Catarina's World

Middle class spending is crucial for economic growth. So now, with Western middle classes in debt and distress, many economists look to the new emerging-market middle class as the foundation for a new era of global prosperity.

Middle class spending power per capita in the Gulf is, for some reason, often overlooked by Western companies.

Last year 70 million people in developing countries joined the middle class, with incomes between $6,000 and$30,000. It is estimated that within 20 years they will surpass their Western pears when it comes to global spending power. The focus is mainly on Asia and it is estimated that in about a decade they will pick up the slack left by overspent America. Emergency market spending is in fact already bolstering the balance sheets of many Western firms.

Needless to say the worlds is focusing on China and India due to its huge populations as well as rapidly rising economies and middle classes. Correct if you look at the amount of people. But by looking at the issue that way we overlook a very potent and prosperous group of people.

When it comes to per capita spending I’m certain that the middle classes in Saudi Arabia and the other Gulf countries not only earn more but also spend far more than their Asian counterparts. It’s not for nothing many middle class Indians chose to work in the Gulf, despite the fact that they are paid less than the locals. Salaries are higher and you pay no income tax in the Gulf.

Shopping is a top leisure activity and when the weekend starts the malls are filled with people who literally shop until they drop. A woman who works in a Chanel shop in the area told me an average customer spends an absolute fortune every time they come to the shop. And the same goes for more expensive items like cars, jewellery and electronics. Considering the importance the Chinese put on saving money, I would be very surprised if middle class people in China, with the exception of some mega rich, spend that much.

The world, certainly multinationals, are already managing the economic spending shift to Asia very well. But quite a few Western companies are forgetting about Saudi Arabia and the Gulf, which in my opinion could prove costly especially for companies selling expensive consumer goods.

A large amount of Asian and Middle Eastern households have incomes today that position them just below the global middle class threshold and so increasingly large numbers of them are expected to become middle class in the next ten years.

Emerging-market leaders know that the Western system created the worldwide boom of the last quarter century that ended when Lehman Brothers collapsed 18 months ago. Now the boom has moved to emerging markets, and their leaders will increasingly choose to alter Western models to suit their countries. Consequently the fact that all eyes are on Asia and the Gulf forgotten could turn out to be a fatal mistake. The new emerging middle classes are supporters of globalization but highly nationalistic. And there is a vast difference between nationalism in China and, say, Kuwait.

Back to emerging middle classes in general, we can conclude that the Chinese bought more cars than Americans last year, and that India has as many Internet users as the U.S. Also it is estimated that by 2030, more than nine out of every 10 mobile phones will be owned by people in the developing world. Coca-Cola actually forecasts a doubling of worldwide revenues to $200 billion over the next decade, thanks to another 1 billion people expected to join the middle class by 2020. So Western companies who haven’t yet focused on developing countries middle classes should jump on the band waggon swiftly and not overlook the Gulf.

(photo: flickr – Lars Plougmann)

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The International Monetary Fund (IMF) wants new authority to supervise the global financial system, Dominique Strauss-Kahn said.

The idea is for the IMF to "construct a global risk map" of nascent systemic risks.

“We must build on this positive momentum to transform the Fund into an institution even better equipped to meet the challenges of the post-crisis era,” Strauss-Kahn told a meeting of the Bretton Woods Committee.

He called for the Fund to improve its tools for financial surveillance and to “construct a global risk map” of nascent systemic risks. And while noting that the Federal Reserve and other central banks provided liquidity swaps during the worst of the crisis, Strauss-Kahn said that the IMF should explore options like short-term credit lines for extending emergency lending in future crises.

So do you think it would work to have the IMF as a global financial policeman? It makes sense from the point of view that they are the ones that need to bail out governments in trouble.

But can they actually prevent another global crisis? Or do you have other ideas of how we can best construct a global authority to prevent the kind of recessions we just had?

Can a global policeman actually prevent downturns from happening? Or just make a recession less severe? Do you believe a global authority is a good idea? Or should we just, as the financial industry wants, leave it to the markets?

(Photo Flickr – International Monetary Fund)

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Yes why not?  The world today is very much like during the Roman Empire. Crassus personifies big business and banks and Cicero, Julius Ceasar and Catilina today’s politicians. And as far as dictators go,  Sulla did what that cateregory are doing today already 2,000 years ago.

Gaius Julius Caesar would have felt at home on Capitol Hill and in the White House. He, or Cicero for that matter, would easily have managed to get himself elected president.

The headline “Financial reform compromise rebuffed in Senate” could easily be applied to the Roman Empire. Not least since that’s where the original Senate was located. The difference is that today you read news in the media and in those days Roman citizens talked about news on the Forum.

