve taken out some very senior members of Al Qaeda.”

Like the fascism of the 1930s, big lies are delivered with the precision of a metronome: thanks to an omnipresent media whose description now fits that of the Nuremberg prosecutor: “Before each major aggression, with some few exceptions based on expediency, they initiated a press campaign calculated to weaken their victims and to prepare the German people psychologically… In the propaganda system… it was the daily press and the radio that were the most important weapons.

Take the catastrophe in Libya. In 2011, Obama said Libyan president Muammar Gaddafi was planning “genocide” against his own people. “We knew… that if we waited one more day, Benghazi, a city the size of Charlotte, could suffer a massacre that would have reverberated across the region and stained the conscience of the world.”

This was the known lie of Islamist militias facing defeat by Libyan government forces. It became the media story; and Nato – led by Obama and Hillary Clinton – launched 9,700 “strike sorties” against Libya, of which more than a third were aimed at civilian targets. Uranium warheads were used; the cities of Misurata and Sirte were carpet-bombed. The Red Cross identified mass graves, and Unicef reported that “most [of the children killed] were under the age of ten”.

Under Obama, the US has extended secret “special forces” operations to 138 countries, or 70 per cent of the world’s population. The first African-American president launched what amounted to a full-scale invasion of Africa. Reminiscent of the Scramble for Africa in the late 19th century, the US African Command (Africom) has built a network of supplicants among collaborative African regimes eager for American bribes and armaments. Africom’s “soldier to soldier” doctrine embeds US officers at every level of command from general to warrant officer. Only pith helmets are missing.

It is as if Africa’s proud history of liberation, from Patrice Lumumba to Nelson Mandela, is consigned to oblivion by a new master’s black colonial elite whose “historic mission”, warned Frantz Fanon half a century ago, is the promotion of “a capitalism rampant though camouflaged”.

It was Obama who, in 2011, announced what became known as the “pivot to Asia”, in which almost two-thirds of US naval forces would be transferred to the Asia-Pacific to “confront China”, in the words of his Defence Secretary. There was no threat from China; the entire enterprise was unnecessary. It was an extreme provocation to keep the Pentagon and its demented brass happy.

In 2014, the Obama’s administration oversaw and paid for a fascist-led coup in Ukraine against the democratically-elected government, threatening Russia in the western borderland through Hitler invaded the Soviet Union, with a loss of 27 million lives. It was Obama who placed missiles in Eastern Europe aimed at Russia, and it was the winner of the Nobel Peace Prize who increased spending on nuclear warheads to a level higher than that of any administration since the cold war – having promised, in an emotional speech in Prague, to “help rid the world of nuclear weapons”.

Obama, the constitutional lawyer, prosecuted more whistleblowers than any other president in history, even though the US constitution protects them. He declared Chelsea Manning guilty before the end of a trial that was a travesty. He has refused to pardon Manning who has suffered years of inhumane treatment which the UN says amounts to torture. He has pursued an entirely bogus case against Julian Assange. He promised to close the Guantanamo concentration camp and didn’t.

Following the public relations disaster of George W. Bush, Obama, the smooth operator from Chicago via Harvard, was enlisted to restore what he calls “leadership” throughout the world. The Nobel Prize committee’s decision was part of this: the kind of cloying reverse racism that beatified the man for no reason other than he was attractive to liberal sensibilities and, of course, American power, if not to the children he kills in impoverished, mostly Muslim countries.

This is the Call of Obama. It is not unlike a dog whistle: inaudible to most, irresistible to the besotted and boneheaded, especially “liberal brains pickled in the formaldehyde of identity politics,” as Luciana Bohne put it. “When Obama walks into a room,” gushed George Clooney, “you want to follow him somewhere, anywhere.”

William I. Robinson, professor at the University of California, and one of an uncontaminated group of American strategic thinkers who have retained their independence during the years of intellectual dog-whistling since 9/11, wrote this last week:

“President Barack Obama … may have done more than anyone to assure [Donald] Trump’s victory. While Trump’s election has triggered a rapid expansion of fascist currents in US civil society, a fascist outcome for the political system is far from inevitable …. But that fight back requires clarity as to how we got to such a dangerous precipice. The seeds of 21st century fascism were planted, fertilized and watered by the Obama administration and the politically bankrupt liberal elite.”

Robinson points out that “whether in its 20th or its emerging 21st century variants, fascism is, above all, a response to deep structural crises of capitalism, such as that of the 1930s and the one that began with the financial meltdown in 2008… There is a near-straight line here from Obama to Trump… The liberal elite’s refusal to challenge the rapaciousness of transnational capital and its brand of identity politics served to eclipse the language of the working and popular classes… pushing white workers into an ‘identity’ of white nationalism and helping the neo-fascists to organise them”..

The seedbed is Obama’s Weimar Republic, a landscape of endemic poverty, militarised police and barbaric prisons: the consequence of a “market” extremism which, under his presidency, prompted the transfer of $14 trillion in public money to criminal enterprises in Wall Street.

Perhaps his greatest “legacy” is the co-option and disorientation of any real opposition. Bernie Sanders’ specious “revolution” does not apply. Propaganda is his triumph.

The lies about Russia – in whose elections the US has openly intervened – have made the world’s most self-important journalists laughing stocks. In the country with constitutionally the freest press in the world, free journalism now exists only in its honourable exceptions.

The obsession with Trump is a cover for many of those calling themselves “left/liberal”, as if to claim political decency. They are not “left”, neither are they especially “liberal”.  Much of America’s aggression towards the rest of humanity has come from so-called liberal Democratic administrations – such as Obama’s. America’s political spectrum extends from the mythical centre to the lunar right. The “left” are homeless renegades Martha Gellhorn described as “a rare and wholly admirable fraternity”. She excluded those who confuse politics with a fixation on their navels.

While they “heal” and “move forward”, will the Writers Resist campaigners and other anti-Trumpists reflect upon this? More to the point: when will a genuine movement of opposition arise? Angry, eloquent, all-for-one-and-one-for all. Until real politics return to people’s lives, the enemy is not Trump, it is ourselves.

This article was first published on counterpunch on 17 January 2017

 

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About the Author

johnpilger-webJohn Pilger has been a war correspondent, author and documentary film-maker. He is one of only two to win British journalism’s highest award twice, for his work all over the world. He received the United Nations Association Peace Prize and Gold Medal, and the prestigious Sophie Prize for ‘thirty years of exposing deception and improving human rights’.

 

Director John Pilger: Disastrous consequences if US proceeds with “policy of provocation”

Managing Human and Intellectual Capital for Sustaining African Organisations

By Hamid H. Kazeroony, Yvonne du Plessis, Bill Buenar Puplampu

In this article, the authors examine the needs of African organisations for human and intellectual capital and suggest how they should work with governments and the educational system to acquire, retain, and develop higher performing talent. Such efforts would create more dynamic and productive organisations to serve African growth.

 

African organisations to function and compete effectively in the global marketplace require particular focus on managing human and intellectual capital.

African continent, since the end of colonial era, which calumniated in the collapse of apartheid in South Africa in 1994, completing the transition, has undergone numerous social, political, economic, and cultural changes impacting management and organisational processes. The transitions within this period gave rise to a new set of human and organisational challenges in each African country in addition to the emergence of social and economic demands by various stakeholders for managing various resources (Kazeroony, 2016). To address their human and intellectual capital needs, African organisations – as stakeholders in their respective countries – should work with their governments and higher education institutions to expand capacity and address social, political, and cultural influencers in the development of human capital. They should continually examine their internal organisational dynamics and organisational practices and relate these to the current and emerging African market conditions within the global economy (Kazeroony, Du Plessis, & Puplampu, 2016). It is only through such focused attention that human capacity may be enhanced to serve African organisations. In this paper, we share a few thoughts on how these may be realised.

 

Macro and Micro Issues in Human Capital Development

At the macro level, public organisations such as the African Capacity Building Organization (ACBF) (What Do We Do, n.d.) help with a variety of financial and expertise resources to advance capacity building for governmental and private actors directly, addressing the human and intellectual needs of organisations for growth and innovation. In addition, organisations such as the African Development Bank Group have been very active in supporting the growth of human capital by engaging in projects that would benefit gender diversity to maximise the human capital utilisation while expanding support for higher education developments in enlarging the intellectual capital pool for African organisations (Capacity Building, n.d.). These represent tangential efforts by non-State actors to influence skill development. However, as the President of Liberia, Ellen Sirleaf noted, African governments may develop policies quickly to address capacity building, however, implementation, prioritisation, and governance issues pose difficult obstacles (Ratcliffe, 2013).

At the micro level, individuals attempting to build their intellectual capacity, face multiple obstacles such as lack of family financial means, lack of educated family members understanding particular needs for success, and limited pathways for access to and progress through higher education.

Higher Education Institutions are the actors who connect the human and intellectual capital requirements of organisations to the individuals who seek skill development and the marketplace which “consumes” talent.

African Higher Education Institutions currently face many challenges including policy gaps, resource constraints, and brain drain. Each of these challenges underscore the need for reform and changes in public policies, collaboration with the private sector, and attention to the gaps between foundational knowledge gained at the elementary and secondary schools and the curricula for developing human and intellectual capital at the higher education end of the spectrum.

 

Public funding of higher education as a part of the infrastructure crucial to the development of human and intellectual capital has remained uneven and subject to governments’ revenue stream. For example, for two decades, the Botswana government, using its mineral revenue, supported the development of higher education to grow its human and intellectual capital (Mpabanga, 2016). However, as commodity prices declined, the Botswana government along with many others in Africa could not sustain high expenditures on Higher Education (HE) in Ghana freezes on wages, recruitments and percentage allocation of government budget resources have been used to deal with dwindling resource options. In addition, regulatory liberalisations have been used to allow private operators into the HE sector to reduce the pressure on government spending.

There is no evidence of systematic integration of current and future industry skill needs with universities’ curricula design processes for sustainable development of human and intellectual capital. However, there are isolated cases where particular universities have adopted limited integration of some aspects of required industry skills into their programs. Examples can be found at Strathmore University Business program in Kenya; Central University in Ghana and Pan African University in Nigeria.

Finally, political issues such as terrorism in Somali and north-western Africa, and Nigeria, war in countries such as South Sudan and Central African Republic, and party in-fighting in places such as South Africa has had debilitating effects on primary and secondary education, destroying bridges to the higher education, and diminishing the higher education capacity to build the human and intellectual capital required by African organisations. The current “Fees Must Fall” protests (News24, 2016) within higher education institutions in South Africa are crippling opportunities for many scholars and do not contribute positively to the developmental landscape in the country and the African continent. We are at present witness to the political and policy impasse in South Africa regarding the “fees-must-fall” conundrum confronting that country.

