- I absolutely enjoy being a parent!
- Scottish Kilt was originally invented in France, while French Croissant came from Romania.
- Scientists estimate that currently there are approximately 400 billion stars and up to 50 billion planets in the Milky Way galaxy. If just 1% of those are in the system’s Goldilocks zone (region around a star whose temperature is “just right” for water to be present), then there would be 500 million planets in our galaxy alone that are capable of supporting life.
- This year I did 2 things from my bucket list, and both are in Japan: picnicking in a Sakura garden and visiting Tokyo Stock Exchange.
- When gentlemen in medieval Japan wished to seal an agreement, they urinated together, crisscrossing their streams of urine. How noble.
- The global trade in banana is more regulated than the global trade in weapons.
- 1st of January became the 1st day of the year in 153 BC. Previously, the 1st day of the year was 15th of March, however according to Theodor Mommsen in his book The History of Rome, Volume IV, this was changed due to disasters in the Lusitanian War, a war of resistance fought by the Lusitanian tribes of Hispania Ulterior against the advancing legions of the Roman Republic.
- So one day a Lusitanian chief named Punicus managed to invade the Roman territory, slew troops and defeat 2 Roman governors. The Romans then responded by sending a consul to Spain, where in order to accelerate the dispatch of aid the Romans made the new consuls enter to office two-and-a-half months earlier before the first official day of the year 15th March, thus effectively changed 1st January to become the 1st day of the year.
- There’s a bottomless river in the Philippines called the Enchanted. Many people, including scuba divers, have tried to reach for the bottom but failed. The locals also claim that nobody has ever successful in catching the fish in the river. Challenge accepted!
- In 1898 Andrew Carnegie tried to buy the Philippines, but failed.
- The 315 kph winds hitting Philippines on November was probably the strongest cyclone to hit land anywhere in the world in history. And some scientists began to question whether climate change is to blame for typhoon Haiyan.
- Muhammad Ali has a star in Hollywood. But it’s the only star not written on the floor, for the respect of the name Muhammad.
- The United States Treasury’s gold reserves are kept at Fort Knox. However, the Federal Reserve’s gold reserves, and those belonged to more than one hundred other central banks, governments and organizations are stored in a vault under the Federal Reserve Bank of New York’s building at 33 Liberty Street in Manhattan. They are stored 8 feet below street level and fifty feet below sea level.
- The theory of gravity was first written by Ibn Al-Haytham in the 1000s in some of his 200 published books, or 600 years before Isaac Newton discovered his theory of gravity in the 1600s.
- Algebra is also invented by a Muslim scholar, Muhammad al-Khawarizmi, a great scientist and mathematician who lived in Persia and Iraq from 780 to 850AD. His story is amazing.
- The board game Monopoly was originally intended to teach the players of the injustice nature of capitalism. The game was first called the Landlord’s Game, and was patented in 1903 by Lizzie Maggie, who believes in the theories of political economist Henry George who despised landlords and advocated a “single tax” on landlords to replace all other taxes altogether.
- In 1890s Gerard Philips stole Thomas Alva Edison’s design for lamps, and founded Europe’s most successful electronics company, Philips. It wasn’t an illegal thing to do as the Netherlands at that time didn’t have laws for intellectual property rights.
- In a 52-card deck, the four standard international symbols of diamond heart spade and club were first used on the French Deck made in 15th century in Lyon and Rouen. It’s largely believed that the Queen of Hearts is a representation of Elizabeth of York (the Queen consort of King Henry VII of England), the King of Hearts was Charlemagne, the King of Diamonds was Julius Caesar, the King of Clubs was Alexander the Great and the King of Spades was the biblical King David.
- In 1913 Hitler, Trotsky, Tito, Freud and Stalin all lived in the same city of Vienna.
- The polygraph machine (lie detector) was invented by a police officer John Larson in 1921 in Berkeley, California, to substitute police method of the third degree, I.e. Getting information from people by beating them up. John Larson based his invention on the systolic blood pressure test pioneered by psychologist William Moulton Marston, who would later become a comic book writer and spectacularly create, wait for it, Wonder Woman.
- The Inca civilisation has a bisexual god, Viracocha.
- Religious traditions actually change over time: In the 10th century most rural Christian priests were married (the Catholic Church cracked down on this in the 12th century). In the 14th century, in both Ottoman and Persian art the figurative miniatures of the Prophet Muhammad existed, while 100 years ago radio, loudspeaker and telephones were haram (and therefore forbidden) for Muslims. In ancient times, animal sacrifice was a core part of Hinduism tradition, as described in Vedas and the Mahabharata (it is now widely abhorred).
- My favourite religious scholar Karen Armstrong then commented that “Medieval thinkers such as St Thomas Aquinas or Maimonides would be astonished at the way we read, preach and pray today.” She then elaborates “we’ve tended to lose older, sometimes more intuitive patterns of thought, [and thus] they would see some of the ways we talk about God as remarkably simplistic. We are reading our scriptures with a literalness which is without parallel in the history of religion, largely because of this rational bias of ours.”
- Hindu’s epic Mahabharata is 15 times the length of the Christian bible.
- Plastic surgery have existed since 600 BC, with Sushruta Samhita, India’s first surgeon, considered as the father of ancient plastic surgery.
- Hong Kong became a British colony up until 1997, believe it or not, was due to British people’s love of tea. Britain import their tea from several places and one of them was from China, and in the 19th century a growing British love for tea made its imports from China to surge, and consequently created a huge trade deficit with the country. In a desperate attempt to reduce the trade deficit, the British government then started to sell Opium – produced in their Indian colony – to China, which was of course illegal in China. Then in 1841 a Chinese official finally caught and seized an illicit cargo of this opium smuggling, and in an exagerrated response the British declared war. The Qing Dynasty of China was heavily defeated in what to be known as the First Opium War, and was forced to sign the Treaty of Nanking on 29 August 1842, which required China to ‘lease’ Hong Kong to Britain until 1997.
- This might come in handy: The green stripe in a bottom-end of a tube bottle means the ingredients are all natural. Red means some natural but mostly chemicals. And black means only chemical are used to make the contents.
- Bulls are colour blind. Hence, contrary to popular belief, they aren’t enraged by the colour red used in caps by matadors, but instead enraged by the perceived threat by the matador that incites them to charge.
- Samsung is a Korean word for “3 stars.” The company was founded in 1938 and started out as an exporter of fish, vegetable and fruit. Look how far they have come.
- While Dutch East Indies company was the 1st ever listed company in the world, it wasn’t the oldest. The oldest surviving company in the world is Kongo Gumi, a building company who was founded by a prince in South Japan more than 1400 years ago. The company is now run by direct descendants of that prince.
- The world’s oldest high-rise settlement, with a history going back 1800 years, is the walled city of Shibam, in Southern Yemen’s isolated area Wadi Hadramut. Consists of mud-brick high rises, this stunning place is often referred as the Manhattan of the desert. This is the google image of that place.
- Pizza Margherita was invented in June 1889 by Neapolitan pizzamaker Raffaele Esposito, to honour the Queen consort of Italy, Queen Margherita of Savoy. The pizza, which consist of tomatoes, mozzarella cheese and basil, represent the colours of the Italian flag.
- Book of the year: I was pretty sure that I’ve read the best economic book when I read Bad Samaritans by Ha-Joon Chang. But then when I further research professor Chang’s ideas I stumbled upon How rich countries got rich and why poor countries stay poor by Erik Reinert. Hideous title, but it’s by far the best economic book I’ve ever read! What Edward Chancellor did on speculation in ‘Devil take the Hindmost’ and what David Graeber did on debt in ‘Debt: the first 5000 years’ Erik Reinert did ever brilliantly on economics with this book. Austerity by Mark Blyth is also brilliant.
- History’s shortest reign was Portugal’s King Luis II, whom in 1908 ruled for only 20 minutes, before succumbing to the head wound he sustained in the assassination that killed his father outright.
