Capitalist and socialist stupid debate

I just enjoyed holidays on Workers’ Day. It was great.

If we compare the capitalism practiced in most of the current developed economies of the World with capitalism practiced in the beginning of the 20th century we can clearly see the achievements of those unionized movements still in place today. People often had to work 12, 14 or even 16 hours per day just to get a miserable salary, while vacations practically didn’t exist. Capital was just as wild as current Chinese 21st century “pro-market-communists” (what a weird combination of words!) where people currently work 12, 14 or 16 hours per day without vacation (!).

If Karl Marx and Friedrich Engels were standing in the same place where Chinese officials built a statue for them in Shanghai, I’m sure they would go crazy :-).

Statue of Marx and Engels downtown Shanghai

With the statue of Marx and Engels downtown Shanghai

I always thought it strange – almost humiliating, let’s say – to see the statue of a Prussian philosopher and a German-English philosopher in the middle of the “World’s Central State” (China in Chinese) telling them what to do with their destiny (“Couldn’t they figure out by themselves?!?” I wondered).

So now, instead of private-capitalists making slaves out of Chinese people, Chinese Communist Party public-capitalists do it better, and systematically (much more efficient this way). Looks like we are lead to believe that this is the price that Chinese people have to play before they can exercise opinions about their destiny (a kind of “slave first, voice later”).

More non-sense hypocrisy is seen when you visit (I did it) the headquarters of the Chinese Communist Party in Beijing and read the founding plaque at the Party:

Sign at the entrance of the Chinese Communist Party founding place.

Sign at the entrance of the Chinese Communist Party founding place: “The founding of the Communist Party of China is the inevitable outcome of the development of China’s modern history”.

You can almost taste a scary Vendetta kind of Chinese movement coming someday, don’t you think? I’m sure the first deep economic problem the Communist Party face, they will evoke this “history” to blame somebody from abroad.

But for me, much more non-sense than all of that Chinese bullshit together is the current debate about right and left-wing parties in Europe (France, Germany, Greece and Spain, for example) and in Latin America (Argentina, Bolivia, etc).

Every time I see a stupid debate between #Sarkozy and #Hollande or between #Rajoy and #Rubalcabar I’m sure they are just playing roles to put people against each other for their own – or their Party’s own – joy or sake. After all, they will all have to play the capitalist game.

Some days ago I saw some flags of the old Soviet Union defending more socialist actions from European governments. I was thinking: “- Are you kidding me? Tell me, who the hell think that a hammer and a sickle still represent European workers these days?!?”

Flag of the Soviet Union

Flag of the Soviet Union

If these leftists Santa-Claus-believers think that socialism or capitalism are still something to debate about these days, at least they should update their flags with something that would make more sense to people in this continent. I even came up with a suggestion to these dinosaurs:

Newton's proposal for a new flag for vintage leftists

Newton's proposal of a new flag for nostalgic leftists

Should I still explain why I made myself a member of the Green Party?

From these places where time is money

Benjamin Franklin’s famous quote “time is money” summarize very well what I observe when exposed to places such as New York, Amsterdam or London. It was in those cities, among few others, that the monarchs, politicians and entrepreneurs of the last centuries “invented” capitalism. I am spending this weekend in London due to an MBA fair and a couple of meetings and again, as usual, I always get surprised to see how this quote is intrinsically present around these places.

Just a stupid example: do you remember when, during hotel check outs, you had to wait for somebody to verify what you consumed from the refrigerator in your room? Some hotels just ask you about it so they can avoid this “verification” cost. Well, in this Hilton I’m staying, they’re using an automatic refrigerator that counts the things you consume so nobody needs to verify any consumption or to ask you anything about it. The curious thing – for me – is that I always see something like this when I visit one of those places where “time is money”.

In most of the so called emerging markets and even in some developed markets this is not the case yet. Things are changing fast, but usually, still, time is definitely something else than money. Just ask a Brazilian during carnival or a Spaniard or an Italian during summer. I remember the case of an American entrepreneur who moved to Bahia – in the Brazilian Northeast – during the 1960’s. Since salaries were so low and everything was so cheap, he had the idea to build a factory over there and export something I don’t remember now. According to his memories, he started paying little money to the employees but they didn’t perform well and couldn’t keep coming to work for more than two weeks. So, he started a productivity bonus, paying bonus to employees in the case they reached some objectives. It didn’t work either. He raised the bonuses and dropped objectives but employees still didn’t show up or were not committed to the work. So he gave up bonuses and simply raised the salary of everybody. Still, after few weeks or months people would get tired of the work and would abandon the job. The conclusion was that people didn’t really need money to live relatively well in the coast of Bahia at that time. They preferred to have their time to sleep, play cards or whatever without money than struggling to get a salary, whatever it was. I think you see what I mean: time was not money at all in Bahia back then. The funny thing is that I read this story while staying in a ryokan – little hotel – in Japan. Do you know why I found this book there? Because this guy decided to leave Brazil and go to Japan to start his business. He ended up being a successful entrepreneur in Japan and I was reading his memories.