 

Role of Agencies and Organisations in Building Human Capital

While international agencies such as the World Bank and the African Development Bank, just to name two, have been helping to build the higher education infrastructure in Africa (African Development, 2009; Africa, 2015), the African needs for sustainable human and intellectual capital requires localised attention in each country. For example, while some universities have benefited from prestigious accreditations status publicly stating their capacity to produce high quality human and intellectual capital to conform to international standards others have not had the resources nor support from existing policy frameworks to be as effective.

Education and human capacity must be built in ways which recognise and require uniquely African constructs embedded in African symbolisms, values, and cultures.

Many countries in Africa have national accreditation systems which oversee the HE sector. It is increasingly important that the educational policy directives issued by political actors in government address the gradual integration of Africa into global economy. It is also important that African organisations create their own sphere of influence to inform educational policy. In Ghana, there is a National Accreditation Board and a National Council on Tertiary Education. As an example, these two agencies ought to examine the peculiar African dilemmas and needs and build up credible human capital approaches which are context located rather than follow the Western organisational models. Education and human capacity must be built in ways which recognise and require uniquely African constructs embedded in African symbolisms, values, and cultures (Puplampu, 2016). It is also important that civil society actors must develop research models which expose the unique skill needs of different places in Africa. Research bodies must spearhead active and interventionist research which offers direct access to information which can be used to change educational policy. This would require links with industry, business regulators, scientific agencies and HEs.

African organisations are communities where relationships are imperative to the operation of the work as manifested by the concept of Ubuntu.

Unlike Western organisational models where relationships are built around the core values of organisation, rooted in organisational culture and enforced by a set of organisational policies and procedures outlined in their human resource manual, African organisations are communities where relationships are imperative to the operation of the work as manifested by the concept of Ubuntu (Bobina & Grachev, 2016). In addition, concepts such as Burungi bwansi (coming together in addressing the community needs) and Kirinju (the one with a grey hair) provide unique African perspectives regarding relationships and hierarchy within African organisations (Mutungi, Mutungi, & Fuentes, 2016). It is; therefore, important for scholars in management in Africa to work to unearth the complicated but viable nexus between some of the traditional cultural nuances noted above and the global demands for formalised procedure and organisational structures as well as the flexibilities demand by globalisation, ICTs and fast changing market situations. These understandings will be crucial if HEs are going to develop the required talent for the future of African organisations and if these organisations are aiming to successfully acquire, retain, and develop the necessary human and intellectual capital to become competitive in their respective industries.

 

The Sustainable Path to the Future

The prospects and views we share above will be important to enable organisations to work with higher educational institutions to shape curricula for developing the required human and intellectual capital.

We contend that managing human and intellectual capital for sustaining African organisations require a holistic approach which

  1. addresses the need for alignment between primary, secondary, and higher education curricular development and implementation,
  2. aligns and dedicates public funding and private foundations for projected human and intellectual capital for responding to each country’s organisations’ needs going forward
  3. supports the conduct of internal diagnostics by organisations to determine their inner dynamics and organisational models and assess their human capacity needs and translate these into practical curricula for universities
  4. facilitates the development of organisational processes to actively help recruit, retain, and develop internally and
  5. promotes relevant stakeholder dialogues which communicate and synergises organisational, economic, social and political agendas and with human capital needs so as to inform public policy and relevant actors.

Featured image courtesy: University of Ghana

 

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About the Author

Hamid H. Kazeroony is Professor of the PhD Management program at Walden University, he is the co-editor of Sustainable Management Development in Africa (Routledge, 2016), Capitalism and Social Relationship (Palgrave, 2014), The Routledge Companion to International Management Education (Routledge, 2013), and The Strategic Management of Higher Education Institutions (Business Expert Press, 2011).


Yvonne du Plessis is Professor of Organizational Behaviour and Strategic Human Resource Management at School of Business and Governance at the North-West University, South Africa.


Bill Buenar Puplampu is Professor of Organizational Behaviour and Chartered Psychologist of the British Psychological Society and the Pro Vice-Chancellor (Academic Affairs)
Central University, Ghana.

 

References
1. Africa [Fact sheet]. (2015, October 22). Retrieved December 7, 2015, from http://www.worldbank.org/en/region/afr/overview#1
2. African Development Bank. (2009). African Development Strategy for Higher Education, Science, and Technology. Retrieved June 15, 2014, from African Development Bank Group website: http://www.afdb.org/fileadmin/uploads/afdb/Documents/Policy-Documents/yol%20%C3%A9duc%20eng.pdf
3. Bobina, M. & Grachev M. (2016). African Social, Cultural, and Political Influences. In H. H. Kazeroony, Y. Du Plessis, & B. B. Puplampu (Eds.), Sustainable management development in Africa: Building capabilities to serve African organizations (pp. 99-122). New York: Routledge.
4. Capacity Building [Fact sheet]. (n.d.). Retrieved October 2, 2016, from African Development Bank Group website: http://www.afdb.org/en/knowledge/african-development-institute/capacity-building/
5. Kazeroony, H. H. (2016). Framing Sustainable Management Development in Africa. In H. H. Kazeroony, Y. Du Plessis, & B. B. Puplampu (Eds.), Sustainable management development in Africa: Building capabilities to serve African organizations (pp. 1-6). New York: Routledge. Kazeroony, H. H., Du Plessis, Y., & Puplampu, B. B. (2016). Sustainable management development in Africa: Building capabilities to serve African organizations. New York: Routledge.
6. Mpabanga, D. (2016). Public Policy and Higher Education: The Case of Botswana. In H. H. Kazeroony, Y. Du Plessis, & B. B. Puplampu (Eds.), Sustainable management development in Africa: Building capabilities to serve African organizations (pp. 9-46). New York: Routledge.
7. Mutungi, S., Mutungi, E., & Fuentes, R. (2016). Management Theories: The Relegated Strengths-Based African Practices. In H. H. Kazeroony, Y. Du Plessis, & B. B. Puplampu (Eds.), Sustainable management development in Africa: Building capabilities to serve African organizations (pp. 188-201). New York: Routledge.
8. News24(2016) FeesmustFall protests, retrieved October 5 2016 from http://www.news24.com/SouthAfrica/News/counting-the-cost-of-feesmustfall-protests-20160412
9. Puplampu, B. B. (2016). Alternative Approaches to Management Research in Africa. In H. H. Kazeroony, Y. Du Plessis, & B. B. Puplampu (Eds.), Sustainable management development in Africa: Building capabilities to serve African organizations (pp. 171-187). New York: Routledge.
10. Ratcliffe, A. (2013, April 26). Capacity building is key to delivering development in Africa. The Guardian. Retrieved from https://www.theguardian.com/global-development-professionals-network/2013/apr/26/development-delivery-aid-agencies
11. What Do We Do [Fact sheet]. (n.d.). Retrieved October 2, 2016, from http://www.acbf-pact.org/what-we-do/our-work

 

The Philippines “BRIC” Plan: From Regime Change Ploys to Accelerated Economic Development

Philippine presidential race front-runner Davao city mayor Rodrigo Duterte kisses the Philippine flag during his final campaign rally in Manila, Philippines on Saturday, May 7, 2016. A bruising presidential campaign drew to a close in the Philippines Saturday with a last-minute attempt by the president to unify candidates against a front running mayor perceived as a threat to democracy virtually collapsing. (AP Photo/Aaron Favila)

By Dan Steinbock

While the Obama White House prepared plans for regime change in the Philippines, President Trump is working on an assertive strategy in Asia. Meanwhile, President Duterte is accelerating the country’s economic growth – dramatically.

 

After the election triumph of President Rodrigo Duterte, the Philippines has initiated a series of economic reforms to accelerate development, decentralise governance and a tough but controversial struggle against corruption and drugs.

The early economic signals are promising. Recently, Finance Secretary Carlos Dominguez III announced that the government is set to sustain growth at close to 7% in 2017, despite “political noise”, by banking on higher infrastructure spending, tax and other reforms, improved peace and order.

The big question is President Trump’s strategy for the region. With his keen interest in history, Duterte knows only too well that, while the US is a powerful regional ally, American security state and imperial dreams, including torture, originate historically from the Philippines. Yet, few expected the Obama State Department to respond as palpably as it reportedly did.

 

Regime Change Plan

After the controversial US Ambassador Philip Goldberg left the Philippines, he wrote a “blueprint to undermine Duterte within 18 months”. According to the document, which was leaked to The Manila Times early in the year, Goldberg advocates fostering public discontent with Duterte by isolating the Philippines through military assistance and economic “blackmail” relative to other ASEAN member countries.

While Goldberg thinks that “(deposing Duterte) would be a challenge for the opposition”, his goal is imperial “rule and divide” among Philippine congressmen and senators; the ASEAN states; and international multilateral organisations. Moreover, the pro-US opposition should be strengthened through aids and grants. The plan calls on Washington to deploy economic, political and military strategies against Duterte “to bring him to his knees and eventually remove him from office”.

According to Daniel Russel, State Department’s assistance secretary for East Asian affairs, the allegations of a blueprint are false. However, Russel himself is a key figure in the US pivot towards Asia. US-based sources have also tried to discredit the blueprint as coming from China’s Philippine Ambassador Zhao, which the executive editor of The Manila Times Dr. Dante Ang calls a “fantasy”.

It is not the first time Goldberg is associated with regime change efforts. In 2008 President Evo Morales and the Bolivian government gave him 3 days to leave the country after declaring him persona non grata – following efforts to fund the opposition leaders, separatists and think-tanks with millions of dollars.

Yet, President Obama rewarded Goldberg by appointing him assistant secretary of state for Intelligence and Research; one of the 16 elements of the US Intelligence Community. That made Goldberg the middleman between US intelligence and US diplomacy. Thereafter he was sent to the Philippines, which he left in less than three years after efforts to intervene with the election outcome.

 

Exploiting Opposition, Human Rights and Ngos

The regime plan ensued after election last May, when President Aquino’s designated successor – former interior minister Manuel Roxas, an ex-investment banker and Liberal Party leader – failed to deliver a democratic victory. Known as “Mr. Market”, Roxas appealed to elites in Manila and Washington but Duterte got almost 40% of the national vote, nearly twice as much as Roxas.

Since elections, there remain nagging questions about the rise of a “narco state” and “drugs generals” during Roxas’ watch as interior minister. One of them is a vocal Roxas supporter, retired national police chief general Marcelo Garbo Jr., a “protector of drug syndicates”. To set such perceptions aside, Goldberg’s plan argues that the political opposition “would need all the political weapons in their arsenal to replace Duterte”. The plan advises “restraint in expressing public support for former President Fidel Valdez Ramos and Vice President Leni Robredo, and other opposition leaders “so as not to alarm the Duterte administration of an impending destabilisation or a coup”.