- The basis of Coca-Cola was arguably invented in Aielo de Malferit, Spain, by a firm called Aielo’s Fabrica de Licores in 1880. The factory was founded by 3 entrepreneurs Bautista Aparici, Ricardo Sanz and Enrique Ortiz, who manufactures quality products including liquors. Aparici, who was in charge of sales, was soon travelling to trade fairs in Paris, Rome, London and Chicago, and in 1885 he went to Philadelphia with a new beverage in his luggage called Nuez de Kola Coca. Before he left, Aparici gave few samples to American sales representatives, and “coincidentally” one year later US pharmacist John Pemberton invented Coca-Cola.
- In the West when someone sneezes the exclamation by other people is: bless you. In Mongolia it’s: may your moustache grow like brushwood. Classy.
- During the time of Peter the Great, any Russian man who wore a beard was required to pay a special tax. So, if they have Movember back then, the month of November would be their best performing month for tax revenue!
- The Movember movement, aka the no shave November movement, was started by 4 people to raise awareness of male-related diseases such as prostate cancer by no shaving for the whole month. I participated Movember this year, but can’t stand the itches after 2 weeks. The beard came in handy though, to tickle the hell out of my son.
- 2013 is really the year for Bitcoin. Crashed on April from $266 down to $105 (a -61% crash, the biggest in history), only to rebound up to $1237.96 by 4 November, before crashing -21% to $877.46 two days later. Some got rich and earned the nickname of Bitcoin Jesus, some fanatically support it like Max Keiser, while others like former Dutch central banker sees Bitcoin hype worse than Tulip Mania in the 1630s. Meanwhile, several stores started to accept Bitcoin as a legitimate payment method, some began to receive their salaries in Bitcoin and there’s even a person who beg for money by posting a flier with a QR code asking for Bitcoin. This virtual currency is either going to be great or disaster.
- As far as the people of Laos are concerned, they live in Lao (without the s), a proud heir to the kingdom of Lan Xang. During the colonial time the French split the country into 3 parts, and the country was called: les Laos. After the French left, however, no one has ever got round to updating the name, and so the name remains Laos.
- The real meaning of celebrating thanksgiving: celebrating the genocide of Native Americans.
- Fart travels approximately at an average of 10.97km/hour. Of course, unless you had a curry the night before. Sneeze, meanwhile, travels at an average of 160 km/hour.
- According to Saxo the Learned’s Deeds of the Danes, Denmark and England have the same ancestral root. Denmark was founded by brothers Dan and Angul. But Angul then left, leaving Dan to rule as a king alone, in which the people and the country adopted his name for their country Denmark. Meanwhile, Angul formed his own tribe, the Angles, and then migrated and invaded the southern part of Britain and renamed the conquered land “England.”
- Modern English language was actually not spoken until the 16th century.
- Our son is 1 year and 9 month by December, and so like any other loving parent, me and my missus are now well-versed with Sesame Street, Mickey Mouse Club, Timmy Time, Thomas and Friends, etc. Apparently, the fictional island of Sodor in the Thomas and Friends got its name from a historical kingdom.
- So the story goes, when the vikings settled in the islands off northern Britain they divided the islands into 2 kingdoms Nordr (the northern Isles) or present-day Shetland and Orkney, and Sodor (the southern Isles) or present-day Hebridges and the Isle of Man. The name Sodor was preserved by the Church in its Diocese of Sodor and Man, and 7 centuries later when Reverend Wilbert Awdrey visited the Church he was struck that while there was an Isle of Man, the island of Sodor did not exist. He then decided on the spot to use the name of this ancient Viking kingdom as the fictional land where his cartoon characters live.
- There is no evidence that Vikings wore horns on their helmets. The earliest image of Vikings wearing horned helmets was found in 1876 production of the “Der Ring des Nibelungen” opera cycle by Richard Wagner.
- Christopher Colombus was not the first European to discover the American continent. The first one was a viking named Leif Ericsson, who discovered America 500 years before Columbus. Interestingly, Leif’s father Erik the Red was the founder of Greenland. Conversations at their family dinner table must be very interesting.
- The story of Easter and the mainstream definition for Christianity are shaped by the Nicene Creed, which was produced in the First Council of Nicaea, a council of Christian bishops convened in Nicaea, Bithynia, in 325 AD by the Roman Emperor Constantine I.
- The Dominican Republic is the only country in the world to display the Bible on its flag.
- Armenia was the first nation in the world to adopt Christianity, converting in 301 AD (36 years before the Roman Empire).
- The world’s first church was St. Peter’s Church, built in Antioch (Antakya), present-day Turkey.
- Turkey produce 70% of the world’s hazelnut. Meanwhile, Bolivia is the biggest exporter of Brazilian nuts. Somewhere in that last sentence lies a very funny joke.
- Brazil is home to the largest Japanese population living outside Japan, with approximately 2.5 million Japanese Brazilian (1% of Brazil’s total population). The Japanese immigration to Brazil started in 1907 when the end of feudalism in Japan created poverty in rural areas, and thus many seek better living condition abroad. At that time, coffee was Brazil’s main export product, and due to the abolishment of slave trade there was a shortage of plantation workers, which the Japanese then filled the void. A lot of the Japanese immigrants settled in São Paulo, where most of the coffee plantations were located.
- In the Napoleonic War era, from 1808 to 1821 the capital city of the whole Portuguese empire was moved to Rio de Janeiro, making it the only capital city for a European Empire that is located outside Europe.
- The Pope used to be very powerful and politically active. In 800 AD Roman Emperor Charlemagne established the precedent that no man would be emperor without being crowned by a Pope. In 1511 Henry II of England had to ask for a permission first from an English Pope Adrian IV, before he proceeded with the invasion of Ireland. The Pope also acted as a mediator for European kingdoms, where in 1493, in the fight between Spain and Portugal on colonial territories, Pope Alexander VI “grant” the Americas to the Spanish and Africa to the Portuguese. The Pope remained powerful until a reform movement “Conciliarism” emerged and limit the Pope’s power.
- The Vatican City was given to the Pope in 1929 by Benito Mussolini as a present. Previously, in 1870 Italian troops succesfully blasted through the city walls of Rome as the final act of Italian unification, and occupied the city. The unification of Italy left the Papal State without any physical territory for the first time in 1200 years, and the situation was made tricky when Pope Pius IX declared that he was a prisoner and locked himself in his palace. This protest was maintained by his successors for the next 59 years until Mussolini grant the Vatican City as a separate state.
- This year Pope Gregory XVI resigned. The last time a Pope resign was Gregory XII in 1415, and last time a Pope resign voluntarily was Celestine V in 1294. Pope Gregory XVI’s successor, Pope Francis I, is without a doubt one of the kindest and most sincere people I’ve ever seen, loving this new Pope! He’s my person of the year.
- Apparently Time magazine also loves Pope Francis and named him their Person of the Year 2013. Even The Advocate, a gay rights magazine, also named him their Person of the Year 2013 – now that’s big.
- There’s a group of people in China who are allegedly alliens that are still living on earth. They are called the Dropa Tribe.
- This year I turned 30, and so I’m opening a new chapter in life. Being twenty-something was awesome, I pushed myself to the many extremes, find my limits, find my strengths and weaknesses, discovered what I like dislike and cannot tolerate, and learned where I am most comfortable in society. And now as I have turned 30, I’m starting to read Der Spiegel more frequently. Uhm, is that normal?
- The breakfast cereal business was created by accident.
- There are 24 hours in a day because the first civilisation that divided the day into smaller parts, the Egyptians, didn’t count in base 10 like we do today, but in base 12 (duodecimal) using fingers and finger joints (excluding the thumb, which are used to point the fingers ans joints when counting) to count up to 6 in each hand.
- In 1500 BC the Egyptians created a device that divide the interval between sunrise and sunset into 12 parts using sexagesimal numeral system (base 60), that’s why there’s 60 seconds in a minute and 60 minutes in an hour. And because there was no artificial light yet, people in that time period treat the daylight and the night as two separate realms instead of the same day, and they counted the night in breakdown of 12 using the observation of 24 stars. Combine the 12 parts during the day and 12 parts during the night, and eureka we have 24 hours!
- The positions of the pyramids in Egypt are aligned with the star constalation Orion.
- The story of the Egyptian pyramids is in Al Qur’an (28:38). In the verse, the holy Qur’an even specifically that the pyramids were made by baked bricks, long before archaeologists concluded that baked bricks were indeed the raw material used.
