When China's proposed bid to buy an American oil company in June of last year backfired on baseless grounds that the deal posed security concerns to the U.S., it became pretty clear that public perception of China was sensitive at least. The U.S.'s trade deficit with China, which has expanded from 6 billion annually in the late 1980s to over 200 billion annually in recent years, is not helping China's public relations campaign either. Public opinion data show a majority (60 percent) believe China is an "unfair trading partner" and that imports from China represent a "serious threat" to U.S. jobs. Oh, and China's military rise is also viewed as suspicious at best; as is China's role in Darfur.
This is what makes Blackstone's Antony Lueng a rainmaker. Lueng has 28 years of investment banking experience and served as the minister of finance in Hong Kong before taking over Blackstone's greater China portfolio. Earlier this month, Lueng helped secure $3 billion for Blackstone's coming public offering, and importantly, he did this without attracting a great deal of attention or fear mongering from the U.S. congress or media.
With the Chinese government holding a big steak, Lueng and the others in Blackstone will be treading carefully - aka, maybe no investing in firms that design state of the art weapons.
Saturday, May 26, 2007
Wednesday, May 23, 2007
Causes of Doha's Death
It was safe to say "Doha is dead" a year ago, but it is now even more safe. Zarkozy is now calling on Europe to "protect" its farmers, meaning he will avoid the concessions in agriculture necessary to appease the Americans, Indians, and Brazilians, among others, and move the round forward. Bruce Stokes of the National Journal wrote an earlier column lucidly explaining the political impediments to Doha's survival, but here is my stab:
That the Doha Round was never really meant to be has something to do with why talks are failing now. Doha was not in the original playbook, but was largely inspired by September 11. Shortly after, the then trade representative Bob Zoellick argued that U.S. national security was intimately intertwined with open borders to trade with underdeveloped economies. In his words:
This concept-that poverty leads to ill-will and then terrorism, and that trade reduces poverty-was manifest in Bush's Middle East Free Trade Area Initiative and then in subsequent deals with countries including Jordan, Oman, and Morocco, that brought narrow economic benefits to the U.S. but were intended to foster longer term economic relationships and shorter term political benefits. In retrospect, it's probably not surprising that a round based on geopolitical objectives, and not by the business interests necessary to make difficult concessions worthwhile in the eyes of politicians and negotiators, would start on shaky ground and not get far off of it.
There are many other reasons why Doha has failed. Among them, the issues have become more complex. The previous round (Uruguay) witnessed the introduction of intellectual property into the talks, signaling that the relative importance of lowering tariffs and other barriers to trade had deminished. In order for talks to be worthwhile-it was implied-formerly second tier issues such as IPR would need to be brought to the table. Further, the table itself was full of new, if not stronger, personalities than before. Multilateral trade wasn't so difficult in the late 1940s, when negotiating partners shared political and strategic objectives. But by the time the Doha talks got started, the players were not only greater in number but had diverse political orientations. China, India, and Russia would now play a prominent role in global trade talks. Despite U.S. rhetoric, the talks would not be based on political objectives, but on cold-hearted economics. Even if they were based on political objectives, all of the parties involved may not have shared them. Finally, it has been argued by Bhagwati and other proponents of multilateral trade that the proliferation of bilateral deals has stunted the progression of multilateral talks. Why waste time on a grand bargain that may or may not go through and will be watered down at best when the quick, meaningful bilateral deals can be negotiated in the meantime? There are other reasons for Doha's death, but in sum:
Talks have reached a point of diminishing returns which is easily seen by the introduction of new issues such as IPR. Alternatives such as bilateral and regional agreements add to this effect. The parties at the table are also more diverse and unwilling to make concessions based on political or security considerations as was the case when the GATT (now WTO) was founded. Finally, envirnmental and labor standards aren't helping, and neither are statements from Zarkozy.