These plans rely on the centre-right Philippine Liberal party, which is known for its market-friendly neoliberal policies and firm support of the US pivot to Asia. Ramos was trained at US West Point in 1960. In the 1980s, he was in President Marcos’s inner circle of national police and military. Following the fall of Marcos, he served as President Corazon Aquino’s military chief. In turn, Leni Robredo is a lawyer and social activist, who the Duterte administration sees more loyal to opposition and possibly the Goldberg plan. Her relationship with the Cabinet fell apart in December, when she was informed “to desist from attending all Cabinet meetings”.

In geopolitics, human rights and non-governmental organisations (NGOs) have only too often been used as geopolitical instruments. The Philippines is no exception. In the Benigno Aquino III era until mid-2016, complacency with drug lords and narco politicians went hand in hand with the rise of 3.7 million addicts. International media was quiet about both. However, when Duterte started his war against drugs and corruption, which has cost over 6,000 lives, international concern escalated rapidly.

In geopolitics, human rights and non-governmental organisations (NGOs) have only too often been used as geopolitical instruments. The Philippines is no exception.

In the public debate, the point person has been Senator Leila de Lima, Aquino’s former Secretary of Justice, who chaired a senate inquiry into the extrajudicial killings of drug suspects. She has been glorified by the BBC as “the woman who dares to defy Philippine president Duterte” and as an outspoken advocate of “justice”. For the same reason de Lima was invited to and awarded in the US as one of the “leading 100 global thinkers” by the Democrats’ Foreign Policy. In the Philippines, many see her awards as perversions of justice, however.

Last August, de Lima was found to have a 7-year affair with her lucratively-rewarded driver Ronnie Dayan who served as her money collector for drug protection and campaign financing. When she was still Justice Secretary, the Discovery Channel presented an unsettling documentary Inside the Gangster’s code on ruthless gangs exerting control over the notorious New Bilibid Prisons, while being coddled by the Aquino administration. Oddly enough, de Lima was removed from the Senate committee last September, but her international accolades ensued after the disclosure of her activities. International media has largely ignored her abuse of public office and public funds.

Non-governmental organisations (NGOs) also play a role in US-Philippines geopolitics, along with wealthy US Filipinos linked with the Aquino circles, such as billionaire philanthropist Loida Nicolas-Lewis, who served as an attorney for the US Immigration and Naturalization Services in 1979-90. Her sister is former chairwoman of Commission on Filipinos Overseas, Imelda Nicolas. Both are Robredo supporters.

A more influential source of funds is billionaire George Soros, who Duterte says has bankrolled local NGOs against him as he has been portrayed as a “mass murderer” in the West. International media has relied on these NGOs and think-tanks in their demonisation of Duterte.

Last November, the US-based Millennium Challenge Corporation (MCC) did not renew its $430 million aid grant to the Philippines. While the Duterte’s criticism about “aid conditions” was reported as “tirades against America” in the West, the MCC is hardly independent. It is chaired by State Secretary John Kerry and Treasury Secretary Jacob Lew. It also deploys indicators that precondition aid on neoliberal policies.

The MCC debacle is overshadowed by the economic implications of US-Philippine military ties. Until 2010, the country’s military expenditures decreased two decades from 1.6% to 0.8% of GDP. During the Aquino era, which coincides with the US pivot to Asia, the expenditures soared to almost 1.4% of GDP, according to SIPRI – which in dollar terms is over five times the proposed aid package in just one year.

 

Ambitious, Transformational Economic Efforts

Under Duterte’s leadership, Manila’s economic development has been dramatically accelerated. Again, international media has largely ignored the story. According to Ernesto Pernia, director general of the National Economic and Development Authority (NEDA), the Philippines must ramp up its total investment spending to some 30% of GDP to achieve its development goal.

The effort is to become an upper middle-income economy by the end of Duterte’s term in 2022, which would pave the way for a high-income economy by 2040. If peaceful conditions prevail in Southeast Asia and the Philippines remains united, such ambitious objectives could be viable.

Last July, I argued in the Philippines Foreign Service Institute (FSI) that, in order to accelerate growth, the country should drastically increase both its domestic and foreign investment, seek funds not just from the Asian Development Bank (ADB) but from the Asian Infrastructure Investment Bank (AIIB); and not just from US and European multinationals but from Chinese companies. Nor can the Philippines any longer afford to export its people, I added. Although some 10% of the GDP can be attributed to remittances, no BRIC-like emerging economy can misallocate its human capital in such a manner. Even the most favourable demographics will be wasted, if there are not enough jobs.

The Duterte administration is intent to restore the kind of growth track that the Philippines enjoyed in the early postwar era when its living standards were still second to those of Singapore in Southeast Asia.

It is this “BRIC-like” transformation that Manila is now trying to achieve. As a result, the public share of investments would have to climb from 5.4% of GDP in the ongoing year to 7% onward until 2022. As private and public investment is expected to contribute 18.6% and 5.4% of GDP, respectively, that would boost total investment to 24% of GDP. The Duterte administration is intent to restore the kind of growth track that the Philippines enjoyed in the early postwar era when its living standards were still second to those of Singapore in Southeast Asia.

However, even the ambitious infrastructure program will not be enough to eradicate poverty and become a high-income economy by 2040. To achieve its ultimate objective, the Philippines needs to raise total investments from the hoped-for 24% this year to 30% of GDP, of which only 7% would be contributed by the public sector.

Additionally, Manila needs to implement broad and deep reforms in tax policy and administration to raise enough revenue to fund the government’s huge spending plan. According to ASEAN, in 2015 FDI in the Philippines was around $5.7 billion, significantly behind Indonesia, Thailand and Vietnam, which attracted FDI of $16.9 billion, $8.0 billion and $11.8 billion, respectively.

As real GDP growth rate is accelerating, Manila is pushing for legislative reform, which would streamline the regulatory environment, and the pivot to China, which translates to the participation of AIIB in Philippine projects and has already led to $24 billion in aid pledges. At the same time, the longstanding maritime dispute has been set aside. At the same time, Japan, a historical investment partner, is planning to raise its FDI in the Philippines with $1.8 billion in business deals plus a pledge from conglomerate Marubeni to invest $17.2 billion in water, power and infrastructure.

Unlike his predecessors, Duterte has little interest in exporting more people. “We have to improve the economy so you will not come back here”, said Duterte during his recent visit in Japan to migrant workers. “If ever you will return to Japan, it will be for a vacation.”

Finally, in my FSI presentation, I also argued that the Duterte administration’s efforts to negotiate sustained peace deals with its Communist and Islamist insurgents could be seen as part of the new economic strategy. A “no-conflict” approach within and around the country would boost stability and thus increase the potential for prosperity. And that precisely has been Duterte’s objective, particularly in the troubled regions and islands in the south; particularly in Mindanao, whose natural resources hold great potential for future economic development.

 

From Obama’s Regime Changes to Trump Uncertainty

In the Philippines, the alleged plan of Vice President Robredo’s supporters to create dissent against Duterte has become a national issue. If a Ramos-Robredo scenario were to fail, Golberg advises exploiting possible rifts “among Duterte supporters”, or assisting “Robredo led opposition groups” coupled with the Catholic Church, business sector and NGOs.

Despite the controversial drugs war, Duterte’s approval and trust ratings in the Philippines remains 83%, according to the Pulse Asia survey. Only 5% of the nation disapproves of Duterte. However, the ratings of opposition figures have fallen. At the same time, the legal battle about vice-presidency is heating. Leni Robredo won vice-presidency with a narrow margin against former senator Ferdinand “Bong Bong” Marcos, former President Marcos’s son. In his electoral protest, Marcos says that the Liberal Party rigged the 2016 elections in favour of Robredo. That kind of fraud would no longer be surprising.

The stakes in the Philippines are no longer just domestic. Today the country’s stability is strongly supported by Beijing as well. Amid the news about the “ouster plot”, foreign ministry spokeswoman Hua Chunying said China was confident on Duterte’s leadership and would continue to support his policies.

Soon President Trump’s administration must reassess Goldberg’s regime-change scenarios in light of his own pledge to redefine “America First” policies in Asia and China. Before the US elections, Trump and Duterte had a brief but friendly phone conversation. While Duterte may get better along with Trump than former President Obama, the new White House’s Philippines plans are subject to its broader Asia and China strategy which – as secretary of state Rex Tillerton’s confirmation hearings suggest – could mean greater assertiveness in the region.

In the Philippines, any US-led regime change effort would face firm domestic, regional and international opposition. Only the Philippines can determine its own future. Unipolar regime change plans should have no role in the multipolar 21st century – especially in Asia which is critical to global growth prospects.

 

 

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About the Author

dan-steinbock-webDr. Dan Steinbock is an internationally recognised expert of the nascent multipolar world. Dan Steinbock is the founder of the Difference Group. He has also served as the research director at the India, China, and America Institute (USA) and a visiting fellow at the Shanghai Institutes for International Studies (China) and the EU Center (Singapore). In the Philippines, he has addressed leading foreign policy, economic and climate change, as well as competition and innovation institutions. For more information, see http://www.differencegroup.net/

 

Trumping World Trade

By Dan Steinbock

After the inauguration, President Trump has begun to reset the White House trade policies. But the consequences of “America First” stance in world trade are wrought with threats.

 

Recently, President Xi Jinping gave a strong speech about the need for more inclusive globalisation at Davos. World trade is a case in point.

In 2015, world export volumes reached a plateau. World trade is no longer growing. Any major protectionist initiative has potential to make a bad situation a lot worse.

 

Trump’s Trade Appointments and Tariff Plans

In the early 2010s, the Obama administration touted the Trans-Pacific Partnership (TPP), which excluded China. On his inauguration day, Trump announced US withdrawal from the TPP and promised to renegotiate NAFTA; if Mexico and Canada would refuse a negotiation, he would have US withdraw also from NAFTA.

The goal is to force some countries, particularly Mexico and China, to change their trade practices, which he has vowed to challenge with “cease and desist” letters and greater pressure for intellectual property rights (IPRs).

Trump has promised to renegotiate or reject other US international commitments. And he has threatened to use 35-45% import tariffs, while his team has floated 10% tariffs. The goal is to force some countries, particularly Mexico and China, to change their trade practices, which he has vowed to challenge with “cease and desist” letters and greater pressure for intellectual property rights (IPRs).

 

Trump’s appointments suggest potential for serious trade friction. He selected Peter Navarro, the author of sensationalist China-bashing books (The Coming China Wars, 2005; Death by China, 2011; and What China’s Militarism Means for the World, 2015), to head the new National Trade Council (NTC), which will oversee industrial policy in the White House.

Navarro’s anti-China buddy Dan DiMicco, former CEO of largest US steel company Nucor and vocal free trade critic, became Trump’s trade advisor and former Reagan administration trade hawk Robert Lighthizer, his US Trade Representative.