- Massive demonstration erupted once again in Bangkok on November by the yellow shirt supporters, after Prime minister Yingluck Shinawatra tried to pass an amnesty bill that would effectively legalise her brother Thaksin’s return to the country. But who exactly are the yellow shirt supporters, and why do they hate Thaksin so much?
- According to Joe Studwell in his book Asian Godfathers Thaksin Shinawatra crossed the line from businessman to politician with the backing of some of the most powerful fellow-Godfathers in the country, in the dream that with Thaksin as frontman they will control the nation politically, for their own benefit. Thaksin present himself as a populist, and once elected Prime Minister he kept his populist campaign promises, which is why the people love him, but then abandoned his fellow-Godfathers and leave them with nothing. At the same time, however, Thaksin’s own businesses got leniencies in regulations, easily won tenders, etc, making him richer all by himself in the process. This abuse of power is the basis of corruption allegations on Thaksin that made him a fugitive since the coup in 2006, which is legitimate. The yellow shirt movement, or officially People’s Alliance for Democracy (PAD), was then formed 2 days after the 2006 coup and was funded by the group of Godfathers that Thaksin lured and then ditch. That’s why the yellow vs red supporters can be seen as the elite vs the poor, while in reality it’s more of a battle between the Godfathers.
- Orangutan has 96.7% human DNA. Too close, that’s way too close.
- The myth of flat earth is actually a modern misconception. According to historian Jeffrey Burton Russell the myth about the dark age where people believed in flat-earth was developed between 1870 and 1920 as a result of ideological setting created by debates over evolution, and was popularised by historians Andrew Dickson White, John William Draper and Washington Irving. In reality since the 3rd century BC onwards no educated person in the history of Western Civilisation believed that the earth was flat, thanks to the spherical viewpoint expressed by the Ancient Greeks. In fact, all major medieval scholars accepted that the roundness of the earth is an established cosmological fact, and Christian scholars even know the earth’s approximate circumference.
- As reported by John Pilger, The CIA actually has an ‘entertainment industry liaison office’ that “helps” Hollywood remake US image. The 2010 Oscar-winner Kathryn Bigelow’s Zero Dark Thirty, a torture-apology movie, was a recent example of movies licensed by the Pentagon.
- Another example is Ben Affleck’s Oscar-winning Argo, where Pilger describes as “the first feature film so integrated into the propaganda system that its subliminal warning of Iran’s “threat” is offered as Obama is preparing, yet again, to attack Iran.” Pilger then elaborates that “Affleck’s “true story” of good-guys-[vs]-bad-Muslims is as much a fabrication as Obama’s justification for his war plans is lost in PR-managed plaudits.”
- The movies Psycho, the Texas chain saw massacre, Deranged and the Silence of the Lambs all inspired by the story of a real-life serial killer Ed Gein.
- In Ancient Rome, all convicted rapist will have his balls crushed by a pair of rocks. Ouch. I bet if this we implement this today, rape cases will go down significantly.
- The huge Irish emigration to places like the US was triggered by the Great Famine between 1845 and 1849 that caused hunger in Ireland. The British gov, though, instead of sending help they sent soldiers to suppress unrest, which prompted the emigration.
- The Rwandan genocide 1994 and the more recent M23 rebel movement against Democratic Republic of Congo can be traced back to conflicts between etnics Tutsi and Hutu. But if we dig much deeper, we’d find out that Both Tutsi and Hutu are actually fake races created by the colonial ruler Belgium. Yes, in reality Tutsis and Hutus are both belong to the same race and ethicity.
- Beer mat was invented by a German man robert Sputh in 1892. Today, Germans continue to dominate world beer mat production, with the Katz Group produce 12 million daily (that’s 75% of the world’s total).
- Electric cars were actually common in the early 1900s. Two gentlemen in Cleveland, Ohio, named Jacob Rauch and Charles E.J. Lang started a car company named Rauch and Lang, and in 1905 began to sell electrically powered cars. They were quite popular that by 1908 the company was producing 500 cars per year, and electric cars were actually favoured by many over oil powered engines. But then in 1928 the company stopped producing due to lack of funds, and there were extreme advances in the internal combustion technology that made the electric models looks much slower and more expensive thanks to companies such as the Ford Motor Company that can mass-produce oil-powered cars, which electric models couldn’t.
- The Three Wise Monkeys have names: Mizaru (See no evil), Mikazaru (Hear no evil), and Mazaru (Speak no evil).
- Pakistan is an acronym for 5 Indian province which then occupied the territory: Punjab Afghan/North-west frontier, Kashmir, Sindh and BalochisTAN. Pakistan, felicitously, also means ‘land of the pure’ in Urdu.
- The name India is derived from the Indus River. The majority of its flows is now in the territory of Pakistan.
- In 2009 a Hindu nationalist group in India set out plans for “Cow Water”, a cow urine soft drink. Mixed with milk, ghee and cow poo, cow urine becomes known as “Five Cow Nectar”, a tonic believe to be able to soothe stomachache and heart burn. I think I just found my limit on my taste-almost-everything-at-least-once rule.
- The US nickname “Uncle Sam” was derived from Uncle Sam Wilson, a meat inspector in Troy, New York. During the War of 1812 against Britain, the demand of military meat supply for the troops increased significantly, and Samuel Wilson was appointed as a meat inspector for the Northern Army. His duties included checking the freshness of the meat and properly package them according to the government’s specifications; where most of the meat he packaged was shipped to a camp of 6000 soldiers in Greenbush, New York. A lot of the soldiers stationed there were locals of Troy, and knew and/or acquainted with “Uncle Sam” and his meat packing business. And they began to associate the label in the meat packages of U.S (United States) that came from Troy as packages from U.S (Uncle Sam).
- I believe we have arguably found the future model for NGOs: read the extraordinary story of Audette Exel, a banker who saves 20,000 people from Nepal to Uganda with her profits.
- Spitzberger, in the island of Svalbard, Northern Norway, is the northernmost place on earth with human inhabitant.
- During the month of Ramadan this year, Muslims in places like Spitzberger and Kiruna, Northern Sweden, followed the fasting time (when Muslims fast when the sun is up) in Saudi Arabia because the sun always up for 3 months in there.
- New York’s Central Park is bigger than Vatican City and Monaco.
- The Grimaldi family bought Monaco in 1419, from Genoa. And then they paid France 4.1 million francs for it in 1861. Yes, they bought it twice.
- The Hanging Gardens of Babylon were actually built 300 miles north of Babylon, in neighbouring Nineveh, by the great Assyrian ruler Sennacherib, and not, as historians have always thought, by King Nebuchadnezzar of Babylon. This revelation was concluded by Dr. Stephanie Dalley of Oxford University’s Oriental Institute, whom after more than 20 years of research has finally pieced together enough evidence to prove her conclusion beyond reasonable doubt.
- Wanker of the year: Senator Ted Cruz, for holding the whole country in hostage during the debt ceiling debate in the US, which have ripple effects on the global markets. But Benjamin Netanyahu wins the lifetime achievement award, for the biggest wanker in history.
- The biblical story of Onan, who was killed by God’s wrath after he masturbated, might not be accurate. According to Scott Korb in his brilliant book life in year one, a more accurate interpretation on the writing of the story suggest that Onan performed a coitus interruptus – a.k.a pulling out before he comes, to prevent Tamar, his sister in law, to get pregnant. I’m sorry, but that makes it more hilarious.
- NASA satellite data shows that on August 2010 East Antarctica set the record for the coldest temperature ever measured with -135.8 degrees Fahrenheit (-93.22 Celcius) below zero. This July the temperature almost hit that low again, with -135.3 Fahrenheit (-92.94 Celcius). Scientists say it is painful to breathe at that temperature.
- Racistly portraying Arabs or Muslims as terrorists is like stereotyping all American women solely from Paris Hilton, Kim Kardashians, Lindsay Lohan, Snooki. And as a matter of fact, Islamic law forbids terrorism.
- According to Murtaza Hussain, the 1400 years of conflict between Sunni and Shia Muslim is a myth.