Are you a citizen or a consumer?

I was watching the main TV News some weeks ago in Brazil when a famous local economic analyst happily announced that the poorest people were starting to have economic power to buy goods like flat TVs and cars and therefore were finally able to become citizens. What an odd affirmation, I thought. If a person born in this country is not a citizen until they have money to buy a TV or a car what the hell they were before? Animals? Native Indians? He didn’t say.

It is so strange to have to hear stupid things like this more and more often that I start to doubt whether I am getting crazy or capitalism is getting so intrinsically connected to our lives that we are forgetting that yes we can live without iPods and iPhones (we cannot live without water by the way, if anybody has forgotten). Ok, I am maybe too old to understand that a current teenager without an iPod can be almost considered a dead teenager (at least socially), but how can’t we be able to generate a more conscious teenager and society with all the information tools that we have available?

It seems to me that people are all anesthetized by the material development that is undergoing in Brazil. Richer people are just thinking on how to make more money out of the “bottom of the pyramid”, medium-class people just thinking on how to become rich people and lower-class people just wanting to get their “basic” needs like owning flat TVs covered.

I have the sensation that everybody is so busy figuring out ways to get money that nobody have time to think anymore over here. If we remember that under the classic unrefined definition of capitalism by Benjamin Franklin “time is money”, thinking may have become a stupid thing to do currently in Brazil. I wonder if that is also the case of other emerging markets nowadays.

Entrepreneurship and Latinity

As I travel around and read about capitalism I can’t avoid seeing some patterns in the recent development of some regions. Entrepreneurial ventures in Latin culture-based countries with long Catholic tradition are different from those created under other social contexts and I believe that at least two former state cities of Asia exposed to European Anglo-Saxon and European Latin cultures in the last centuries can be used to illustrate that: Macau and Hong Kong. Macau as a former Portuguese colony and therefore exposed to an European Latin set of values and Hong Kong as a former British colony, exposed to an European Anglo-Saxon set of values. Both cities are located in the delta of the same river, the Pearl River in China, lying down just in front of each other. Both cities were passed to Chinese authorities recently, Macau in 1999 and Hong Kong in 1997 after many decades or even centuries of foreign European rule. The Portuguese established a permanent settlement in Macau in 1557 and Hong Kong was occupied by the British in 1841, both as commercial trade posts between Europe and Asia. Nowadays, it is interesting to witness the urban and material result of the development of these two societies in loco, through satellite images from Google Earth or even through typical tourist pictures of both cities’ downtown.

First picture: Downtown Macau, by Holger Mette.
Second picture: Downtown Hong Kong by Oksana Perkings.

Despite of obvious historical differences between the commercial power of the Portuguese and the British empires along the last centuries, both regions developed together, exposed more or less to the same kind of trade until the first half of the 20th century. Since the British took over, the people from Hong Kong enjoyed a freer economic environment than the people from Macau, but that was not an important variable to their history until the Chinese communist revolution of 1949 took place and both regions attracted capitalists from all over China. With preference for the British settlement, which was more business friendly, Hong Kong became one of the world’s leading financial centers and ranked the freest market in the world by the Index of Economic Freedom for 15 consecutive years (The Economist), disputing today this position with Singapore, not coincidently another former British settlement. In 2009, for example, the Hong Kong Stock Exchange, the 6th largest in the world, raised 22% of the worldwide IPO capital. Under the official policy of positive non-interventionism, Hong Kong is often cited as a successful example of laissez-faire capitalism. Not surprisingly, the same phenomenon can be observed when comparing the development of Goa in India to Mumbai or East Timor to Singapore, the last both in the neighbors Indonesia and Malaysia.