That the Doha Round was never really meant to be has something to do with why talks are failing now. Doha was not in the original playbook, but was largely inspired by September 11. Shortly after, the then trade representative Bob Zoellick argued that U.S. national security was intimately intertwined with open borders to trade with underdeveloped economies. In his words:
Trade is about more than economic efficiency. It promotes the values at the
heart of this protracted struggle...Erecting new barriers and closing old borders will not help the impoverished. It will not feed hundreds of millions struggling for subsistence. It will not liberate the persecuted...And it certainly will not placate terrorists. This President and this Administration will fight for open markets and free trade. We will not be intimidated by those who have taken to the streets to blame trade -- and America -- for the world's ills. The global trading system has demonstrated -- from Seoul to Santiago -- that it is a pathway out of poverty and despair.
This concept-that poverty leads to ill-will and then terrorism, and that trade reduces poverty-was manifest in Bush's Middle East Free Trade Area Initiative and then in subsequent deals with countries including Jordan, Oman, and Morocco, that brought narrow economic benefits to the U.S. but were intended to foster longer term economic relationships and shorter term political benefits. In retrospect, it's probably not surprising that a round based on geopolitical objectives, and not by the business interests necessary to make difficult concessions worthwhile in the eyes of politicians and negotiators, would start on shaky ground and not get far off of it.
There are many other reasons why Doha has failed. Among them, the issues have become more complex. The previous round (Uruguay) witnessed the introduction of intellectual property into the talks, signaling that the relative importance of lowering tariffs and other barriers to trade had deminished. In order for talks to be worthwhile-it was implied-formerly second tier issues such as IPR would need to be brought to the table. Further, the table itself was full of new, if not stronger, personalities than before. Multilateral trade wasn't so difficult in the late 1940s, when negotiating partners shared political and strategic objectives. But by the time the Doha talks got started, the players were not only greater in number but had diverse political orientations. China, India, and Russia would now play a prominent role in global trade talks. Despite U.S. rhetoric, the talks would not be based on political objectives, but on cold-hearted economics. Even if they were based on political objectives, all of the parties involved may not have shared them. Finally, it has been argued by Bhagwati and other proponents of multilateral trade that the proliferation of bilateral deals has stunted the progression of multilateral talks. Why waste time on a grand bargain that may or may not go through and will be watered down at best when the quick, meaningful bilateral deals can be negotiated in the meantime? There are other reasons for Doha's death, but in sum:
Talks have reached a point of diminishing returns which is easily seen by the introduction of new issues such as IPR. Alternatives such as bilateral and regional agreements add to this effect. The parties at the table are also more diverse and unwilling to make concessions based on political or security considerations as was the case when the GATT (now WTO) was founded. Finally, envirnmental and labor standards aren't helping, and neither are statements from Zarkozy.
Benefits of Joining the EU's Currency Regime
The costs of maintaining independent monetary policy were felt in the U.K. today as Honda's persident Takeo Fukui said that its UK plant would not be expanded due to currency uncertainty.
Tuesday, May 8, 2007
China and the U.S. Trade Deficit
Bob Samuelson outlines the problems associated with the U.S.'s trade deficit with China:
On the first point, that China is undermining the world trading system that the United States helped create. Well, the United States is not using the mechanisms that it created to resolve illegal trading practices. The purpose of the WTO dispute settlement mechanism is to bring countries to negotiate, and if all else fails, to litigate to prevent illegal practices from continuing. Samuelson claims that China is wrecking the system. I assume that he means China is undermining the system by subsidizing its currency. But currency manipulation is not against WTO rules, and secondly, undervaluing one's currency is akin to an export subsidy AND an import tariff. The U.S. should continue to take the Chinese to court in other areas, however, where China is in violation of trade rules.
On his reference to the IIE study holding that China's currency is overvalued by as much as 40 percent. Even if China revalues, the U.S.'s trade deficit with the world will remain unchanged. Basically, Samuelson is worried about deficits and thinks that revaluing the Yuan will solve the problem. But it won't. It COULD change the composition of the U.S. trade deficit.
China is already the world's third-largest trading nation and seems destined to become the largest. On its present course, it threatens to wreck the entire post-World War II trading system. Constructed largely by the United States, that system has flourished because its benefits are widely shared. Since 1950, global trade has expanded by a factor of 25. By contrast, China's trade is mercantilist: It's designed to benefit China even if it harms its trading partners.