- Currently Indonesia has 255,000 mosques, 13,000 Hindu temples, 2,000 Buddhist temples, 1,300 Confucianism temples and over 61,000 churches. With over 61,000 churches, Indonesia has relatively more churches than Great Britain and Germany, two Christian-majority countries. Hence, despite with what the media are portraying Indonesia is actually a tolerant nation.
- According to investigative journalist Andre Vltcheck in his book Indonesia: the archipelago of fear, Indonesia didn’t experience a regime change when our dictator Soeharto stepped down (not ousted, but stepped down) in 1998. Instead, the regime only had, in Vltcheck’s words, a “change of clothing.” Actually this makes a lot of sense, and explains pretty much most of the things going on with the current politics.
- The Indonesian slang word for money, duit, is actually comes from a copper coin named ‘duit’ that was introduced by VOC in 1724 during the Dutch colonial times in Indonesia.
- The Aral Sea was once the size of Ireland, but since the 1960s the sea has shrunk into a string of salty puddles. Before the end of this century, the remaining of the Uzbek half of the sea will dry up altogether to be replaced by a poisonous dust-bowl desert.
- Early next year we are expecting our 2nd child, so in 2014 I’ll definitely be a sleep-deprived father of two. Can’t wait! 🙂
- And so, to wrap things up, I leave you in the good hands of the cool people at Twisted Sifter, which on August posted 40 fantastic maps that will help us make sense of the world. Have a great 2014 guys!
There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction – John Maynard Keynes
New York City, 22 September 1985. At the invitation of US Secretary of Treasury James Baker the Finance Minister of 5 economic super powers gathered together in the Plaza Hotel, Manhattan. The attendants of the meeting were Gerhard Stoltenberg of West Germany, Pierre Bérégovoy of France, Nigel Lawson of Britain, Noboru Takeshita of Japan and James Baker himself of United States. These men were gathered by Baker on this day with the objective of reaching an agreement to simultaneously push down the value of the US dollar against their respective currencies, particularly against the Japanese yen.
At that time Paul Volcker’s high interest rates had created an overvalued dollar that eroded US exports and consequently switched their trade balance from a surplus of $7 billion in 1981 to a deficit of $212 billion by 1985, mainly with Japan at the other end of the trade. Moreover, thanks to Ronald Reagan’s great financial deregulation, which was overseen by Milton Friedman, in the same period the federal government deficit also increased from $74 billion to $212 billion, a deficit that were only sustained by the willingness of the Japanese to put their surpluses in US Treasury Bond.
By then, Japan had risen to be the 2nd largest economy in the world, with the share of world trade up to more than 10%, which resulted to burgeoning trade surpluses and capital exports comparable with Britain in the 19th century. Income per capita was in the course of exceeding the US levels, its banks were the largest in the world in terms of both assets and market value, while Japan’s industrial companies dominated the world’s consumer electronics and other technology-focused industries.
This economic success story was the result of the adaptation of some form of Friedrich List’s economic theories, with decades of guarded financial sector by the ministry of finance, which ensured that cheap loans were channelled from the citizens’ thrifty savings to its highly leveraged corporations. Imports were restricted by a variety of measures by the Ministry of International Trade and Industry (MITI), while the government also implemented a fiscal policy that maintains a stable currency exchange rate that produces a continuous devaluation of the yen, thus making Japanese exports cheap especially compared with the US.
As they gain enormously from the trade with the US, the Japanese reinvested their trade surpluses to US financial instruments such as Treasury Notes and also began to invest their trade surpluses in other US assets, most famously by buying the icons of American capitalism such as New York’s Rockefeller Center and Hollywood’s Columbia pictures. But perhaps the most bizarre of all was Mitsui Corporation’s acquisition of the Exxon Building in Manhattan for a record price of $610 million, or $260 million above Exxon’s asking price so that Mitsui’s president can see his name in the Guinness Book of World Records.
But as Japan’s most important export market the US had a leverage towards Japan and was able to pressure them into changing their fiscal and monetary policy in order to increase yen’s value against the US dollar. This pressure was conducted in the midst of a growing resentment in the US for the “Japanese invasion” where angry auto-workers in Detroit destroyed Japanese cars in protest against their cheaper imports. There was also an accusation of dumping practices where manufactured goods sold in the US were cheaper than their price in Japan, while the New York Times warned that “today, forty years after the end of World War II, the Japanese are on the move again in one of history’s most brilliant commercial offensives, as they go about dismantling American industry.”
The culminating result of this pressure was the meeting on 22 September 1985 in Plaza hotel Manhattan, which eventually gave birth to the Plaza Accord, an agreement by the 5 finance ministers to simultaneously devalue the US dollar against their respective currencies.
Fast forward to 8 January 1998. In the heat of the Asian market crash Indonesians across the nation were panically clearing store shelves and gathering any food supply that they can find, in a fear of food shortages due to the continuous currency collapse. Up to then approximately $150 billion had fled the country, mostly to neighbouring Singapore, with rupiah plummeted close to Rp.10,000/dollar compared with around Rp.2,400/dollar just 7 months earlier. Demonstrations and riots were starting to take place (a rarity in President Soeharto’s dictatorship) with Human Rights Watch Asia reported that in the first 5 weeks of 1998 price riots, bomb threats and over two dozen demonstrations took place in the island of Java and quickly spread to other islands.
Meanwhile, the banking sector’s Non Performing Loans (NPL) had risen to 48.6%, and thus effectively triggered a domino effect from what began as a currency crisis in 1997 into a banking crisis and eventually to a fully-fledged economic crisis. By 1998 inflation soared to 77.6% and as the country that got hit the hardest Indonesia’s GDP fell by -13.1%, followed by second worse hit Thailand by -10.8% and third worse South Korea -6.7%.
Unemployment rate increased tenfold in Indonesia with poverty doubled, while unemployment increased threefold in Thailand and fourfold in South Korea, where urban poverty in South Korea almost tripled with nearly a quarter of the population falling into poverty. In addition, as the crisis created more victims and as governmental power weakened, in a manner similar with the rise of fascism in 1930s Europe, the rise of radical Islamic sects (back from fighting the Soviet Union in Afghanistan alongside CIA-sponsored Al Qaeda) and separatist movements also intensified in several South East Asian countries.
Just like Latin America in the 1980s, as the crisis worsened international credit dried-up for the battered region, and the governments were then forced to use their currency reserves to pay for imports, service their debt and cover losses in the private sector; adding a huge pressure to the economic instability. Understandably, the market responded with more panic, and thus in just 1 year $600 billion had disappeared from their stock exchanges, wealth that had taken decades to built.
The implementation of the Plaza Accord in 1985 did not directly cause the Asian market crash 1997. However, it did mark the end of the era of undervalued yen and mark the beginning of a rapid fundamental shift in the Japanese economy, which created a butterfly effect that would eventually lead South East Asia towards this catastrophic direction.
On the other side of the coin, a much bigger fundamental shift was occurring in the mid 1980s that created another string of butterfly effect that would lead to the Asian market crash. Intended to fight the stagflation effect from the Petrodollar Recycling in the late 1970s, the very high interest rates imposed by Paul Volcker to defend the dollar has subsequently caused the Third World Debt Crisis, where the World Bank estimated that between 1980 and 1986 repayment of dollar-denominated foreign debts for a group of 109 debtor countries bloated from $430 before the US interest rate hikes, to $658 billion with repayment of principal of $332 billion and interest payment alone of $326 billion.
As an effect, according to a study by Hans K. Rasmussen of Danish UNICEF, a massive transfer of wealth occurred in the early 1980s from the Third World countries primarily to the US. And for a lot of these countries that were unable to pay the bloated debts, they were forced to give away their sovereign control over their own economy in return for an “economic assistance” by the IMF and World Bank.
Moreover, the 1980s also witnessed the deteriorating economies in the member states of the Soviet Union – the root cause of revolutions that began in Poland in 1989 and eventually ended with the dissolvement of the Soviet Union by Mikhail Gorbachev in his speech on 25 December 1991. The end of Cold War completed the holy trinity for ‘Dollar Hegemony’, following the collapse of the Gold Standard and the creation of the Petrodollar system.
