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01 Happy new year

Alain de Botton
—Why money is not enough

I believe 2009 will be the year when the question of how society should be arranged will cease to be an idle, abstract topic, dwelt upon by ivory-tower intellectuals after a few glasses of wine, and will instead enter the workaday mainstream with a vengeance. Everyone will become a political philosopher; and all of a sudden, some of the great issues facing our world will be up for grabs. It will be a frightening, exhilarating time. Expect to see record numbers of people reading political blogs, attending classes in political theory and turning once again to Karl Marx, Adam Smith and John Ruskin.

All this because a consensus about the virtues of individualism, liberalism and consumer capitalism is splintering beneath us. At the heart of the debate lie questions about fulfilment. We’ll be asking whether the modern economy has been attending to our needs. We’ll be asking, to paraphrase that thundering 19th-century prophet Thomas Carlyle, “This successful industry of ours, with its plethoric wealth, which of us has it enriched? We have sumptuous garnitures for our life, but we have forgotten to live in the middle of them. Are people better, stronger, braver? Are they even what they call ‘happier’? Do they look with satisfaction on more things and human faces in this God’s Earth? No, for we have profoundly forgotten everywhere that cash-payment is not the sole relation of human beings.”

Environmental arguments against consumer capitalism will fuse with a horror at the vulnerability of capital markets. There will be a new climate of scepticism about the market system – one which will defy old labels of left and right. Expect to see ex-bankers finding unexpected points of agreement with environmental activists, poets and fashion designers. ­Ultimately, the question will be: are our economies delivering on their promises? It’ll again be pointed out that our outer success is masking deep-seated inner disturbances. Western society has always been an uneasy amalgamation of the values of the old Roman Empire – success, wealth and individual glory – and the values of the Judeo-Christian world, with its emphasis on charity, serenity and love. After 20 years of success, the values of the Roman lion will go into abeyance and the more compassionate lamb will take centre stage again.

This will have consequences. Greed and superficiality will be out. Television executives will have to raise their game and stop giving us bread and circuses when we need facts and consolation. During a deep recession in the construction sector, we’ll ask whether buildings should ever have been in the business of making money. Wise minds will stress that the quality of our houses, streets and cities is ultimately part of the mental health industry – and should not be seen as commodities without public responsibility.

The sensitive and educated readers of monocle will know not to give up all interest in the aesthetic side of life, but nevertheless be smart enough to raise questions about enterprises that use beauty as a superficial lure, rather than as a way to herald inner transformation.

Over all, we’ll become a lot richer, but not in a way we had planned. Here’s where John Ruskin comes in. He was interested in wealth – obsessed by it even. However, it was wealth of an unusual kind that this great art critic had in mind, for he emphasised repeatedly that he wished to grow wealthy in kindness, curiosity, sensitivity, humility and intelligence – a set of virtues he referred to as “life”.

In his great text, Unto This Last, he entreated us to set aside our monetary conceptions of wealth in order to take up a “life”-based view, in which the wealthiest people would not be the bankers and the landowners, but those who most keenly felt wonder beneath the stars at night or were best able to interpret and alleviate the sufferings of others. After the greatest stock market crash in living memory, there will be no end to questions about what being wealthy really means.

Alain de Botton is an author and philosopher

02 Out with the old

Andrew J Bacevich
—Obama’s new world

When George W Bush leaves the Oval Office on 20 January, he will bequeath to his successor a condition of imperial overstretch. President Bush has proved quite adept at initiating conflicts, less so at concluding them. As a consequence, the US today finds itself with too much war and too few warriors. When it comes to putting boots on the ground, the Pentagon is tapped out – an expression of the contradictions that ­afflict the present-day US national security strategy.

Like all new presidents, Barack Obama can expect to enjoy a “honeymoon” likely to last several months. During this period, his ability to effect the change he has promised will be at its peak. The American people will expect him to use that honeymoon to get the US economy back on track – itself a monumental challenge. Yet unlike Bill Clinton when he assumed office back in 1993, Obama won’t have the luxury of “focusing like a laser” on economic concerns.