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Santos-Dumont, Wright brothers and the “spirit” of Entrepreneurship

This small reflection comes from my PhD dissertation, during a short passage where I examine the power of the rationalized Anglo-American “spirit” of entrepreneurship when compared to the Latin French-Brazilian “spirit” behind the invention of the airplane:

In the first decades of the 20th century, Schumpeter identifies this strength of the Unternehmergeist (“Entrepreneur-spirit” in German) in society. The concept of entrepreneurship cannot be fully understood without his contributions. Schumpeter argued that the innovation and technological change of a nation comes from the entrepreneurs and had a very clear view about the role that both innovations and entrepreneurs played in market-oriented economies. Nations that had adopted market-oriented economic model had experienced a kind of economic evolution explained by neoclassic economists with the use of limited static analysis that focuses on the calculation of economic variables thought the use of supply and demand curves in accordance with rational choice theory. According to Schumpeter, innovations were the responsible for the dynamism and the evolution of this economic model, since they were responsible for strong internal impacts on the system by changing the way products and services are developed, done or delivered. New combinations of old products or practices were also considered innovations by Schumpeter and those innovations are often responsible for changing economic power from one hand to another in society, giving dynamism to the system. This is the moment where the person responsible for those changes appears: the entrepreneur. Therefore, the entrepreneur is not just a well succeeded businessman or businesswoman, more than that, he is an innovative businessman or businesswoman. The entrepreneur is a special type of economic actor responsible for putting innovations into action – not necessarily technological innovations – and therefore promoting the development of the economy as a whole. Moreover, Schumpeter affirms that the entrepreneur is not motivated by the hedonistic fruits of his work; he is a natural leader in the search of social recognition. Schumpeter defines an ideal-type of entrepreneur whose actions ignites the process of “creative destruction” as innovative products, services and management practices create new markets that often destroy established ones. According to Schumpeter, the entrepreneur is able to rearrange a set of resources in a different way, disrupting with established ideas and provoking a short moment of self crises in the system or in part of it. In that sense, Schumpeter contributed by starting a different economic debate about the role of individuals not necessarily motivated only by rational profit in the development of markets.

One precise case illustrates very well the different mindsets over the exploration of innovation and entrepreneurship under different social perspectives: during the development of flying machines. Many inventors were studying flying machines by the year 1900. The Brazilian inventor Alberto Santos-Dumont, for example, worked since 1898 in his machines, being the first person in the world to flight a self propelled flying machine in Paris, in 1903. In accordance with his set of values and beliefs, Santos-Dumont never thought about patents or making fortune from his inventions. According to Hoffman’s work on the inventor (2004):

“Santos-Dumont did not believe in patents. He made the blueprints of his airships freely available to anyone who wanted them. He saw the flying machine as a chariot of peace, bringing estranged cultures in contact with one another so that they could get to know one another as people, thereby reducing the potential hostilities”.

Meanwhile, in the other side of the Atlantic Ocean:

“[…] the Wright brothers had a very different motivation from Santos-Dumont in developing the plane. They were not idealists. They did not dream about bringing distant people together. They were not thrill-seekers. […] They were intent on building flying machines for financial gain”.

These passages go in accordance with Max Weber’s writings about the Protestant Ethic and the “Spirit” of Capitalism published only one year after that, in 1904 and 1905 and with Schumpeter’s later conception of the entrepreneurs. Under this perspective Santos-Dumont can be considered an inventor, while the Wright brothers, entrepreneurs, despite of the fact that they were working in very similar projects.

BRICs x PIGS: many letters, few truths

As you must know, the BRICs and the PIGS involves nine countries: Brazil, Russia, India, China, Portugal, Ireland, Italy, Greece and Spain. Coincidently, my life has been influenced a lot by some of these countries. Except by Russia and Ireland, I have been in all the others, and more than that, had been deeply exposed to some of them. I am Brazilian, I am Portuguese, I had lived in Spain and in India for quite a good time and had visited Greece, Italy and China before and after my MBA (which mean, before and after I understood what capitalism was about). I believe that a top MBA is one of the best ways to understand global capitalism today, but this comment has enough implications for another post.

Well, although it may look like the BRICs are slowly “dominating the world” economically and the PIGS are symbolic representing the collapse of the political dominance of the “developed” economies, I think these fashionable terms created by economic analysts and economic journalists in the comfort of their offices in New York or London do not represent what is going on for real in those countries. What happens is that people like believing in simplistic analyses and stereotypes. We mentally prefer to “solve” complex problems by limiting them to a small and simple definition in our heads.

