Wednesday, October 26, 2016

Is the New World Order Here Yet? (Book Review)

Written after the 2008-2009 financial crisis, Jerome Corsi strikes an appropriately skeptical tone towards globalization in America for Sale (2009, hardcover) (updated?): "What is left challenged by globalists is the possibility that globalism itself may be inherently flawed.  The world economy is moving to a leveled labor market in which a government and business elite will be the only winners... It should be clear... that globalism has not worked... What all Americans must understand is that global governance will end up destroying the very American nation-state our Founding Fathers intended to create for us to pass on to future generations."

Corsi fairly summarizes other influential thinkers' views, such as Joseph Stiglitz, who believes globalization has failed because it has operated without sufficient protection for developing countries; however, Corsi's own ideas have several issues:

1.  When America was exporting its own values and products all over the world and imposing its influence worldwide, Americans did not complain about globalization. Quite the contrary--American writers proudly proclaimed the 21st century the era of "soft power."  Now that other countries are gaining sufficient power and influence to export their images and perspectives to other countries, suddenly Americans are unsure of globalization. America seems hypocritical and small for taking such a view rather than seeking to compete on its merits.

2.  Corsi assumes that international governance necessarily requires a loss of sovereignty.  Yet, he never considers that it's worth giving up a small or measured loss of sovereignty to gain a substantial benefit, especially when so much of American innovation and prosperity come from its multinational corporations, which make most of their money overseas.

3.  Corsi assumes that all international governance mechanisms will harm American values; however, if American values are superior, why wouldn't they prevail in negotiations and other economic "battles"?  Corsi writes that in "a world economy, the United States was valued as a consumer country, not as a producer, manufacturer, or exporter." (pp. 162) There is no reason such a scenario must always be true.  With the appropriate level of tax credits and proper negotiations, the U.S. could produce (and export) whatever it likes.  Thus far, however, its tax incentives have failed to be on par with China's, creating predictable consequences.

When America's major source of innovation comes from military R&D, it's no wonder countries like Japan have been more innovative than America with respect to quality-of-life matters and domestic infrastructure.  Of course spending to kill will result in entertainment-oriented and consumer applications rather than constructive ones.  Ships and aircraft carriers don't have too many transferable uses in a landlocked domestic economy other than supply chain advantages (logistics), which benefit transporting consumer goods worldwide, not making everyday life easier for residents.  Innovation is different when it seeks to control and monitor populations in unknown or rural areas compared to when it seeks to make life more efficient in densely populated cities.  America once again looks small when it complains about trade deficits while creating budgeting incentives that guarantee them.

4.  Corsi correctly identifies America's relatively high wages as an impediment to eliminating trade deficits.  However, he once again fails to address them in a concrete or constructive way, assuming always that negotiations cannot resolve such issues.  Even if we assume that wages in America will stagnate over x number of years, there are ways to negotiate against artificial financial manipulation, such as devaluation in other countries' currencies.  One way would be to increase tariffs only one way by x percent relative to any devaluation.  (That one I got off the top of my head, so you can see that an almost infinite number of ways exist to balance trade in ways that force countries to compete based on quality or merits rather than price or labor costs.)

Another example would be the granting of x dollars to the country or corporation whose products are being copied due to lax copyright or IP enforcement.   The real problem is how to calculate such penalties and how to encourage domestic IP enforcement without resorting to lengthy or expensive litigation, and Corsi offers no solutions here.  Corsi and other protectionists lament the idea of international tribunals, but their whole point is to protect companies from having to litigate in other countries' "home courts," where they would be at a disadvantage due to language and cultural barriers, even if using local counsel.  The fact that international tribunals are slow or clunky is no reason to stop globalization.  A hardy people would seek to reform court systems or to implement better oversight, not to give up substantive economic activity due to slow lawyers and ill-prepared judges.  No one argues we shouldn't have the Olympics because some referees make terrible decisions.

5.  Corsi is fantastic when it comes to evaluating and explaining other economists' positions, but his own haven't stood the test of time.  Chapter 7 is titled, "The Plan to Destroy the Dollar."  From pp. 186: "Regional currencies like the euro are merely stepping-stones on the path to the Holy Grail of a one-world currency."

About a decade later, the US dollar and the Japanese yen are the world's strongest currencies, and the euro has been in steady decline.  This is one example of Corsi's narrow academic focus.

Here's another, from pp. 211: "Ironically, the United States may be approaching an era where it will be impossible to buy a U.S.-manufactured auto, or an era marked by a global economy in which the only manufacturers that survive will be the multi-national corporations with car-manufacturing capacity in China, aimed at taking China's low-cost labor markets."  Last time I checked, not only do Ford and GM make cars in the southern U.S., but even Volkswagen and other foreign car companies make cars in the U.S.

One more, from pp. 228: "Avoid Investing in Stocks and Bonds."  Since the publication of Corsi's book, both stocks and bonds have increased substantially.

6.  I did not see any substantive opinions on the state of American K-12 education, which is an interesting omission to the extent the quality of one's education matters as workers compete not just domestically but worldwide.

