Barack Obama – forging a legacy in stone

Not content with having forced through health reforms against extreme and vitriolic political obstinacy, Barack Obama is turning his attentions to the much-needed reform of the banking sector.

It is a much repeated phrase in America, that “Main Street must never again be so reliant on Wall Street”, and it is the hypocrisy and self-indulgent ideology of bankers that will now come under genuine, tangible scrutiny for the very first time since the global economy crashed almost 2 years ago, as a result of the fraud charges brought by the US Securities and Exchange Commission (SEC) against Goldman Sachs.

In a few days time, Barack Obama will debate his banking reforms with The Senate in another round of hand-wringing, shaking of heads and venomous attacks on this “Communist” by Republicans and, even, some Democrats. It is no surprise that the timing of the charge of fraud being brought by the US SEC against Goldman Sachs is so aptly timed, and it is for this reason that I state that this will be the first tangible scrutinisation of the industry since the crash.

Up until now, Governments the world over have quite rightly focused their minds on saving the banking sector, utilising public sector funds in which to do so, thereby ensuring ordinary tax payers are not left totally bereft due to the actions of a small number of self-centred imbeciles. Only now, given that the global economy has stabilised, and investigators have had time to build water-tight cases, is the time right to bring lawsuits against those who brought the crash to bear.

In my opinion, it would be the wrong thing to do if banks and bankers had demonstrated some sort of remorse or indeed willingness to change their worst practices. However, the fact that Goldman Sachs have a huge $20bn war chest to dish out in bonuses this year speaks absolute volumes. They haven’t changed. They will never change. Unless they are forced to change through structural, regulatory and litigious force.

And that’s why this legal action brought against Goldman Sachs, and all the subsequent legal actions that will be brought against a variety of the worst offenders, is a hugely unfortunate necessity if the global banking system is ever to be rebalanced in favour of the ordinary man on the street. It is hugely unfortunate that this is necessary, because I believe that this legal action will be the spark that ignites a double-dip recession.

With the threat of legal action against fraudulent collusive practices between and within the murky worlds of hedge funds, investment banks and market analysts, the banks will once again close up shop, strangling the liquidity necessary to stimulate and fuel business in every corner of the globe. This will lead to another bout of job cuts, misery, and bankruptcies, as well as create a catalyst for further lurches towards extremist and non-mainstream political parties.

However, it is a legal action that, despite the short- to medium-term pain, is absolutely necessary in the longer-term. Just as America will have to go through huge amounts of pain to restructure it’s health system, the World will have to suffer yet more pain while the global banking system finally gets the attention it has deserved ever since bringing the economy close to total collapse.

Barack Obama is making very tough choices, and shying away from not one single battle.

He is the President that America needs, and he is the American President that the World needs.

All power to him. I believe his legacy will be unparalleled.

The Dogs of War

This is a great visualisation by John Snow at Gizmodo of the huge battle going on for our digital souls…. Google, Apple & Microsoft are fighting the first true war of the 21st Century (if we ignore those pesky terrorists) in their attempts to create lifestyle cocoons around each and every one of us, developing a multi-verse of platforms which will ensure that, once we are snared, it will be almost impossible to disentangle ourselves. The implications for personal data and privacy are, as we all know, enormous….

The pace of change is frightening

Fantastic little video here from The Economist that highlights just how quickly society is changing around us… check it out.

India’s torch continues to shine brightly

Having elected Manmohan Singh, in May, as the Prime Minister of the Congress party for a second consecutive term in office, this time with a clear majority, India is on the verge of a new golden era.

For the first time since 1984, the last time Congress won a clear majority, the Government is in a position of unilateral strength. In the interim, being part of a divisive coalition has weakened successive Governments.

Manmohan Singh and his Congress party now have the ability to push through the micro and macro reforms that will spur the economy on to even greater expansion and, most importantly, redistribute wealth throughout the poorer strata of society.

It is as a result of weak and corrupt governance over the past two decades that one quarter of the world’s malnourished still live in India, despite the recent exponential economic growth. The convoluted administrative structures that have been built on corrupt and dynastic foundations need to be torn down to ensure that systems are put in place to reduce the poverty gap significantly.

And it is to Mr Singh’s credit that these are the reforms that he plans to push through as quickly as possible, now that his hands have been freed from the shackles of a coalition. It is also very much to the credit of the Indian people that they have looked beyond the politicking of potential ministers who based their candidacy on the grounds of religion, caste, and regional issues.

Mr Singh has been given the chance to rule with a free hand because the Indian people believe in the reforms he has promised, and respect the economic miracle that he and Congress have presided over.

The election of Congress is not the only reason for India’s 1 billion strong population to be positive. The economy continues to thwart recessionary pressures, having just recorded two consecutive quarters of 5.8% growth.