Instead, he will have to attend simultaneously to pressing issues of national security. For starters, Obama will have to deliver on his commitment to end the Iraq War, something that may prove more easily said than done. He will also find himself pressed to make difficult decisions on Afghanistan, a war that virtually all observers concur is now going very badly. On the campaign trail, Obama has talked of sending additional US troops to Afghanistan. Where he expects to find those troops is not clear. Then there is Pakistan, which escalating US military action is converting into a third active front in the ongoing war on terror. Here, Obama will inherit a ticking time-bomb.

Yet Obama dare not allow these operational questions to distract him from an even more fundamental problem: the incoherence of overall US efforts that aim to prevent any recurrence of September 11. However great the exertions of American soldiers, diplomats, aid specialists, and intelligence agents, there is no central idea or set of principles to which American actions adhere. The longer the war on terror persists the less purposeful it becomes. To put it bluntly, the US is strategically adrift.

The strategy originally conceived by the Bush administration (and its neoconservative cheerleaders) – the Freedom Agenda, whereby the US would employ both soft and hard power to “transform” the Islamic world – has disintegrated, demolished above all by the failures and disappointments of Iraq. Although Bush himself now claims that victory in Iraq beckons just around the corner, anyone fancying that US efforts there provide a template for application elsewhere is deluded. Operation Iraqi Freedom is a one-off event. The repudiation of the Bush legacy signified by Obama’s election makes that clear.

So when it comes to strategy Obama needs to start over from scratch. Doing so should begin with taking a second look at the threat posed by violent Islamic radicalism. While it is undeniably serious, that threat falls well short of being existential. The old strategy posited open-ended global war as the only plausible response to that threat. A new strategy should consider alternatives, perhaps by formulating a strategy of containment akin to that which served the West so well during the Cold War. The old strategy assumed that American power and especially US military power was essentially limitless. We now know better. A new strategy will ­restore some semblance of equilibrium between means and ends, reducing the US appetite for war and easing the burdens placed on American warriors, while still keeping the US and its allies safe.

Is Obama up to the task? He has ­already proven himself a remarkably talented and savvy politician. Thankfully he also gives every indication of being immune to the pernicious ideological enthusiasms of his predecessor. Yet statecraft requires gifts of a particular sort.
Among other things, it is a collaborative undertaking. If in filling key positions on his national security team such as national security adviser and secretary of defense, he appoints old warhorses recycled from previous Democratic administrations, then “changing the way Washington works” will turn out to be little more than a campaign slogan. If instead Obama chooses individuals who reflect his own persona and outlook, then genuinely creative governance becomes at least possible.

Andrew J Bacevich is professor of history and international relations at Boston University

03 Truth be told

Paula Scher
—How to rule in 2009

Call me an optimist, but I believe we may have reached a time in history when our major expectation of leaders is that they talk to us intelligently, as adults. What this means is that information has to be ­provided to us in an honest, logical, non-manipulative manner, and then a course of action should be recommended based on the leader’s best reasoning – with a strong, inspirational appeal to our better human natures.

In the US, for over 20 years, our presidents have used the biblical and ­inflammatory language of “good” and “evil” to describe difficult international relationships. In the days of Reagan and Thatcher, Ronald Reagan called the Soviet Union “The Evil Empire” while he accelerated the arms race.

The threatened Soviet Union, after years of covering up its economic dissolution, couldn’t match the US dollar for dollar in terms of arms expenditure, and came apart. Reagan’s timing was lucky. If President Nixon had called the Soviet Union “The Evil Empire” during the economically healthier Brezhnev administration there would have been no ­détente, no Strategic Arms Limitation Talks, no peace with China, and that rhetoric could have potentially launched a third world war.

But Reagan got away with it and ­conservative Americans loved it. US politicians then seized on this “good vs evil” rhetoric to demonstrate their strength and resolve in all conflicts. International affairs were described to the public in black and white terms: “win or lose”, “with us or against us”.