There's a huge gap in philosophy. By accident or design, China has embraced export-led economic growth. The centerpiece is a wildly undervalued exchange rate. Economist Morris Goldstein of the Peterson Institute thinks the yuan is 40 percent cheaper than it should be. The resulting competitive advantage props up exports, production and jobs. Since 2001, China's surplus on its current account -- the broadest measure of its trade flows -- has jumped from $17 billion to $239 billion. As a share of China's GDP, it has zoomed from 1.3 to 9.1 percent...
Despite popular impressions, China's trade offensive hasn't yet seriously harmed most other economies. For example, America's current account deficit (to which Chinese imports contribute) was $857 billion last year, up from $389 billion in 2001. Still, that hasn't stymied job creation; the U.S. unemployment rate is 4.5 percent. And world economic growth has accelerated.
Even Chinese officials favor higher local demand. But either they can't or won't stimulate it. Personal consumption spending is a meager 38 percent of GDP; that's half the U.S. rate of 70 percent. The Chinese save at astonishingly high levels, partly because they're scared of emergencies. The social safety net is skimpy. Health insurance is modest: Out-of-pocket spending covers half of medical costs, reports economist Nicholas Lardy of the Peterson Institute. There's no universal Social Security, and only 17 percent of workers have pensions. A mere 14 percent are covered by unemployment insurance.
It is not "protectionist" (I am a long-standing free-trader) to complain about policies that are predatory; China's are just that. The logic of free trade is that comparative advantage ultimately benefits everyone. Countries specialize in what they do best. Production and living standards rise. But the logic does not allow for one country's trade systematically to depress its trading partners' production and employment. Down that path lie resentment and political backlash.Everyone complains about America's trade deficits, but they actually symbolize global leadership. Access to the U.S. market has promoted trade by enabling other countries to export. But the deficits cannot grow indefinitely. Imagine now a trading system whose largest member seems on accumulating permanently large surpluses. Nor, it might be added, are surpluses ultimately in China's interests. They drain too much of its production from its citizens and contribute to growing domestic economic inequality. What everyone needs is more balanced Chinese economic growth, less dependent on exports.
Given the immense stakes -- literally the future of the global trading system -- the Bush administration has been too timid in pushing China to change. The Treasury Department won't even declare China guilty of currency manipulation. No doubt doing so would irritate the Chinese. But avoidance is no solution; the longer these problems fester, the more intractable and destructive they will become.
On the first point, that China is undermining the world trading system that the United States helped create. Well, the United States is not using the mechanisms that it created to resolve illegal trading practices. The purpose of the WTO dispute settlement mechanism is to bring countries to negotiate, and if all else fails, to litigate to prevent illegal practices from continuing. Samuelson claims that China is wrecking the system. I assume that he means China is undermining the system by subsidizing its currency. But currency manipulation is not against WTO rules, and secondly, undervaluing one's currency is akin to an export subsidy AND an import tariff. The U.S. should continue to take the Chinese to court in other areas, however, where China is in violation of trade rules.
On his reference to the IIE study holding that China's currency is overvalued by as much as 40 percent. Even if China revalues, the U.S.'s trade deficit with the world will remain unchanged. Basically, Samuelson is worried about deficits and thinks that revaluing the Yuan will solve the problem. But it won't. It COULD change the composition of the U.S. trade deficit.
True Cost of the Iraq War
Bob Hormats of Goldman has a new book on the historical costs of wars. The Washington Post's Lori Montgomery mentions the book and other issues related to the costs of Iraq and Afghanistan.
Takeaway: Iraq is overrated in terms of its effect on the fiscal outlook. The true problems are related to rising entitlement spending a few years down the road. That said, the last way one would have hoped to prepare for the boomers' retirement and the associated social security and health care costs would have been to pile on more debt today on an exercise that was ultimately unnecessary. So Iraq, while not the driver of fiscal problems, comes at a really bad time.