Just as in some countries today the oligarchs ruled at the expense of the common man.The main tools for power were already then elections, taxation and courts of law. Making profit was crucial to Roman businessmen. Crassus almost had hundreds of slaves executed just to serve his business interests. He had houses burnt down to buy them for nothing to increase his wealth.

Power corrupts and Cicero, just like any opportunistic politician throughout time, completely changed his policies to get elected (does it sound familiar?). And no doubt a fabulous orator like him would also have been able to convince any electorate today to vote for him.

So haven’t we learned from what went wrong with the Roman Empire? Why doesn’t humanity evolve, learn from history and move on? Because it is not big business, the banks or politicians that are at fault. It is human nature. Once a generation has learnt from its mistakes another generation takes over that have yet to learn.

Human nature doesn’t change. Many people, even though they would rather die than admit it, would do anything for money, power and glory. Not to mention fame and just simply feeling important.

Catilina tried to benefit from the people’s discontent in order to further his own interests. Just like Lenin once did. Karl Marx’s philosophy of communism was a beautiful ideology. But it doesn’t work because of the economy and greed. Sweden is supposed to be socialism at its best. Socialists should presumably be bereft of greed and look out for the interests of the less fortunate in society. Not so, socialists, just like any other people, grab as much as they can, whenever they can.

Many of us would like to see a fair world. But the world has never been fair and it’s unlikely that it ever will be. About 15 years ago I told a friend of mine who used to be minister of foreign affairs in Mexico that I would like to see all people in the world eat three meals a day and have basic schooling. He told me, “Catarina, it will never happen because the US will not allow it”. In other words vested interests, the US at the time, will look after its own interests.

But since empires come and go who does what to whom evens out throughout history. In the future the Chinese and Indians will do to the West what the West has been doing to them.

Makes you wonder what makes today different from the past, doesn’t it? Why should people who genuinely want to make a difference succeed today where caring people in the past failed? Will the fact that the whole world is so interconnected make a difference?

Maybe the most important lesson from history is survival? Marcus Mummius, a Roman army commander put it very well over two thousand years ago: “ When you are hurt (in battle) the worst you can do is stop fighting. If you do the pain takes over and you are finished. I have seen many soldiers die of wounds that shouldn’t have been fatal just because they stopped fighting and gave in to the pain. No you just scream and throw yourself right back into the fight. That way you will neither feel the pain nor bleed to death since the blood will rush to your brain and the arm that holds your sword  to enable you to succeed”.

(photo: genjo m Flickr)

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Global trade contracted by about 12 percent in 2009 but has started to pick up, the head of the World Trade Organization (WTO) Pascal Lamy said. The WTO has revised its previous estimate of a contraction of about 10 percent in 2009 but declined to give a forecast for 2010.

Whether the pick-up in global trade is short term or sustainable is difficult to say.

“World trade has also been a casualty of this global economic crisis, contracting by about 12 percent in 2009,” Lamy said. He added that it’s a huge drop and the sharpest decline since the end of World War Two.

Asked about world trade in 2010, he declined to give any figure but said: “Certainly there is a pick-up. Whether this pick-up is short term or sustainable is difficult to say but we certainly are picking up.”

Lamy told a meeting organized by the European Policy Center think-tank that opening global trade offered a way out of the crisis and that it was “economically imperative” to conclude the Doha round of talks on a new global commerce pact.

So it seems global trade is picking up but even experts are not sure if it will continue to do so this year? What do you think? Will world trade pick-up this year? If so, how much do you forecast? Or is the rise we have seen so far this year just a temporary increase that will start declining again?

(Photo: Vita Vanaga Photo Xpress)

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The combination of the rapidly expanding global fashion and beauty industry and the internet is providing opportunities for developing countries.

Environmentally responsible fashions can become cultural ambassadors that change global value sets and lead to other economic changes that also foster greater respect for the environment.

It enables them to use their creative talents and cultural heritages to create jobs and sell products that are environmentally responsible. And even better, results can come swiftly thanks to the internet. Their ideas, designs, and products can be displayed online and sold rapidly around the world.

Experts at UNCTAD’s “Best of Nature” conference believe fashion, cosmetics and perfume can lead to significant increase of employment in developing countries. We are mainly talking about small businesses which there, as well as in the rest of the world, is an important component of progress. With the right marketing such creative work can be not only profitable but promote different cultures and biodiversity as well.