Corsi would benefit from adding a review of actual terms and conditions of the trade agreements he complains about, but the first half of his book is fantastic because it so clearly lays out many of the issues we face today.

Bonus:

Jill Stein supporters are generally smarter than other party supporters but they still don't realize their positions are effectively the same as Donald Trump's, but in different ways. 
Extreme liberals don't want to build a physical wall but they want to stop the free flow of global capital and development or restrict them so thoroughly, it's almost the same in the end. 
Her: "NAFTA costs American jobs, including good management jobs, and allows companies like Ford to take advantage of fewer regulations in other countries. It also reduces tariffs, hurting some industries like agriculture." 
Me: "I like poor people. I have no problem with a corporation helping them in other countries. The problem with the loss of manufacturing jobs isn't NAFTA--it's our own gov's failure to invest in retraining or other higher skilled work programs, along with extended unemployment benefits for displaced workers." 
Her: "But these companies destroy domestic competition when they move, like Walmart destroys mom and pop shops." 
Me: "You have not said how specifically, but if you're arguing Walmart pays better wages or makes products more cheaply than the competition, why is that a problem? Why shouldn't Venezuelans and Mexicans have better access to higher paying jobs and cheaper products? No one is forcing people to take those jobs, so the pay is probably much better than domestic companies. 
I agree working conditions must be monitored, but just because the level of legal protection isn't the same as here doesn't necessarily mean they're being taken advantage of." 
Her: "Over time, the competition destroys domestic industries and smaller businesses in other countries." 
Me: "But if GDP increases over time, then both countries benefit as industries are modernized and newer technologies are introduced to workers and residents who would not otherwise gain access to those advancements without corporate investment." 
Her: "The TPP allows corps to sue entire countries." 
Me: "Yes, because if the country confiscates corp assets, there needs to be a way for the company to protect itself. You have a billion dollars. Would you invest it in Venezuela without legal protection?"
Her: "The money shouldn't be there in the first place." 
Me: "So screw the poor people in Venezuela who would otherwise have greater access to jobs." 
Her: "You're raising your voice. This discussion is over."

Thursday, September 15, 2016

18 Countries in 5 Months: Travel Lessons

I started writing this article in Sydney, Australia and finished in Denarau Island, Fiji.  



I prefer Melbourne to Sydney—it’s more compact and has better public transportation—but wherever you go, Australians are some of the most open, friendly, and down-to-earth people you’ll meet (except in their airports, which, like America, seem to require hiring citizens with the lowest IQs).  In a city where slot machines and horse race gambling are regular additions in bars and restaurants; brothels with mostly Thai workers offer sex for 140 AUD and operate next to strip joints where customers cannot touch an Australian dancer for less than 100 AUD; and marijuana is essentially legal with a doctor’s prescription, you realize regulating man’s vices can be done ways that do not automatically remove the populace’s brains or sense of adventure (as opposed to say, well-regulated Taipei, where people—both inside and outside of airports, remarkably—are also friendly but where your greatest danger is dying of boredom). 

As Australia is the 17th country I’ve visited in the last 5 months, I’ve noticed an interesting trend—cities that attract affluent Chinese (or affluent or well-educated immigrants) see property and other prices explode.  It seems that some enterprising Chinese parents have cashed in some stock market gains from the Chinese or Hong Kong stock markets and put it not just in Singaporean and Hong Kong banks, but in property all over the world.  In fact, when I see smart, young Chinese adults with expensive private college American degrees helping their parents run a restaurant or hotel in Indonesia, I’m torn between lamenting the loss of talent and realizing that most college-educated Americans could not compete with the competence and humility I see every day when traveling in Southeast Asia. 

When I traveled 12 years ago, I saw mostly European and American tourists.  Now, I see few Americans and mostly Japanese, South Koreans, Australians, Dutch (wanderlust appears to be part of their very tall genes), and an increasing number of Chinese tourists.  (The Canadians can’t be far behind, but you never know with them, since they tend to blend in politely.)

[Update: just met a Canadian solo traveler in Fiji. She lives in New Zealand as a dental hygienist. She’s going back to visit her family for X-Mas because she’s yet to adapt to the abomination of sunshine in December and no natural fir trees.  As is the case with most of the non-Eastern-European white women I’ve met, the conversation ended abruptly after I questioned one of her statements.  I realize the line between playful mocking and polite criticism can be a fine one, but no other culture but Western white women seems so sensitive to having clearly incorrect statements contradicted.  

After a conversation about our travels, she said that Australian *airport* employees were “smart” because they recently caught two Canadian girls smuggling in millions of cocaine.  I pointed out that Australia was in the middle of nowhere and didn’t have land-based borders, so assuming its Navy was on the job, it was easier to prevent drug trafficking, and in any case, it wasn’t the Aussie airport employees per se who would catch the drugs—it would be trained dogs.  She persisted in defending the Aussie *airport* employees and after she left, I looked up the incident.  Yup, it was an international effort and drug-sniffing dogs caught the enterprising Canadians.  The two Canadians—both under 30—weren’t criminal masterminds, either, as they went on a very expensive cruise and posted Instagram pictures of their travels.  I think I may have crossed the line when I added that the Aussie government isn’t going to report their failures in catching drug smugglers, so the only ones she’ll hear about would be the occasional successes, and again, drug-sniffing dogs and basic surveillance—not Aussie ingenuity, which has yet to lead to a country-specific cuisine or Aussie-made technology used widely beyond its borders—would be responsible. 