The three will work with Secretary of Commerce, billionaire Wilbur Ross, who made a fortune by offshoring American jobs and as bankruptcy expert. He calls China “the world’s most protectionist country.”

 

Targeting US Deficit

Targeting the US deficit Trump has also named Japan as one of the deficit contributors, which Japan’s Finance Minister Taro Aso has considered inappropriate. In terms of trade imbalances, “China is No 1”, Aso says.

In protectionist initiatives, the blame is in the eye of the beholder because one country’s deficit is another’s surplus. Trump’s trade warriors will begin by singling out nations that have large trade surplus with the US. That makes big trading economies obvious targets. In 2015, the list was topped by China ($367 billion), Japan ($69) and Mexico ($61 billion), and Germany ($60 billion)

However, they are likely to ignore the size of these surpluses on a per capita basis. If we take into account the population size, Germany ($720) is the deficit leader followed by Japan ($543), Mexico ($488), but China ($262) is far behind.

Now, if the Trump administration really is serious about targeting deficit leaders, it should probably consider a trade war with Ireland. After all, US has a deficit of $30 billion with Ireland, which translates to $6,380 in per capita terms – that’s 9 times the German and 24 times the Chinese figure, respectively.

In reality, trade deficits are likely to serve as pretexts for protectionism – even if such policies penalise the rest of the world.

 

Regional Trade Deficits, Nationalist Tariffs

Trump’s goals may well be dictated by realpolitik. Deficit criticism serves largely as an effort to undermine European unity (hence his anti-Merkel tirade), the rise of China and Mexico, and Japanese reforms. In such a win-lose world, “America First” is not possible through cooperation or even competition, but only by winning and harming perceived adversaries.

A single-minded focus on trade deficits ignores the fact that global economic cooperation is not just about trade in goods, but about trade in services and high-technology.

And yet, historically, US trade deficits did not start with China, or any other single country. Rather, they are regional and have prevailed for more than 41 years with Asia – first with Japan, then with newly-industrialised Asian tigers and recently with China and emerging Asia.

A single-minded focus on trade deficits ignores the fact that global economic cooperation is not just about trade in goods, but about trade in services and high-technology. It also includes investment, which Trump would like to attract from the very same countries that he risks alienating with his trade policy.

And it includes migration flows, which Trump would like to restrict dramatically, which would hurt US long-term growth, reduce remittances to poorer nations and boost anti-US resentment particularly in the Middle East.

 

Smoot-Hawley Tariff Act Déjà Vu

Trump’s stated protectionism does have a historical precedent. In 1930, the US Congress passed the notorious Smoot-Hawley Tariff Act, which sharply raised the cost of foreign imports.

While the Tariff Act seemed to work initially, it soon caused other nations to retaliate. As rounds of tit-for-tat retaliation contributed to the Great Depression, the way was soon paved for another world war.

Trumping world trade is a bad idea, but its timing is even worse.

 

The original, slightly shorter commentary was released by China Daily on January 23, 2017

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 About the Author

dan-steinbock-webDr. Dan Steinbock is the founder of the Difference Group and has served as the research director at the India, China, and America Institute (USA) and a visiting fellow at the Shanghai Institutes for International Studies (China) and the EU Center (Singapore). For more, see http://www.differencegroup.net/

China’s Emerging Silicon Valley: How and Why Has Shenzhen Become a Global Innovation Centre

By Xiangming Chen and Taylor Lynch Ogan

Shenzhen is China’s very own Silicon Valley. Find out how it has become innovative by tracing its rapid growth and strategic transition; what are the four of its most innovative companies, and what are the key factors that make it an innovative ecosystem in which companies have thrived.

 

Many informed people would have heard about Shenzhen, which has grown, at a breakneck pace, from a small village and China’s first special economic zone to a prosperous megacity and an emerging centre of innovation over three decades. Yet how many people, even in the global corporate community, have heard about BYD, which happens to have risen from Shenzhen to the world’s manufacturing leader in rechargeable batteries and electric vehicles in 20 years? Probably not many. Besides the tale of Shenzhen as a “miracle city”, there is a story to be told about how and why Shenzhen has also become a global hub for innovative companies like BYD. While our previous article in this magazine focussed on the rise of BYD with Shenzhen,1 this article has two purposes. The first is to look at how Shenzhen has become innovative by tracing its rapid growth and strategic transition as a favourable backdrop and then profiling four of its most innovative companies. The second is to examine the key factors that make Shenzhen an innovative ecosystem in which companies have thrived.

 

Rapid Growth and Quality Transition

Few companies can perform well if their home city does not create and sustain healthy demographic and economic growth. This has not been a problem for Shenzhen, which has been one of the fastest growing cities in China and the world for the last 35 years. In fact, no other city anywhere in the world has gained more population than Shenzhen since 1980 (see Figure 1 below).

 

 

Unlike any other large city in China, Shenzhen has maintained a small proportion of its population (only about 30%) as officially registered with hukou. Besides the approximately 70% or eight million long-term residents included in Shenzhen’s total population, there are as many as another eight million short-term residents in Shenzhen today, bringing the total to around 18 million.2 This qualifies Shenzhen as China’s largest immigrant city. The inflow of human resources through the large influx of immigrants has contributed to Shenzhen’s innovative capacity (see later).

The rapid growth of Shenzhen’s economy has both paralleled and facilitated its structural shift favouring innovation. After averaging about 35% annually for its GDP growth through 1995, Shenzhen kept its annual growth at around 14% through 2014. As a result of this slowed but sustained high growth, Shenzhen’s GDP per capita in 2014 reached around $25,000, the highest of all Chinese cities. At this pace, Shenzhen’s GDP per capita is expected to hit $36,000 in 2020, equaling the 2012 figure for Hong Kong.3 Driving the more recent and future growth is the accelerated development of services and the relative contraction of manufacturing (see Figure 2 below).

 

 

The still substantial share of GDP in manufacturing is no longer produced by the labour-intensive and low-tech assembling industries that dominated the earlier phase of Shenzhen’s economic development. Instead Shenzhen’s manufacturing has become increasingly high-tech, new-tech, and clean-tech favouring such industries as new information technology, biotechnology, new energy, new materials, numerical control tools, and robotics. With this shift, the value added of these new industries as a share of GDP rose from 28.8% in 2010, to 35.6% in 2014.

 

 

Shenzhen’s industrial upgrading has been accompanied and fostered by the continued growth of human capital. As Figure 3 on the next page shows, as the number of college graduates rose, the highly educated base of the population became stronger. In Shenzhen today, college educated talents relative to its permanent population stand at 37.1%, higher than 28.6% in Beijing, and 23.4% in the New Pudong district of Shanghai. Shenzhen’s expanded human capital has translated into a greater and more effective capacity of R&D at both the firm and aggregate levels. From 2009 to 2014, the firms’ share of Shenzhen’s R&D stayed over 90%, and Shenzhen’s R&D budget as a share of GDP stood at 4.2%, doubling the national average of 2% and far exceeding the 2.5%, which is regarded as the international norm for innovative economies. High levels of investment in R&D have paid off in the number of patents Shenzhen has applied for and been granted. In 2014, Shenzhen applied for 82,254 patents, up from 42,279 in 2009, and was granted 53,687 patents, up from 25,894 in 2009.4 Shenzhen-based companies also accounted for 46.9% of all Patent Cooperation Treaty (PCT) applications from China in 2015. By then Shenzhen led all large Chinese cities in the number of patents applied and grant for 12 years in a row. Through June 2016, Shenzhen accounted for 51.8% of all applied patents in China.5

 

A Quartet of Innovative Companies

Since firms dominate R&D in Shenzhen, they logically form a wide and deep pool of technological innovation. But do they? What firms lead and in what key industry sectors reflect and represent Shenzhen’s growing identity and strength as a global innovation centre? Here we profile four of these firms, all started by entrepreneurs.

 

BYD

BYD was founded in Shenzhen in 1995 by a young, ambitious battery chemist, Wang Chuangfu, who aptly named his company BYD Co. Ltd., his acronym for “build your dreams”. The 29-year-old Wang began making rechargeable batteries for cell phones in his first factory in Shenzhen. Just five years later, BYD was the world’s largest cell phone battery manufacturer. The inevitable transition for BYD was to put their battery into a car. Five years after BYD purchased Xi’an Tsinchuan Auto Co., Ltd., a defunct Chinese automobile manufacturer, in 2003, BYD released the world’s first plug-in hybrid electric car, the F3DM. This attracted interest from investors, including Warren Buffett who bought 10% of BYD Co. Ltd. in 2008 for $230 million, and Wang became China’s richest man and has since been one of the wealthiest individuals.

BYD has grown to over 200,000 employees, the largest rechargeable battery manufacturer with over a 25% global market share, and the largest electric vehicle manufacturer in the world. Wang also stresses the other side of the coin, where there must be cleaner alternatives for generating energy, especially now that his company’s products demand so much electricity.

BYD also pioneered a solar tracking system, where the panels can follow the path of the sun across the sky, thus stabilising power generation and matching peak loading time.

BYD soon entered the solar power industry, which Wang stressed was a new energy total solution, one that was not only about grid parity, but also grid quality. BYD’s photovoltaic system was multilayered and the first of its kind in the industry, which is now being emulated by companies like Tesla/Solar City. BYD’s double-glass solar panel is highly energy efficient, long-lasting, and requires less precious metals in order to be cost competitive. BYD also pioneered a solar tracking system, where the panels can follow the path of the sun across the sky, thus stabilising power generation and matching peak loading time. Most importantly, the solar tracking system increases the efficiency of the panels by 29%.               

BYD also stresses having an inverter in their photovoltaic system, which further increases efficiency and reliability. Arguably the most important part of any photovoltaic system is energy storage, a focus of BYD’s from the beginning. The Energy Storage System (ESS) is essentially a big battery that stores the energy produced by the solar panels during the day, which is also the peak loading time for energy usage. By storing the excess energy, the ESS can then feed the grid with its stored energy when demand is high. BYD’s newest slogan is aptly “The official sponsor of Mother Nature”.

 

 

DJI

Shenzhen is also home to the world’s largest consumer drone manufacturer, SZ DJI Technology Co., known to most as DJI. The privately held robotics company’s growth is strikingly analogous with that of Shenzhen. Founder and CEO Frank Wang started the company in 2006, and in 2011 DJI was still a startup. Frank Wang’s story is cliché Silicon Valley-startup. Growing up, Frank Wang struggled as a student, and at 16 years old, he finally received his long-coveted remote-controlled helicopter, which he reversed engineered. He studied electronic engineering at the Hong Kong University of Science & Technology, and in his senior year he moved with two of his classmates across the border to Shenzhen where he began selling drones to hobbyists out of his three-bedroom apartment.6

DJI has been called the “Apple of drones”, and Frank Wang “China’s Steve Jobs”, especially for his unique management practices, even admitting himself to Forbes that he can be an “abrasive perfectionist”. When Forbes asked what he thought of being compared to Steve Jobs, he said he appreciates it, his philosophy being, “All you need to do is to be smarter than others.”7 The 35-year-old entrepreneur is now worth over $3.6 billion, lives in Shenzhen, and drives a four-year-old electric car.

