Current Intelligence magazine's monthly columnsCOLUMNShttp://www.currentintelligence.net/columns/2011-12-09T01:09:10ZSquarespacePlease Update Your RSS Subscriptionshttp://www.currentintelligence.net/columns/2011/12/9/please-update-your-rss-subscriptions.htmlThe Editors2011-12-09T10:00:00Z2011-12-09T10:00:00ZThe columns section has been discontinued. Not to worry: the columnists - Faisal Devji, Jon Western, Stephen Saideman and Scott Smith -- are all still contributing to Current Intelligence. CI has moved to a new structure and format, so instead of multiple RSS feeds, all of our analysis and commentary will now be available through a single, new Analysis page.

We've linked to it here for ease of access, and you can subscribe to the Analysis RSS feed here, as well. Enjoy.

The Editors

]]>UN Irresolutionhttp://www.currentintelligence.net/columns/2011/10/25/un-irresolution.htmlStephen Saideman2011-10-25T21:30:00Z2011-10-25T21:30:00ZThe TV show “Community” recently had an episode largely dedicated to two groups of students competing to run their school’s Model UN program.  The episode concluded with a win by the team that was less reality-based, as a political science professor (at the community college around which the show is centered)  stated that the UN is a “fundamentally symbolic organization founded on principles of high minded rhetoric and empty gestures.”  This snark seemed most appropriate given its timing: as world leaders line up for the annual speeches in September and October, as Palestine’s membership status was being hotly debated, and as the UN Security Council could not agree to sanction Syria for its repression.


The issue of Palestine as a member of the UN is entirely symbolic (although not entirely meaningless), as the US and Israel essentially recognized Palestine in previous agreements.  Further, even as it gains international recognition, Palestine will join the ranks of states that have less than full control over their own territory.  Statehood, as recognized by the UN, will not change too many facts on the ground.  Somaliland has managed to get by despite the lack of recognition, and the list of non-recognized countries  is getting longer all the time from Taiwan to Abkhazia and beyond.


Of course, we should not be surprised that Russia and China would veto a resolution addressing human rights.  It is more surprising that they let the Libya resolution go last March.  Of course, they now bear the scars of that resolution, as France and its allies took that resolution and ran with it.  The important point here is that China, in particular, gets to vet the world’s decisions about the application of human rights standards.


Why do I find this at all problematic?  If I had never moved to Canada, I would have just laughed at the Community episode and moved on.  But having moved outside of the US, I was surprised to find that Canadians (and folks elsewhere) tend to think that UN approval is a stamp of legitimacy that might be required for international interventions.  While nice as an ideal and convenient when one already does not want to participate in an invasion of Iraq, it means that one’s foreign policy becomes subject to the whims of the veto-holders on the Security Council.  And, excuse me, but the idea of Putin or the Chinese having a veto on American or Canadian foreign policy is not terribly appealing.  As it would not be appealing for many countries to essentially grant the US a veto.


We are far from a world in which each veto-holder at the UN is seen as representative, well-governed, and fair.  These are not Supreme Court justices but powerful countries with their own interests.  China is hardly democratic, Russia is pretty flawed (especially with the Putin return to power, as if he ever left), and the US showed that its leaders are not bound by the rule of law during a semi-emergency. 


I am not suggesting that the UN be reformed so that there are no vetoes at the UNSC, nor am I arguing that we should restrict who holds the vetoes.  Hoping for either or both would be ignoring the institutional logic of the vetoes—change is not going to happen.  No, what I am suggesting is that we might not want to over-rate the legitimacy and power of the UN and the Security Council.  While the UN and the Security Council are important fora for presenting messages and for trying to win global popularity contests, they should not be seen as arbiters of justice.  The presence of Libya and other repressors on the Human Rights Council reminded us that these organizations do not have membership criteria tied to suitability or fit with the avowed standards of the organization.  As long as we also remember that is the case for the UN Security Council, we would be alright.