I declined to say that even Canada managed to invent Blackberry and Lululemon, and what have the Aussies ever done for us (outside of mining)?  Just to be sure, I looked up Australia’s number one technology company.  It’s Atlassian (symbol: TEAM), founded in 2002, and now with a whopping 1,700 employees worldwide.  Yeah, I never heard of it, either. One gets the sense that white Western culture depends on not looking like a fool even if richly deserved, which would explain why the U.S. wouldn’t issue any comment on the Chilcot Inquiry and is increasingly becoming like a cranky old man refusing to admit that he just fell asleep in his lounge chair or made any other mistake, ever.] 

In an age where images of American superheroes like Captain America and Superman are ubiquitous worldwide on clothing, backpacks, and toys, you realize the non-American countries haven’t yet figured out they are the New World and the new frontiers—like it or not.  I just saw an Aussie boy wearing American flag socks and a Kobe Bryant jersey playing basketball.  I asked if he was American, and he was not.  (I wouldn’t wear a Dellavedova or Bogut jersey, but there’s no excuse for not appreciating Patty Mills, if you ask me.) 

The American propaganda machine is so good—it better be, with no fewer than 17 intelligence agencies on the taxpayers’ payroll—it seems that showing pictures of the Statute of Liberty and WWII prevails over the changing facts on the ground, even as Canada, Turkey, Germany, and other countries take in more Syrian refugees than America; elect Rhodes Scholars who are also self-made millionaires (as opposed to the 2016 Republican nominee, who inherited millions of dollars); elect female leaders who speak out against American surveillance (long before Democrat Hillary Clinton criticized Edward Snowden as a lawbreaker and President Obama called him unpatriotic); increase GDP without forcing residents to go into debt for essential items like healthcare and education; build efficient, cost-effective public transportation; and open doors carefully to educated immigrants, while America debates whether to directly accept immigrants who will bring much-needed technology skills; indirectly accept them by granting outsourcing and technology firms a higher visa cap; or not accept them and allow other countries to benefit from their expertise.

Some people will ask me what I’ve learned over the last 5 months traveling across the globe, starting in Colombia and ending in Fiji.  Rather than bore them verbally for hours over overpriced coffee, I hope to direct them here—where they can be bored on their own time and schedule over another long-winded, meandering post. 

Democracy is Dead

Just kidding.  I’ll save the politics till later.  I’ll just say that the Australian military member I met at a Sydney war memorial knew more about the U.S. Constitution than most Americans and told me, “No one else but America has a [winner-take-all] two-party system because it doesn’t work.”  He was also one of the most honest, good men I’ve ever met—grew up working with his hands.  Anyway, let’s start with the fun stuff. 

Go to Places where People Ignore Rules Crafted in Response to Fear

Melbourne was one of my favorite cities—except for the airport, of course.  At Melbourne’s airport, the customs official told me to put my phone away (because putting phones away by the time you reach the customs counter definitely, definitely prevents pictures and videos from taken), then made the grand gesture of holding my passport photo in the air and glancing at me and then the passport photo at least twice.  The entire incident, minus the phone discussion, took about 4 or 5 seconds or, if you prefer, two times more than a mentally disabled person would require to look at the passport photo as it was being handed to her, remember it, and then determine whether someone was actually trying to scam his way into Australia with his biometric passport and the Australian visa he already applied and paid for two months ago. 

In any case, I loved Melbourne (for the record, my fav cities were Tokyo, Santiago, San Pedro de Atacama, Hong Kong, Melbourne, and Jakarta.  Yes, Jakarta.  The food is amazing, and it’s the real “land of smiles”—in about 5 years, when public transport arrives, the city will become an easier tourist destination).  Melbourne had an oddly familiar feel, and it’s not just because its Luna Park area resembles Santa Cruz, California.  It’s because it felt and looked exactly like American pre-9/11—open, unafraid, optimistic, and diverse. 

Melbourne has a large, popular casino with all the works—a poker room with a neon sign flashing "Las Vegas," a fancy food court, etc.  Each area has at least one security guard, and the signs separating one area from another say that bags must be checked. The poker room had a large, ex-military-looking gent guarding it.  I went to him with my bag open and as doe-eyed as I could possibly be.  In America, I can sometimes get away with looking Mexican, Central American, or Spanish, but in Australia and Southeast Asia, everyone’s first guess was Arab.  After the airport experience, I was prepared to be strip-searched, but the gent gave me a wide smile and said, “It’s ok, mate, I trust you.”  The second and third time I moved between areas without being bothered was when it hit me—Melbourne is a city where people have kept their common sense.  (The large security guard saw me reading the rules next to the entrance and must have figured out potential terrorists don’t bother reading written regulations before making their move.) 