Subsequently, with Chicago School ideology fully installed in the Reagan administration and with IMF and World Bank controlled by the Washington Consensus, global-scale deregulations soon followed, with indebted countries and former communist states then converted to free-market capitalism and subscribed to US dollar as their reserve currency. As a result, the world economy and the entire global financial market system became heavily dependent on US dollar, and not surprisingly currency peg against the dollar then became the norm for a lot of currencies around the world. This made the US dollar the engine of the domination of the American Empire, and it gave the Fed chairman a tremendous power over the world economy, as the chairman controls the flow of the dollar.
Not missing from this trend were the currencies of South East Asian countries, which also pegged to the US dollar since their deregulation in the 1980s. With the implementation of the Plaza Accord the value of the pegged South East Asian currencies weakened alongside the dollar, and thus enhancing their export competitiveness. Not surprisingly, in the late 1980s and early 1990s this model looked strong and worked really well for the South East Asian economies, as stable dollar and cheap exports created some of the best economic growths in the world.
However, the boom of the 1980s in the US was about to end in a spectacular fashion, while the single Euro currency plan looked set to be implemented, at about the same time few politically-connected Asian Godfathers became increasingly powerful and wealthy in South East Asia. But before these events come to surface, the implementation of the Plaza Accord in 1985 first created a new trend in Japan.
The great Japanese Bubble
The Japanese called it Zaitech. It is a practice of financial engineering that was born since December 1980 when Japanese companies were allowed to account their investment with whichever higher between the book value or the market price, thus can easily hide their losses and forge their profits. The practice started to become a growing trend in Japan after their deregulation in 1984, when the ministry of finance permitted Japanese companies to operate special accounts for their shareholdings, known as Tokkin accounts, which allowed these companies to trade securities without paying tax on capital gains. Brokerage houses were also allowed (more precisely the government turned a blind eye) to set up services to manage special speculative accounts for companies, known as Eigyo Tokkin, where these brokerages offered a guaranteed of minimum return above the current rate of interest.
But it was not until 1985, immediately after the agreement at the Plaza Accord began to be implemented, when Zaitech practices began to widespread as a new trend. As agreed in the Plaza Accord, central banks committed over $10 billion to a dollar devaluation that would be implemented over several years period. The result was apparent, from 1985 to 1988 the dollar declined 20% against the German mark, 40% against the French franc and 50% against the Japanese yen, with yen strengthened from a high of ¥259 to under ¥150/USD, causing the purchasing power of the Japanese currency to increase and thus sparked the great Japanese shopping spree, from Louis Vuitton handbags to Van Gogh paintings.
The strengthening of the yen, however, also practically erased Japanese’s competitive edge in trading. And in response for the appreciating yen Japanese exporting companies began to compensate their declining profits and currency losses in sales by turning to Zaitech practices and speculation. The result was immediately transparent. Within the space of 3 years after the Plaza Accord the stocks in the Nikkei index in Tokyo rose by 300%, with nominal value of all the stocks listed in the exchange accounted for more than 42% of the world’s stock values. And within that period of time, the amount of capital invested in Tokkin funds grew from just under ¥9 trillion in 1985 to over ¥40 trillion ($300 billion) in 1989, at the height of the bubble. Total corporate gains from the Tokkin investment also increased from ¥240 billion in 1985 to ¥952 billion within just two years’ time.
Perhaps the most interesting part was during the same period ordinary operating profits from these corporations actually declined, but they compensated the decline by profiting from their Zaitech and speculative practices. In fact in some cases, the speculative activities became the main activity of their business. For example, a steel company named Hanwa raised over ¥4 trillion in the late 1980s from Zaitech, with their gains from speculative activities exceeded their profits from core business by 20 times.
While triggered by the Plaza Accord, this speculative environment was then further enhanced by the Bank of Japan, which during 1986 reduced interest rates in 4 occasions down to 3%, in order to stimulate the economy after the economic growth slipped below 2.5% due to the strengthening of yen, which made Japanese goods in international market became twice as expensive. However, as the price of imported goods became cheaper due to strong yen and since the price of oil was falling, the resulting fast monetary growth from the rate cut did not feed into consumer price inflation, but instead they fuel the rise of stock prices and most crucially land prices.
Indeed, despite the rising trend of stock market prices, according to Edward Chancellor in his brilliant book Devil Take the Hindmost the engine of the Japanese bubble was actually its property bubble. The Japanese government has a history of discouraging the sale of land and intentionally creates an illiquid property market, which actually stimulated land speculation. As an effect, land prices in Japan rose by 5000% between 1956 and 1986, with land prices only experienced a decline in 1974 alone, while consumer prices merely doubled. Therefore, understandably, acting on the belief that land prices could never fall Japanese banks had the tendency to provide loans with the collateral of land, instead of cash flows, making the rising value of land became the engine for credit creation for the entire Japanese economy.
In December 1987 representatives from the world’s central banks gathered in Basel, Switzerland, at a Bank for International Settlements meeting, to set new international standards for banking capital. Before this, Japanese banks had traditionally operated with a lower capital adequacy ratio compared with their foreign counterparts, since they were protected by the Ministry of Finance. However, foreign bankers complained about this unfair competitive advantage in global banking, and they demanded the Japanese banks to conform to the conventional level of banking capital, by raising their capital ratio to 8% by the spring of 1993.
However, an important concession was secured by the Japanese representatives at Basel. Under the cross-holding ownership system in Japan (the Keiretsu system), 45% of the unrealised gains on their share ownership on other companies could count for up to half of the required capital reserves. In other words, the banks’ ability to create credit became linked to the share price level in the Tokyo Stock Exchange, and thus indirectly to property prices, as the higher the stock prices the more inflated their capital and the more credit that the banks can lend, which were increasingly valued against property assets as collateral.
This was apparent towards the end of the 1980s, when lending activities against land and property increased, especially among the smaller companies. Total bank lending increased by ¥96 trillion between 1985 and March 1990, half of which went to small businesses that invested heavily in the property sector. The loosely-regulated consumer credit companies also increased property loans from ¥11 trillion in 1985 to ¥80 trillion by the end of 1989. On several occasions loans were provided for up to twice the collateral value of the property, while as the bubble heightened multi-generation hundred-years mortgages were issued to those who cannot afford to buy even a small apartment in central Tokyo.
Within this context, property values rose in tandem with the increase of stock market values, with Tokyo stock prices rose by around 40% annually and Tokyo real estate prices ballooned by 90% in some cases, reaching an astonishing heights that valued Tokyo real estate greater than that of the entire US real estate, with the grounds of Imperial Palace in Tokyo once valued to be worth more than the entire real estate value of Canada.
By 1988, the 10 largest banks in the world were all Japanese banks. And Japanese share prices increased 3 times faster than their corporate earnings (even after including the profits from Zaitech practices), with the Tokyo stock exchange flaunted some of the most overvalued share prices in history: services companies sold at an average of 112x earnings, textile sector at 103x, marine transportation at 176x, fishery and forestry at 319x, and even Japan Air Lines which in the process of privatisation was trading as over 400x annual earnings.
Moreover, the Japanese economic bubble was not only limited to Japan, as another new trend was increasingly spread to its South East Asian neighbours, namely globalisation. Due to growing trade friction with the US in the late 1980s and the steep rise in the value of yen thanks to the Plaza Accord, many Japanese exporting companies began to shift their production overseas, in the form of Foreign Direct Investment to their South East Asian neighbours, or as what to be known as the ‘yen bloc countries.’
This creation of international division of labour, with Japan as the central figure, was made in the midst of the end of the Cold War and during the time of the accelerating spread of globalisation. Trade volume for both exports and imports then increased between Japan and South East Asia, with Japanese companies export machinery and components to production facilities in South East Asia, and in return they import the finished goods back to Japan.
Hence, as the Japanese economy undergone a massive bubble the effect also spilled to South East Asia, as demand from Japan for finished goods kept on rising, helping to create what to be known as the Asian Tigers.