The global war on terror (costs of fighting in Iraq and Afghanistan)...is about to become the second-most-expensive conflict in U.S. history, after World War II.
Since the Sept. 11, 2001, terrorist attacks, Congress has approved more than $609 billion for the wars, a figure likely to stand as lawmakers rework their latest spending bill in response to a Bush veto. Requests for $145 billion more await congressional action and would raise the cost in inflation-adjusted dollars beyond the cost of the wars in Korea and Vietnam.
But the United States is vastly richer than it was in those days, and the nation's wealth now dwarfs the price of war, economists said. Last year, spending in Iraq amounted to less than 1 percent of the total economy -- about as much as Americans spent shopping online and less than half what they spent at Wal-Mart. Total defense spending is 4 percent of gross domestic product...In contrast, defense spending ate up 14 percent of GDP at the height of the Korean War and 9 percent during the Vietnam War.
And this time, the war bill is going directly on the nation's credit card. Unlike his predecessors, Bush is financing a major conflict without raising taxes or making significant cuts in domestic programs. Instead, he has cut taxes and run up the national debt. The result, economists said, is a war that has barely dented the average American's pocketbook and caused few reverberations in the broader economy...
Like all debts, however, the bill for Iraq and Afghanistan will eventually come due. While it is unlikely to cause economic upheaval, such as the devastating inflation that followed the Vietnam War, economists foresee substantial increases in government spending to rebuild the nation's exhausted armed forces, care for its disabled veterans and cover rising interest payments.
Administration officials say those payments will be easier to afford because Bush's tax cuts strengthened the economy and boosted tax collections. But even many conservative economists are skeptical. Some worry that the bill for Iraq will come just as the baby-boom generation starts retiring, further straining a budget that will require deep cuts, higher taxes or bigger deficits...
Borrowing is common in wartime. According to Hormats, virtually every U.S. war has required some debt. The title of his book, "The Price of Liberty: Paying for America's Wars," comes from a 1790 report by the nation's first Treasury secretary, Alexander Hamilton. Hamilton wrote that the heavy debt that helped finance the Revolutionary War was "the price of liberty" and insisted that the new nation scrupulously repay it to preserve its ability to borrow in the future.
Hamilton won that argument, and the government's commitment to repaying its debts has become a bedrock American principle. At the same time, most wartime presidents have tried to cover at least part of the cost of their conflicts by means other than debt, Hormats writes, often pushing radical changes in fiscal policy aimed at restraining deficits and inflation.
To help pay for World War II, by far the nation's most expensive, Franklin D. Roosevelt expanded the number of taxpayers from 4 million to 42 million, tripled tax collections as a percentage of GDP and slashed spending on his treasured New Deal programs. As the military budget devoured more than a third of the economy, Roosevelt also called for mass sacrifice, rationing food and gasoline, capping prices and wages and exhorting Americans to spend any money they could spare on war bonds and stamps.
Heavy government spending on the Korean War set off a bout of inflation that neared 8 percent in 1951. To pay for the war, President Harry S. Truman raised the top tax rates to 91 percent for individuals and an all-time high of 70 percent for corporations, while imposing wage and price controls.
Lyndon B. Johnson, who tried to protect a 1964 tax cut and his Great Society programs while escalating U.S. involvement in Vietnam, eventually signed both a tax increase and spending cuts in 1968 -- too late to avoid touching off more than a decade of inflation.
Bush, in contrast, has allowed domestic spending to rise and cut taxes repeatedly since taking office, adding more than $3 trillion to the national debt. He signed a huge stimulus package two months after marching on Baghdad in March 2003. A few months later, he signed legislation to create a Medicare prescription drug benefit, the biggest expansion of the federal health program for the elderly since its creation in 1965. That combination is unprecedented...
Though the administration has not cut domestic spending, it has managed to hold the budget for discretionary programs relatively flat in recent years, Fratto said. After the 2001 terrorist attacks, a tax increase to pay for the ensuing war could have devastated the economy, he said.
"Could it have been paid for by tax increases? I suppose it could have been," Fratto said. "But at what cost to the economy?"...