Now DJI has essentially created a market for consumer unmanned aerial vehicles (UAVs) where they currently control over 70% of the global market for consumer drones. DJI is already valued as high as $10 billion. Their Phantom series of drones, which rolled out in early 2013, finally brought an affordable entry-level drone to the market for $679. Though they barely broke even on the drone, they priced it so low to essentially create a market for UAVs and to prevent a price war from competitors.8 DJI’s product line extends further than just entry-level drones, however. Their highest level drones are used by nearly every production company in Hollywood, and are even replacing news helicopters.

DJI prides itself on engineering and designing every part of their drones, such as the blades, controller, gimbal, radar sensors, software, and even the camera. It is impressive such a new company is able to manufacture their own camera that shoots 4k video given the complexity of a camera the size of a golf ball. All of their main competitors, except GoPro, an action camera company, outsource at least the camera component of their drones. DJI’s gimbal, a mechanism that allows the camera to move on a fixed axis to create a stabilised image, is also incredibly advanced, so much so that DJI even has a product line for professional camera grips. Their gimbals and cameras have even been spotted mounted to the top of BYD police cars in Shenzhen, likely testing facial recognition software.9

 

Huawei

Huawei is a leading global information and communications technology (ICT) solutions provider. It overtook Ericsson as the world’s largest telecommunications equipment manufacturer in 2012. Huawei was founded in 1987 by Ren Zhengfei, a former engineer in the People’s Liberation Army. At the time of its establishment, the company reportedly had only RMB21,000 ($3,300 in today’s US dollar) in registered capital. Its employees, both managers and employees, worked in a small office that also served as a kitchen and dormitory. Huawei focused on manufacturing phone switches, but has since expanded its business to include: building telecommunications networks; providing operational and consulting services, and equipment to enterprises inside and outside of China; and manufacturing communications devices for the consumer market.

During its first few years, Huawei’s business model consisted mainly of reselling private branch exchange (PBX) switches imported from Hong Kong. Meanwhile, it was reverse-engineering imported switches and investing heavily in research and development to manufacture its own technologies. By 1990 the company had approximately 500 R&D staff, and began its own independent commercialisation of PBX switches targeting hotels and small enterprises. The company’s first major breakthrough came in 1993, when it launched its C&C08 program controlled telephone switch. It was by far the most powerful switch available in China at the time. By initially deploying in small cities and rural areas and placing emphasis on service and customisability, the company gained market share and made its way into the mainstream market.

Domestic success spurred Huawei to go global. In 1999, Huawei set up its first R&D centre in Bangalore, India. From 1996 to 2000, Huawei made a concerted effort to promote itself at many international expos. It engaged IBM, at a substantial cost, to be its technology-training provider. In 2003, the company entered into a five-year contract with IBM. In 2005, Huawei’s international contract orders exceeded its domestic sales for the first time. In late 2010, Huawei was planning to invest around $500 million to set up a telecom equipment manufacturing facility in Tamil Nadu, India and $100 million to expand its R&D centre in Bangalore.

In 2015, Huawei’s revenue reached RMB395 billion ($60.8 billion based on the year-end exchange rate), an increase of 37% year-on-year. Huawei’s 4G equipment is widely deployed around the world and is now being used in the capital cities of over 140 countries. Globally, Huawei is setting the pace for IT systems based on cloud architecture. Following a path towards a super-connected world, Huawei is already a leader in developing 5G, an enabler of disruption. Being one of the newest megacities in the world, Shenzhen is an ideal city to test 5G networks that connect the Internet of Things to smart buildings, devices, appliances, and vehicles. While the technology is still being developed and tested by the world’s top telecommunications companies, when released, 5G will connect 100 billion devices, and will be 66 times faster than 4G. 5G is expected to spark the materialisation of wholly new ideas and applications such as virtual reality-based immersive entertainment, remote surgery, and driverless vehicles. Huawei has been conducting much of their 5G testing in Shenzhen, and are likely working with other Shenzhen-based companies, such as BYD.10

 

Tencent

Tencent is a leading provider of Internet value added services in China and is one of the largest Internet companies in the world. Its many services include social network, web portals, e-commerce, and multiplayer online games. In 1998, Ma Huateng, with four other classmates, co-founded Tencent, after making money playing the stock market. In 1999, inspired by ICQ, the world’s first Internet instant messaging service, developed by an Israeli company, Ma and his team launched a similar software, with a Chinese interface and a slightly different name – OICQ. In December 2000, Ma changed the name of the software to QQ, which became widely popular in China.

In the early 2000s, Ma Huateng expanded Tencent’s business portfolio. In 2003, Tencent released its own portal (QQ.com) and made forays into the online gaming market. By 2004, Tencent became the largest Chinese instant messaging service (holding 74% of the market). Later in 2004, Tencent launched an online gaming platform and began selling virtual goods to support the games published on their platform (virtual weapons, gaming power), as well as emoticons and ringtones. In 2005, Tencent launched the C2C platform Paipai.com, a direct competitor to e-commerce giant Alibaba. In January 2011, Tencent released WeChat, a cross-platform instant messaging service, which quickly became one of the largest standalone messaging apps by monthly active users.

Fast forward to June 31, 2016, the monthly active user accounts of QQ were 899 million while its peak concurrent user accounts reached 247 million. WeChat has over a billion created accounts, 700 million active users, with more than 70 million outside of China. With this huge market, Tencent has passed telecoms giant China Mobile to become the nation’s most valuable publicly-traded company. Tencent’s new crown as Asia’s most valuable company reflects its dominant position, which could pose an eventual challenge to global social networking leader Facebook.11

Tencent’s newest foray into online payments has also paid off. One of its moves was to invest in Didi Chuxing, a ride-sharing service almost identical to Uber. Didi’s seamless integration with WeChat allows WeChat users to order a ride from within the WeChat app, as well as pay or split the fare using WeChat Wallet. This also allows WeChat users to pay for goods and services at numerous shops and eateries, large or small. Very quickly, Tencent has built one of the world’s largest payments systems, with transactions that could exceed $556 billion in 2016, almost doubling the $280 billion that PayPal banks per year.

 

An Ecosystem of Innovation

The four profiled companies exemplify a large number and heavy density of successful firms, mostly privately owned, based in Shenzhen. What explains this clustering in this particular city? We address this question by seeing these companies as embedded and thriving inside a favourable ecosystem, nurtured mainly by four factors (see Figure 4 below).

 

 

While the four companies represent different industries, they share an underlying emphasis on innovation through strong R&D. BYD relies on its 16,000 R&D engineers and state-of-the-art manufacturing techniques. In 2010, BusinessWeek ranked BYD the 8th most innovative company in the world, ahead of Ford, Volkswagen, and BMW. About 40% of DJI staff work in R&D, and they have opened an R&D centre in Palo Alto, California. As of September 2015, Huawei had over 170,000 employees, around 76,000 of whom were in R&D. It has 21 R&D institutes in China, the US, the UK, Germany, Sweden, Columbia, India, and Turkey. More than 50% of Tencent employees are in R&D. In 2007, Tencent invested more than RMB100 million (about $15 million) in setting up the Tencent Research Institute, China’s first Internet research institute, with campuses in Beijing, Shanghai, and Shenzhen.

A small and purposeful local government is the first key to Shenzhen’s successful ecosystem for breeding and sustaining innovative companies (the upper left box of Figure 4). This was baked into Shenzhen as a special zone-turned-new city over three decades ago. Untainted with strong state control and economic planning, Shenzhen charted a new course for developing innovative governance and created a municipal government with a more limited structure and purposeful role, not as a comprehensive administrator, but as a catalyst for targeted development initiatives.12 In guiding Shenzhen’s transition from a low-tech factory town to a global innovation hub, the municipal government has adopted a number of measures to foster creative industries and firms. The local government is spending RMB21.5 billion ($3 billion) on emerging industries such as new energy represented by BYD. Shenzhen has taken a clustering approach to the cultural and creative industry by creating model bases for creative design, cultural software, animation and games, new media, and so forth. It subsidises up to 70% of rent for “creative” start-ups. The local government also launched the 1st Innovation Competition of International Talents held from November, 2015 to April, 2016, which is open to all IT talents around the world, to win a total of $880,000 bonus plus an additional $200 million government subsidies and venture capital.13

Going beyond citywide policies, the Shenzhen government has targeted specific leading industries and firms. Climate change, energy conservation, and emission reduction has been a high priority. Shenzhen Development and Reform Commission (SDRC), the most important department under the municipal government and supervised by a Deputy Mayor, oversees urban construction to mitigate climate change and implement clean development policies. Already with the largest fleet of electric vehicles in the world, Shenzhen has recently added 2,000 more – 1,300 buses and 700 taxis – all bought from local EV manufacturer BYD through a subsidy-type program. Major support by a small and purposeful government for a leading firm like BYD illustrates both the relative status of and close interaction between state and market in China, especially in Shenzhen. It is reported that in Chinese cities, government officials walk in front of CEOs of local companies when they meet, while in Shenzhen, CEOs like Wang Chuanfu of BYD walk ahead of government officials.14 Wang walked side by side with President Xi Jinping of China during the latter’s official visit to the UK in October, 2015 when London bought more zero-emission electric busses from BYD (see the photo below).

 

Wang Chuanfu, CEO of BYD, with President Xi Jinping and the Duke and Duchess of Cambridge and a BYD Bus in London.

 

The second factor in the ecosystem of innovation is immigration (the upper right box of Figure 4). Shenzhen is the largest city of immigrants in China, especially so if including the temporary migrant population not captured in Figure 1. Interacting with other factors, immigration is an important source of entrepreneurial spirit and drive. Research shows that a high percentage of start-ups in Silicon Valley have been launched by immigrants, largely from China and India.15 A popular saying in Shenzhen goes, “You are a Shenzhener once you come here.” The expression embodies the optimism of the new generation of entrepreneurs, high-tech experts, craftsmen, and others who see Shenzhen as a land of opportunity like no other city in China. “It’s a true paradise if you want to create your own business,” said James Wang, a 39-year-old Internet entrepreneur in a local science park.16 The young migrant entrepreneurs today, like their predecessors such as Ren Zhengfei of Huawei and Wang Chuanfu of BYD who migrated to Shenzhen in the 1980s and 1990s, prove that a lesser government and open immigration since the beginning of Shenzhen has maintained an open and attractive environment for some entrepreneurs to succeed.