The protectionist roots
South East Asia has always been a strategically important part of the world trading system since the ancient times. Rich with wide range of commodities, it attracted many merchants and travellers into the region from Chinese, Indian and Arab merchants to European explorers such as Ferdinand Magellan, Marco Polo, and Christopher Columbus who accidentally landed in America while aiming to reach the Indies to pursue the supply of spices like nutmeg, pepper, cloves and ginger. First the Portuguese arrived, followed by the Spanish, the Dutch, the British and finally the French. Before long, European presence in South East Asia evolved into annexation of territories with the Dutch controlled the East Indies, the British controlled Malaya and Hong Kong, the French controlled the Indochina region and Spanish and US controlled the Philippines, leaving Thailand as the only country not colonised by the West.
By the late 1950s and 1960s most South East Asian countries had gained independence, and began to construct their economy that focuses on agriculture with an economic policy broadly known as Import Substitution Industrialisation (ISI). ISI is an economic model largely based on the thinking of 19th century German economist Friedrich List, which focuses on self-sufficiency through nationalisation, subsidising vital industries, increased taxation, micro-management of the supply of foreign exchange and highly protectionist trade policies that include high import tariff barrier.
ISI was a reasonable response to the end of colonialism. During the occupation, the colonial powers had structured these countries’ economy to heavily dependent on the export of low-value-added commodities to the ruling power, while in return they were forced to import a huge flow of finished manufactured goods back from the ruler at a higher price. In addition, tariff barriers were set very low, thus killing any chance for local industries to thrive, thus as a result these countries were forever stuck with exporting raw materials in order to pay for their expensive imported goods. Hence, for these newly-independent nations the adoption of ISI was arguably the best way to break out from the Mercantilism colonial model, through protecting their economies to nurture their “infant industries.”
The very term “infant industry” was first coined by the first US Secretary of Treasury Alexander Hamilton. On 5 December 1791 Hamilton submitted a report to the US congress about their new country’s manufactures, and proposed a program to stimulate the economy through developing its industries. The ideas of the report were principally rooted in the economic theories implemented by Queen Elizabeth I of England and by France’s Finance minister Jean-Baptiste Colbert (under the rule of King Louis XIV), and core to his ideas was the importance to protect the country’s “industries in their infancy” from foreign competition, in a then-backward country like the US, and nurture them until they could stand on their own feet. This made Hamilton the father of “infant industry” thinking that would later be further developed by Friedrich List, which was often mistaken as its originator.
In the report Hamilton, of the Federalist party, proposed several measures to protect the infant industries by using the likes of protective tariffs, government subsidies, import bans, export ban on vital raw materials, import liberalisation of industrial input and tariff rebates for it, prizes and patent rights for invention, regulation for product standards, development of transportation infrastructure and as briefly mentioned in part 1, financial infrastructure in a form of a national bank (in other words, all of the things that the contemporary Washington Consensus condemn. If Hamilton is a finance minister of a developing country today the IMF and World Bank would have denied any fund to his country and would be lobbying for him to be removed).
By implementing high tariffs, the US were acting against the advice of mainstream economists of the era such as Jean Baptiste Say and Adam Smith, and was constantly pressured by Britain to adopt free trade policies, with Adam Smith – whose book The Wealth of Nations appeared during the American Revolution in 1776 – commented that the US would make a big mistake if it protected its industry. However, in a different section of the book Adam Smith contradicted himself by declaring that only nations that have a manufacturing industry could ever win a war. Hamilton had read Wealth of Nations, and he based the industrial and commercial policy of the US with Smith’s declaration in mind, but leave out his theoretical claim about free trade.
The protectionist plan was also opposed internally, however, by populist Thomas Jefferson and James Madison, of the Democratic-Republican party, on the ground that it would lead to corruption (especially in the area of government subsidy) and would play favour to the industrialist North over the agrarian South. This would be the persistence problem for the economic policy of the US until the inevitable outbreak of the Civil War between the North vs. South. To put things in perspective, the US politics at the time were dominated by southern plantation owners that wanted to use the proceeds they earned from exporting agricultural products to import higher-quality European products at the cheapest possible price. Hence tariffs and nurturing an infant industry was not at their best interest. However both opposing sides did agree that manufacturing independence was vital for the country, but they strongly disagreed on how to obtain it.
After a lengthy debate, the average tariff on imported manufactured goods was indeed raised but only from around 5% to around 12.5%, which wasn’t high enough to support the infant industries and was only raised to generate income for the government. Hamilton resigned as the Secretary of Treasury in 1795 following a scandal on his extra-marital affair with a married woman, and in 1804 he died at the age of 50 in a pistol duel in New York, without seeing his proposal adopted in full. Had he lived for another decade he would have witnessed his ideas being fully implemented.
According to Cambridge economist Ha-Joon Chang, whom specialises on tariff and trade policies, in his book Bad Samaritans, when the war against Britain broke out in 1812 US Congress immediately raised the tariffs from the average of 12.5% up to 25%, interrupting the imports from Britain and Europe, and thus allowing the space for new local industries to emerge. Thanks to the pressure from this new group of industrialists, the tariff protection was further raised long after the war, notably after the Tariff of 1816 passed by Congress, to 35% by 1816 and up to 40% by 1820, reaching the protection level planned by Hamilton.
This irritated the South, and the North vs South tension was further escalated when the Tariff of 1828 was passed, which enhanced the protection for the industries in the North but at the expense of the agrarian South, in a form of higher import cost for goods they did not produce and affect the profitability of the British exporters, which in turn less able to import cottons from the South.
By the 1860s, 30-odd years after the Second Bank’s charter expired, the tariffs were very high that it successfully created an environment that nurtures American infant industries, and became the main reason for the period of prosperity that groom the likes of Thomas Alva Edison, Alexander Graham Bell, The Wright Brothers and Henry Ford; despite having no central bank at all. Key to this innovative period was the “American System” program created by Whig Party Senator Henry Clay – the speaker of the House 1811-1820 and 1823-25 and the ally of US Second Bank’s president Nicholas Biddle – whom heavily incorporated Alexander Hamilton’s protectionist ideas that was perfected by Friedrich List.
This led to the broke out of the Civil War. Ha-Joon Chang remarked in Kicking Away the Ladder that the Civil War, though it was fought on the issue of slavery, was arguably more intensely fought on the ground of tariff, as Abraham Lincoln was a protectionist president who adopted Henry Clay’s “American System” by raising tariffs to the highest level at the time in US history immediately after he got elected. Indeed, the South actually had more to fear and more to lose in the tariff issues than in abolishment of slavery, with slaves merely only functioned as the plantation workers while tariff could cause more direct impact to their exports. With this in mind, Chang concluded, the emancipation of the slaves in 1862 was arguably more of a strategic move to win the Civil War, rather than out of a moral conviction.
The industrialist North eventually won the Civil War, and the tariffs remained high at 40-50%, the highest in the world, until the World War I broke out in 1913. This high tariff environment was the context that prompted economic historian Paul Bairoch to describe the US as “the mother country and bastion of modern protectionism.”
Moreover, despite their constant pressure towards the US to adapt free-trade policies, Britain was enjoying a period of economic prosperity ironically also thanks to the protectionist policies, which was installed in the late 15th century and early 16th century by Henry VII. From the 1st Tudor monarch Henry VII until the last under the House of Tudor Elizabeth I, Britain implemented protectionism subsidies, government-sponsored industrial espionage, distribution of monopoly rights, and other interventionist means to nurture and develop their woollen manufacturing industry – Europe’s high-tech industry at the time.
Before the Tudor’s rule, Europe’s textile manufacturing industry was centred in Bruges, Ghent and Ypres, in the Low Countries (present-day Netherlands and Belgium), with Britain relying only on their exports of raw wool to finance their imports. But then Henry VII came to power after seizing the King of England crown from Richard III at the battle of Bosworth Field, and he began to implement a form of ISI in 1489. At first King Henry VII increased the tax on export of raw wool, he even banned the export of unfinished cloth for coarse pieces above certain market value, to encourage domestic wool processing industry in substitute for just exporting the raw material. He then also sent royal missions to identify locations suitable for woollen manufacturing in the country as well as recruited skilled workers from the Low Countries.
However, at first his protectionist and interventionist policies were not successfully implemented as when the export duties were first raised it became immediately clear that Britain did not have the proper capacity and sufficient equipment to process all the raw materials into cloth, and their textile industry was not yet established or was not matured enough to handle the volume of wool to be processed. This was a major lesson learned, a sober reminder that protectionism – just like liberalisation, austerity and privatisation – if implemented too early when the economic infrastructure is not ready, could cause disastrous consequences.