Hormats called Bush's war financing "shortsighted," not only because of the potential fiscal consequences but also because it bypassed an opportunity to engage the support of the public, which has grown increasingly skeptical of the war.
"They tried to do this on the cheap and without a candid conversation with the American people about the cost," Hormats said. "But the irony is the great wartime leaders have seen it in the opposite way," theorizing that a call to sacrifice would "tie people to the war effort."
Joseph E. Stiglitz, a Columbia University professor who was chairman of the Council of Economic Advisers under President Bill Clinton and who was among the winners of the 2001 Nobel prize for economics, said Bush has undertaken a "deceptive policy of saying you can have both guns and butter" -- a strategy similar to Johnson's in the early years of Vietnam. In December, Stiglitz co-authored a study that predicts the Iraq conflict alone will eventually cost taxpayers more than $1 trillion, counting military rebuilding and health care for wounded veterans.
"It's actually turning out to be a very expensive war," Stiglitz said. But "it has been designed to be a war the American people don't feel.'"
Takeaway: Iraq is overrated in terms of its effect on the fiscal outlook. The true problems are related to rising entitlement spending a few years down the road. That said, the last way one would have hoped to prepare for the boomers' retirement and the associated social security and health care costs would have been to pile on more debt today on an exercise that was ultimately unnecessary. So Iraq, while not the driver of fiscal problems, comes at a really bad time.
Sunday, May 6, 2007
Consequences of Offshoring
Alan S. Blinder of Princeton University in today's Washington Post:
I'm a free trader down to my toes. Always have been. Yet lately, I'm being treated as a heretic by many of my fellow economists. Why? Because I have stuck my neck out and predicted that the offshoring of service jobs from rich countries such as the United States to poor countries such as India may pose major problems for tens of millions of American workers over the coming decades. In fact, I think offshoring may be the biggest political issue in economics for a generation...
The reason for my alleged apostasy is that the nature of international trade is changing before our eyes. We used to think, roughly, that an item was tradable only if it could be put in a box and shipped. That's no longer true. Nowadays, a growing list of services can be zapped across international borders electronically. It's electrons that move, not boxes. We're all familiar with call centers, but electronic service delivery has already extended to computer programming, a variety of engineering services, accounting, security analysis and a lot else. And much more is on the way.
Why do I say much more? Because two powerful, historical forces are driving these changes, and both are virtually certain to grow stronger over time. The first is technology, especially information and communications technology, which has been improving at an astonishing pace in recent decades. As the technology advances, the quality of now-familiar modes of communication (such as telephones, videoconferencing and the Internet) will improve, and entirely new forms of communication may be invented. One clear implication of the upward march of technology is that a widening array of services will become deliverable electronically from afar. And it's not just low-skill services such as key punching, transcription and telemarketing. It's also high-skill services such as radiology, architecture and engineering -- maybe even college teaching.
The second driver is the entry of about 1.5 billion "new" workers into the world economy. These folks aren't new to the world, of course. But they live in places such as China, India and the former Soviet bloc -- countries that used to stand outside the world economy. For those who say, "Sure, but most of them are low-skilled workers," I have two answers. First, even a small percentage of 1.5 billion people is a lot of folks. And second, India and China will certainly educate hundreds of millions more in the coming decades. So there will be a lot of willing and able people available to do the jobs that technology will move offshore.
Looking at these two historic forces from the perspective of the world as a whole, one can only get a warm feeling. Improvements in technology will raise living standards, just as they have since the dawn of the Industrial Revolution. And the availability of millions of new electronically deliverable service jobs in, say, India and China will help alleviate poverty on a mass scale. Offshoring will also reduce costs and boost productivity in the United States. So repeat after me: Globalization is good for the world. Which is where economists usually stop.
And where my alleged apostasy starts.
For these same forces don't look so benign from the viewpoint of an American computer programmer or accountant. They've done what they were told to do: They went to college and prepared for well-paid careers with bountiful employment opportunities. But now their bosses are eyeing legions of well-qualified, English-speaking programmers and accountants in India, for example, who will happily work for a fraction of what Americans earn. Such prospective competition puts a damper on wage increases. And if the jobs do move offshore, displaced American workers may lose not only their jobs but also their pensions and health insurance. These people can be forgiven if they have doubts about the virtues of globalization.