This became the daily foreign policy speak of the George Bush administration. Bush referred to an “Axis of Evil” that included Iraq, Iran and North Korea. “Evil” must be destroyed so “good” can prevail. So, we found ourselves at war in Iraq, at a nuclear stand-off with North Korea, and trying to prevent a hostile Iran from gaining nuclear weapons.

Slowly, Americans have begun to see that this moralistic explanation of things that are actually very complicated (for ­instance, the relationship between Shias and Sunnis in Iraq) is inadequate. Americans have realised that they were misinformed, misled into war; Bush’s ­incendiary rhetoric hasn’t served them well, and they are sick of it. I believe that the public will finally perceive strength in honesty and reason, rather than swagger.

In the US, this form of leadership is best demonstrated by president elect Barack Obama, and it was practised by Al Gore. Gore had always been an uncomfortable, pedantic speaker, but he overcame it all in the documentary film, An Inconvenient Truth, in which he featured. Here, he first made the case for dangers of global warming in a grown-up and teacherly way, without ­vituperative fear-mongering. He followed it with a call to action that became eloquent in relation to the case he had already made. Now, while it’s true that our premiers and presidents cannot run out and make feature films every time they need to address their public, it is still possible for them to follow a similar format. They have to devote time to making the case. Like all good teachers, they have to lesson-plan before standing in front of the class. Obama, a former college professor, is great at this. His campaign messaging has been masterfully clear due to superb planning. He has been brilliant at pivotal crisis moments, such as his address on race during the Reverend Wright ­controversy. Obama used the crisis as an ­opportunity to teach a national lesson. He also used the current economic crisis as a chance to prove his position on the failed economic policies of President Bush.

While Obama initially inspired young people to become politically active. He won the election because he appeared calm, knowledgeable and confident during a real crisis. He behaved like a college professor, not a rabble-rouser. He seemed like Atticus Finch in To Kill a Mockingbird, calmly telling us a wellknown truth with a moral.

John McCain, by contrast, seemed like a mild hysteric, waving, flailing and continually changing his position. During the campaign, he was more ­incendiary, and it backfired. McCain’s strong suit was supposed to be foreign policy. But in the debates McCain kept talking about “winning” in Iraq and suggested that Obama was in favour of “losing”. The polling showed that Obama won all three televised debates and that he won on foreign policy as well as his views on the economy. I suspect this was partly ­because of McCain’s language. He ­created a black and white scenario for something grey.

The seriousness of the times ­demands serious dialogue. We need teachers, not demagogues, we need reason without apparent bias, and we need to be called to action by self-evident truths, not blind faith or what’s in the leader’s gut. The times will make (or break) the man.

Paula Scher is principal at Pentagram New York

04 Deal time

Amnon Aran
—Peace in the Middle East?

The Arab-Israeli conflict is at a crossroads. On the one hand, Israeli and PLO officials are meeting regularly and the ­Israeli-Syrian track has been revived. On the other hand, radical forces opposing the feeble peace process have been gaining power in Israel, Iran, and in the Arab world. The next couple of years could be the last chance at peace Israel and the Arabs have before the current window of opportunity closes for a very long time.

Since the US convened a peace conference in Annapolis in 2007, little progress has been made. The Palestinian national movement is in one of the most profound internal crises since its establishment. As long as Hamas keeps control over the Gaza Strip the Palestinian president, Mahmoud Abbas, effectively presides over only 60 per cent of the Palestinians. No Palestinian leader under these circumstances could negotiate, let alone carry through, a peace agreement. An election has been called in Israel, where early polls give the right, led by the Likud party, which is against negotiation with the Palestinians, an advantage over the centre-left, led by the Kadima party. On the Syrian-Israeli negotiation front, too, little real progress has been made.