]]>The BRIC Insidehttp://www.currentintelligence.net/columns/2011/10/20/the-bric-inside.htmlScott Smith2011-10-20T13:00:00Z2011-10-20T13:00:00ZREGARDLESS of how one feels about it, the Occupy Wall Street protest that’s grown in both size and geographic scope in the US (and internationally) is focusing a bright light on an issue that’s been actively obscured in US politics for a decade, and which has passed some critical markers in terms of severity: US income levels—and opportunities to generate income—have fallen, and continue to fall, alarmingly. New US census data indicates that median incomes fell by 6.7% from June 2009 to June 2011 alone. Poverty rates have climbed, and unemployment remained stagnant, pouring more cold water on Americans at the end of a so-called "lost decade".

One of the key drivers of decline that many politicians point to is the export of manufacturing jobs that have been at the heart of the US economy over the past century or more, as well an increasing slice of service sector jobs that have powered it for the last 20 years. America’s loss has been a gain for China, India, Mexico, Vietnam and a host of other emerging markets whose new middle classes have grown while America's own has not. And now that the world’s largest economy has been sufficiently hollowed out, some economists and consultants are flagging what they view as the beginnings of a reversal.

A combination of sliding manufacturing wages, weak union protection, an increasingly anti-regulation mood among legislators in the US,  inevitable wage inflation in China and high costs of maintaining long supply chains across the Pacific, are creating conditions wherein companies are considering repatriating factories back to the US. In the analysis of the Boston Consulting Group (BCG), which has studied this phenomenon, the made-in-China savings are negligible enough to merit bringing some industries back onshore. BCG has recently gone so far as to name key industries that could be first in line: transportation goods, computers and electronics, fabricated metal products, machinery, plastics and rubber, appliances and electrical equipment, and furniture.

In short, the core of American industry is effectively becoming almost as Chinese as China, in economic terms, but with marginally better quality control. It’s not necessarily a new thesis. Tom Friedman raised the spectre of global economic equilibrium in “The World is Flat,” and financial writer Michael Lewis takes it a step further in his new book, “Boomerang,” which places the US economic calamity in the same context as those of Ireland, Greece and Iceland, though these are largely dealt with at a macro level. The emerging downside of globalization is that it flows both ways. The US may have benefited from low-cost foreign production and cheap labor elsewhere, but that benefit has, in net terms, raised other nations' standard of living while sapping America's own, due to overleveraging.

Some large corporations have seen this leveling and taken advantage of it to bring to the US market lower-cost design and innovation picked up in emerging markets, often without the end consumer being any the wiser. Most American buyers of inexpensive sedans made by companies like Honda and GM, for example, wouldn’t know their vehicles were optimized first to suit the tastes of Chinese consumers, and only then exported to the US -- a reversal of the historical trend that “what’s best for America is best for the world.”

It’s a strategy adopted by a wider range of global companies, as well. GE, for example, has touted its bottom-up innovation strategy of sourcing from developing markets new ideas for lightweight, inexpensive approaches to technology development. Numerous other global brands have sent specialists into the field to see what could be learned from innovation under constraint to use in developed markets where margins are tight and money newly scarce.

Economics isn't my field, but observing and analyzing how economics and other forces change our behaviors is—in particular, how these forces change our use of technology. On this point, an interesting cluster of signals has been emerging recently that points to growing similarities among the growing US “underclass” of low-income individuals and families, to their global, lower middle-class counterparts in the BRICs (Brazil, Russia, India, China) and beyond. Even as they are layering up, we are stripping down, so to speak.

Take for example, a new set of data released by the Pew Internet & American Life Project this past summer (and recently refined) which indicates an unwiring of lower income consumers. Pew’s earlier research showed that, amid the deleveraging that American households are undergoing, Internet and mobile connectivity have largely been protected from the chop, as they provide both low-cost entertainment and communication. Now the fixed-line Internet connectivity is going to an increasing number of homes, and mobile Internet is protected as critical infrastructure. As a single investment, the mobile phone can deliver the greatest number of functions, at a sufficiently high level, at the least cost.