From that moment, seeing Melbourne and Sydney made me sad. Everywhere I went, I was reminded of San Francisco and Santa Cruz, but without Donald Trump or Sarah Palin as potential rulers. The government unions in Sydney are doing the same thing as the ones in California—demanding greater pieces of the tax pie and claiming if they don’t get the money they want, they cannot guarantee safety.  The Australians shrug off such fear-based threats and focus on maintaining their existing 15 USD minimum wage and a healthcare system that covers all their medical bills (but not their ambulance bill) for 1.5% of their income.  That’s 1.5% of their income each year (the military gent I mentioned earlier told me, “I don’t even notice it—comes out of my regular paycheck.”). Their outgoing central banker, Glenn Stevens, gave such a compelling, educational interview in the Australian Financial Review (see 9/9/16 edition), I promised myself I was going to read everything he wrote. 

I now know why George Soros—who is more often right than not on macro issues—calls his programs “Open Society.”  When you live in an open society, good things happen.  People who aren’t afraid of each other are more likely to collaborate spontaneously without needing to go to the same expensive universities.  I met an American dancer at a basketball shop in Sydney who taught me more about fashion economics than I learned in the last ten years.  I would have never met him in America.  He told me he’s moving to Australia under an immigration program designed to attract workers under 31 years of age. He’ll be closer to his Fijian girlfriend, too.  Meeting him and experiencing his optimism and energy firsthand made me happy for the rest of the week.  It turns out that good, non-judgmental people are the ultimate anti-depressants and motivators.  (Thanks, Maleek!)

Places that aren’t open societies or that spend an increasing allocation of their tax revenue on military or law enforcement bleed and repel talent if the allocated tax revenue is at the expense of non-law-enforcement job growth.  Over time, assuming options exist, the most open-minded or financially stable people prefer to live in open societies, which also tend to be happier. 

It is no coincidence that Melbourne and Sydney are similar to two of California's most prosperous cities, Santa Cruz and San Francisco.  The formula is the same:

Attract law-abiding, hard-working immigrants. 

The immigrants bring new talents and/or increase demand for essential services and items like housing, gasoline, groceries, etc. 

The increased demand increases the value of the existing residents’ houses, making them feel richer. (Just ask yourself: why have housing prices in American cities increased more in diverse rather than non-diverse places, or in places near diverse places?) 

The existing residents feel richer and spend more money, increasing demand not just for essential services, but for expensive coffee, clothing, etc. 

A new creative class emerges, attracting young people and more diverse jobs, such as website design, interior design, etc. 

The government sees a higher tax base and increases government jobs, which usually go to people connected with the political or real estate players, which again favors existing residents rather than immigrants. 

Everyone is happyuntil the demand from immigration succeeds too well, pricing out the next generation from the housing and other markets. 

After the last step, societies have a choice—they can turn on each other, refuse to make sacrifices, and start blaming each other.  Or they can try to increase mobility, spread out job growth not just in the large and now-larger cities that have attracted immigrants (i.e., spread the wealth geographically), and try to achieve some balance that doesn’t allow excessive inflation in essential items like housing, college, and healthcare. Existing residents usually split in two groups—the ones that owned houses before the immigration boom and the ones that rented.  (You can guess which group blames the different-looking residents for their new problems.) 

By the standards mentioned above, America is the worst of all developed countries—not only is it the only developed country that appears to lack efficient and broadly available public transportation in its major cities, it also requires its residents to go into debt to get essential items like a college education.  In most developed countries, personal debt is anathema.  Listen to Brad Katsuyama from Flash Boys (2016) talk about his experience coming to New York from Canada: “Everything was to excessI more offensive people in a year than I had in my entire life. People lived beyond their means, and they did it was by going into debt. That’s what shocked me the most. Debt was a foreign concept in Canada. Debt was evil. I’d never been in debt in my life.”

When I realized that personal debt was necessary to achieve a basic standard of living in America, especially for younger people, the more I saw a connection between its increasingly authoritarian society and its attitudes towards personal debt.  Vietnam saw numerous protests in America, including ones where college students were shot and killed.  Syria and Libya, in contrast, saw few protests and certainly not sustained or effective ones.  Part of this change is obviously the lack of a mandatory draft, but a society in debt or with excessive inflation in essential items is not one that can buck the Establishment or established political players, especially during a recession, when government spending drives job growth. 

I’m going off course again, so I’ll end this section with a quick observation: the only airports I saw with the new scattershot body scanners were American, Thai, and Australian.  (The Thai airport personnel were nice, so the American and Australian machines must come with a training manual titled, “Fear is the New Black: How to Pretend to Be Military-Tough without Actual Military Training.”)  Some societies are becoming more open, and others are becoming more closed.  It’s not a surprise that economic protectionism follows when people become more fearful of each other, unaware that the same immigrants they increasingly fear are the precise reasons for their economic growth thus far. 

