Capitalism's Flaw: a Cycle of Failure then Possible Rebirth

Sadly, capitalism has become a dirty word in some circles, especially amongst young Westerners. I don't blame them. If my best-case prospect was 30,000 USD in debt (credit, car, and student loans) by the age of 24, I'd be against the system, too. 

But capitalism isn't the problem per se--it's the way adults have engineered the economic system with lenient banks. Too many people fail to realize how much the U.S. dollar--or any empire's currency--has been propped up by military force and the slave trade. 

The United States and Mexico, 1821-1848 ((c) 1913, 1969)
by George Lockhart Rives

Most young people do not know that England occupied Havana, Cuba in 1692 in part because of its strategic port; that Guantanamo Bay and Hong Kong are consequences of superpowers legally occupying weaker countries to perpetuate subservient relationships; that a treaty, Utrecht in 1713, specifically gave the British an exclusive license to take captured slaves to the Americas for sale and labor; that in the next phase of empire handover, Spain hastened its decline by supporting the English against France (choose your allies carefully, especially in wartime, when shifting allegiances are common); that the idea of absolute monarchy only crumbled in 1812 thanks to both French and American Revolutions; or that Mexican law (as of July 13, 1824, before America's 1863 Emancipation Proclamation) prohibited the slave trade; that the March 11, 1827 Constitution of Coahuila (Mexico) and Texas expressly declared, "in the [Mexican] state no one is born a slave"; that America invaded Nicaragua in 1912, Haiti in 1915, and the Dominican Republic in 1916 (because the Dominican Republic owed Wall Street money); and so on. 

Averell "Ace" Smith in Commonwealth Club Magazine (2019)

The American conquest of Mexican territory in 1848 is significant in that it created a playbook for Wall Street involvement: 1) create a pretext to invade; 2) take territory from the weaker country; and 3) force the country to go in debt in your currency. 

Published by Colegio de Mexico

This same playbook backfired severely in Germany when dominant powers imposed financial terms and conditions paving the way for demagogues, who always arrive with scapegoats in hand. (Ironically, it was a German philosopher, Immanuel Kant, who created a universal moral law in 1785 that should have assisted future German populations: "Act in such a way that you treat humanity, whether in your own person or in the person of another, always at the same time as an end and never simply as a means.") In those days, the world learned from its mistakes post-WWII, creating a Marshall Plan that led to defeated Germany and Japan becoming superpowers and stable trade partners. Today, no one believes Iraq--attacked and invaded twice by the United States--will ever become a superpower or more than an oil supplier. 

Domino effect on debt non-repayment usually leads to a crisis.

Whither Western capitalism? Within historical context, it's hard to believe capitalism has ever worked an honest day in its life. To recapture the hearts and minds of young people all over the world, capitalism needs honest, sincere politicians, diplomats, and journalists. Currently, all of the aforementioned are MIA. Until that changes, we might as well prepare the obituary of capitalism--and our young. 

© Matthew Mehdi Rafat

Bonus I: John Swinton, late 1800s: 

I made the acquaintance of Wendell Phillips and found that he, too, had come to similar conclusions. He believed that the capitalist system was steadily undermining the world and bringing his countrymen into a condition quite as wretched as that of the slaves; and he vehemently condemned it.

Bonus II: Wendell Phillips (1861): 

I think the first duty of society is justice. 

The nation which, in moments when great moral questions disturb its peace, consults first for its own safety, is atheist and coward... Slavery has made our churches of Christ to churches of commerce. 

Despotisms are cheap; free governments are a dear luxury--the machinery is complicated and expensive. 

Were safety or security the first objective of human society, this principle, "if unlimited, false... [and] unqualified, it justifies every crime, and would have prevented every glory of history... But grant it. Suppose the Union means wealth, culture, happiness, and safety, man has no right to buy either by crime." 

Look at our history. Under it, 700,000 slaves have increased to 4,000,000. We have paid $800,000,000 directly to the support of slavery. This secession will cost the Union and business $200,000,000 more. This loss which this disturbing force has brought to our trade and industry, within 60 years, it would be safe to call $500,000,000... slavery has been strong enough to rule the nation for sixty years, and now breaks it to pieces because it can rule no longer. 

Bonus III: Alexander Hamilton: "Justice is the end [goal] of government. It is the end [goal] of civil society." 

What's in the Box?