We economists assure folks that things will be all right in the end. Both Americans and Indians will be better off. I think that's right. The basic principles of free trade that Adam Smith and David Ricardo taught us two centuries ago remain valid today: Just like people, nations benefit by specializing in the tasks they do best and trading with other nations for the rest. There's nothing new here theoretically.
But I would argue that there's something new about the coming transition to service offshoring. Those two powerful forces mentioned earlier -- technological advancement and the rise of China and India -- suggest that this particular transition will be large, lengthy and painful.
It's going to be lengthy because the technology for moving information across the world will continue to improve for decades, if not forever. So, for those who earn their living performing tasks that are (or will become) deliverable electronically, this is no fleeting problem.
It's also going to be large. How large? In some recent research, I estimated that 30 million to 40 million U.S. jobs are potentially offshorable. These include scientists, mathematicians and editors on the high end and telephone operators, clerks and typists on the low end. Obviously, not all of these jobs are going to India, China or elsewhere. But many will.
It's going to be painful because our country offers such a poor social safety net to cushion the blow for displaced workers. Our unemployment insurance program is stingy by first-world standards. American workers who lose their jobs often lose their health insurance and pension rights as well. And even though many displaced workers will have to change occupations -- a difficult task for anyone -- only a fortunate few will be offered opportunities for retraining. All this needs to change.
What else is to be done? Trade protection won't work. You can't block electrons from crossing national borders. Because U.S. labor cannot compete on price, we must reemphasize the things that have kept us on top of the economic food chain for so long: technology, innovation, entrepreneurship, adaptability and the like. That means more science and engineering, more spending on R&D, keeping our capital markets big and vibrant, and not letting ourselves get locked into "sunset" industries.
In addition, we need to rethink our education system so that it turns out more people who are trained for the jobs that will remain in the United States and fewer for the jobs that will migrate overseas. We cannot, of course, foresee exactly which jobs will go and which will stay. But one good bet is that many electronic service jobs will move offshore, whereas personal service jobs will not. Here are a few examples. Tax accounting is easily offshorable; onsite auditing is not. Computer programming is offshorable; computer repair is not. Architects could be endangered, but builders aren't. Were it not for stiff regulations, radiology would be offshorable; but pediatrics and geriatrics aren't. Lawyers who write contracts can do so at a distance and deliver them electronically; litigators who argue cases in court cannot.
But even if we do everything I've suggested -- which we won't -- American workers will still face a troublesome transition as tens of millions of old jobs are replaced by new ones. There will also be great political strains on the open trading system as millions of white-collar workers who thought their jobs were immune to foreign competition suddenly find that the game has changed -- and not to their liking.
Can the French Embrace "Creative Destruction"?
Sarkozy's win in France's national election could lead to greater flexibility in France's economic system. Economic growth in France is lagging and youth unemployment is above 20 percent. So maybe the country will take a new approach toward managing the changes brought about by globalization and the introduction of new technologies. But then again, what if accepting economic change, or embracing the "creative destruction" that results in the replacement of less productive jobs with more productive ones, so contradicts French cultural norms to make this acceptance difficult if not impossible?
Here is Grant McCracken:
"Last week, doing ethnographic interviews in Paris, I was told several times that the French are "equal." To an outsider like me, this is improbable. Certainly, equality is there in the model of social democracy France has embraced. Yes, the French are equal before the law and their God. And yes, equality is there in the commitment to "egalite" that survives the revolution of the 18th century. But evidence of inequality is everywhere. Indeed, the French insist on differences of class, status, wealth, power, and several kinds of capital. Respondents would not to be dissuaded, and I got to thinking how it is the French might be said to be "equal." Here's my guess, and it's only a guess. European hierarchies in the medieval and early modern periods used a relatively simple system of status marking: the notion of relative fineness. Those who ranked high exhibited fineness in their clothing, their food, the manners, their speech and their very bodies. Those who ranked low exhibited a relative coarseness in clothing, food, manners, speech and bodies. I will spare you the details except to say that fineness was finally a matter of intellectual, aesthetic, almost spiritual disposition. High standing people could make fine distinctions. Low standing people could not.