In my own way, I’m doing what I can to maintain the vestiges of American rebellion (RIP George Carlin).  In Santiago, Chile and every single other South American airport, I took videos of the airport baggage area and sent them to the TSA on Instagram with snarky comments such as, “Santiago is the most prosperous city in South America, and its airport has plenty of tourists and fancy shops, but they don’t have a TSA.” (In Tokyo, my favorite city, it took just 5 minutes from the time I exited the airplane to get past customs/immigration, so I didn’t have time to take a video—now that’s efficiency.) 

Open Societies Don’t Care What You Do in Your Bedroom

Ladyboys, transsexuals, sapiosexuals (if I see that word one more time in a dating profile, I’m going to puke), and homosexuals—what do they have in common?  In open societies, no one gives a damn about your sexual preferences. 

In Bangkok, I was served by ladyboys wearing too much makeup in grocery stores.  In Manila, a Muslim mall shopkeeper with a headscarf wearing sandals worked alongside a Catholic wearing a gold cross and Nikes. In Fiji, the best servers at my resort are 6’3”, 250 pounds, with waxed eyebrows and high-pitched voices.  There are red light districts in prosperous Sydney and not-so-prosperous Bangkok—and like all red light districts, they have delicious, reasonably-priced food available at 1:30AM. 

We’ve talked about personal debt and excessive or artificial/external inflation being the death knell of peaceful economic progress, but the other consistent component of an open society is sexual openness.  Before France tragically experienced terrorism, most news articles mentioning the country would discuss the President's mistress or the copious amounts of sex (inside and outside marriage) that French couples had.  Suddenly, the articles shifted to cities banning full body swimwear (“burkinis”) and police officers forcing a Muslim woman to remove her headscarf at a beach (ISIS itself couldn’t have created better propaganda showing Western hypocrisy on freedom of religion).  Which article would you rather read—the one about a city council having nothing better to do than pass a law allowing cops to harass old Muslim women on the beach, or the President shagging a model with his wife’s permission? 

After experiencing a traumatic event—especially terrorism—societies and governments have a choice—they can remain open or they can close themselves off directly (restrict immigration) or indirectly (allocate more tax revenue to unnecessary military expansion, whether domestic or international).  I’ll give you one guess which direction much of America has chosen.  (If you're an Aussie airport employee, you can have four guesses--I believe in leveling the playing field.)

Successful Societies Maintain Informal Norms

Not following stupid rules, using common sense, and letting people have sex in peace create a natural segue into my next topic: the informal vs. the formal, or “How Did We Allow Lawyers and Insurance Companies to Set Behavioral Norms?” (aka What’s Behind the Rise of Donald “I’m Not Politically Correct” Trump?)

I’ve mentioned Dan Ariely’s book, Predictably Irrational (2008), before. Ariely discussed an Israeli daycare’s late pick-up policy.  Initially, a few parents were late picking up their children, causing the daycare to incur overtime.  In an attempt to minimize disruption, the daycare instituted a penalty for late pickups.  Every late interval incurred a certain fee.  What happened next? Late pickups *increased*.  Ariely’s genius was figuring out why. 

Ariely determined that before the penalty (which could also be called a rule or law), social norms rather formal norms prevailed.  Ariely called it “shame,” but whatever you want to call it, it worked better than the rule-based or legal system.  Basically, when you trust people, they usually rise to the occasion unless other incentives interfere.  The minute you get lawyers involved, people start doing cost-benefit analyses and try to “game” the system.  In the case of the daycare, they will have to add more rules (higher penalties, shorter intervals etc.), which function as amendments to their law.  All too suddenly, a new law or rule becomes more complex and convoluted and still doesn’t deliver the intended result.  As Michael Lewis wrote in Flash Boys (2014), “Every systemic market injustice arose from some loophole in a regulation created to correct some prior injustice.” (Bonus: "As a law professor...I certainly understand the law and the rules. And one of the things I understand is that you can't write a law that I can't get around." -- Michael Josephson) 

Go look at any random American civil code.  Observe the numerous subsections, which usually indicate a lobby group or group of concerned citizens have, over time, exempted themselves from the law’s purview or at least minimized its bite.  What’s that? You say some new laws protect more people, such as transgendered people? Ask yourself: in the absence of express diversity quotas, is a small business owner more or less likely to hire someone who can sue him for discrimination, or someone who looks like him and who belongs to the same religious institution? If the latter, does such a dynamic mean that small employers are encouraged to hire minorities (whom the law intends to help) after they’ve hired everyone they know and when demand quickly escalates beyond what they anticipated? 

Creating rules or laws almost guarantees—in the absence of an irreverent, anti-authoritarian culture—that people will be more likely to do the minimum required by law, because lawyers have interjected themselves in a social norm and overruled it by fiat. Sure, we have the Queen and her progeny as a useful conduit to establish social norms in the U.K. and to take attention away from Englishmen with bad teeth and out-of-shape British women, but when lawyers set too many social norms, they take away personal initiative, and societies seem to become apathetic.  Indeed, more laws don’t mean the intended goal of the law will be achieved or even promoted—it could mean that people see the law itself as an excuse or barrier to acting on their own.  Meanwhile, in Japan or South Korea, social norms usually prevail over legal ones, so any older male can be an authority figure, not just the police. 

