Vanishing Worlds and Emerging Markets

What a great place to live and work Cambridge is! The
weather sucks, parking is a nightmare and the primary tool of municipal
fundraising, and the rents are through the roof. Yet we keep coming back,
for reasons like the following.

Last week the Dowbrigade attended a
couple of amazing Lectures, which are
regular events on the Cambridge cultural calendar, like tractor pulls or
baked-bean potlucks in other parts of the nation. We have refrained from
blogging them up to this point as we have been searching for a hook, a
common thread, a way to integrate them both into an all-encompassing worldview
which reflects the diversity of intellectual endeavor in the People’s Republic
of Cambridge.

No luck so far, so on this frigid President’s day we are resolved to go
ahead anyway, hoping that some uniting principal will emerge as we write.
If not, our failure may have to be the story itself.

On Tuesday, we dropped into the JFK Jr. Forum at Harvard’s Kennedy School
of Government to see old friend and high school running mate
Ken Rogoff talk about his three years as Chief Economist and Director of
Research for the International Monetary Fund.

The Dowbrigade has known Ken since we were Middle Schoolers and needed
our Moms to deliver us to each other’s houses for "Play Dates" that included
stamp collecting and model building, but we had not spoken to him since
he moved to Washington to arbitrate the lives of billions of people in
the developing world.

We arrived at the Kennedy School a bit early and staked out a seat in the
second row. We were disappointed to learn that our Airport card could pick
up nothing but the overpowering signal of the JFK School wireless service, which
of course told us in no uncertain terms that we were not authorized to
access it.

Silly Dowbrigade! Recently introduced to the world of wireless interconnectivity,
we had naively assumed that because we were authorized to access the Harvard
Law School wireless service, our laptop would function all over campus.
Ha! After 32 years at Harvard we should have assumed that its academic
Balkanization extended into the wireless world. We suspect that even Harvard
President Larry Summers lacks super-user privileges which would allow him
universal access to all nodes Harvardian.

Ken’s topic was "International Debt Crisis – the Next Generation" (note
the geeky Star Trek reference). Promptly at 6 he strode to the podium dressed
in natty academic uniform; brass-buttoned blazer, grey flannel slacks and
a valiant vestige of the sixties, a semi-psychedelic neck tie. He was introduced
by some Kennedy School dean, who remarked on Ken’s three successive careers;
as the youngest American chess International Master, a professor at Princeton
and Harvard, and most recently as the tsar of third-world lending at the IMF.

There was passing mention of the brouhaha which apparently landed him back
at Harvard after three tumultuous years at the IMF. About two years ago, when
the IMF’s lending policies were viciously attacked by eminent American
economist Joseph Stiglitz,

Ken stepped
up to bat to defend the agency. Although most of the economic
dictums and details which were being bandied about quite frankly flew way
over the Dowbrigade’s head, our ear is finely atuned to the minutiae of
academic discourse, and it was clear in this case that the attacks and
counter-attacks were becoming increasingly personal.

This is fortunately rare in the world of academia, but appearantly less so in the upper
reaches of economic policymaking and evolving globalization, and so we
were less than completely surprised to learn that Ken was returning to
Harvard. This evening, he started his presentation by introducing his conclusion – that
the revolving debt crises of the 80’s and 90’s – Mexico, Brazil, Argentina,
Thailand, Turkey, Russia, etc. – have in no way been resolved, and that
the current cascade of investment capital into developing markets completely
ignores the certainty that another round of defaults is just around the
corner.

As he developed his thesis it was clear that he had identified as one of the primary
risk factors for international economic stabilization at this time – the monstrous
budget and trade deficits being run up by the Bush administration. It is
increasingly likely, he said, that the eventual outcome of the US stimulating
its economy by spending more than it collects and financing the rest will
be another global recession. He noted however (and here he smiled a thin,
bloodless smile), "A recession is to an economist what a plague is to an
undertaker."

As Ken asks in his article "This
Time its Not Different" in this week’s Newsweek International,
"Has everybody forgotten about Mexico (1994); Thailand, South Korea, Indonesia
and others
(1997); Russia (1998); Brazil (1999); Argentina (2001); Turkey (2001),
and Brazil (2002)? They shouldn’t".