In order to be effective in managing the conflict, not to mention advancing peace, the international community needs to abandon some of the flawed policies it has adopted until now. It’s unrealistic to think Syrian president, Bashar al-Assad, could cut an ­independent peace deal with Israel when its closest regional allies, Hezbollah and Iran, are Israel’s sworn enemies. And there is a limit to what can be achieved by working only with President Abbas, flooding the West Bank with money and upgrading Fatah’s security forces. Hamas is a popular movement with a social welfare network, and cannot be excluded from the political process.

There is one possible route to peace that has been on the table for some time but has not yet been given the chance it deserves. In 2002 the Arab League adopted the Arab Peace Initiative (API), a flexible document that provides rough guidelines for how the end of the Arab- Israeli conflict might look. It envisions normalisation of relations between Israel and its Arab neighbours in return for withdrawal from all occupied territories and recognition of an independent Palestinian State. But it leaves room for Israel, the Palestinians, Syria and Lebanon to negotiate their differences over such issues.

The API offers clear advantages for key players in the Arab-Israeli conflict. For Israel it provides an attractive political framework for a resumption of the Arab-Israeli peace process because of the consent it has from the Arab League. For the Palestinians, it could help mend the current breakdown in their political system. Even though Hamas does not recognise Israel’s right to exist, it has indicated it would be willing to work with the API, which does. For Syria, the document could provide the legitimacy it needs to complete a peace deal with Israel. Because of its appeal to all parties, the API could be the key to a meaningful revival of the Arab-Israeli peace process. Under the leadership of the newly elected US president, Barack Obama, the international community should do all that is in its power to encourage all sides to agree final amendments so that they can endorse the document. There are no assurances that this would suffice to kick-start a meaningful Arab-Israeli peace process. But it is a real opportunity waiting to be seized. Now is the time to seize it.

Amnon Aran is a fellow of the LSE and a Middle East expert

05 When in Rome…

Richard Roberts
—Financial déjà vu

One of my favourite financial wisdoms is the observation by legendary fund manager Sir John Templeton that the four most expensive words in the English language are “this time it’s different”. The current financial meltdown has brought it to mind repeatedly. Financial boom and bust has a long pedigree. The earliest known episode was in 2nd-century BC Rome. The Roman ­Republic farmed out many state functions – from tax gathering to temple building – to contractors known as publicani that resembled modern corporations. They were substantial institutions with professional executives and raised capital through issuing shares called partes. These were tradeable securities that fluctuated in value, providing opportunities for speculation.

Modern times have witnessed dozens of financial crises – so many as to enable economists to identify a six-stage cycle. Stage 1: displacement – an innovation creates new profitable opportunities. Stage 2: euphoria – optimistic expectations lead to rapid rises in asset prices and the belief that “this time it’s different”. Stage 3: mania – the prospect of easy money draws in investors and prices soar. Stage 4: distress – market sentiment shifts from greed to fear and insiders retrench. Stage 5: panic – as asset prices fall, investors stampede to sell, accelerating the crash. Stage 6: revulsion – public hostility to financial excess – until the next euphoria.

The opening financial boom and bust of modern times occurred in Amsterdam in the 1630s and focused on a new, exotic import (displacement): tulip bulbs. Rising bulb prices (euphoria) sparked a craze that drew in hordes of amateur speculators pushing prices higher and higher (mania). Innovative financial techniques – futures and options made their debut and trading on margin became widespread – fuelled the bonanza. But then, with bulb prices run up to astronomical levels, avarice turned into fear (distress). In February 1637, the market crashed and tulip bulbs became unsaleable at any price (panic). People who had borrowed to participate in the boom were ruined, the economy went into recession and litigation overwhelmed the courts (revulsion).

The same cycle is at work today. Underlying the current crisis are two shifts in the business of banking (displacement): securitisation of bank loans, and reliance on the wholesale money market for funding. The former encouraged lack of proper regard for risk, notably on US mortgages, by both banks and borrowers (euphoria). Short-term inter-bank borrowing mushroomed to fund yet more high-yield, high-risk assets and to finance mismatched mortgage-lending (mania).