Biodiversity is a source of creativity and new products for the perfume industry. It is vital for supply chains to be transparent so that natural ingredients are responsibly harvested to make sure that the supply of valuable plants is not exhausted, Michel Mane, President of Mane USA said. He added that “by establishing techniques for the growth of perfume ingredients in developing countries we are able to ensure the ecological viability of our ingredients. By using both cutting-edge, environmentally benign agricultural practices and providing local employment we are able to ensure the ecological viability of our ingredients”.

More than 40% of Unilever’s turnover is now in developing countries, said Giulia DiTommaso, Unilever’s Director of External Affairs for Africa, the Middle East and Turkey. They are one of the largest buyers in the world of ingredients such as palm oil and have noticed increased consumer interest in environmentally friendly products. Unilever is hence focusing on sustainable use of water, soils and, not to forget, respect for biodiversity.

A vital issue is how environmentally responsible products can be certified and traced. We want to be sure of what we are buying. According to Sean Ansett, Managing Partner of At Stake Advisors, “customers will want to be able to trace their purchases “from farm to fork and from mine to mobile phone”. Current technology is showing that such traceability is now possible, if difficult”.

“There are “tool sets” to allow corporations to improve the transparency of their supply chains. Doing so generates brand trust and loyalty, especially as customers increasingly demand that products be environmentally responsible”, Tim Wilson of Historic Features said. They supply such tools to customers like Wal-Mart.

Definitions of “natural” and “organic” still have not been set by for instance the European Union, but are under development and definitions hence still vary from country to country.

African fashion is increasingly popular in the developed world and is creating thousands of jobs in Africa. There is for instance a fashion school in Niger that’s helping 150 African designers develop their talents.

What Africa needs is the capacity to mass produce fashion, says Anggy Haif, a Cameroonian fashion designer. The continent lacks the infrastructure and industry needed for widespread production of natural-fibre clothes. But there is a huge market for that kind of clothes and many jobs depend on developing such facilities.

So now that concern over the environment is mounting, and words such as “green” and “sustainable” and “responsible” are heard widely, environmentally responsible fashion and beauty products have the opportunity to shift from niche products to being much more widely used. Environmentally responsible fashions can become cultural ambassadors that change global value sets and lead to other economic changes that also foster greater respect for the environment.

Wouldn’t it hence be an idea for aid and donor organisations to devote more time and money to assisting developing countries with getting the infrastructure and know-how needed to develop more such companies? To do so would lead to sustainable development that would enable the nations to gradually work and trade themselves to a better standard of living. As opposed to most aid it would not just have a temporary effect but would assist the developing world long term starting now.

photo: Ethan Allen Flickr

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How do you map health clinics or water delivery sources in a slum? Humanitarian agencies will be seeking answers to these and other questions as vulnerable populations settle in a sea of shacks on the outskirts of cities and towns across the world in the next few years.

So you thought you were badly hit by the recent downturn? Not compared to these people.

And to make the situation worse the global economic downturn could push as many as 21 million people in the Asia-Pacific region and at least 14 million people in Latin America into extreme poverty, according to the UN and World Bank. Many of them will, needless to say, seek their fortune in cities.

There hence is a huge need for programs to reduce vulnerability in urban settings. According to the World Bank’ Development Report 2010 half the world’s people now live in cities, a share that will rise to 70 percent by 2050. Of urban population growth (5 million new residents a month), 95 percent will be in the developing world, with small cities growing fastest.

So you thought you were badly hit by the recent downturn? Nothing compared to these people, I’m afraid. So what are we going to do to give them a decent life? Aid to developing countries from richer nations will fail to hit aid targets set five years ago at the Gleneagles summit, a study suggests. Total aid will be USD107 billion in 2010 against 2005 pledges of USD128 billion, the OECD has forecast. It also said that of the USD21 billion gap between promises and likely actual aid, the large majority – USD17 billion – was a result of the donors not hitting their targets, while just USD4 billion was caused by the global financial crisis reducing their national income. In other words the global crisis have hit the worlds poorest and most vulnerable people massively. And you thought you were badly hit by the recent downturn? Nothing compared to these people, I’m afraid.

Also we mustn’t forget that countries with a lot of poverty easily gets trapped in crime or worse, become failed states. And I don’t need to tell you how easily failed states can follow in the steps of Afghanistan and Somalia, do I? So it’s in the interest of all of us to help eradicate poverty in the developing world. But what can we do that will work and not turn out to be just another pledge never met? Now after the recent global crisis it is actually more urgent than ever.

Maybe a group of nearly 50 organizations came up with the answer? They said in a letter to political leaders circulated this month that a global tax on banks’ financial transactions should be introduced to fight poverty, protect public services and tackle climate change. The campaign for a “Robin Hood Tax” is backed by charities such as Oxfam, as well as aid agencies, unions, green groups, financiers and economists. Presumably the logic is that since they caused the global crisis that has pushed millions and millions of people into extreme poverty they have an obligation to help give the poorest a decent life?