His point is that because interest rates are so low in the developed world,
international investors are once again pouring capital into developing
markets ill-equipped to maintain the discipline and sound economic management
necessary to guarantee a continued return on investment. As an example he mentioned Brazil,
which in August 2002, less than two years ago,
was on the border of default and only escaped thanks to a $45 billion loan
from the IMF. At the time, they had to pay a whopping 24% above US treasuries
prime rate to find financing on the international market. Today Brazil is
paying only 4% above prime, not that much more than the spread many individuals
pay on their mortgages. As Ken notes, it is a lot easier for the local
bank to seize your house or car than it is for Citibank to get to a deadbeat
sovereign debtor.

His main point was that the post-1994 period of revolving third world debt
defaults was not an aberration. Argentina has defaulted five times since
its birth in the 1820s, Brazil seven times, Mexico eight times, Turkey
seven, Venezuela nine, etc. While it is impossible to predict exactly where
the next collapse is coming, it is inevitable, and the investors pouring new
money into these endangered economies are either in denial or playing a
dangerous game of musical chairs with their money.

"Investors ought to realize that last year’s 55 percent average return
on emerging-market debt was an aberration. Developing-country leaders need
to realize that borrowing is like taking steroids: it gives countries a
short-term performance boost but leads to insidious long-term problems."

Ken’s solutions? Basically, more discipline. Discipline on the part
of developing countries to avoid debt financing that solves their
immediate problems
but creates unsupportable debt loads. Discipline on the part of international
lenders to realize that these economies still represent considerable
risk and raise interest rates accordingly. Discipline on the part of the US government in controling their own deficit spending. And discipline in the
international
lending community to make it more difficult for foreign creditors to
enforce claims in rich-country courts and make it harder for developing
countries
to borrow.

Perhaps his most surprising pronouncement to the Dowbrigade personally
was that any and all of the developing countries in debt crisis could
pay their debt, if they only had the political will to do so. He made is sound so simple.

He called the present free-lending atmosphere a recipe for disaster,
and ended on this sobering note, "Debt crises are as old as international
lending,
and call me crazy, but I don’t think we are going to have to wait too
long for the next one."

After that eye-opening glimpse into the high-flying world of international
finance we didn’t feel much like sticking around to wool-gather about
high school escapades, so after a brief exchange of business cards and
a loose
plan to get together soon to play tennis, we left.

The very next night we ventured into a very different world-view, just a
few blocks away, at the First Parrish Church on Church Street in Harvard
Sq.
to hear old classmate Wade Davis speak about "Vanishing Cultures – Mankind’s
Dwindling Heritage".

Wade and the Dowbrigade were at the core of Harvard’s program in Cultural
Anthropology back in the 1970’s. Both of us were interested in Ethnobotany,
which is basically the academic study of getting high on weird plants.
Although the Dowbrigade got sidetracked on a research expedition to the
Peruvian Amazon and ended up teaching English in the Peruvian National
University for 10 years, Wade went on to become the premier ethnobotanist
of our generation and how has one of the All-time Greatest Job Titles
in the history of jobs. He is, according to his resume and business card,
the Explorer-in-Residence at the National Geographic!

What a job! He gets to gallivant around the globe, saving endangered
species of humans and animals, writing about and photographing the weird things
he sees and hears. Over the years Wade has developed a dynamic and hypnotic
speaking style, which is somewhat surprising considering that back in
college we attributed
his quiet demeanor to near-constant intoxication by stupefying substances.
His lecture was pure poetry, as he painted word pictures in the air with
a cadence
and clarity which bespoke practice and conviction.

He began with a brief but panoramic tour of some of the diverse cultures
he has visited, trying to give the audience an idea of the incredible
variety of flavors of the human experience that exist on the planet today.
He was
attempting a task so daunting as to be almost impossible; to express
in words what it is like to live in a different world, to experience
life
from a different perspective, and to move back and forth between alternate
realities like some people switch from the Red Line to the Green.

Obviously impossible to do in words, but we got the impression that the
majority of the packed house of perhaps 200 had enough first-hand experience
with other cultural worldviews to appreciate the truth of which he spoke.
After impressing us with the wonder of human variety and his encyclopedic
knowledge of some of the nooks and crannies of life on earth, he started
dropping bombshells on our sense of wonder.

Deforestation and development is destroying the habitats not only of
thousand of animal and plant species, but of a significant percentage
of existing
human cultures in the world. Within our lifetimes, over half of all human
cultures and languages will disappear. Every two weeks an elder dies
somewhere on the planet who represents the last speaker of a unique human
language.
It takes thousands of years for a language to evolve. These languages
will never be heard again.