As China’s first special economic zone bordering Hong Kong, Shenzhen has developed a “buzz” that does not exist elsewhere in China (the lower left corner of Figure 4). Besides being linked to economic opportunities, this “buzz” manifests itself in a lifestyle that appeals to young entrepreneurial people. The average age of residents in Shenzhen is 28.7 years old, and people aged 20 to 29 make up 35.8% of the city’s population. In comparison, the average age of Shanghai’s population is over 40, and people over 60 are 27% of the city’s registered population. Around Shenzhen, young people are everywhere and a feeling of a sense of excitement and dynamist is in the air. This lifestyle for the young was a critical cultural ingredient in the formation of Silicon Valley from its beginning.17 Half a century later, Shenzhen has reproduced the mutual reinforcement between youth, lifestyle, and immigration in producing an innovative ecosystem.

Hong Kong serves as a convenient and suitable neighbour that initiates and sustains fast and dense cross-border flows of human talents, innovative ideas, and business activities.

The demographic and cultural aspects of this system are hardened by the physical location of Shenzhen across the border from Hong Kong. Shenzhen’s earlier development and dominance of low-end manufacturing (toys, garments) would not be possible without these factories crossing the border from Hong Kong. Shenzhen’s strategic shift to the industries represented by the four firms above has also benefited from the location proximity and relative weakening of Hong Kong. Frank Wang started DJI with his classmates from the Hong Kong University of Science and Technology. In September 2016, DJI opened a flagship store in Hong Kong that will not only serve as a retail outlet, but also provide a prominent space for the worldwide community to share its experience of flight and explore the latest drones and aerial cameras. Given its more developed institution of higher learning and well-established global financial and marking capabilities, Hong Kong serves as a convenient and suitable neighbour that initiates and sustains fast and dense cross-border flows of human talents, innovative ideas, and business activities.

Hong Kong however has lost lustre in innovation as Shenzhen’s star has risen. Some companies in Hong Kong have a hard time finding local programmers with both technical skills in coding and the ability to think independently and creatively. A recent university study reported that there is a widespread feeling in Hong Kong that the city has lost its can-do spirit. A more pessimistic local designer commented, “Innovation wise, Hong Kong is doomed.”18 Is the erosion of Hong Kong’s innovation expected or inevitable as the much newer and younger city of Shenzhen across the border has become so innovative? This is not the place to figure out why Hong Kong has become less innovative than Shenzhen. The reversed positions of the two cities on the same border only further highlight Shenzhen’s ascent as an innovation centre.

We round up the four corners of the ecosystem (the lower right box of Figure 4) by returning to the rapid growth of higher education as demonstrated in Figure 3. It is no doubt that the presence of top universities such as Stanford in Silicon Valley, MIT in Boston’s Route 128, and Duke University in the Research Triangle Park in North Carolina have been critical to the success of these innovation regions. As a “factory city” built off a special zone in its earlier years, Shenzhen was a barren land for higher education. While Shenzhen University was established in 1983, it did not grow to scale and produce more graduates until later. The initial level of college educated were immigrants like Wang Chuanfu of BYD, although the base of college education, in both absolute and relative terms, remained low during Shenzhen’s era of traditional manufacturing through the early 2000s (Figure 3). Then higher education took off, spurred by the new graduate schools in Shenzhen established by Tsinghua University in 2000 and by Peking University in 2001, China’s top two universities. This rapid expansion of higher education (Figure 3) has both accompanied and fueled Shenzhen’s rise as an innovation centre. It is only fitting that the Shenzhen government is planning to increase the number of colleges and universities to 20 by 2025 when enrolled college students will rise to 250,000, with 200,000 of whom being full-time. If this ambitious plan materialises, Shenzhen will be able to draw a lot more on home-grown human talents to sustain its innovation.

 

A Bright Future

If Shenzhen is China’s emerging Silicon Valley, is it also on the way to become the world’s new Silicon Valley?19 In one respect, the four companies profiled are global leaders in their respective industries or industry segments. In another, they are already as, if not more, innovative as their best competitors. For example, Huawei submitted 3,442 applications for international patents, compared to 2,409 by Qualcomm, in 2014. The respective figures for Tencent and Microsoft were 1,086 and 1,460. Besides these leading innovators, another telecommunications equipment company based in Shenzhen – ZTE – filed 2,179 patent applications compared to 1,539 by Intel.20 There is much evidence that Shenzhen has accumulated a critical mass of innovative companies that are beginning to resemble and even rival the original Silicon Valley, at least relative to much of the latter’s existence.

As Hong Kong has lost some innovative capacity, it has enhanced Shenzhen’s already powerful position as a contiguous innovation centre.

Unlike Silicon Valley and most other innovative cities and regions in advanced economies, Shenzhen’s rise to an innovation centre has been driven by a limited and purposeful local government. This distinctive strength has also fostered a faster concentration of innovative technology companies in Shenzhen. Similar to other innovative places, heavy in-migration has created an open and diverse environment conducive to the birth and growth of innovative companies. A buzzing lifestyle has attracted even more entrepreneurially minded young people to Shenzhen. Bordering Hong Kong has facilitated Shenzhen’s innovation in two ways. It accelerates and densifies flows of creative ideas and practices. As Hong Kong has lost some innovative capacity, it has enhanced Shenzhen’s already powerful position as a contiguous innovation centre. Despite an earlier lack of higher education in Shenzhen, the subsequent rapid expansion has caught up in providing needed human resource for sustaining Shenzhen’s innovation. The relative strengths of these four factors have created a favourable ecosystem that distinguishes Shenzhen from other Chinese cities in industrial innovation. This ecosystem also characterises Shenzhen as a new global innovation centre.              

*Parts of this article on BYD and other companies were presented by Taylor Ogan at the conference on Asia/Environment, Bard College, Annandale-on-Hudson, New York, 14-15 April, 2016; and at the Center for Urban and Global Studies at Trinity College, Hartford, 20 September, 2016. Helpful comments from these audiences were acknowledged, but we are responsible for any errors in facts and interpretations that might be in this article. We are grateful to the Henry Luce Foundation for an institutional grant to Trinity College that supported Taylor Ogan’s summer research project on BYD in summer 2015 and summer 2016. We also thank Professors Zhao Dengfeng and Chen Yong of the School of Economics at Shenzhen University for allowing us to refer to their materials and remarks from the Global Cities Forum, Shanghai Jiao Tong University, 30 October, 2016. Assistance by Xinyi (Ellen) Liu of Trinity College in producing Figures 1-3 is gratefully acknowledged.

 

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About the Authors

Xiangming Chen is the Dean and Director of the Center for Urban and Global Studies and Paul E. Raether Distinguished Professor of Global Urban Studies and Sociology at Trinity College, Connecticut, and a distinguished guest professor at Fudan University, Shanghai. He has published extensively on urbanisation and globalisation with a focus on China and Asia. His most recent book Global Cities, Local Streets: Everyday Diversity from New York to Shanghai (with Sharon Zukin and Philip Kasinitz) was published by Routledge in 2015 (Chinese edition, Tongji University Press, 2016). He was instrumental in launching the China & the World series at The European Financial Review and has been the main author of a dozen China-related articles since 2012.

Taylor Lynch Ogan is currently a junior at Trinity College, Connecticut, majoring in Urban Studies. His focus is on the implementation and investment of sustainable energy and electric vehicles, specifically in China. He has done research in Shenzhen, China in the summers of 2015 and 2016 supported by the Henry Luce Foundation, as well as in New York City, Chicago, and Los Angeles.

References

1. Ogan, Taylor Lynch and Xiangming Chen, “The Rise of Shenzhen and BYD—How a Chinese Corporate Pioneer is Leading Greener and More Sustainable Transportation and Urban Development.” The European Financial Review (Feb/March, 2016): 32-39.
2. The 18 million figure was given by a scholar at the Graduate School branch of Tsinghua University in Shenzhen, June 2016.
3. These figures were drawn from the PowerPoint presentation given by Professor Zhao Dengfeng of Shenzhen University at Shanghai Jiao Tong University, Shanghai, 30 October, 2016.
4. Same as Note 3.
5. “Shanghai vs. Shenzhen: A most heated war between the two cities”, 11 November, 2016; accessed from http://mp.weixin.qq.com/s_biz=MzAxMTE0NDMyNA==&mid=2649509754&idx=1&sn=b8a3bdb93d98b2ff5b15650704e3f8af&chksm=835d7291b42afb87ef601ca7cec1358f105c0fd9c1639e3b77a8c9bd28b90de4eafb62867267&mpshare=1&scene=5&srcid=1112SHAbyxneaHajY11bodod#rd.
6. Accessed from http://www.australiannationalreview.com/frank-wang-worlds-drone-billionaire/.
7. “Forbes global game changers: The full list”, Steve Schaefer, 10 May, 2016; accessed from http://www.forbes.com/sites/steveschaefer/2016/04/13/forbes-global-game-changers-the-full-list/5/#6523b8d1509e.
8. Accessed from http://www.forbes.com/sites/ryanmac/2015/05/06/dji-drones-frank-wang-china-billionaire/#50b658b6210c.
9. This profile of DJI drew from Wikipedia.
10. This profile of Huawei drew from Wikipedia and Huawei’s 2015 Annual Report.
11. “Tencent Takes China’s Corporate Crown On Facebook-Sky Hopes”, Doug Young, blogs.Forbes.com, 6 September, 2016; accessed from http://www.forbes.com/sites/dougyoung/2016/09/06/tencent-takes-chinas-corporate-crown-on-facebook-sky-hopes/#77e40aa982ee. The profile of Tencent also draws from Wikipedia.
12. Chen, Xiangming and Tomás de’Medici, “The ‘Instant City’ Coming of Age: The Production of Spaces in China’s Shenzhen Special Economic Zone.” Urban Geography (31, 8, 2010): 1141-1147.
13. “Shenzhen offers awards, funds to attract IT talent”, Chen Hong, on ChinaDaily.com.cn, 5 February, 2016: accessed from http://www.chinadaily.com.cn/china/2016-02/05/content_23409928.htm.
14. Mentioned by Professor Chen Yong at the Global Cities Forum, Shanghai Jiao Tong University, Shanghai, 30 October, 2016.
15. Saxenian, AnnaLee, The Regional Advantage: Culture and Competition in Silicon Valley and Route 128 (Cambridge, MA: Harvard University Press, 1996); The New Argonauts: Regional Advantage in a Global Economy (Cambridge, MA: Harvard University Press, 2007).
16. “Shenzhen set to steal Hong Kong’s thunder”, on ChinaDaily.com.cn, 13 May, 2015; accessed from http://www.chinadaily.com.cn/business/2015-05/13/content_20700251.htm.
17. Rogers, Everett M. and Judith K. Larsen, Silicon Valley Fever: Growth of High-Technology Fever (New York, Basic Books, 1984).
18. “What Hong Kong can learn from Shenzhen’s buzzing startup scene”, Johan Nylander, 2 May, 2016; accessed from http://www.forbes.com/sites/jnylander/2016/05/02/what-hong-kong-can-learn-from-shenzhens-buzzing-startup-scene/#6aa4b5be2d8d.
19. See Lüthje, Boy, Stefanie Hürtgen, Peter Pawlicki, and Martina Sproll, From Silicon Valley to Shenzhen: Global Production and Work in the IT Industry (Lanham, MD: Rowman & Littlefield, 2013).
20. Same as Note 3.