I've been watching the German series Dark (2017), which is fantastic. [Update: Season 3 was terrible, but the first two seasons were excellent.] It helped inspire the following thoughts: 

Momentum, if aided by unaccountability, can become destiny. Making a u-turn becomes increasingly difficult as possibilities (aka potential timelines) are eliminated, which then increases the signal/information from reduced numbers of sources, driving outcomes favoring whichever ideas and cultures have the most momentum--regardless of the best long-term strategy. Paradoxically, momentum can lead to inertia. Such inertia (as well as momentum) has become worse as human beings create ways of living that prioritize the visual over the abstract. 

A picture may be worth 1,000 words, but over time, if it's disconnected from abstract ideas, it will not lead us--or our children--to the truth. In short, information without context dooms humanity to historical loops. Globalization should have increased both the signal and the fidelity of information but has done the opposite, requiring us to determine how to reverse course--before it's too late. 

More here: https://youtu.be/tNRv7LiWF6s 

Bonus, Tom Griffiths, in edge.org: "There are cases where you can tie this very directly to AI... Nick Bostrom has this thought experiment where you make an AI whose goal is to manufacture paperclips, and then it consumes the entire earth manufacturing paperclips... It gets better and better at consuming... until we've paper-clipped ourselves."

Manila's Chinatown, Where Chinese and German Immigrants Intersected

I am a pessimist by nature, but good coffee—the world’s most traded commodity after oil—always cheers me up. To get a cup of coffee from farm/mountain to your mouth requires navigating diverse worlds of marketers, supply chains, bankers, and laws. Because the profit margins are great, cafés can become linchpins of revitalized communities and workspaces. 

I’m in Manila’s Chinatown, in a building once inhabited by German immigrants Ernest and Alfred Berg, who arrived in Manila around 1922 looking for better opportunities post-WWI. Within the Berg building was Cosmos Bazar, founded in 1926 and owned by a Chinese immigrant, Mr. Lim. Mr. Lim eventually sold his store to a Fujian, Chinese immigrant named Mr. Sy, and the full story is equal parts tragedy and fairytale. 

As a teenager, SY Lian Teng changed his name on a ship's manifest to “Ong Tico” to immigrate to the Philippines, working for his father in a sari sari shop. Preternaturally ambitious, he found an unpaid internship at Mr. Lim’s Cosmos Bazar for two years, increasing his business skills. After seeing Mr. Sy’s diligence, Mr. Lim offered the store to him when Mr. Sy was just 20 years old. 

In 1930, at the age of 24, Mr. Sy married LEE Siok Keng. By 1945, however, WWII bombings and fires destroyed the store and killed 8 of his 9 children and his wife. After 4 years of mental recovery back in China, in 1949, he returned to Manila, re-opened his store, and married a Filipina, Emerenciana Antonio Soyangco. They had four children. In 1951, he bought the Berg Department Store from Ernest Berg. A letter to one of his grandchildren carefully reminds his heir that family is more important than money. 

Today, “The Den” coffeeshop is located in Mr. Sy’s and Mr. Berg’s building. It sells the Philippines’ best coffeebeans, from Kalsada Coffee. Cosmo Bazar is nearby and sells only Pilot pens and pencils. 

© Matthew Mehdi Rafat (2019)

Bonus, from Fannie Tan Koa’s article: “‘I believe that 85% of Manila was destroyed by the Americans, not by the Japanese...’ ‘They [the Americans] wouldn’t stop bombing the city... to kill the Japanese [occupiers]...’ ‘But the Japanese have retreated; they are no longer here...’ ‘They answered, ‘Sorry, General MacArthur’s orders!’”

Interview with Alain, Belgian Expat

As soon as Indonesia is like Europe, I move. If it becomes, “Life is a big competition, you have to be number one,” I move.

Alain van den Bossche, a gregarious Belgian, owns one of Jepara’s newest resorts, a 16-villa resort named Coconut Lodge steps away from Coconut Beach. Interestingly, his name contains the term ‘bos,” meaning “wood” in Dutch. Impressed with the construction—much of it with local wood—and details of his resort, I had the opportunity to talk with Alain, who speaks Indonesian, French, English, and some Flemish.

Q: This is one of the best-designed hotels I’ve seen. You’re also in the furniture business, a common profession in Jepara because of its well-regarded woodworking reputation, but how did you learn design? Almost all the details are perfect here. For example, the straw I’m using is bamboo, not paper (which interferes with taste) or metal (which rusts). The song playlist features beautiful Spanish songs I’ve never heard before, like Alma Corazón y Vida by Los Panchos and Azúcar Amargo by Fey.

Alain: I do it myself, by traveling, by seeing different countries, combining everything, mixing it all together, [and] trying to make something look the way I want. I want to make this place feel like home. It’s not important to make something big. Most places [in Indonesia] are more like a market. They call it in Indonesia, the “target,” [but] I don’t really care about [business] targets. Number 1, be happy, enjoy, and if you make a little bit of money, it’s good. I’m already 51 [years old], the train is already passing. If I want to be a millionaire, it’s too late.