Indeed, in India there is only talk of a slowdown, rather than a fully blown recession. Although growth rates have steadily receded from their peak of 9% in 2007, and 7.3% in 2008, the country continues to expand rapidly.

The key to India’s continued growth is the fact that, in direct contrast to China’s export-led model, the economy is fuelled by domestic demand. And that domestic demand is actually set to grow exponentially once the antiquated models of public governance are torn down, and a more equitable distribution of wealth can be achieved.

“There will be much greater prosperity in India now than ever before,” explained R. Balakrishnan, Chairman of Lowe India, an advertising agency. “The wealth disparity had become so, so huge in India during the boom, and the slowdown is actually bridging that gap. It is correcting the imbalances within the economy, and is a hugely positive force for Indian society.”

“The boom period only affected the cream of Indian society. The top 10% of financiers and property developers got very rich,” Balakrishnan concluded. “Now, the other 90% of consumers are seeing prices drop, and for the growing middle classes in India, suddenly property and cars are becoming much more affordable.”

Colvyn Harris, CEO of JWT India, another advertising agency, said: “Certain sectors are seeing growth of 20-30% year-on-year. Ordinary Indian people are seeing their disposable incomes increase in real terms as the economy corrects. India is like a pyramid, with the size and scale at the bottom, and that is what you are seeing kicking in right now. The real India is now emerging.”

It is this thriving, burgeoning, buoyant middle class that is the driving force behind India’s continuing economic success. The boom times may have seen unparalleled growth for India, but the rewards went into the pockets of a small minority. There is a huge swathe of completely untapped demand, just waiting for the moment when it can rise to the surface. And that moment is now.

On top of the existing middle classes, who are now finding themselves in the position of having increased real disposable incomes, it is the sheer scale and depth of the lower classes in India that ensures that domestically fuelled growth will exist for many years.

The entrepreneurial spirit that courses through every sinew of Indian society, allied to the reforms of Mr Singh and his Congress Government, will bring relative wealth to many, many millions more people, who have thus far been excluded from the benefits of a decade of exponential growth.

While most of the rest of the world spirals into a spinning maelstrom of recessionary gloom, India’s golden era is just beginning.

China – thoughts

As the Western world wallows in recession, there are many commentators who are looking to China (and India) to be the growth engines that will kick-start the global economy back into life. However, the assumptions that are made about China’s ability to drag the rest of the world back into growth are, in my opinion, hopelessly optimistic. 

The reality is that, even as China experiences continued growth during the recession, the nature of their export-led economy is causing severe mass unemployment within the manufacturing sector, and is actually perpetuating the widening wealth gap between rich and poor.

Many manufacturers in China have zero channel distribution mechanisms within their own country, and were totally reliant on exports, predominantly to the USA, so their businesses have simply crumbled, even though domestic demand is on the increase. This is leading to unemployment for millions of blue-collar and migrant workers (young and old), forcing them to return to rural areas from the major urban centres.

And we’re talking about big numbers here – estimates put the number of migrant workers in China at 200m people, so this is a significant shift of labour away from the indutrialised heartlands.

The point about the decimation of China’s export economy is that there is incredible pressure on the Government to provide jobs for the people, even though the country has moved towards a laissez-faire model. There is expectation on the part of the population that the Government will invest in infrastructure,  invest in urbanisation programmes, and invest in the service economy, in order to create jobs both for University graduates and migrant workers, and to counteract the invisible hand of the global downturn.

Importantly, the key here is that the focus for the Chinese Government is to provide jobs for Chinese workers, and to develop mechanisms to increase domestic demand for domestically produced goods and services. There is no focus within China on increasing imports, or on driving up foreign investment, as part of this plan, meaning that the short-term impact on the economies of the West will be negligible.

In the medium- and long-term, of course increased domestic demand in China will benefit the rest of the world, simply due to sheer weight of numbers (almost one-quarter of the world’s population is Chinese). But China is not going to be the country that holds out a helping hand to everyone else right now, at the hour of need. The internal pressures on the Government to create jobs, stimulate demand and provide a certain standard of welfare are simply too great.

And this pressure brings me to the heart of the matter regarding China. The country is experiencing some genuinely difficult teething troubles as it moves from being a Communist state-run country to a free market. This downturn has highlighted some of the tensions that still exist between these disparate ideologies, both in terms of economic structure and social harmony.

As I’ve detailed above, there is expectation on the Government to provide from an economic perspective, and the Government have responded to that call with increased investment in infrastructure and services. However, the tensions at a social level as China reforms from a state-run model are arguably more tense, particularly in the area of freedom of speech.

China has, over the last 12-24 months, seen an exponential explosion in the area of social media. Chinese people of all ages have adopted the internet as their own, a space through which they can share news, content and information, and connect with friends, without state supervision. This lightning-fast adoption of social platforms as a main pillar of information gathering and sharing is largely as a result of the history of information-repression that has existed in China for many, many decades.