Like Wade Davis, the Dowbrigade believe that humanities inheritance is
irreversibly impoverished every time the variety of human experience
is reduced in this way. To us, the human experience on this planet is
like
an intense and beautiful tapestry composed of thousands of distinct and
stellar threads of culture and language, and when those threads are cut
or left to dangle the coherence and completeness of the tapestry can
be seen to fray and weaken. If there is a way for the human race out
of this
mess we have created, each time the diversity of the human experience
is reduced by cultural extinction, the solution becomes that much more
difficult
to imagine. If present trends continue, we will eventually find ourselves
trapped in a monoculture with no way back.

Wade ended with a story which reinforced the concept of technological
relativity and gave pause to the Dowbrigade, who like so many today looks
to technology
as a source of solutions and a fountain of hope. Back in the 70’s, when
we were students of Cultural Anthropology, the concept of "Appropriate
Technology" was in vogue. Wade’s story went like this.

In Canada, where Wade is from, there were until relatively recently,
groups of Aleuts in the northern territories who lived lives to a large
extent
identical to their ancestors. They hunted and fished, built their shelters
from ice, and not only survived but thrived in one of the most hostile
environments on the planet. In the early 1950’s, not coincidentally in
conjunction to open up the vast Canadian oil and gas fields, the government
embarked
on a program to collect the native Aleuts and gather them into fixed
villages where they could benefit from health, education and economic
infrastructure
– basically all the benefits of modern society.

Most of the Indians were more than willing to accept the offer of free
housing, healthcare and education, but some of the old-timers resisted,
preferring to preserve the ancient ways. One old man in particular loved
his rough life on the ice and tundra, the companionship of his sled dogs,
and the divine illumination he found in the artic emptiness and nowhere
else.

His family was determined to move him to the new village along with them,
and were convinced he had acquiesced as his protests diminished with
time as the relocation date moved closer. In order to keep him from striking
out on his own, they confiscated all of his tools and resources; his
knife,
sled, boots, snowshoes, etc., leaving him with just the furs on his back.
But one night just a few days before the final departure, under cover
of darkness and into a gathering blizzard, the old man slipped from the
final
family igloo.

Behind a protective wall of ice he squatted and took a sizable shit.
Carefully, he reached down and retrieved it, and as the Arctic cold solidified
it he carefully molded it into a shit-knife. After the basic form was
set, he used his saliva to create a hard, sharp edge.

The old man then went to his beloved sled dogs. He called to his favorite,
and while murmuring reassuring endearments to the animal, slit its throat
and gutted it on the spot.

Quickly, he skinned the dead animal with his shit-knife and wrapped his
freezing feet in the warm dog skin. Then he constructed a crude but functional
one man sled from the dog? ribs, and cords and straps form its ligaments.
Calling over another dog, he strapped up his home-made sled and disappeared
into the raging storm.

Apocryphal or not, it really makes one think, no? For those of us for
whom "roughing it" means getting by without broadband on vacation, the
knowledge,
ingenuity and determination of that old Eskimo are things we will never
be privileged to experience. To the Dowbrigade the lesson to be learned
is that the crucial factor in the value of our experience is not in what
technology is available to us, but rather how we use it, and to what
ends.

And so, in the end, our own ideological conundrum came down to this;
Can we envision a world in which the personal visions of Ken and Wade
can constructively
coexist? Q world where macro-economic growth can continue in a fashion
equitable to both investors and investees, while protecting and preserving
the human cultural inheritance we received from our ancestors and are
charged with leaving for our descendents.

We are unable to answer in the affirmative. For a while now our main
doubts about the transcendental potential of capitalism has lain in the
cyclical
nature of its spasmodic starts and stops. While these mathematically
delineable variations are grist for the publications of economists and
, they take
a devastating human toll of on both the microeconomic (workers struggling
to stay afloat without a paycheck) and macroeconomic (nations in periodic
bankruptcy stifling the aspirations of millions) levels.

Wade talked about how one of the demographic results of globalization
has been massive internal migrations to the major cities in impoverished
third-world
countries. This makes it easier for those people to participate in the
global economy, to access modern education, medicine and manufacturing
jobs (if they exist), but at a tremendous cost. Declining agricultural
production, abandoned hinterland and, most tragically, truncated cultural
traditions and forgotten repositories of human knowledge.

For someone who prides himself on his ability to simultaneously hold
contradictory ideas in his mind, this inability to integrate Wade’s and
Ken’s worldviews
is deeply disturbing. Lacking a way to encapsulate them in an integrated
whole, sanity demands that we choose one or the other. Stay tuned……