Tuesday, August 18, 2015

Economics at the Center of Arab Spring Ground Zero by Roger Brown

In early 2011, the Arab Spring quickly ignited in Tunisia, and within weeks its fires had spread to almost every nation in the Arab World. As massive demonstrations and conflicts ignited in city after city, Peruvian economist Hernando de Soto realized that he was witnessing what was perhaps the most important event of his lifetime. One question dominated his thoughts: Exactly why would the suicide-by-fire of Mohamed Bouazizi, and insignificant fruit peddler in a dusty backwater Tunisian town, resonate so strongly that the reaction would topple four governments?

He immediately sent a research team to Tunisia and other North African countries to find out. Institute for Liberty and Democracy (ILD) researchers worked in the streets and souks of North Africa for months. To their great surprise, they learned that there had been dozens of similar suicides by small entrepreneurs and businessmen across the region.

ILD teams interviewed as many families and survivors as they could, and the stories they heard were all eerily similar. Few of the suicides were ever motivated by politics. All were hard workers who were not permitted to work legally. All had been abused, humiliated, ejected, and robbed of their means to make a living. All simply wanted to be left in peace, to be free of petty harassment and corruption.

As the data poured in ILD research teams in North Africa, we at FTCN realized that we had the story of a lifetime. We had access to Bouazizi's family and friends and were receiving report after report of landmark ILD statistics.

Together, they demonstrated unequivocally that the Arab Spring was far more about economic inclusion than religion or politics. The data also mirrored what the ILD had documented in over 30 other developing world communities worldwide: property rights and inclusive efficient business law are far more important factors in development than suspected.

Our production crew joined de Soto and his researchers, going to ground zero of the Arab Spring: Bouazizi's family, friends, and community. Together with them, they documented Bouazizi's last day. They also filmed other small businessmen who are hopelessly trapped outside the system. 

Bouazizi's death resonated so strongly because his experience of corruption, exclusions, daily humiliation, bribery, and bureaucratic labyrinths, specifically designed to be impenetrable to those without connections, are identical to those which over 100 million people across the Arab world would experience on a daily basis. Our documentary introduces a new perspective and critical new ideas essential to the international discussion surrounding these events.

We were exploring new ground here, and, of course, we wondered how much of our finding reflected Islam or Arabic culture. These two elements are part of the picture, to be sure, but de Soto emphasizes that this is a revolution in Arabic society, not an Arabic revolution. He sees this process as one every society must go through.

The end results is the first Free To Choose Network project to be distributed, in Arabic, across the Arab world. The program is being broadcast repeatedly via Alhurra, the network set up by the United States shortly after the Iraq War. It is being used by the ILD in meeting with community groups, and is also being screened in universities across the Middle East and North Africa.

The Arab world is realizing the incredible importance of "invisible things" - property rights, efficient business law, and truly free markets open to all. We often take these for granted, like stoplights, paved streets, or electricity. But with each project I have done with de Soto, I have witnessed how the "invisible things" make all the difference in the world between poverty and prosperity.

To stream The Unlikely Heroes of the Arab Spring, click here.

Roger Brown has been the writer and producer of three FTCN documentaries with Hernando de Soto.

*This on location report was recirculated from the 2014 Spring Winning Idea News.

Friday, August 7, 2015

Globalization in the West

"Even for the most successful multinationals profit margins in international markets are, on average, lower than margins in the domestic markets." Robert Salomon, a professor of international management at the NYU Stern School of Business states, "It's the liability of foreign markets. By virtue of the fact that you are foreign, you are at a disadvantage."

When globalization was pitched as the strategic imperative du jour nearly two decades ago, that was not the case. It was supposed to act like a rising tide, lifting all boats in poor and rich countries together. Bolstered by the thought of hundreds of new assembly line jobs at multinationals in emerging nations, the middle class was expected to swell, which, in turn, would increase higher local consumption. New factories would be needed to meet this boost in demand, further raising local standards of living and handing the largest non-domestic companies a vast and enthusiastic expanded customer base.

In the meantime, in the United States and Europe, consumers would have their selection of inexpensive items made by workers thousands of miles away whose wages were much lower than theirs. In time trade barriers would drop to support even more multinational expansion and economic gains while geopolitical cooperation would flourish.

Western corporations -- hoping to find new fast-growth revenue channels and inexpensive manufacturing opportunities to amplify mature economies at home,-- set up shop in regions like China, Brazil, Russia and India, where the greatest GDP (Gross Domestic Product) gains were anticipated, as well as in so-called second tier emerging nations such as Thailand, Malaysia, the Philippines and Nigeria.

Despite all this activity and enthusiasm, hardly any of the promised returns from globalization have materialized, and what was until recently a taboo topic inside multinationals --  to wit, should we back out, even rein in, reconsider our global growth strategy? -- has become an urgent, if still hushed, discussion. Considering some of the failures involved with globalization, virtually every major company is struggling to find the most productive international business model. Approaches like reshoring or relocating manufacturing operations back to Western factories have emerged. This is largely due to labor costs and productivity measurements. There is still some debate about how much reshoring is actually underway, but there is strong evidence of this trend: GE, Whirpool, Stanley Black & Decker, Peerless and many other companies have reopened closed factories, or even built new ones in the United States.

One thing is for certain, there is money to be made for multinationals the world over, but they have to rethink their business strategies for creating it. Globalization is still a barely profitable, complex strategy for most companies.

Globalization at the Crossroads demonstrates how the West successfully revolutionized its legal systems, property laws, and developed the modern corporation. Other nations that have instituted private property and business reforms, such as post- WWII Japan and present-day China, have seen their economies take off and their middle classes grow. Globalization is the new civilization. But unless we include the 80% of humanity currently excluded from the system, they will bring civilization down, as they have brought down other civilizations in the past. Click here to stream the full program from FreeToChoose.TV.