Q: You had mentioned construction to me. Were you a subcontractor or foreman in Belgium?

A: I wanted to be an actor, but I was a teacher for mentally disabled people like [you see] in the Special Olympics. I re-made a very old home [using my time] every weekend and on my holidays, but I left Europe without sleeping a single night in the house. I was supposed to get married, but my father had just passed away. She [my ex-fiancée] didn’t want to wait a few months. [Instead of re-scheduling,] She canceled the wedding a month before… she was Italian. [Alain throws his hands in the air to communicate he should have known the result.]

I took my rucksack, put my house on the market, told the agent just to get me my costs back—it actually sold much higher than I expected but I let him keep the difference--and I was free. I spent a year traveling, went to Bali, where I made friends with an English guy who advised me to go into the furniture business. By then, I had not much money left, and although I had a ticket to Australia, I threw the ticket away, stayed in Bali, and went into furniture import-export. [Back then,] I used to sell on the flea market, too. I would go to Europe once a month, pick up quality items [from the trash], refurbish, and sell. I opened a shop in Belgium doing import/export, then I came back to Jepara, made my first small company with my then-girlfriend. We rented a small place for three years. It was really tough that time. That was 24 years ago.

Q: 24 years?

A: Yes, 24 years ago.

Q: You mentioned the [property] foundation to me earlier. Can you tell me more about your strategy in achieving stability while being so close to the beach?

A: River stones are the best for foundation. Take stones from the river, put them all the way around the property, fill it up with dirt, use a leveling system [Alain draws a three-pronged tool in the air resembling a self-leveling tool] every 4 meters, [and you] gotta do your pillars all the way around the full space.

Q: Why did you choose this location? It’s a bit isolated and far from the town centre.

A: This is my fourth [constructed] property in Jepara. I like the social life, [but] I also like my privacy, privacy here is like having gold. If you have a house in the village, someone will knock on your door all the time [to make social visits]. In Europe, [if you want to be alone] you go to the back portion of your home, but here, four guests will come [to say hello], and when they leave, another four [neighbors] come. The reason [I chose this location] is [for the] quiet. You have rice fields and the ocean.

[Indonesian businesses] like to be near the road… the beach idea is only the last 10 years. Before, [Indonesians] wanted to go to the mountains. They didn’t want to get sunburned, they enjoyed the cooler weather, but tendencies are changing. [Local] Movie stars are getting tanned and influencing others to enjoy the beach. [And] Indonesia is booming completely. Middle class is exploding. 20 years ago, the only thing you saw were foreigners or government or criminals but now you see young entrepreneurs. 20 years ago, it was just business hotels. But you look on Instagram now, they [young Indonesians and Europeans] go everywhere [and as a result, businesses are diversifying].

We have a saying in Belgium: “Belgian people have a brick in their stomach.” [Editor’s note: the exact phrase in English is, “Every Belgian is born with a brick in the stomach.” It means every Belgian wants to build their own house.] In Europe [today], no one [young] wants to take [mortgage] credit for 20, 25 years [anymore]. They want to travel. [In my case,] I met the right person at the right moment, it’s all luck. I always say, “I’m the luckiest guy on the planet.” If I could, I’d give some of my luck to other people.

Q: How do you motivate your employees?

A: I try by explaining to them [how things should be, instead of giving orders.] I also give them attractive salary, about 50% above minimum salary. Here, minimum wage is about 1.8 million [rupiahs] monthly. I give them 2.5 million [rupiahs], [and] I would like to give them more. I tell them, if you can take the stress off my shoulder, then I’ll pay more. I want to sell this place and build another one with no debt.

Q: Did you get a euro-denominated loan or one from a local bank?

A: We got a local loan, [equivalent to] 100,000 euros loan in rupiahs. I owe about 1,000 USD a month for 20 years. I think it’s about 10% [annual] interest. You know, foreigners cannot buy property here, they can only buy through a local [Indonesian citizen] or a company. I already have a furniture company but I don’t want to mix it [so I have an arrangement with a local]. I live all the way in the back on this property. [10% interest sounds high] But here, savings deposits pay out 7% net [interest] in your pocket. If you bargain, you might even get 8%. [For me] it’s all about the rupiahs because I live in rupiahs. I sell in euros, but I live in rupiahs [so currency fluctuations don’t impact me as much].

Q: What was the banking experience like?

