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Stock Ideas Top Headlines Globalization’s Bum Rap
Stock Ideas Top Headlines Globalization’s Bum Rap 
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By Charles Delvalle Interest rates are a funny thing. If you haven’t noticed, the Fed loves to act like they won’t lower rates. Whether the market believes that or not is a different story altogether. But how can you determine what the market expects future interest rates to be? |
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| Globalization’s Bum Rap |
| Tuesday, 02 October 2007 | ||||||||
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Dear Reader, I’ve had a lot of discussions about globalization. But this one was a little one-sided. Several years ago, I was riding up an elevator of a hotel in the southern Russian city of Rostov-on-Don with a couple of Russian guys. I didn’t know them but they could tell I was American. They looked at me and began speaking to each other in a normal voice. Maybe they assumed I didn’t understand Russian. Anyway, they said roughly, “Look at the sonovabich #@%! American. What the @%$# is he doing here? The @%# Americans. All they do is come here and @$%# suck us dry. These @$#ers pretend to help us, and all the while they’re stealing our resources, eating our food, and taking away our wealth.” I don’t think they thought much of globalization. Now the shoe is on the other foot, in a way. France, Germany, the UK, and other countries are afraid that some of their “crown jewels” could be taken over by national investment funds (called “sovereign funds”). Several Asian countries (including China) plus some Gulf States have them.They total $2.5 trillion in all. And they have the wherewithal to buy some of our biggest and most treasured companies. This is not a good time for all those people who fought globalization tooth and nail. I’d hate to think where these countries would be without globalization. For a clue, all we have to do is look at the world’s most isolated economies and see how well that works. Anybody have a hankering to buy property in North Korea or Myanmar? Everybody should know this, but let me ask it anyway. Why is China growing like great guns, adding an equivalent of a New York City to its urban population every year? And why is Cuba’s economy in tatters? They’re both run by governments that have kept a tight lid on centers of political power sprouting from outside their favorite elitist group – the Communist Party. The big difference between the two is that China’s communist leadership figured out that it needed capitalism. So, beginning some 30 years ago, it began to import its money, technology and know-how from the west. For now, at least, communism is laying side by side with capitalism in China.I don’t think these odd bedfellows can last indefinitely. But then again, I didn’t think they’d last this long. But that’s a topic for another Tuesday.That’s the funny thing about globalization. It doesn’t care much for “isms.” Communism … capitalism … despotism … it props up regimes of all stripes. That’s why globalization is despised in some circles.
If you don’t like a country’s politics, it’s easy to begin resenting the big investments we make in those countries through either the private sector or multilateral banks like the World Bank or Asian Development Bank. What particularly bugs some people (and I don’t blame them) are the tens of millions of dollars that are illegally siphoned off these big bank-funded projects and end up in the pockets of the crooks running the country. At least when private companies invest, they want their money back with a little profit. When ROI is driving investments, unaccounted-for millions of dollars tend not to be a problem.But here we go again – that’s the other reason why globalization is a dirty word to some. The drive for profit supposedly leads to exploitation, the proliferation of sweat shops, and the spread of poverty in those very countries desperate to beat it back. I’ve been to one of those sweat shops. I knew it was a sweat shop before I even entered the place. First, it was located in the relatively poor city of Jakarta (Indonesia). Second (big clue!), they made sweaters and blouses. Third, they exported all their production. And fourth, they worked under contract for a huge western clothing company. Hey, I can add two and two with the best of them. So, imagine my surprise when I actually set eyes on the place. I took in a well-lighted, spacious, air-conditioned facility, where the sound of all the sewing machines created a soft high-pitched hum. When I nodded at a couple of the workers, they smiled back at me. Later, the manager told me that these were some of the best-paid jobs (for manual labor, of course) in the city. But what really impressed me was the community job program the company ran and financed. You see, they lent sewing machines to people who couldn’t go to the factory every day, and let them earn money from home. The evil side of globalization turned out to be a charade. Now, don’t get me wrong. I don’t believe that sweat shops have been banished from the face of the earth. As long as there are unscrupulous people, there will be unscrupulous business practices. But they’re not limited to sweat shops and don’t need globalization to flourish. I’ve seen plenty of studies and data that the influx of Western technology and business practices roots out dingy slave-wage work places. If you had a choice, where would you prefer to work? Globalization’s biggest problem is the expectations it creates. It was amazing how many Russians thought they (and the country) would get rich almost overnight with the demise of Communism and increase of foreign investment there. But I’m a big believer in the benefits of globalization. As an investor, the companies that globalize tend to have forward-thinking management and strong products. They’ve successfully competed against companies in their home markets and now they’re doing the same in their competitor’s home markets. Many of them make great investments.But I also like globalization because it’s so good at creating wealth and spreading it around. I’d be curious to hear any stories you have about globalization. Has it helped you? Hurt you? Made a difference in your life? Let me know and I’ll publish the best of them in Investor’s Daily Edge. Good Global Investing, AMG P.S. To let me know what you thought of today's article, send an e-mail to: This e-mail address is being protected from spam bots, you need JavaScript enabled to view it
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