I experienced this dynamic myself when I did pull-ups on the train—an older Japanese man tapped me on the shoulder and made a disapproving gesture.  In a movie theater, I had temporary restless legs syndrome, and an older Japanese man three seats down reached over and gently put his hand on my leg, indicating I should stop.  In Seoul, a Nigerian-American teacher told me, “The police here [in South Korea] have little power—I’ve seen older Korean men overrule the police and tell the police what to do, and the police comply because the man was older.”  (Thinking about this social dynamic gives me more insight into why some Asian countries, like Japan, are opposed to mass immigration.  It’s not xenophobia or racism—it’s because they haven’t figured out how to maintain their harmonious social norms, which, in the case of Japan, have led to one the most peaceful, polite, prosperous, safe, and efficient countries in the world.) 

No system is perfect, and there’s an obvious flaw in this particular social norm system—older men aren’t exactly a diverse demographic when it comes to enforcing rules, and having every man over 50 years old as a potential enforcer doesn’t help foster a culture of creativity or innovation.  Japanese women seem to be quietly rebelling against the “older men as social enforcers” dynamic by refusing to have kids and using the Japanese yen’s strength to study abroad and travel as much as possible.  (A big shout out to the Japanese study abroad students who took me to Melbourne’s St. Kilda beach and took fun pictures with me, a random stranger they’d just met in a cafe.)

At least under the Western system, you’ll have more women and minorities able to have a voice and shift the culture.  Yet, is that really true? The point of the law is to create a predictable system.  If the male judge in Courtroom A interprets an anti-discrimination law or a witness’s credibility differently than the female judge in Courtroom B, then justice is determined by the random assignment of a judge.  In addition, most American judges are older men anyway.  Look at your average police station—mostly white men (though cities are becoming more creative and appointing more minorities as public faces of their departments, which looks good but does nothing to change the dynamic for 80 to 90+% of the employees and the residents with whom they interact). Your average K-12 district?  Mostly white female teachers. (From Ed-Data in 2010: "In 2008-09 California’s teachers were predominantly white (70.1%) and female (72.4%), quite a different look from the student population that was 51.4% male and had major ethnic categories of 49.0% Hispanic, 27.9% white, 8.4% Asian, and 7.3% African-American.")

At the end of the day, are the Western and Eastern systems really all that different?  And shouldn’t the question be how to create a society as harmonious as Japan, but with more input from everyone, not just older men?  As a Canadian told me in Taipei, “Things changed when we stopped caring about each other.”

Formal Norms Destroy Harmony as Lawyers and Government Enforcers Take Over Society and Divert Tax Revenues into their Pockets

The worst part is that as more laws are passed, the more funding is demanded by x group to enforce such laws.  Then society becomes even more fragmented as existing political players are scared by the potential threat to their own funding and use their media connections to attack the new players (see, for example, traditional K-12 districts vs. public charter schools—I mean, God forbid students in failing or inner city schools be allowed options); the entity receiving new funds does whatever it takes to make sure it can sustain its new funding (if it cannot produce objective results, then it usually relies on fear or presumed heroism by highlighting outliers); and people still not part of the government largess have no choice but to use victimhood, whether real or imagined, to gain equal access to government-fueled job growth or at least to prevent themselves from being used by others to justify their government funding.  See, for example, Ferguson, MO, where studies have shown the poor and politically-disconnected are fined at alarming rates to maintain government jobs or government job growth, or intentionally segregated.  Exploitation "is in turn made possible by residential isolation. Ever since the creation of the 16th-century Venetian ghetto, the physical separation of a dishonored group has served to shield the larger city from the consequences of disinvestment in the marginalized area, and to shift the blame for the conditions in the community onto the dishonored group. The maintenance of segregation--by race or class or religion--permits the cycle of neglect to continue.") (from The Atlantic, June 2016, page 37, Patrick Sharkey.)   

By the way, it’s not just government that’s fragmenting society with its funding demands and overreach into private lives—private companies are destroying their reputations when they use metrics designed to measure performance but which, like most other rules, become gamed over time.  The metric becomes the goal rather than the service.  (See Goodhart’s Law, which Ruchir Sharma explains in The Rise and Fall of Nations (2016) as follows: “once a measure becomes a target, it ceases to be useful, partly because so many people have an incentive to doctor numbers to meet it.”  I’d add that metrics cannot capture intangibles essential to customer satisfaction and therefore the long-term viability of a brand.) 

I tend to focus on government actors rather than private sector bad actors.  Fiji Airways (love the English subtitles and captions in your in-flight movies, but still waiting on your response to my complaint about the Sydney airport fellow) and Starbucks might give you terrible customer service, but their employees won’t come into your home, shoot your dog, and still keep their jobs if they act on a bad anonymous tip.  With corporations and businesses, the key is to focus on externalities and the environment, which is another way of saying that banks and natural resource companies need to be heavily regulated but without applying the same level of scrutiny to other, more productive and more innovative businesses.  Sadly, the American government is also inept in this area—it not only failed to catch Enron’s financial shenanigans, it actually approved one of its accounting methods, and according to Michael Lewis in Flash Boys (2014), the “only Goldman Sachs employee arrested by the FBI in the aftermath of a financial crisis Goldman had done so much to fuel was the [computer programmer] employee Goldman asked the FBI to arrest.” 