 

Life After Trump

By Boris Kagarlitsky

Trump’s election is not just a separate random episode of current politics. It is also not an indicator of American exceptionalism. It rather suggests that similar processes are under way in the US and in Western Europe. And is it just the West that is affected?

 

The vote of the United States Electoral College has finally put an end to the 2016 presidential campaign. Attempts to prevent Donald Trump from becoming the US president continued until the last moment: the electors were called upon to ignore the will of their states and voters; however none of these attempts have succeeded.

It is important; nevertheless, to understand why the liberal part of the American society reacts so hysterically to the Trump victory. President-elect did not even assume the office, but a fierce propaganda campaign, unprecedented in recent American history keeps raging; mass protests against his policies which are not only not being implemented, but also have not been formulated yet, are being organised. A grotesque and demonic figure of Trump haunts the consciousness of the liberal public, the evaluation of his words and actions is based on the presumption of guilt. This includes the words he never said, but could have said, and actions that he did not carry out, but according to the liberals, would certainly have to perform. In other words, the president-elect is being criticised not for what he has done, and even not for what he plans to do, but largely for what he is supposed to do according to the ideas of American liberals on how the absolute evil should behave.

In other words, the president-elect is being criticised not for what he has done, and even not for what he plans to do, but largely for what he is supposed to do according to the ideas of American liberals on how the absolute evil should behave.

Does it mean that the attacks on Trump are absolutely baseless and without merit? Certainly not. However, they simply reflect an unconscious fear by part of an American (and not only American) society of spontaneous objective processes, which are unfolding in the country and in the world, and which are beyond their comprehension and control. Trump’s victory is only one of the multiple symptoms of these processes, but this is the fact, which lies on the surface. As people often do, they confuse the cause with the consequence.

The panic reaction to Trump’s success is caused by the fact that the liberal circles have no grasp of the colossal tectonic shift currently under way in the world economy. There is also no understanding of the irreversibility of this shift. But there is a completely justified perception of its catastrophic nature: we are talking about the end of a social-economic order, which persisted for more than a quarter of a century, about destruction of the institutional base of neoliberal capitalism, which was systematically and consistently being constructed throughout this time.

Trump’s election is not just a separate random episode of current politics. It is also not an indicator of American exceptionalism. It rather suggests that similar processes are under way in the US and in Western Europe. And is it just the West that is affected?

British vote to exit European Union, similar vote in Italy against the government, referendum in Holland rejecting Ukraine association with EU, and many other political facts, which hit us almost every week, are interpreted, at best, as a rebellion of mistreated and uneducated lower classes discarded by the system. But why did the rebellion start now? Why is it becoming more and more successful, and, most importantly, why does it grow, inspiring millions of people, who, according to the establishment ideologues, should not get involved? Marginalised ideas suddenly became mainstream.

 

The ideological control, which, in the framework of Western democracy, is conducted through a meaningful consensus of all main parties, suggested a formal diversity of opinion accompanied by a compulsory uniformity of conclusions. In other words, you can support or oppose capitalism, have different opinions on the historical roles of de Gaulle and Stalin, but when thinking about specific issues, regardless of the starting point of your argument, you are obliged to conclude that there is no alternative to the policies of the European central bank, to the Eurozone membership and fiscal discipline.

As a result of these differences, the European Union entered the stage of institutional breakdown without going through the phase of “perestroika”, as did the USSR, which means that the psychological effects of this transition are even more traumatic and brutal. Everything started to crumble not “fast”, but “at once”, leaving people completely at a loss, especially those who still hope for the preservation of the existing order.

Such turn of events boggles their minds and causes panic. But the scope of the transition is not the only problem. The transition is accompanied by a collapse of an unprecedented ideological hegemony inherent to the western society of the past dozens of years. Neoliberal politics in its right, conservative, as well as the left, politically correct version, always relied on the small part of the society. No, this is not the notorious 1%, which entered the public consciousness thanks to the “Occupy Wall Street”. These are quite a few people who are part of the system in different ways, and who benefit from this system (including, by the way, a significant portion of the young radicals, whose symbolic protest was a kind of shadow of the official ideology).

This part of the society, who in Western Europe receives benefits from the clientele programs of Brussels bureaucracy, and in the US works to promote various politically correct practices, in a large part relies on the re-distribution of resources from the real sector of the economy. Nobody likes the Wall Street bankers or European Central Bank functionaries, but it is the symbiosis of the liberal public institutions and creative class with the financial capital that is the pillar of the current model of capitalism.

At the same time as the real sector (including not only the industry, but also science, public education, and social infrastructure) was degrading, jobs were disappearing, and workers were losing their livelihoods, the liberal class which earns their living from sharing profits of the financial capital under the guise of participation in “creative economy” and “civil society” was formed. This, mostly parasitic minority lived with a comfortable confidence that they were the majority, moreover, they were the core and the most progressive part of the society, while people holding viewpoints which differed from theirs were a tiny marginal minority, which should not be taken into account. This group spontaneously reproduced the dominating ideology in its different varieties, including the one of the radical left kind. In all versions of this ideology the problems of the economical structure and real politics were overshadowed by the cultural issues, making tolerance more important than the wages; protectionism and jobs were excluded from a serious discussion, and ecology became a quasi-religious symbol of faith. In this approach it is only important that you believe in climate change: the discourse left the framework of political pragmatism, and turned into a semblance of a religious dispute. What is important is not how you propose to solve the problem, but if your symbolic interpretation is the “correct” one, and if you are ready to repeat the correct words.

The absence of practical alternative guaranteed preservation of status quo, in the framework of which both the critics of the system and the conservatives played their roles, as if they were dancing a never-ending dance in one place.

The politics of targeted help, oriented towards the support of specific “minorities”, advocated by the left liberals, was a quite conscious and consistent attempt to split the society and undermine solidarity, not only the class solidarity, but any solidarity – professional, corporate, or regional. Clientelism became a substitute for the solidarity. Horizontal bonds between people belonging to the same social groups were blurred and weakened, while ties to the community leaders who are part of the liberal elite, were systematically strengthened.

The rhetoric of “justice” and even “resistance” was duly reproduced, but it became completely separated from the real social processes. Separate acts of solidarity with different “struggles” calmed the humanistic conscience of the left liberals, allowing them not to think about the complex strategy of the transformation of the society. This approach resulted in abandonment of not only class politics, but politics in general (if you understand it as an activity aimed at transformation of social institutions and relations).

All the talk about the privilege of the white males – workers, farmers, bureaucrats, small business owners, barely making the ends meet – was to substitute and stop all questions about the interests of the ruling class.

A myth about “white males” who allegedly were the main privileged group of the society, who stayed in the way of the progressive changes, and oppressed the minorities, became the key ideological rationale for this approach. It didn’t matter that the myth was constructed by the representatives of the liberal elite, who are predominantly white, and are mainly male. Their main goal was to substitute social and class criteria by gender and ethnicity, analysis of the economic contradictions – by discussion of cultural differences. All the talk about the privilege of the white males – workers, farmers, bureaucrats, small business owners, barely making the ends meet – was to substitute and stop all questions about the interests of the ruling class. On the other hand, the role of the main victim of the system was assigned to immigrants. They were seen not as active participants of the labour market, but exclusively as passive victims. The discussion about the direct connection between the encouragement of illegal immigration and systematic oppression of the migrants by the employers, which are two sides of the same coin, was an absolute taboo. The fact that these are the earlier arrivals who are interested in the limits on the flow of immigration the most, because it undermines their position on the labour market, was never discussed.

Thus the liberal left criticism of the system was in fact an essential ancillary of the conservative social and economic policy pursued by the ruling class.

However, the system still has slipped into a crisis, simply because it completely exhausted its capabilities for development. The endless growth of the global market, accompanied by increasingly depressed conditions of national markets and the weakening of societies on the national level, turned out to be impossible. The financial expansion does not only generate bursting bubbles, but also leads to an objective necessity for debt relief, and nationalisation of financial institutions. The era of free market naturally prepares the conditions for the onset of protectionism, while dismantling of the welfare state breeds conflicts on the scale and in the forms long forgotten, returning us not even into the first half of the 20th century, but in the beginning of the 19th century, when socialist parties or trade unions which could help to normalise the class struggle, and give it a sensible ideological perspective, did not exist. The protest of the masses really assumes the form of a riot, in the words of Pushkin, “senseless and merciless”, but it cannot be any different, because the ideological field is completely occupied by the supporters of the established order, while the order itself is crumbling, not under the assault from its opponents, but from its own contradictions.

In such situation only radical forces, which are not afraid of dramatic and unpredictable turn of events, have a chance to succeed. Catastrophic consequences will arrive everywhere regardless of who takes the power in the next one or two years. In this sense, Donald Trump with his indifferent readiness to achieve his goals through the scandals, crises and shocks, is psychologically much more adequate in the role of the president of the United States than any of his allies or critics. It is quite a different question if his recipes will be helpful to find a solution to the unfolding crisis.

The desire of conservatives to preserve things the way they are at any cost, to maintain the status quo, remains the main motive of their actions, moreover, there is no difference between conservative Republicans, liberal establishment and their critics for that matter. Some are happy with the existing system, others – with their role in the system. In fact, the West has worked out a very comfortable and convenient division of labour between the respectable right-wing and respectable left-wing. The former conducted their economic policies dismantling the welfare state, and state regulations, unlocking the markets of goods and capital for transnational corporations and banks. The latter advocated for multiculturalism, political correctness, affirmative action, positive discrimination, the rights of minorities, while understanding perfectly that they do not offer an alternative to the existing neoliberal economic order, but rather work to complement it. Economic policies of the right and cultural and social policies of the left together are two sides of a single logic and a single strategy aimed at fragmenting of the society. That is why the seeming paradox often mentioned by the liberal intellectuals who write for The Nation and The Guardian, has become possible: the decades before Trump’s victory were not only the years of neoliberal economic reforms – deregulation, privatisation, and redistribution of resources from the real sector to the financial capital, but also the time when many progressive victories were won: from passing medical marijuana legislation to gay marriage bills to putting ever increasing number of women and minorities in positions of power, and, finally, electing the first black president. This, however, is not just a coincidence, there is a direct link between these two processes. The ideology of political correctness served and supported the economic practice of neoliberalism.