Do you think a Robin Hood Tax is the way forward? Or what other solutions are there? As it is billions of people are leading a life you and I have seen but cannot really comprehend what it would be like. So now let’s move beyond self interest and come up with innovative solutions that work!

Photo: Flickr – Maciej Dakowicz

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Sometimes when I read the news it seems like a script to a new James Bond movie. Dr No is at it again with a 300,000 strong cyberarmy whose only purpose is to get into other countries secret networks. And Blofeld, or maybe Goldfinger, is helping countries deceive their citizens as well as an entire continent.

What's 007 up to? Having a martini, shaken not stirred, or fighting Dr No's cyberarmy?

Last year MI5 warned that Dr No is making a huge attempt at hacking into Western companies concentrating on defence, manufacturing, PR and law. They also said that “honeytraps” of beautiful girls were being used occasionally. Apparently it happened to the deputy mayor of London who woke up to find that he had been drugged by a pretty woman who downloaded secret files from his Blackberry while he was knocked out.

If you believe the news, Dr No wants to use cyberspace to destroy vital infrastructure in the West in areas like government, finance, business, military and defence. And the irony is that many of his cyberarmy soldiers have actually been educated at top institutions in the West.

Dr No’s victims so far are said to include Google in January this year and Exxon Mobile who suspect that he has stolen vital information from them. The bad news, according to Wired, is that nobody is immune to this kind of APT attacks. And they seem to happen mainly to companies and countries of interest to Dr No, who deny the allegations.

Two Euro countries current economic trouble was kept hidden for a long time with the help of Blofelt who, for a hefty fee, assisted them with sweeping their problems under the carpet to make Europe believe everything was fine. Nothing illegal just questionable from an ethic point of view but very profitable for Blofeld. He was also very active in orchestrating the global recession by all kinds of actions that almost brought down the entire American banking system and not to forget the substantial part he played in bringing AIG to its knees. With the Blofelds of this world it would have been tricky even for James Bond to do anything since they are not breaking the law. But that could be solved by his license to kill.

The continuation of the scripts would be M asking Miss Moneypenny to find 007. In his meeting with M Bond would be told everything is at his disposal to fix the problems. And as we know, James Bond always succeeds. No doubt he would have innovative and helpful gadgets from Q that would give him the upper hand, not least, in cyberspace. Can’t help wondering what 007 would need to do to succeed in the current scripts? And who would be the “honeytrap” Bond girl that would change sides to help him out?

Good and plausible scripts for Bond movies, don’t you think? Highlights how thin the line between fiction and reality is. If you believe everything you read in the news, that is. With a long background in media I am aware that not everything you read is true. Many times the negative aspects are blown out of proportion and facts are sometimes simply just invented. But there is at least a grain of truth in these stories.

Fiction is often based on reality but the latest ventures of Blofeld and Dr No, again, proves that it works the other way round as well. Maybe the perpetrators actually got their inspiration from fiction? Maybe I’m not far of when guessing on Dr No and Blofeld?

Blofeld's actions must, so far at least, have harmed the world more than Dr No has?

Makes you wonder if we live in a real world or life is like a Bond movies, doesn’t it? As long as the Dr Nos and Blofelds of this world are not caught and brought to justice they thrive. But the good news is that after going through a multitude of difficulties 007 always succeeds and end up having a wonderful time with the Bond girl. So let’s hope the real world will play out like that.

Begs the question where is James Bond at the moment? Hopefully not with a beautiful “honeytrap” that doesn’t see the error of her ways. Much better that he is speeding in his Aston Martin through the streets of London to attend a meeting with M. Or maybe he is actually recording a new Bond movie based on the above scripts? If so I wonder if the villain will be Dr No or Blofeld? Which one of them has caused most harm? Despite Dr Nos cyberarmy I tend to believe that Blofeld’s schemes have, at least up until now, been more harmful to the world.

Photo: Flickr theringhotel’s photostream +Paul Baack)

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China needs to run a continued fiscal deficit and let its real exchange rate rise to rebalance its economy towards domestic demand and thus sustain the impressive growth of recent years, the OECD has said.

Will OECD's strategy to get the Chinese to spend more work?

In its Economic Survey of non-member China, the OECD maintained its November forecast of an acceleration in gross domestic product growth to 10.2 percent in 2010 from 8.7 percent last year. China should let its currency rise to cool inflation and help ease economic distortions as it emerges from the global crisis, the OECD said.