A: [Because it’s through a local] They base the loan on the manager’s salary, not on the project. They are thinking that the loan amount should be based on money the manager will receive each month. If it’s through a company, it’s different. [Since we didn’t go through a company] We opened as a homestay, [and the local] used a personal tax number to pay the tax.

[When I first came here 24 years ago,] you needed 200,000 euros in the bank or something like that to get a loan. So what the banks did, they would loan you the 200,000 for a day or a week, get a notary to certify the amount [in your account], and collect a 500 USD fee for the “service.” Now, of course, it’s stricter. [President] Jokowi is very good for people who want to invest. Compared to the old days, you can do a lot online now because of Jokowi, and you can even get your visa online. 24 years ago, it was the “Wild West” here. At that time, it was, “Give a little [money] on the left side and the right side [to get things done],” but that time is over.

Q: Most Westerners don’t know much about Indonesia. What made you choose this country over others in the entire world, including your native Belgium?

A: I fell in love. When I arrived in Medan [Sumatera], I fell in love. In Europe, people only complain. I like to talk, I like to have a lot of friends. I know people everywhere, rich, poor. You can mix here with all types of people.

Q: What have been the challenges for you, as an outsider, opening a business in Jepara? Has it been easier or harder being in a small town rather than big city like Jakarta or Semarang?

A: I arrived here as a backpacker. I don’t have the mentality of a businessman. I know other people who have the fiber of business in them, but they’re struggling. This is really funny in life. The more you run after it, the more difficult it is to achieve it. It [the better path] is actually, “Take it easy, don’t have too much big plan, [then] everything goes smoothly.” I’ve been lucky to meet the right people and to be in the right spots, but it hasn’t always been smooth. In the beginning, some locals were angry I was paying higher salaries. I had people coming after me with tire irons. Some people are still angry foreigners are paying better salaries because foreigners are able to sell in Europe and get higher prices. I think they should be happy [about the higher salaries] but it’s not that way.

Q: How did you get your contacts in shipping and import/export?

A: I was a real tourist—I didn’t even know about emails. My French friend told me about import/export in a bar in Bali. It’s really easy. You need an agent. The agent does everything for you. Most of my customers are in Belgium, including my brother [so I already have contacts in Belgium]. I’ve changed agents a few times [but the key is to find a good import/export agent].

Q: What advice can you give to Westerners who want to fit into Indonesian society?

A:  First, don’t try to make the people [here] understand your way of things. Try to find a middle way. You have to make the effort. You have to adapt, and locals have to adapt. Don’t expect people to adapt 100%. You will learn a lot, and they will learn your personal professional standards. They have a saying here: “Alon alon asal klakon.” It means, “Going slow is not a problem--you will still get there.” A bit like the old [Aesop] story of the rabbit and the tortoise. In Europe, they teach kids they have to have a lot of ambition, they have to be perfect. But in Indonesia, people seem to ask themselves, “What do you really want in life?” What is more important than having friends and being able to sit and have a coffee? But this [attitude] will change because of us [Westerners] bringing our culture here. But I’ve always said, as soon as Indonesia is like Europe, I move. If it becomes, “Life is a big competition, you have to be number one,” I move [someplace else].

Q: At the same time, you’re obviously competitive, and you have a strong desire to compete well. Where does that come from? Did you play professional or semi-professional sports?

A: I play sports and I love sports. I play futsal and football/soccer. Indonesians would tell me, “It is more important to sweat than to win,” but I told them, “The most important [goal] is to win.” They’d respond, “We sweat, that’s good already.” My workers, now they play, they go 1,000%, I like that. Age makes you change. Before I was like a piece of fire. But now… this place, I want to make sure everyone happy. It’s “ramah” [strictly translated, it means “friendliness”], it’s the reason everyone likes Indonesia, because of the politeness. If they lose that, it’s like losing the thing that makes you different. I want to see that ramah thing here [at the resort.]

Q: What do you think of President Joko Widodo's idea to move the capital from Jakarta to Kalimantan?

A: I would have a better idea. Jakarta is so crowded [and that’s the reason for the move]. Right away, I would fix a minimum salary for all of Indonesia. Big cities give a higher [minimum] salary than villages. That’s why you have so much movement, where people go to Jakarta to find opportunities. We have a lot of broken homes because of that, because of men leaving their hometowns to work in Jakarta. Reduce Jakarta salary [to bring it in line with an appropriate national minimum wage], shift workers to Semarang [and other cities], and people would say, “Why should I go to Jakarta?” Then migration to other cities would increase [thereby reducing pressure on Jakarta’s infrastructure]. He [President Jokowi] wants to move [the capital] because it’s too crowded in Jakarta, so it’s difficult to find water resources [and other problems arise because of overpopulation in one place]. Life in Jakarta is expensive, but of course it’s because salaries are expensive. But if you change from 5 million [rupiah] to 2.5 million a month…

[Interview held on August 29, 2019 in Jepara at Coconut Lodge. Transcript above has been condensed/modified from original conversation. No compensation, directly or indirectly, was received or due for this interview as of August 2019.] 