Alas, the situation started to change drastically once the economic crisis kicked in. The measures that the ruling class were undertaking to stabilise the situation (regardless of which party occupied the White House) only created new problems, making the situation even worse. Since nobody offered a systemic alternative, the crisis only deepened as the time passed. The economic problems, in turn, inevitably led to the exacerbation of social contradictions, not the imagined ones, the constructed differences between identities, but the real ones, perceived on the level of everyday social life.

An awakening, revealing the harsh reality, which had nothing to do with the beautiful dreams, finally came. The minority, which perceived itself as a majority, found out how the things really are. But it was the suddenness and the harshness of the awakening that predetermined the reaction: instead of attempts to find a solution we see panic and determination to defend their positions from the “aggressive majority”, which all of a sudden stopped being “obedient”.

The liberal public already started to realise that it found itself in an opposition to the majority of the society, or, at least, to the lower classes. But it does not realise that it is in a conflict with the objective logic of the economic development and with the course of history.

This moment gave a chance for the revival of the left movement in the developed industrial countries. A sudden ascendance of the politicians and organisations which yesterday appeared to be too radical for the majority of the society speaks for itself: Jeremy Corbyn becomes a leader of the Labor Party in Great Britain, Alexis Tsipras, the head of a radical left party SYRIZA becomes a prime-minister of Greece, while in the United States a little known provincial senator, a self-proclaimed socialist, Bernie Sanders becomes a serious contender for the White House.

However, this success of the Left was short lived, and it was their fault. None of the leaders who have risen to the top, thanks to the sudden wave of public unrest, had courage to break away from the liberal establishment. The burden of these ties drowned them. Tsipras capitulated in the face of the demands of the EU and European Central bank leadership, and imposed on Greek people a much more harsh and dishonourable agreement than anything ever signed by the right-wing governments. Jeremy Corbyn made concessions to the right-wing of his own party, and refused to support the demand for the seceding of Britain from the EU, supported by the majority of the British people. Finally, Bernie Sanders, refused to fight for the presidential nomination despite the fact that many of his supporters were convinced that the primaries were unfair and rigged by the party establishment who favoured Hillary Clinton. He refused to run as an independent as well, arguing that such a move would benefit Trump.

These actions made Trump’s victory inevitable.

And it’s not just about the number of votes. Trump turned out to be the only candidate who went against the establishment, the only one who represented the objective and urgent need to get out of the framework of crumbling system. When Sanders left the stage he created a situation in which there was no alternative to Trump. Not because Trump is good, but because all other political forces are stubbornly unwilling to accept the idea that the old world, the old way of life, and the old rules of the game are gone, and that the attempts to preserve them will inevitably result in political losses.

Trump turned out to be the only candidate who went against the establishment, the only one who represented the objective and urgent need to get out of the framework of crumbling system.

In the meantime, a new anti-liberal majority is forming in America and Europe. It is based on corporate solidarity, not class solidarity. On one hand, the workers and the lower classes are quite ready to unite with the real sector entrepreneurs to confront not only financial oligarchy, but also cultural and political establishment. On the other hand the politics of breaking society into competing minorities does not work anymore, because liberal policies carried out in the last quarter century has led to the stratification inside ethnic, religious, cultural and other minorities where small privileged groups receiving various benefits, are more and more clearly in an opposition to the rest who are suffering from the economic policies, and are indifferent to the issues of political correctness, affirmative action and positive discrimination. The role of loyal sub-elites, integrated into the establishment is to ensure support of the current economic system by the corresponding communities. but they are losing control little by little. Social contradictions within the communities not only have become more important than the opposition to the mythical “white males”, but also are being realised by the masses of people. Solidarity begins to transcend communal barriers.

It seems that the eight years of an African American president in the Oval Office became a turning point: they showed that the success of a black politician from Illinois did not help millions of black workers and unemployed all over the United States. Moreover, while his success was celebrated, African American middle class suffered a setback.

People have come to realise, little by little, that the economic and social interests of the majority of African Americans as well as “white males” are quite the same: they need jobs, security and confidence in the future. Of course, the political machine of the Democratic Party insured support for Clinton by the majority of African Americans and Latinos, still Trump received a record number of votes from these groups when compared to other Republicans who ran for presidency in the recent years. It was this shift that predetermined Trump’s success in the swing states.

Finally, a considerable share of the vote came from Sanders’ voters, who were angry with the apparatus of the Democratic Party who actually stole the victory from their candidate. Bernie himself, as well as the rest of the left political elite capitulated and called on their supporters to vote for Clinton. But this capitulation only demonstrated how limited the capabilities of the intellectuals are: the majority of left rank-and-file did not follow them. They stayed at home, voted for Trump, or gave their vote to the Green candidate Jill Stein.

A new anti-liberal majority is a political fact in the United States and Western Europe. Aggressive campaign against Trump launched by the liberal circles in the US only works to consolidate this majority. Even if Trump’s policies won’t work, he will just strengthen his position in this situation, since his confrontation with the establishment and the efforts of his opponents to block his agenda are too obvious. How this majority will evolve is still an open question. Liberal propaganda, which makes every effort to present this huge mass of people who oppose the current order as uneducated and vicious racists, eventually plays in the hands of the right, leaving them to be the sole force that offers ideological forms, which allow the expression of the accumulated discontent.

The lamentable experience of the Clinton campaign has shown the consequences of cooperation of the Left with the liberals. Despite the diligent refusal of Bernie Sanders and intellectuals around him to mount an independent political struggle after the end of the primaries, despite their desperate calls to support the former first lady, it all ended in failure. Clinton’s campaign drowned, pulling all those who joined her down to the bottom. And as long as this lesson is not learned, it will be repeated again and again.

If the Left really wants to stop sliding of the US and Western Europe to the right they should not support the liberal regime as a “lesser evil”, but, on the contrary, they should take an active part in its dismantling. They should start a dialogue with the disaffected protesting masses, support their legitimate demands and work to form a new culture of solidarity, overcoming the barriers of political correctness and multiculturalism.

Unfortunately, what we currently see in reality is the triumph of the opposite tendencies. The Left turned itself into pawns of the liberal-conservative establishment. More over, in the global strategy of the elite they received a role of a strike force which has to be mobilised to destabilise Trump’s administration. However, the more successful these efforts will be, the faster they will lead to a direct confrontation between the liberal middle class and the working class.

The Left should not play the game offered by the establishment and make every effort to block the attempts of Trump to get the society out of the impasse. Instead, they should demand more reasonable, and more socially oriented policies, which the new president and his team are not likely to deliver. Bernie Sanders partially demonstrated a correct approach when he announced that he was ready to collaborate with the new president on certain conditions for the goal of improving the lives of working families. However, he was not consistent, did not make logical conclusions, and did not formulate an integral political strategy. The main goal should not be the defence of the minority rights, but overcoming of fragmentation of the society. When the society is completely integrated, and minorities become an organic part of the majority, when the principles of equality are carried out consistently and rigorously, then any discrimination, including positive discrimination, becomes impossible.

The main goal should not be the defence of the minority rights, but overcoming of fragmentation of the society.

To make this a reality, instead of counteracting Trump, the Left should demand that he fulfils his own promises, push him toward more radical, deep and extensive change based on a new historical perspective of development.

Will the Trump administration be able to fulfil these demands? It is unlikely. But this will create preconditions for the transition to a new stage of change, when all outstanding issues and unmet needs will be put on the agenda understood by society. The work on the dismantling of neoliberal order which will inevitably start during the term of the 45th president of the United States is necessary in order to pull the society out of impasse. Trump himself will be unable to accomplish it due to his class, cultural and ideological limitations. He is just preparing conditions for more serious changes, which are inevitable in the unfolding situation of confrontation. Only the new social forces which will take shape in the nearest few years will be able to complete this process.

This is a second chance for the Left. After their indecisiveness and readiness to support the “lesser evil” led to the interception of initiative by the right populists, they might be able to return to the political arena. But a complete, open, and demonstrative beak up with the liberal establishment is the necessary precondition. Ideologues and leaders of the contemporary Left in the US and Western Europe, with a rare exception, are unlikely to be able to do it. They are too integrated into the current political order. But this is the only possible platform for the consolidation of the left movement.

All of this is relevant not only for the United States, but also for the majority of the European countries, including Russia. The growing discontent everywhere takes form of populist movements, which have a potential to be led by the right and left alike, but in both cases they are aimed at the dismantling of liberal institutions and politics in the form they have developed in the last three decades. The changes in the United States open unprecedented opportunities for change in other countries: the more US is busy solving its own problems, the less they interfere in the affairs of other countries, the more opportunities for the people of the world to solve their problems independently. It was the liberal America with its hypocritical interventionism who served as the global conservative force blocking the natural needs of social evolution in other countries. This was the politics, which paralysed the grass-roots growth of social movements and democratic initiatives, and bore the radical Islamism and other movements which substitute social mobilisation by violent reprisals against those who are perceived as the culprit of current troubles and problems. Rejection of interventionism by US will not put an end to conflicts and wars, but these problems will be solved by local forces, based on the balance of local and regional interests.

As for Russia, Trump’s victory does not bring good news for her ruling circles. The attitude of Donald Trump towards Vladimir Putin does not matter, the protectionist agenda of the new leadership in Washington nullifies the economic strategy of Kremlin, which continues to believe that the flow of cheap money from the US and the flow of Chinese goods to the US market will help to maintain the price of oil at the level which allows them to avoid any internal political reforms. Alas, this time is over. US sanctions and aggressive hysteria of Obama and Clinton helped to stabilise current Kremlin regime, maybe even prolonging its existence for a few years. But this is coming to an end, too.

The victory of Trump in the US presidential elections marks the point of no return for the history of the world. Saving the old order becomes impossible. And, most likely, even the American president is not aware of how large-scale the transformation process will be, the process he has started by the very fact of his arrival into the White House. But very soon everyone will feel it. Not only in America but also in Western Europe, in China and in Russia.

 

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About the Author

Boris Kagarlitsky is a sociologist living and working in Moscow. He served as an adviser to the chair of Federation of Independent Trade Unions of Russia in 1992-1994 and later worked for Russian Academy of Sciences at the Institute for Comparative Political Studies and is currently the director of the Institute for Globalization and Social Movements (IGSO) and a professor at Moscow School for Social and Economic Sciences. His recent books in English are Empire of the periphery: Russia and the World-System (Pluto, 2008) and From Empires to Imperialism: States and the Rise of Bourgeois Civilization (Routledge, 2014).

 

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