Morgan Stanley economist Steve Roach is just back from the global captialist confab at Davos and he can’t quite accept the violin music he kept hearing – to him it sounded more like Nero fiddling while Rome burns. To wit, in Roach’s view the U.S. and Chinese economies are still dangerously overheated while the stars of Davos retain their misplaced faith in Alan Greenspan and the Central Committee of the Chinese Communist Party! This is a pretty odd pair on the global scene. The bottom line, according to Roach, is that Greenspan remains unwilling to raise interest rates high enough to choke off U.S. consumer demand. Americans keep extracting cash from their homes with low mortgage rates and buying cheap labor consumer goods from Asia, particularly China. The result is ballooning consumer debt and unsustainable export led “growth” in China. If Roach is right this economic tsunami will make it all the way across the Pacific Ocean.

Morgan Stanley

I was interviewed yesterday by the Financial Times regarding the proposed acquisition of IBM’s laptop division by China’s PC giant Lenovo. Their most recent story on the deal is linked below. My quotes may have fallen on the editor’s floor or may appear in a future article, but as the FT indicates my major point is affirmed: politics continues to influence the global markets.

This is anathema to strong advocates of globalization but is a theme I have highlighted in my research, most notably in my article on the IPO of Chinese oil giant PetroChina (scroll down for a link). I have identified four different political forces that are jostling for influence in the financial markets and the cross border mergers and acquisition markets:

1) neo-liberal advocates of a laissez faire, or “invisible hand,” approach to corporate transactions;

2) national interest advocates (like Rep. Duncan Hunter quoted in the FT) who want the U.S. government to be more aggressive in reviewing deals for their impact on national security;

3) neo-mercantilists who largely operate in the government bureaucracies of developing countries (and are likely the forces behind the push by Chinese companies into the global marketplace); and

4) the new internationalists that includes labor, environmental and other NGO type forces attempting to reshape globalization to take account of the larger social cost of market forces.

All but the last are present in the IBM-Lenovo deal and thus the fortunes of this deal merit close attention.

FT.com / Business / Asia-Pacific – IBM’s $1.7bn China deal could threaten American security, say US politicians

Here is a link to a useful summary of the current debate inside the AFL-CIO about its future. And below that is my comment submitted in response to the article. This debate will likely simmer for the next few months and, hopefully, emerge in a constructive discussion at the AFL-CIO convention this July in Chicago.

The Fight for Our Future — In These Times

Christopher Hayes mars an otherwise useful summary of the current debate in the AFL-CIO by concluding that the point is not keeping the AFL-CIO together. This is a naieve and dangerous sentiment. It echoes the threat made by the SEIU to withdraw from the federation if Andy Stern did not get his way in the current debate – an odd sentiment considering he is at the same time arguing for more centralization in organized labor. Opening the door to such centrifugal forces threatens one of the core strengths of American labor – which with 13 million members remains the largest best organized independent isntitution in American political life and thus, by definition, a crucial force for strengthening democracy in an era of global multinational capital and unprecedented exercise of state military power.