It was not until 1578, during Elizabeth I’s reign (1558-1603), that the British textile industry finally had sufficient processing capacity and had become mature enough to be able to cope with a ban on raw wool exports. Once the export ban was in place, it drove competing manufacturers in the Low Countries, who became deprived of wool raw materials from Britain, to ruin. Textile manufacturing then became Britain’s top exporting industry, and it provided the majority of the export earnings to finance a large quantity of import of food and raw materials that fed the Industrial Revolution.
Indeed, by implementing ISI Henry VII and his successors in the House of Tudor had transformed Britain from a relatively poor country into the wealthy Britain which would become the British Empire. By 1860 Britain produced 20% of world’s manufacturing output, and in 1870 it accounted for 46% of world trade in manufactured goods (For a comparison, China as at 2007 produces only around 17% of world manufacturing output, even though everything seems to be made in China). It was only then – 84 years since the publication of Wealth of Nations, after British industries had become mature, and when Britain was at their economic prime – that Britain finally implemented free trade policies.
Britain had long preached free trade and tried to force it to the world, in the same manner as the Washington Consensus are presently doing, even way before themselves implement it. But once they finally implement free trade, more pressurr was given to the world and especially to the US to adopt free trade policies, in which Ulysses Grant – a Civil War hero and US President in 1868-1876 – famously remarked that “within 200 years, when America has gotten out of protection all that it can offer, it too will adopt free trade.” The US did finally adopt free trade after World War II, but they did so after US’ industries were already matured (analogically speaking, as if the industries are already a grown man with a college degree, and no longer a fragile baby needed nurture and care from his parents) and its supremacy was unchallenged.
However, Ha-Joon Chang remarks “the US has never practised free trade to the same degree as Britain did during its free trade period (1860 to 1932), [as] it has never had a zero-tariff regime like Britain.” Moreover, despite lowering its tariffs the US government still uses non-tariff protectionist measures, namely R&D subsidy. Between 1950s and mid-1990s US federal government funding for R&D accounted for 50-70%, way above the average 20% implemented by “big government” countries like Korea and Japan, ensuring US’ technological lead in key industries such as life sciences, aerospace, semiconductors, computers and the internet.
Nevertheless, despite still using protectionism, just like Britain in 1860s the US then began to preach about free trade and forced it to the world, for their trade benefit, only this time they did so ever successfully through the Washington Consensus and the Dollar Hegemony.
At the end of World War II, South East Asian countries such as Indonesia and Thailand, and East Asian countries like South Korea and Taiwan were similarly poor. But today South Korea and Taiwan have a GDP per capita of around $20,000 while Indonesia and Thailand report GDP per capita of only $3000 and $5000 respectively. This huge wealth gap, according to Joe Studwell in his book How Asia Works, is determined by the consistent set of interventions implemented by the governments.
In the book, Studwell highlighted that there are 3 critical intervention stages that governments can implement to speed up economic development: 1. To maximise economic output from agriculture, which employs a vast majority of people in poor countries 2. To direct entrepreneurs and investments towards manufacturing, which make the most effective use of limited productive skills of the work force of a developing economy, and create value in factories by working with machines that can be easily purchased on the world market 3. To intervene the financial sectors to channel their capital on intensive small scale agriculture and on manufacturing development.
After World War II the success stories of East Asian countries of Japan, Korea, Taiwan and China were all thanks to the full implementation of all of these stages. First, they radically restructured their agriculture sector as a highly-labour intensive household farming, which, despite only generate tiny gains per person employed, make use of all available labour and pushes up yield and output to the highest possible levels. Then East Asian governments focused their modernisation efforts on manufacturing, and further enhanced their technological upgrading through subsidies that were only given to firms based on certain standard of export performance, which along with export discipline had created the pace of industrialisation to a level never been seen before. And finally, East Asian countries made their financial systems slaves to these two reforms. As a result, these interventions have produced the quickest progressions from poverty to wealth that the world has ever seen in East Asia.
Among these East Asian countries, the fastest growing story was South Korea. As described in the book 13 Bankers, since the wreckage of the Korean War in the 1950s South Korea had managed to turn their country around from a country poorer than India into an economic powerhouse where they became a member of Organization for Economic Cooperation and Development (OECD), the club of the advanced industrialised countries, by early 1990s. In the process they managed to dramatically reduce poverty, increase income per capital by eightfold, achieve universal literacy and tremendously successful in closing the technology gap. South Korean government also ran highly efficient steel factories (a counter argument that denies Chicago School’s assumption that governments aren’t capable of running an enterprise), while its conglomerates such as Samsung, Daewoo and Hyundai were equally successful in producing goods known all over the world.
By contrast, South East Asian countries started off with the same ambitions and equal endowments after the end of World War II, but have not followed the same policies, resulted a fast growth for a period of time but with unsustainable progress. By the 1980s as their population significantly growing, the governments in South East Asia conducted an economic reform and replaced their ISI policy with Export Oriented Industrialisation (EOI) policy, where they shifted their economic focus to labour-intensive manufacturing with comparative advantage of cheap labour.
Just like South Korea the South East Asian countries also implemented protectionist policies and planned their path to liberalisation slowly and carefully. As described by Naomi Klein in The Shock Doctrine and Joseph Stiglitz in Globalization and its Discontents, they kept vital sectors like energy and transportation in the hand of the government, they prohibit foreigners to own land and buying out national companies, they also had high import tariff barrier and blocked many imports from North America, Europe and Japan, as they built up their own domestic market. As in the Washington Consensus model, trade was important, but the focus was more to enhance exports not removing barriers for imports. Trade was eventually liberalised, but only after the fundamentals were strong for the local companies. In other words, these were economic success story mirroring what Britain did under the House of Tudor and what the US did in the late 19th century, and almost none of the model that the Washington Consensus were preaching.
However, just like in many other low-income countries in the past half-century, the economic development was dominated by a small group of elitist with personal ties to the ruling family, which traded business favours with political support and financing. According to Joe Studwell in his other book the Asian Godfathers this system are identified as “crony capitalist” in the Philippines, “Pariah capitalist” in Thailand, “Ali Baba operations” in Malaysia where businesses fronted by the more ethnically accepted Malays (Ali) but actually run by Chinese (Baba), and “Cukong operations” in Indonesia, in which a Cukong is a person described as politically beholden for his commercial success and had to pay politicians and military for their share of the success.
Despite having different names, their activities were all the same: with the so-called Godfathers as the beneficiaries, carefully-planned privatisations were conducted without tenders and deregulation merely substituted state monopolies with cartels of Godfathers. Hence, the performance-determined subsidies imposed by the East Asian countries was not implemented by South East Asian governments, but instead protectionism measures were channelled to the politically-connected and not necessarily the best manufacturing firms that meet the minimum standards, a fatal flaw that prevent them to nurture globally-competitive companies.
Furthermore, with the exclusive relationship with the President/Prime Minister and his family, these Godfathers built mega factories, won concessions to construction works, gained monopoly access to raw materials and received leniency on regulations while alienating their competitors. But perhaps most crucially, especially in Indonesia where the practice was rampant, these Godfathers founded many banks that stored a growing domestic savings rate, which, as a proportion of GDP, the growing savings rate can be as high as 30% in Hong Kong and Indonesia and more than 45% in Singapore. As a benchmark, in the mid 1960s savings rate in South East Asia was at par with Latin America, but by early 1990s it was 20% higher, thanks to the rise of manufacturing jobs that allure people to enter the labour force and earn wages, and thus allow more people to save an increasing proportion of their income.
With a complete disregard on the 3rd stage of intervention on financial sector (that channels funding only to the best firms for the agriculture and manufacturing reforms), these banks then lend most of their funds back to related Godfathers’ businesses. This inefficient form of manufacturing reform led a Japanese economist Yoshihara Kunio to warn in the 1980s that South East Asian countries risked to becoming a “technology-less” developing nations, which was what exactly happened when their investment funds dried up in mid 1990s.