And here, more than anywhere else, is where we see the tensions between the ideologies of Communism and Capitalism come into play. In the weeks surrounding the 20th anniversary of The Tiananmen Square massacre, on June 4th 2009, there are numerous examples of the Chinese Government undertaking a concerted effort to repress any information about the events of 20 years ago.

Blogging portals were down, including this one – WordPress – which now explains why I couldn’t access it while I was in China. Flickr was down. Hotmail was down. Facebook was down, and I had to trick the computer by putting .m. in front of the Facebook URL to get to the mobile site. Twitter users found a way to circulate information around the censorship blocks but soon found that they were down too. People received copies of The Economist and The Financial Times with the pages relating to Tiananmen ripped out. Foreign journalists at the actual event were kept out by police.

These examples demonstrate a disgraceful repression of information that have absolutely no place in the modern world, where social networking sites and the internet have changed the way in which we all consume news and process/share knowledge.

But more than that, they represent the extreme tensions that exist within the country. The Government wants to be a leader in the modern world, and China undoubtedly will be a super-power, but yet they continue to try and suppress information that is perceived to be anti-Chinese in some way, or that paints their country in a bad light. These are not the actions of an enlightened leadership.

It is these tensions between Communism and Capitalism, plus the inevitability of a reformulated world order with China (and the other BRIC countries) gaining in relative importance versus the waning super-powers of America and Europe, that makes the country such a fascinating, intriguing place to be at the moment.

We may not agree with some of the actions of the Chinese Government, in terms of protectionism or social repression, but it is a unique country that is evolving and adapting to the pressures of the modern era in a very different way to any other country.

China will be at the forefront of the next phase of globalisation throughout  the 21st Century, but the nature in which they will lead is still in the balance. The global economy may not get too much help over the next 2-3 years, but the choices that the Government makes in that period, in resolving the economic and social tensions inherent within China right now, will be critical to everyone for decades to come.

TED – Ideas for India’s future

This is a talk, just published by TED, where Nandan Nilekani discusses his vision for India’s future.

This is an excellent presentation, in which Nandan gives a fantastic summary of the ideologies that have made India what it is today, and what it will be tomorrow.

 

Well worth a look.

And for those who don’t know TED, it is possibly the best website around – their motto is ‘Ideas Worth Spreading’ – so check it out: http://www.ted.com/

#worldview_newyork

This is all a bit ‘arse about face’ as I’m currently in Mumbai, but here’s a post about my trip to New York a few weeks ago.

I’ve pulled together a short film using some of the pics and vids I took during my visit to the big apple, and below have written a few words about my experience of the great city during this period of severe economic turmoil.

 

The atmosphere in the fabulous, diverse metropolis of New York had changed markedly since last time I was here, barely a year ago. The mood was darker, the streets more sombre. There’s still the hustle and vibrancy and dynamism of the city I know and love, but the recession has definitely taken – and continues to take – it’s toll.

The newspapers and TV stations were full of angst and vitriol, much as they are in the UK. The front page of the New York Times was running a story about the tent cities springing up across the USA as more and more people lose their jobs, their homes, their livelihoods.

 

 

 

 

 

 

 

 

 

Announcements of a 6.3% reduction in GDP from the last quarter of 2008, the fastest decline in the US economy since 1982, flashed across the bottom of the screen on every news channel every 30 seconds. The Barclay’s logo swept across the digital signage of what used to be the Lehman Brothers building, sending a chilling and symbolic message across the neon diorama of Times Square.

Obama’s new administration continues to push through stringent regulations on the very financial system that has brought unprecedented wealth to America, in order to prevent the kind of systemic risk-taking that has brought the global economy to its knees. But the very concept of Government intervention and regulation is anathema to an America that has grown exponentially under the free market ideology of Milton Friedman. And one could sense that there is a deep concern that it will no longer be the land of possibility it once was.

 

 

 

 

 

 

 

 

 

Even the feelgood factor from Obama’s election victory seemed to be wearing thin – only 66 days into his Presidency – as journalists began to snipe at his perceived fetish for media exposure (an appearance on the Jay Leno show; the cancelling of American Idol to address the nation), and pounce on his errors of judgement, such as his unfortunate comment whilst on Jay Leno about disabled athletes.

And all of this amidst the glare of being the most important man in the world at a time of unprecedented economic challenges, with politicians from both sides of the bench questioning and belittling his proposed $3 trillion bailout package. The G20 summit in London a couple of weeks ago may have been a success, but domestically Obama is under extreme pressure to turn the economy around and lift America back onto a positive footing.

I absolutely love New York, and have no doubt that it will be at the forefront of America’s surge back to growth, but times are tough right now and NY is feeling the heat.

 

#worldview_prologue

It is now less than 24 hours before I get on a flight to Mumbai, and begin what promises to be the adventure of a lifetime.