Innovation, Immigration, and Debt-Fueled Development  

As I wrote above, cities that attract the best or hard-working immigrants win economically, at least for one or two generations.  It’s not a big leap to go from cities to countries and to realize that absent some exceptions, immigration has been responsible for *all* of America’s and Britain’s post-WWII success (one could even argue that a German-Jewish immigrant, Einstein, helped win WWII with nuclear innovation). 

Economists, philosophers, writers, pundits and academics, like everyone else, are subject to confirmation bias or other biases.  They see their country’s new prosperity and, absent a clear breakthrough such as the discovery of new natural resources or technology, attribute it to a particular way of doing business (“What’s Good for GM is Good for America,” which then morphed into studying the “superior” Japanese business model); a particular leader (Winston Churchill or Truman); and/or a particular religious construct (the Protestant work ethic, Judeo-Christian values, etc.). The last one always baffles me, because Christian/Catholic antipathy and discrimination against Jews has been well-documented and includes much more than just Reichskonkordat and ordinary Germans juggling church and National Socialist meetings. From the U.S. Holocaust Memorial Museum website: in 1933, “Almost all Germans were Christian, belonging either to the Roman Catholic (ca. 20 million members) or the Protestant (ca. 40 million members) churches.”  

If I’m right about immigration, then the rise in demand I discussed earlier because of new residents is the real source of Western prosperity, not any type of after-the-fact theorizing, especially when you add debt to drive economic development.  Stated another way, what if most of Western post-WWII economic growth is a simple combination of immigration plus increased bank, VC investment, and corporate loans?  Think about it—the easiest way to increase demand (and jobs and tax receipts) is to pump more money into a country’s economy.  As long as that additional dollar keeps making the rounds, from the business owner to the employee to the local café owner to the local mechanic and to the restaurant owner, it will become four dollars without any need for innovation, further addition, or unique competitive advantages. With enough debt, any economy can be transformed from supply-driven to demand-driven.  Adding immigration and marketing to debt turbocharges the sleepiest of hamlets—at least for a while. 

At some point, however, especially if wages don’t rise with the cost of essential items, issuing debt has less economic impact.  Businesses may continue to use loans to cushion themselves against unpredictable cycles, but the dollar of debt no longer moves around four times, enriching all who come in its path—it may not even move at all if lower interest loans are used to pay off earlier, higher interest debt.

You might be asking yourself, "What does this have to do with his travels?"  Every single prosperous Western city I’ve visited in my life has been diverse, with many first generation immigrants. I don’t think it’s a coincidence. In fact, the only two major advantages I see that Western societies have over Eastern societies are diversity and materialism.  Materialism is a funny way to describe an advantage, but once you realize Western economies rely on consumer demand to drive job growth and use debt as a growth turbocharger, it’s obvious why Western governments and central banks are doing whatever they can to re-generate the money flow. Is this model sustainable in the absence of continued immigration?

So Now What?

Far be it from me to suggest that having 2,391 different kinds of sodas is not the pinnacle of Western prosperity, but seeing different systems work in different countries makes you listen—I mean, really listen—to different viewpoints. Many Asians I met told me, “You Americans have too much freedom.”  They meant they’d rather have a little less freedom to say whatever they want in exchange for much more harmony and peace.  One lesson I learned is that fewer options don’t necessarily translate into worse off societies.

When I managed to score an upscale resort room in Hilton Fiji Denarau (after 15 years of saving AMEX points, it seemed like a good time to use them), I finally learned why people pay so much more to isolate themselves from the locals.  When I travel, I always try to stay in areas where the locals live, or I just get an Airbnb with a local person. Resort areas are essentially the same, so what’s the point? Well, the point is that you’re around people who can afford to be there, so it feels safer and more cozy—you might even make a business connection or two.  It goes without saying that the sunsets and rooms are exquisite (My Hilton beachfront room had a shower AND a large bathtub).  You’re also around staff who are super nice to you because they have the best-paying job for miles.  I suppose being around financially-incentivized kindness is better than scorn or apathy, but I still say the food is always worse and more expensive in resort or beach areas, and I’d rather have access to a 5 to 10 USD foot massage in a run-down strip mall than a 50 USD one in a fancier ambiance.  Once every 15 years ain’t a bad time to hit up a fancy resort is all I’m sayin’.  

[While we’re on the subject of companies, the most useful apps were Airbnb, Agoda, Uber, Couchsurfing (check out the events, which include walking tours), Tinder, iTranslate (paid version), Google Translate, Orbitz, my banking app, AMEX (to pay my recurring bills back home, like my Netflix account), and various messaging apps—WhatsApp, Viber, WeChat, and Line.  Many people recommended Grab, which is similar to Uber.  When I get back, I’m getting the iPhone with the largest memory capacity—16 GB wasn’t enough for all my pictures, apps, and videos.  T-Mobile's worldwide roaming plan was fantastic--it saved me from having to buy SIM cards in every new country, though I was sometimes stuck with 3G rather than LTE or 4G.  Regarding airlines, LATAM Airlines was the best in South America.  For shorter trips, budget Air Asia was just fine.  I'd avoid Avianca, Qantas, and Fiji Airways.  Use Virgin or Virgin Australia instead.

