January 07, 2004

Greetings From London, Outpost of the End of the Western World

I'd hoped to have a picture of a proper English breakfast on the Insider today...but the software required to upload pictures from my digital camera TO the computer here in the Fleet Street Publications office...isn't handy. I'll try back at the hotel later. Meanwhile, it's surprisingly nice here in London...nicer than in Paris even, although grayer today than yesterday. I'm here to meet with a few people in "The City." We're forming a sort of investor's round table to exchange ideas and chronicle what I'm calling capitalism's "Journey to the East." The idea--although a bit controversial-- is simple. The world's economic center of gravity is moving...from the socialized welfare states of the West...to the East...to the services capital of the world, India...and the goods capital of the world, China. As I said, "Big Idea." I'll be "unpacking" that idea here on the Insider and in the monthly issues. From a big picture "strategic" perspective, it requires thinking about a world in which America is not the preeminent economy...one where the words "America" and "Capitalism" are not synonymous. It also requires figuring out just what the Asian version of capitalism is going to look like in the 21st century. The "spirit of capitalism" isn't just moving. It's changing...but into what exactly? Tactically speaking...and immediately speaking...one of the immediate causes of this migration of capital and labor from the West to the East is the imminent calamity facing America's financial economy....the economy created, distorted, bloated, and imperiled by artificially low-interest rates. Of course...there can be no creation without destruction. Don't believe me? Just remember the Law of Conservation of Matter...that matter cannot be created or destroyed. It only changes states. (In chemistry terms, strictly speaking, the law states that in a chemical reaction, the sum of the mass of the reactants equals the sum of the mass of the products. ) It's tempting to get into a tangent here about how wealth is created in the context of the law of conservation of matter. That is, it seems to lend itself to a mechanistic description of wealth...that there's only so much that can go around and that all you can do is redistribute it from one place to another. Thus the Marxists. However, human labor, ideas, and ingenuity add value to the raw materials of earth. Matter can be destroyed. But that doesn't mean value can't be added...by turning oil into plastic, steel into skyscrapers, or ebonized birch and walnut into a Steinway. That (adding value to raw materials through ideas) is the spirit of capitalism. And it doesn't have much to do with the kind of financial high-wire act taking place in corporate boardrooms (and private kitchen conversations out of earshot of the kids) all over America. A lot of people won't be comfortable with the idea that America has made an enormous collective moral error by so recklessly pursuing financial wealth instead of producing real value. What is it to be an American if not to live in the citadel of capitalism? Maybe this is what the French feel like right now. DeGaulle is rumored to have once said to Eisenhower that without France, there could be no West. This has turned out, I think, not to be true. Ideas evolve. And though they find better manifestations in some countries and cultures than others...no idea, be it democracy, equality, or capitalism "bleongs" to any one country. These ideas exist, Platonically, whether nations exist. And so there will be capitalism without America leading it. That is the world we're going to live in. That is the great question of the 21st century...what will Asian capitalism look like...and how can investors like you and me profit from it while avoiding the decline and fallout of the deleveraging of America?


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