After some last minute technical emergencies with the mac, I think I’m finally ready to leave sunny London to embark on an adventure that will take in India, Hong Kong, Shanghai, Tokyo, Singapore, Thailand, Australia, New Zealand, Argentina, Chile, Peru and Brazil. 

The trip could take anywhere between 3 and 12 months, depending on a variety of factors – but the main aim from my perspective is to get out there, have fun, immerse myself in alien cultures, and have a phenomenal life-changing experience.

But it’s not all about play (although there’ll be plenty) – there is a business angle to this trip as well.

I’ll be meeting a wide variety of people from the world of advertising and marketing, asking for their opinions and perspectives on some of the big questions facing the industry today. It seems like an apt time to be undertaking this type of project, with the twin towers of technological innovation and global recession combining to create an era of unprecedented change.

The blog you are reading now will predominantly be for my personal experiences of the trip, and there will be plenty of photos, videos and anecdotes from my journey. I’ll also be on twitter (@nicka77 or search #worldview), and will be geo-tagging photos and videos on my flickrstream as I go.

The opinion pieces on how the industry is changing will be featured on campaignlive.com, and the idea for the #worldview project is to explore the global themes i am focusing on through a plethora of local and regional lenses.

Although Mumbai is the first stop on the world tour, in reality the #worldview project started a couple of weeks ago when I went to New York.

I was able to discuss how advertising and marketing is changing both globally and within America with Bob Greenberg & Chris Colborn at R/GA, Bob Jeffrey at JWT, and Mark Wnek at Lowe. The guys gave me some fantastic insights, and I’ll be talking about the conversations we had over the coming weeks and months, comparing and contrasting their perspectives on the industry with opinions from the countries I’ll be visiting.

Over the last two weeks, I’ve also spoken to a number of people in London to get some great (and varied) perspectives on the shape of the industry, both in the UK and worldwide. Again, i’ll be referencing those discussions in forthcoming posts.

I want to take this opportunity to say a huge thanks to everyone who has found the time to talk to me so far, and who has helped to kick start the project in its embryonic stage. 

Now the project is about to begin for real.

I hope you enjoy the journey as much as I do.

N

G20 summit

As we all know, this economic summit is taking place at a time of unprecedented economic turmoil, and it’s critical that actionable solutions are agreed and pushed forward by the countries taking part.

Although I agree with the fact that people should be able to protest, and indeed should protest when they believe in something, I do hope that these protests are peaceful and there is no action taken that will hinder the G20 from fulfilling its ambition to stem this downturn and return the global economy to growth.

Given the fact that market forces are powerful and unstoppable, however, I do have grave doubts that any Government or group of politicians actually has the power to stop this runaway train from continuing along the path it has set, and crashing headlong into the barriers.

However, what this group of politicians do need to do is understand what is within their power, and to ensure that they 1. don’t allow such extreme risk-taking and short-termism to permeate the culture and everyday workings of the banking system moving forward, and 2. ensure that  a more liberal form of pure-market capitalism is developed to ensure greater equality of wealth between developed and emerging markets.

The first point – to eradicate the culture of extreme risk taking – is simple enough if stringent regulations are put in place at both a national and international level to ensure that investment bankers, hedge funds, currency speculators et al are not able to destabilse the system or certain institutions by shorting them, making runs on them, or betting against them within relatively miniscule time-frames.

The second point – to create a more liberal form of capitalism – is a harder task but one that must be aggressively pursued. Although I don’t agree with Sarkozy’s stance of walking out of the G20 summit if he doesn’t achieve his aim of a global financial regulator, he does have a point. That is to say that some form of supra-national system needs to be imposed by every national Government to create a co-ordinated approach to delivering tangible, sustainable systems through which to assist and support developing economies.

One notion that I have believed in for a very long time is to create a sliding-scale tax on all corporate profits in every developed country, where the monies are distributed to developing markets to aid state infrastructure and local industry. This would redress the imbalance of the structures set in place by the IMF and World Bank over the last 20-30 years. Of course this doesn’t address the issue of corrupt governance in developing markets, but that is another topic for another time.

This idea may be overly simplistic, but now that the banks are being part-nationalised, and may need to become wholly state owned for a period to save the financial system, this is an unprecedented opportunity for liberal leaders such as Obama, Brown & Sarkozy to impose developmentalist ideologies to any future credit arrangements between banks and the corporate sector. These developmentalist ideologies should also include clauses relating to the environment regarding targets for carbon emissions and climate change.

Again, my knowledge of the intricacies of global finance and high level politics is sketchy at best, but it seems to me that we have reached a watershed in the evolution of the global economy, where un-fettered profits in the developed world to the detriment of huge swathes of the global population will no longer be tolerated. 

The time for action is upon us, and the G20 summit is the best chance we have had in decades for achieving real change.