A stronger currency, coupled with more social spending, could help to reduce China’s high savings rate, boost consumer spending power and narrow its trade surplus. .It is appropriate for the exchange rate to appreciate,. said Deputy Secretary-General and Chief Economist Pier Carlo Padoan.

PHoto: Maharepa Flickr

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When democracies loose economic power democracy itself is weakened. Already now China has the third largest economy in the world and within 5-7 years it will be the main producer of goods globally.

Hu Jintao may be shorter but China has the upper hand

The US on the other hand, has a huge budget deficit and is already borrowing heavily, not least from China. So no wonder China is already starting to show its power.

At the Copenhagen climate summit Obama and many other leading heads of state took part. China however, sent an insignificant deputy foreign minister with no ability to take decisions without confirmation from Beijing. The Chinese government also protest against US actions with a new vigour and confidence.

China continues to produce and Westerners keep on consuming on borrowed money, not least from China, which is an equation that doesn’t add up. Soviet communism declined because the economy didn’t add up but that’s not the case with China whose economy is capitalistic while the government keeps a firm grip on power and its people.

According to the OECD, Western countries’ debts in 2008 were equivalent of to 100% of their GDP. China on the other hand has a deficit equivalent of 21 percent of GDP. So not only is the Chinese economy performing very well, they are also partly bankrolling the West. And money talks.

Unless the democratic part of the world, like the Chinese, start saving and stop consuming on borrowed credit, democracy as a whole will loose out. The US and Europe are the worlds largest democracies and China is the world’s biggest dictatorship. It does matter who has the best performing economy in the world. To ignore that would be a fatal mistake. But for some reason it seems the West can not be bothered to make an effort to stop power slipping away. That the center of the world is moving I have known for a long time, but what surprises me is that the West doesn’t seem to do anything to stop it from happening, or at least delay it. Where’s the fighting spirit?

photo: FlickrPhotosAccount

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It’s beginning to seem to me that we are making the art of succeeding as a leader too complicated. There are umpteen theories that all have one thing in common – they work for some and for others they don’t.

Would Virgin group be what it is today if Richard Branson hadn't mastered the art of communication?

Most people who suddenly find themselves in a leadership position swiftly realize that the top position is completely different from what they imagined. And worse, there is no manual.

There is no school for becoming a successful leader. New leaders frequently feel lonely since there are fewer people privy to high level information. It can be overwhelming. So much so that the fact that a leader’s success depends on communication is frequently forgotten.

Richard Branson is an excellent example of a very successful leader who masters the art of communication. To the extent of jumping from high buildings to get the attention needed to promote a new Virgin venture. Don’t think anybody would dispute how successful he is. But the confusion caused by all these theories and schools of leadership actually led one guy straight out of university to have the audacity to make a comment in a discussion on Linkedin that he had a lot to teach Richard Branson. Indeed? What are the odds of he, or anybody else, becoming as successful a leader as Richard is? Pretty slim, I’d say considering that very few ever become as successful as Richard Branson is. And the success of Virgin is very much down to Richard’s exceptionally good ability to communicate.

The tasks of a leader is, simply put, to vision where a company is heading (strategies, future accomplishments, managing the destiny of the organisation and so forth), find the people the organisation needs to fulfil it’s vision, make choices and take decisions. Leaders also have to continuously serve, learn, correct, evaluate and motivate.

And how are you going to succeed with all that if you don’t master the art of communication ? Both internally and externally it’s the most powerful tool a leader has. It’s crucial to communicate with others about trends that affect the future of your business and stretch your thoughts by discussing your ideas with friends, associates and other great thinkers.

Ideas are an extremely powerful force. By communicating ideas to people you engage their minds and help them see new possibilities and new opportunities. Strong and evocative ideas energize people and incite action. As leaders, our ideas are important. Leaders need clear ideas and philosophies about how to win in the marketplace, how their organisation should operate and how to develop their people.

Leaders succeed because they are able to focus and deal with the 5% of issues that are crucial, build support and create followers, put out fires fast and finish what they started. How would that be possible without communicating? Especially since many decisions are instant so a non-communicative leader would fail miserably.

Successful leaders spend much more time communicating their decision than actually taking the decision. Lots of time is also spent on coaching and motivating others. And, tedious as it can be, repeating the decision to get maximum effect. But despite that most people wrongly believe leaders spend most of their time making decisions. Leaders who only take decisions will fail miserably since communication is the key ingredient. Not communicating enough is hence the main reason for failure and not, as many believe, that they were following the wrong theory. And don’t forget that leaders live in the future so the more your communication enlightens you about tomorrow the better a leader you will be!

(Photo: Flickr linniekin)

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