As an economic and social tool, an Internet-connected mobile phone is seen as a critical possession for   people and families on the downward economic escalator, and for newcomers to the US on their way up. I saw the latter phenomenon in field research over five years ago among immigrants living in US cities. A prepaid mobile is an early acquisition, and sometimes even a group resource. It enables access to jobs, contact with families, acquisition of other utility services, and so on. And with the availability of prepaid smartphone services that don't require established credit history, low-cost smartphones have penetrated these growing lower economic tiers.

This might sound familiar if you’ve kept up with the spread of mobiles and smartphones in the developing world. Emerging middle classes and those at the bottom of the economic pyramid have graduated up to higher levels of sophistication in mobile devices. In a study we recently completed of almost 50 countries worldwide, we found that one of the key trends in technology uptake is no longer the spread of mobile phones in general, but the boom in smartphones, even at lower economic levels. For emerging markets, first contact with the Internet is increasingly coming not through PCs but via a hand-held or pocket-sized device. A new study of rural China shows what this looks like: copious quantities of modern media, piped in via a 3G connection, consumed by that country’s lower middle class. Similar research results are becoming apparent in countries such as Indonesia, India, and across the emerging world.

So what does this mean in the context of the US economy? Underneath the stereotypical American tier of multi-device, high-speed households choc-a-bloc with the newest Apple devices, games consoles, flat-screens and fibre connections, is a growing layer of pragmatic technology users for whom utility is a higher priority than entertainment or convenience. For them, a mobile is a life tool, a means of staying both connected and afloat. If one factors in the possibility that US incomes could remain flat for the next decade, as just forecasted by a Wall Street Journal panel of economists, this layer will grow to be a more substantial part of the technology audience, looking much more like the lower middle classes in the BRIC economies than the more economically mobile top tier.

A recent Gallup poll indicated that fewer Chinese than Americans reported struggling to afford food or shelter for their families. That's a fairly stark data point at the current juncture. Technology usage is just one indication of how the lives of both country’s middle classes are starting to converge in alternately worrying and surprising ways. Should these two economies continue along similar trajectories to what they have been doing for the past five years, we may soon need to consider not just how to capitalize on BRIC growth abroad to grow the US economy. We may also need to adjust to the development of a similar economy within the US—the development of our very own BRIC inside.

--
Scott Smith is the author of Discontinuities, CI's monthly column on disruptive technology and innovation in emerging markets. He is founder and principal of Changeist, LLC,  foresight and strategic design consultants advising organizations as they navigating complex futures.

]]>After Libya and Syria: Can R2P Survive?http://www.currentintelligence.net/columns/2011/9/27/after-libya-and-syria-can-r2p-survive.htmlJon Western2011-09-27T19:00:00Z2011-09-27T19:00:00ZMORE>>]]>Human Flesh Search Engineshttp://www.currentintelligence.net/columns/2011/9/20/human-flesh-search-engines.htmlScott Smith2011-09-20T10:30:00Z2011-09-20T10:30:00ZMORE>>]]>Ten Years After 9/11: Big and Small Lessonshttp://www.currentintelligence.net/columns/2011/9/10/ten-years-after-911-big-and-small-lessons.htmlStephen Saideman2011-09-10T21:43:50Z2011-09-10T21:43:50ZMORE>>]]>Mirror World: China's Evolving Technology Sectorhttp://www.currentintelligence.net/columns/2011/8/16/mirror-world-chinas-evolving-technology-sector.htmlScott Smith2011-08-16T15:00:00Z2011-08-16T15:00:00ZMORE>>]]>Transition in Afghanistanhttp://www.currentintelligence.net/columns/2011/8/15/transition-in-afghanistan.htmlStephen Saideman2011-08-15T08:00:00Z2011-08-15T08:00:00ZMORE>>]]>Categories Of An Imagined Pasthttp://www.currentintelligence.net/columns/2011/8/15/categories-of-an-imagined-past.htmlFaisal Devji2011-08-15T08:00:00Z2011-08-15T08:00:00ZMORE>>]]>Shanzai! The Era of DIY Warfarehttp://www.currentintelligence.net/columns/2011/7/18/shanzai-the-era-of-diy-warfare.htmlScott Smith2011-07-18T08:45:00Z2011-07-18T08:45:00ZMORE>>]]>