Then in August 2007 greed turned to fear and the inter-bank market froze as banks became alarmed about the solvency of counterparties and their own liquidity (distress). Money-market paralysis busted Lehman Brothers, while withdrawals by nervy depositors sank Northern Rock (panic). Big banks were driven into the arms of governments for recapitalisation by drastic mark-downs in the value of investments. The contraction of credit and the related economic slowdown led to falls in mainstream asset prices, initially of houses and subsequently shares.

We are now moving into the cycle’s final stage – revulsion – a phase that will be characterised by three further “R” words. Recession – the US and Britain are already there. Reckoning – the pursuit and prosecution of those held responsible. Reform – a tightening of regulatory controls. Yet history suggests that as memory fades, financial players of the future will find creative new ways to learn the hard way, convinced, once again, that “this time it’s different”.

Richard Roberts is director of the Centre for Contemporary British History at the University of London

Q&A: Andrés Mompotes

Chief editor, ‘El Tiempo’

Colombia

Who deserves a bigger stage in 2009?
The poor in Africa and the impact the global financial crisis has on them.

And who should get off it?
Official spokespeople from multilateral institutions such as the World Bank and IMF. This is the moment to let others into the debate about creating a new capitalist structure and more transparency.

What themes will dominate the year?Unemployment, the economy, hunger, and the future of capitalism.

Which nations will be on the up?
This is the moment for Europe to reclaim direction and dominance rather than the US.

And on the down?
The US. I think, in a way, the world is going to make the US pay for the financial crisis we face today.

Q&A: Amir Zada

Global financier, Exotix

New York

Who deserves a bigger stage in 2009?
Raoul Castro because we can expect a more constructive relation with the US. Morgan Tsvangirai, very simply because he is not Robert Mugabe.

And who should get off it?
Mugabe. Russian oligarchs because that kind of huge spending is not appropriate any more.

Which nations will be on the up?
China, because of its military might. Cuba and North Korea. Both these countries are going to see a transition. Kim Jong-il is on his way out. For Cuba, relations with the US are going to change.

And on the down?
Russian oligarchs were burnt by the credit crisis and it’s going to take a while to revive corporate Russia. Venezuela: the dampening of the oil prince is going to lead to a decrease in its regional influence.

Q&A: Paul Killik

Stockbroker, Killik

London & Dubai

Who deserves a bigger stage in 2009?
*Chinese premier Wen Jiabao. The West has been reluctant to recognise China’s growing economic strength. This is short sighted and China, which is behaving responsibly in a fragile world, should be invited to join the G8 as a replacement for Russia.**

And who should get off it?
*Putin, who still controls power in Russia. Russia has demonstrated it does not deserve the status accorded to it following perestroika and should be removed from the G8.

Q&A: Barrie Harrop

Wind power entrepreneur, Windesal

Australia

Which nations will be on the up in 2009?
Australia, China, Japan. Here in Australia, we have some 400 years of natural gas reserves. In my hometown of Adelaide, the Roxby Downs mine has the world’s largest reserve of uranium, the new energy fuel for the 21st century.

And on the down?
The US. It is going to take many years for them to sort out their banking mess and embrace climate change. They have the resources to do it but are the least willing to show leadership as per capita they are the most energy-hungry on earth.

Q&A: Trevor Ncube

CEO, ‘Mail & Guardian’

South Africa

Who deserves a bigger stage in 2009?
Barack Obama. I like his vision for the world and what he represents. He can bring back American leadership and build bridges with the Europeans.

And who should get off it?
George Bush. He’s been bad for America and bad for the world. Look at the debt he’s leaving behind, let alone the legacy of Afghanistan and Iraq and the broken relationships between America and Europe.

What themes will dominate the year?
Economy, environment and the oil price. The economy is obvious – we’re all worried about our savings. With Bush gone, America should treat the environment as a more important issue. The price of oil will have a major impact on the economy and conflict. A high price has allowed Russia to be more belligerent.

Which nations will be on the up?
China and India. They are coming from a low base and have a long way still to rise.

And on the down?
The US and Europe. The economic decline will affect them politically.

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