I’ve already told you one other lesson: informal systems can and often do work better than formal systems in creating harmony and a psychologically healthy society.  Despite not including metrics such as opiod prescriptions per capita in their statistical analysis of success, formal systems work better or should work better at allocating capital and allowing knowledgeable workers greater access to higher wages.  In Jakarta, which had the best and most interesting food I’ve ever had (even better than Singapore’s hawker stalls), I met a college-educated woman making about 4,000 USD a year working 40 hours a week with a 3 hours daily commute.  She spoke fluent English, French, and Bahasa Indonesian and used to work in a foreign embassy.  Another woman I met in Cebu, Philippines had an MBA, spoke perfect English, and was smarter than most Americans I’ve met (and definitely smarter than Canadians who think Aussie airport employees catch cocaine smugglers because of their superior intelligence rather than their Navy, drug-sniffing dogs, or international maritime cooperation).  The Filipina makes 7,500 USD a year (not including expense reimbursements) managing an upscale pizza franchise in several cities. 

Put either of them in any country that favors a formal system, and they’d make at least 40,000 USD—but would they be happier? I suppose it depends on how well infrastructure improves, cutting down on commute time and pollution levels—and whether they feel as if their skills are rewarded appropriately and whether their children have greater opportunities than them.  Many smart people I met overseas wanted to go to Canada or Australia, or, as a third option, America. The 21st century seems to be defined by jobs and taking risks to get better pay, which benefits the destination country (as I explained above) while boosting the earning capacity of the immigrant. Countries that don’t value their smart workers, especially their female ones, are going to lose them.  (Believe it or not, getting a job in an upscale mall in the Philippines may require a college degree—to guarantee the worker speaks fluent English to satisfy tourists—and student loans don’t really exist in developing countries.)

In any case, the informal vs. formal is the lesson I keep coming back to.  In developing countries, which often lack paved roads near their beaches, drivers honk horns to warn pedestrians they’re coming or the car in front of them that they’re about to pass.  Despite traffic that is too zany for me to ever contemplate driving in any SE Asian developing country, I never saw any driver honk his horn in anger at another driver.  Once, when there was a miscommunication, two drivers waved repeatedly at each other, honking horns to signify contriteness, a symphony of apology. 

Conclusion

I’ll leave you with my favorite quote from my travels, from a Filipina woman who had a keychain in the shape of a dildo. When I asked her about it, she remarked, “I don’t understand people who don’t like sex or who don’t like talking about it.  Where do they think they came from?” 


Where, indeed?

Update: I realized I didn't mention South America much.  Rio was overrated, though its Botafogo neighborhood had some interesting cafes and bookstores. (I didn't go to São Paulo.)  Chile was my favorite South American country.  It doesn't seem a coincidence that Chile was able to "re-set" many of its problems after Pinochet's often brutal regime.  

Perhaps there's another pattern worth following: after various government agencies gain too much unchecked power, they often become ineffective or arbitrary despite their increase in power. (Absolute power corrupts, remember?)  At that point, a strongman ruler is more likely to get elected or ushered in by a coup--whether in Turkey, the Philippines, or America--and the people, fed up with ineffectiveness and corruption, give license to extrajudicial measures, as long as they feel the ruler is trying to clean up the mess.  

The psychological effects of the new, often politically incorrect politician are immediate--people are energized because they feel as if their voices have been heard.  I've visited the Philippines several times.  After President Duterte's election, I was struck by the chasm between what I was seeing and feeling in the country--renewed optimism and hope--and what the media was reporting--an out-of-control politician.  President Duterte is a lawyer who's taken on the Catholic Church and mining companies and spoken in favor of environmental regulation and women's rights.  (Just goes to show you--you can't trust the media.  Get out there and see for yourself before making any conclusions.)  

I'm guessing the positive mood was the same in Turkey after the recent attempted coup, when people came out in droves to support the existing president, who then removed thousands of government employees allegedly part of the attempted coup, including teachers.  Do years of static government consolidation require a strongman to use extrajudicial means to clean up shop?  

Seeing lithium miners' poor living conditions in one of Chile's most visited tourist towns indicates that a strongman may be able to reverse stagnation and corruption, but the long-term picture is not clear.  In an ideal world, people would realize how lucky they are to live in relative peace and do whatever it takes, including self-sacrifice, to never reach the point of needing a strongman ruler. 

Update: I originally thought I'd been traveling for 6 months straight, but someone told me it's about 5 months straight--from April 22, 2016 to September 16, 2016, or 147 days.  

Update: from The Atlantic, June 2016, page 17: "According to the Pew Research Center, immigrants and their children and grandchildren will account for 88% of U.S. population growth over the next 50 years." (Howard W. French)