At some point, France constructed an idea of itself, its culture, its collectivity that broke with this longstanding historical convention. In France, according to this convention, everyone was capable of discerning and exhibiting fineness. Especially, in the domain of eating, food, cooking, cuisine, here the French were one. The table was the place were fineness was identified, discussed, shared, prized and that was just for starters. The main course had yet to come. (The democratization of fineness extends beyond food, of course. It is there in the language itself, which is why the lowliest clerk at the Tabac is entitled [obliged!] to sneer at our high school French.)
There was some period in which culture and economy worked hand in glove. Discernment and taste were national exports. Industries based on discernment and taste flourished. Wine, food stuffs, perfume, handbags, scarves, watches, and clothing brought in a fortune. The language itself exported well.
The grandeur that was the culture that was France...this was accessible to the rest of us, miserable cretins living in the far provinces. Everywhere in North America, there were little shrines everywhere, "French restaurants," we called them, places where middle class families could go to glimpse for a moment, to taste for a moment, what France had created with its national accomplishment. French restaurants were draped in seriousness and heavy red curtains. They were staffed by men with deep knowledge and great courtesy. The food was heavy and ornate. Tables groaned Silver, plate, and crystal. The whole thing was well off the Paris standard, of course, but obeisance was called for and obeisance was paid.
And some few years ago, we North Americans decided we couldn't care less. Several culture trends made this restaurant and many of the exports of France look suddenly too...too. We decided that formality counted for less than informality. We shifted from ceremony to spontaneity as our preferred cultural mode. We gave up solemnity for something more winning and cheerful. We abandoned heavy foods for something lighter and more "fun." Most important, food became a place to experiment, and now the French looked, even after nouvelle cuisine, positively hide bound.
Bad for France. But not, one would have thought, intolerable. If France were committed to the creative destruction that most Western economies and cultures take for granted, this should have been a simple matter. Accept your losses, make your accommodations, and move on.
But in France this was not simple. It would have meant compromising the beautiful idea, the magnificent theater of French life. (And this is very beautiful indeed. Even the smallest details of the built world exhibits the French faculty for fineness. And you find yourself thinking, "ok, this is what it looks like, when everyone in a culture, over a very long period, cares about design and execution.")
This may be the only Western culture in which the phrase "creative destruction" is fully paradoxical. All of us balk for a moment at the phrase, but the French, I think, must just shake their heads and say, "no, it's creative or it's destructive." This is a culture that approaches perfection, and for a world like this all of the things that make other Western economies go, innovation, responsiveness, competition and innovations, these, in France, are wrong. These contradict the the French style of life.
The English could invent punk because there wasn't very much to keep them from the aesthetic violence it required. The Germans could rebuild the nation state because all it demanded of them was that they tear down a place stinking of cabbage and soft coal. Americans could push us all down the bobsled of post modernity because all it meant was surviving the the bouleversement of Silicon Valley in the late 1990s.
But the French, for them change must feel lapsarian, a fall from an exquisitely accomplished grace. The rest of us blunder from a uncertain present into the maw of a chaotic future, but then as one of my French respondents said, "it's not like you've got very much to lose." The French, you see, pay dearly for change, and sometimes they just can't bring themselves to budge."
References
Thornhill, John. 2007. Not working: why France may find its social model exacts too high a price. Financial Times. April 16, 2007, p. 9.
Thanks to Tyler Cohen for linking to this piece.
