In my professional life, I spend a substantial amount of
time advising clients on acquisitions or investments in privately held companies,
especially those that are troubled or have some issues. I am on the front lines of deciding whether
and how to invest in these companies, and when to get out.
Viewed through this structure of portfolio management, we,
as a nation also make choices of where to expend finite resources in time,
energy and resources in developing and maintaining our global partnerships. We
should have a forward looking posture with respect to future returns and
dividends just as we do in the corporate world.
I believe that the coming years will see a major shift of attention away
from some regions and toward others.
China. Our fundamental
premises vis-à-vis China have been badly mistaken. As recently as four years ago, Nobel Prize
winner Eugene Fama was asserting that trade with China would result in an
emerging middle class that would demand more freedoms from the ruling
government. China would eventually
evolve into a more responsible global citizen.
Thomas Friedman lauded China as a country that “can solve big problems.” Since the
Clinton administration welcomed China into the WTO with open arms, the exact
opposite of what Fama predicted has come to pass. China has become more authoritarian, more
aggressive, and more repressive. Through
currency manipulation, dumping and intellectual property theft, our industrial
heartland was eviscerated. The Chinese
stole or coerced away intellectual property, engaged in widespread corporate
espionage, hacked into the government’s personnel files and its military was
behind the Equifax hack. It built a vast
surveillance state, repressed the Hong Kong protesters, and coerced the Vatican
into having a say in bishop selection in China.
It flouted basic notions of human rights with its operation of Muslim
detention camps. It began to assert military power in the South China Sea. Instead of becoming more democratic, President
Xi n tightened his grip on power. Its
repression of information, well documented by the New York Times, of the
coronavirus outbreak (even going so far as to blaming the U.S.) is just the
latest example of totalitarian China’s inability to be a responsible global
citizen. The CCP has demonstrated that
it is much more interested in controlling the narrative than in controlling the
virus.
After decades of deluding ourselves, we have begun to wake
up under the Trump administration. My
first hard slap in the face came from University of Chicago professor John
Mersheimer, who in his book tour, exclaimed boldly, “You do not want China to
become rich.” Donald Trump, to the
consternation of the corporate and DC establishment urged companies to begin
pulling out of China. Although I am a
free trader, I concur with the process of decoupling. Good trading partners do not steal each
other’s stuff. What we hoped would be a
good trading partner and market for our goods and services morphed into a
geopolitical rival.
Middle East. Likewise, the blood and treasure, time and attention poured
into the Middle East has been staggering.
Two wars and trillions of dollars later, and we would be hard pressed to
assert that there has been any appreciable progress, other than a handful of
states that seem to have accepted Israel as a state and a little bit of
liberalization within Saudi Arabia. Our
attempt to remake Iraq was a catastrophic failure. Trump’s characterization of Syria
as “nothing but blood and sand and death” may not be too far off. Even Middle East scholar Daniel Pipes in his essay
50 Years: The Middle East & Me in American Thinker, noted,
“And yet: reaching the half century mark, I admit to a
certain ennui. The region’s old problems
(fear of modernity, hatred of the West, despotism, the Arab-Israeli conflict,
conspiracy theories) remain unsolved even as new ones (Islamism, anarchy, water
shortages, Chinese influence) keep growing.
When momentous change does finally come (as in Libya, Egypt, Yemen,
Syria, Iraq) things usually get worse.”
In his January 17, 2020 essay in the WSJ entitled The Middle
East Isn’t Worth It Anymore, Martin Indyk asserted,
“Yet after the sacrifice of so many American lives, the
waste of so much energy and money in quixotic efforts that ended up doing more
harm than good, it is time for the U.S. to find a way to escape the costly,
demoralizing cycle of crusades and retreats.”
Both the Middle East and China turned out to be bad places
for us to do business. But what about future investments of time and treasure?
The region that most intrigues me is Africa. The notion first came to me from---of all
places----a weekly radio program entitled Afropop Worldwide
(www.afropop.org). Georges Collinet has
hosted a weekly radio program for over 30 featuring African music but he also
intersperses commentary about culture, politics and even the economies of the
countries that he features. In his January 16 program on Abidjan, capital of
the Ivory Coast, many of the artists commented on their ties to France, the
improvement in the economy and the vibrancy of the culture. One artist tried to persuade a person that
wanted to immigrate to Europe, “Instead of fleeing, why don’t you stay and
build a future here for your country?”
While I am not well versed in African politics or its
economies, the program spurred me to think about the possibilities. I then read an excellent article in Foreign
Affairs magazine by Judd Devermont and Jon Temin, entitled, Africa’s Democratic
Moment:
In that article, Devermont and
Temin acknowledge some of the challenges that sub-Saharan Africa has faced but spun
out areas of real concrete progress. The emergence of key reformers in Congo,
South Africa, Ethiopia, Nigeria and Angola.
The authors see real promise and progress in the region, and state that
“the United States should increase its diplomatic, financial and technical
support to those states doggedly reforming on their own initiative, beginning
with Angola and Ethiopia.” Unlike the Middle East, where we have attempted to beat democracy into some states with a hammer, several African states appear to be finding their own way.
I have much to learn about sub=Saharan Africa and Africa generally. But it offers intriguing possibilities. In addition to the factors that Devermont and
Temin highlighted, Catholicism is growing in Africa (while Christianity
generally is on the decline in the U.S. and Europe). Remember that the two states that voluntarily
gave up their nuclear programs – Libya and South Africa--- are on the African
continent.
As we decide where to invest and where to divest, I believe
it will be away from China and the Middle East, and we should consider
investing more in Africa.
And besides, the music is wonderful.
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