Update/Correction on September 2, 2019: Alain informed me today he was the one who broke off the wedding: [paraphrased] "She did not want to move the date [after my father's death], and she demanded I move forward or cancel. She did not expect I would choose to cancel when she gave me the ultimatum."

Concert Review: Seal at Mountain Winery

Some people seem born suave, exiting the womb with aplomb and blessing the world with their presence. Seal is one of these people. His voice has declined with age, and he's no longer able to do his exquisite "Prayer for the Dying" as well as he used to, but he more than made up for it by prefacing the song with a story about three near-death experiences, then wading through the crowd during his performance. 

The rules of mere mortals do not apply to Seal. He interacted with the crowd constantly, creating a spectacle that was part-messiah (look at the awed audience), part-DJ, and part-motivational speaker. While performing at Mountain Winery in Saratoga, CA, he mentioned he does not drink alcohol. He told various individuals as well as the crowd he loved them, prompting one to respond, "We love you, too!" He communicated his love verbally and by Ryu-style hadukens from his chest, actions that would be deemed insincere if done by other musicians, but this is Seal, comprenez vous? By the end of the performance, everyone was on their feet, trying to match the energy of the 56 year-old Los Angeles immigrant with a posh British accent. ("Seal" was born Henry Olusegun Adeola Samuel in Paddington, London.) 

His best new song was "Morning After," and of course he sang the old favorites, "Crazy" and "Kiss from a Rose." I've been a fan ever since I heard "Crazy," and I'm still a fan. May we all be so lucky to be half as suave as Seal in our fifties. 

© Matthew Mehdi Rafat 

On Patriotism

I love the smell of false patriots in the morning: 

So it goes. 

A New Geopolitical Structure: Mr. Rogers' Neighborhood

In this video, I explain the 22nd and 23rd centuries will not belong to the three post-WWII superpowers; instead, the future belongs to countries unstained by slavery, expansion at any cost, and petrocurrencies. Previously, Russia and USA divided the world in pursuit of oil while China used its large consumer population and formerly low-cost producer status to steadily gain economic ground. Today, increasingly disfavored oil and petrochemical production--no longer viable long-term due to environmental concerns and advances in renewable energy--are breaking apart the old military-industrial order. Meanwhile, China hasn't served as a low-cost producer in a decade, bringing it in direct competition with USA and weakening the standard debt-investment recycling model. 

The stage is now set for developing countries to leverage their demographic advantages and set the terms of trade amongst themselves using geographical proximity to reduce transaction and transportation costs. They can also control currency manipulation by focusing on trade with neighbors and in currencies within their own geographic trade zones, thereby reducing dependence on foreign navies, foreign shipping insurance, and disinterested currency speculators. In pursuing a new path forward, so-called "developing" countries can create alternatives to an increasingly immoral Western economic order based on military spending, debt slavery, segregation, and selective inflation. The keys are 1) creating a stable banking system based on a partnership and employee ownership model; 2) minimizing petrocurrency country influence by focusing on trade with nearby countries; and 3) promoting media and creative outlets based on accurate, human-led language translations within each geographic region. What worked for Mr. Rogers can work for countries, too: "Won't you be my (economic) neighbor?" 

© Matthew Rafat (2019)

(Video HERE.) 

Bonus I: I realize satellite technology is becoming more vital to planned economies, but one wonders if developed countries, in racing towards space, will neglect their citizens left behind on Earth. 

Bonus II: a 20 minute follow-up to the first video can be found HERE. Ultimately, de-globalization will not mean less international trade, but less dependency on complex international tribunals. Such international tribunals often favor post-WWII superpowers' interests based on the potential to coerce less developed countries through currency arbitrage and tariffs/sanctions/export controls. 

From Bloomberg's Matt Levine (June/July 2019 newsletter)

In the future, one can imagine scenarios where countries with "weaker" currencies band together through more focused regional trade agreements while importing technology from non-regional countries. As long as most trade is between countries with "weaker" currencies, the ability of more developed countries to set economic rules or to withhold vital resources is diminished. Once developing countries have achieved enough trade amongst themselves, they can then focus on building foreign currency reserves as a further buffer against non-regional interference.