Here is Grant McCracken:
"Last week, doing ethnographic interviews in Paris, I was told several times that the French are "equal." To an outsider like me, this is improbable. Certainly, equality is there in the model of social democracy France has embraced. Yes, the French are equal before the law and their God. And yes, equality is there in the commitment to "egalite" that survives the revolution of the 18th century. But evidence of inequality is everywhere. Indeed, the French insist on differences of class, status, wealth, power, and several kinds of capital. Respondents would not to be dissuaded, and I got to thinking how it is the French might be said to be "equal." Here's my guess, and it's only a guess. European hierarchies in the medieval and early modern periods used a relatively simple system of status marking: the notion of relative fineness. Those who ranked high exhibited fineness in their clothing, their food, the manners, their speech and their very bodies. Those who ranked low exhibited a relative coarseness in clothing, food, manners, speech and bodies. I will spare you the details except to say that fineness was finally a matter of intellectual, aesthetic, almost spiritual disposition. High standing people could make fine distinctions. Low standing people could not.
At some point, France constructed an idea of itself, its culture, its collectivity that broke with this longstanding historical convention. In France, according to this convention, everyone was capable of discerning and exhibiting fineness. Especially, in the domain of eating, food, cooking, cuisine, here the French were one. The table was the place were fineness was identified, discussed, shared, prized and that was just for starters. The main course had yet to come. (The democratization of fineness extends beyond food, of course. It is there in the language itself, which is why the lowliest clerk at the Tabac is entitled [obliged!] to sneer at our high school French.)
There was some period in which culture and economy worked hand in glove. Discernment and taste were national exports. Industries based on discernment and taste flourished. Wine, food stuffs, perfume, handbags, scarves, watches, and clothing brought in a fortune. The language itself exported well.
The grandeur that was the culture that was France...this was accessible to the rest of us, miserable cretins living in the far provinces. Everywhere in North America, there were little shrines everywhere, "French restaurants," we called them, places where middle class families could go to glimpse for a moment, to taste for a moment, what France had created with its national accomplishment. French restaurants were draped in seriousness and heavy red curtains. They were staffed by men with deep knowledge and great courtesy. The food was heavy and ornate. Tables groaned Silver, plate, and crystal. The whole thing was well off the Paris standard, of course, but obeisance was called for and obeisance was paid.
And some few years ago, we North Americans decided we couldn't care less. Several culture trends made this restaurant and many of the exports of France look suddenly too...too. We decided that formality counted for less than informality. We shifted from ceremony to spontaneity as our preferred cultural mode. We gave up solemnity for something more winning and cheerful. We abandoned heavy foods for something lighter and more "fun." Most important, food became a place to experiment, and now the French looked, even after nouvelle cuisine, positively hide bound.
Bad for France. But not, one would have thought, intolerable. If France were committed to the creative destruction that most Western economies and cultures take for granted, this should have been a simple matter. Accept your losses, make your accommodations, and move on.
But in France this was not simple. It would have meant compromising the beautiful idea, the magnificent theater of French life. (And this is very beautiful indeed. Even the smallest details of the built world exhibits the French faculty for fineness. And you find yourself thinking, "ok, this is what it looks like, when everyone in a culture, over a very long period, cares about design and execution.")
This may be the only Western culture in which the phrase "creative destruction" is fully paradoxical. All of us balk for a moment at the phrase, but the French, I think, must just shake their heads and say, "no, it's creative or it's destructive." This is a culture that approaches perfection, and for a world like this all of the things that make other Western economies go, innovation, responsiveness, competition and innovations, these, in France, are wrong. These contradict the the French style of life.
The English could invent punk because there wasn't very much to keep them from the aesthetic violence it required. The Germans could rebuild the nation state because all it demanded of them was that they tear down a place stinking of cabbage and soft coal. Americans could push us all down the bobsled of post modernity because all it meant was surviving the the bouleversement of Silicon Valley in the late 1990s.
But the French, for them change must feel lapsarian, a fall from an exquisitely accomplished grace. The rest of us blunder from a uncertain present into the maw of a chaotic future, but then as one of my French respondents said, "it's not like you've got very much to lose." The French, you see, pay dearly for change, and sometimes they just can't bring themselves to budge."
References
Thornhill, John. 2007. Not working: why France may find its social model exacts too high a price. Financial Times. April 16, 2007, p. 9.
Thanks to Tyler Cohen for linking to this piece.
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