However, the truth is that you find some of the poorest people in the world by visiting countries like Brazil, India, China and their neighbor countries. People that do not have access to clean water, to basic health treatments, to the minimum contact with formal education or justice. In Brazil, for example, I dare to say, perhaps exaggerating a bit, that justice does not exist. You can kill whoever you want with very little chance to be arrested. In 2009, the country broke all its records of violence in all levels, at least 25% of my closest relatives had been robed in 2009. Politicians do whatever they want and keep accumulating fortunes in Switzerland without any reaction of the people. We look anesthetized by decades or even centuries of political rape. The growth we observe today is conjectural, nothing has really changed. Today’s Brazil is a huge “bubble” that can explode right after the Olympic Games of 2016 if we make to get there.

China is a dictatorship where you are simply arrested and killed if anybody in the government does not like you. Of course people can live with that and enjoy economic growth but at the bottom of their souls they are not happy of living under that circumstances. I believe that after famine, one of the worst things someone can face in the world is the lack of freedom. Freedom to walk around, to explore your country, to read whatever you want and debate. In the west (Europe and North-America) we tend to take freedom for granted but unfortunately this is not what we see in a large portion of the BRICs.

In the other hand, in the “poor” countries of Italy or Greece, people have absolutely high standard of living in all areas. They may have to own one car instead of three, or wait two hours more in the hospitals to be attended, or even eating less in restaurants, but they still have enough social and economic “fat” to burn and use their education to find out a solution to their economic problems. In Spain – what a pity – there are 500 thousand homes empty due to the real state bubble. In Brazil or India, there are many millions of homes lacking. Maybe Spanish people could ship the homes they built in excess to Brazil, India and China. What do you think? Sometimes these “poverty” and endless crisis in the developed countries look to me as a global tale to make immigrants stop moving there.

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Monopolies: why it has to be this way?

Sometimes people get frustrated with other people. In my case, today, since I fortunately don’t have very important things to get worried about, like any disease or personal crisis I get directly mad or disappointed with life and other people very few times. One example of that happens when I have to interact with those mobile, cable TV, airline and bank telemarketing attendants and all those young and underprivileged people that need to do these kind of services in Brazil. Everybody say that is not their fault, that they do not have anything to do with the bad service they provide and that they just follow the orders their bosses give to them. Some other people say that they do not have enough structure to be able to respond to customers demand and etc. I never bought those ideas. I never thought there were people getting paid to plan ways to annoy other people.

About a year ago, however, I had to interview a Brazilian person to the MBA program I attended; today I am in charge of interviewing future candidates of the MBA programs of a top European Business School and I can proudly say that I make part of a team of people that are building one of the best universities in the world. This guy I was about to interview was the senior manager of a cable TV customers’ relations department and that would be my best chance to understand why their specific service was so bad, after all, I was a customer of them myself and I was never able to solve my smaller problems thought their customers’ service. Surprisingly, he told me that yes his job was to plan very dirty ways to sell people things they didn’t need and indirectly irritate people by not allowing them to cancel their services properly, making people to wait for 30 minutes in line and things like that. For example, when people called them to cancel their services, they deliberately cut the line in the middle of a conversation as it was inadvertently. He did not like doing that but that was the way to do it, their vice-presidents and presidents asked him to do so. He wanted to leave this industry, although he did nothing to change that situation as a senior manager. Of course I recommended the school not admitting him; he was not admitted and ended up going to another European top business school. I feel sorry that soon, society will have to deal with a person that is right now being trained to do more evil. If he was able to annoy millions of people without a top MBA, you can imagine what he will be able to do soon.

Today, thinking about it after not being able to acquire the match of my favorite football team after waiting in line for more than 35 minutes – I realized that in fact the problem is not with these middle management people, their employees or their bosses. The problem is with the governments and the contracts and regulations that allow all those monopolized kind of services to take place this way. We know big services like this is not really a matter of capitalism, is a matter of government allowing private investors to explore a monopolized service that will allow them to get some return over their capital that is better than saving money in the bank. I suppose governments are pressured to allow them to act without too much regulation in order to not damage the project.

This is where my critics in this post go to: to people from the government that allow companies to operate this way, to people from the government that do not care that companies operate this way and to companies’ owners that do not care about the people that is suffering from the quality of their services because they need better return rates. It is in this kind of permissive relation between capital and public interest that people get tired of capitalism. Private investors do not see that reputation and legitimate social power it is what matter today and these practices become unsustainable when people start to like or ask for government intervention to protect them from evil market practices. That is why I think companies that deliberately do dirty things like this are unsustainable in the long term.

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