Nevertheless, between 1986 and 1995, with their currencies pegged to the undervalued US dollar, South East Asia was in cloud nine, with the average export growth rose by 4-10% per year, and with average GDP growth of 8-10% a year in Indonesia, Malaysia and Thailand, compared with 6-8% in the period after 1960. In Thailand alone exports jumped from $9 billion in 1986 to $57 billion in 1995, while manufacturing’s share of exports in Malaysia increased from 12% in 1970 to 74% in 1993. This success story was lauded as an Asian Miracle, and earned them the nickname of the Asian Tigers.
Moreover, in this booming period the lack of government efficiency in nurturing export discipline and channelling funding to firms that meet the export standard was somewhat compensated by the huge flows of FDI that went into South East Asia. Among those who came to set up an FDI in these countries, Japanese companies were the biggest investors in the region, which implemented a system of division of labour with South East Asia undertook the manufacturing part of their system. As mentioned before, as the Japanese economy undergone a massive bubble, the effect of the great Japanese bubble also spilled to South East Asia as demand from Japan for finished goods kept on rising, thus became one of the driving forces of the phenomenal economic growth enjoyed by the Asian Tigers.
However, judging an economic progress by growth rate alone had proven to be misleading, as Brazil had managed to grow more than 7% a year in the 1960s and 1970s only to crumbled after the Latin American debt crisis in early 1980s. The sudden collapse of the Brazilian economy exposed the bitter truth that too much of Brazil’s earlier growth had been generated from debt that did not channelled into a more productive and competitive economy. With this realisation, the growth of the Asian Tigers under the crony capitalism environment can be considered fragile, although unlike Brazil South East Asia was not flushed with debts. But this, as we shall see, will soon change.
With the Asian Miracle in full effect, Western and Japanese banks and corporations increasingly demand more than just access of FDI for low-cost manufacturing in the region, and desired the access to the booming consumer markets and the right to acquire the best of South East Asian corporations. Various pressures were thrown to the South East Asian governments to open up their controlled financial markets and to free capital flows in the interest of “level playing fields” as well as easing regulation for foreign capital lending.
The argument for “level playing field” was first mentioned by US president Ronald Reagan, where in the Uruguay round of General Agreement on Tariff and Trade (GATT) in 1986 he called for “new and more liberal agreements with our trading partners – agreement under which they would fully open their markets and treat American products as they treat their own.” Understandably, developing countries resisted at the time, and thus the GATT trade talks that started in the Uruguayan city of Punta del Este in 1986 stalled until the talk in Marrakech in 1994. The concluding result of this trade talks was the transformation of GATT into the World Trade Organisation (WTO), an organisation that became part of the Washington Consensus.
Critical to the new WTO was the adoption of the principle of a ‘single undertaking’, which required all members to sign up to all agreement. While in GATT countries could pick and choose the agreements that they want and did not want, in the ‘single undertaking’ principle all members (except for the poorest countries) had to conform by the same rules, where, true to neoliberalism principles, all of the members had to reduce tariffs, give up import quotas, give up export subsidies and also abolish most domestic subsidies.
The ‘single undertaking’ policy might look fair at first, but it actually favour developed countries at the expense of developing countries. For example, as described by Ha-Joon Chang, WTO requires all countries to reduce tariff quite substantially in proportional terms, but this means that in absolute terms developing countries will ended up reducing their tariffs a lot more than developed countries since they started off having higher tariff in the first place. For instance, before the WTO agreement India’s average tariff rate was 71% and after WTO they were required to cut around 55% of tariffs down to 32%. Similarly, the US tariffs also cut by 55%, but it was a cut from 7% down to only 3%. If translated to money, an imported goods to India that formerly cost $171 would now only cost $132 – a fall of 23% in consumer price that would dramatically alter consumer behaviour. Meanwhile in the US a $107 worth of imported goods would have only fallen to $103, a price difference of 4%, which most consumers will hardly notice.
In addition, although developed countries have low ‘average’ tariffs, they tend to disproportionately protect products that developing countries export, such as textile and garment. This means that developing countries will still face higher tariffs when exporting to developed countries. As Oxfam report highlighted “the overall import tax rate for the USA is 1.6%. That rate rises steeply for a large number of developing countries: average import taxes range from around four per cent for India and Peru, to seven per cent for Nicaragua, and as much as 14-15 per cent for Bangladesh, Cambodia and Nepal.” As a result, in 2002 India paid more tariffs to the US than Britain did, even though Indian economy was less than one-third that of Britain, while Bangladesh paid nearly as much tariffs to the US as France, although the size of its economy was only 3% that of France.
In the mid 1990s, under pressure from the IMF and the newly created WTO acting on behalf of the banks and corporations, the Asian Tigers eventually agreed to split the difference to create a ‘level playing field’: they would maintain the protectionist model, but would lift barriers to their financial sectors and allow a surge of currency trading, paper investing and overseas borrowing by local businesses.
Consequently, this gave the Tigers’ economies further exposure towards the vagaries of global market. With their respective currencies pegged to US dollar, as their respective central banks maintained high interest rates their currency peg to the US dollar meant that at the same value of currency local businesses can access cheaper funds from lower interest rates environment such as in the US and Japan. As a result, with the newly eased regulation for cross-border borrowing, local businesses began to borrow heavily from foreign banks (with the ratio of private-sector-debt to total-national-debt increased from 12.6% in 1980 and 29% in 1990, to a whopping 81% by 1998) and thus flooded their respective countries with foreign dollars, which made way to luxury real estate, local stock markets and other assets, creating the environment for speculative bubble.
The businesses got more incentives to borrow from US banks in the first half of the 1990s when Fed Chairman Alan Greenspan cut US interest rates from 9% in May 1989 to 5.75% by July 1991 to then-historical-low of 3% in September 1992 where he controversially held them for the next 15 months. In addition, the rate cut also effectively devalued the price of US dollar and made US exports cheaper, thus, with currency peg to the dollar, the Tigers’ exports also improved accordingly.
However, the effects of the rate cut on the Tigers’ economy were by all means fortunate consequences. Alan Greenspan cut interest rates to fight off recession caused by the Savings & Loans crisis, the spectacular ending for the great financial deregulation of the 1980s and its subsequent decade of greed. The crisis was rooted in 1982 when the Reagan administration deregulated Savings & Loans companies and effectively allowed them to make risky investments using their depositors’ money, which contributed to the stock market boom of the 1980s. However, by the end of the decade hundreds of these Savings & Loans companies had failed, and between 1985 and 1992 more than 2000 banks collapse, hundreds of people were arrested for fraud and more than $100 billion eventually spent to bailout the financial system.
One of the worse cases of fraud was conducted by Charles Keating, who in 1985 – when the federal regulators began to investigate him – paid an economist $40,000 to defend him and wrote a letter to the regulators praising Keating’s sound business plans and expertise, and concluded that he saw no risk in how Keating invest his customers’ money. The economist that Keating hired was Alan Greenspan, and Charles keating was found guilty and went to prison shortly afterwards.
It was in this context that Alan Greenspan – since then appointed as the Fed’s Chairman by Reagan in 1987 – cut interest rates from 9% in May 1989 to 3% in September 1992, which also affect interest rates across the board. Consequently, Greenspan’s rate cuts caused rates drop for bank savings, corporate bonds, convertible bonds and T-bills, while the rate cut also provided investors with cheap money to invest in higher yielding investments in stocks. Investors then were given a simple choice: stick with the declining yield of the bond market or participate in the rising yield of the stock market. Hence, according to the book Greenspan’s Bubble, the aggressive rate cut by Greenspan had massively over stimulate the stock markets, and lay the foundation for the stock market mania of the 1990s and particularly the hype over the new trend of tech stocks, which created what became known as the Dot.com Bubble.
Meanwhile, in late 1989 Japan’s Finance Ministry tried to stop their ever expanding bubble by sharply raised interest rates. But the action backfired as the bursting of the bubble ironically became the very trigger to the inevitable crash of the stock market (a long continuous crash like the dot.com crash rather than like the October 1987 one day crash), with many of their banks suddenly loaded with bad debts. The crash then followed by overall debt crisis, where a budget surplus of 2.4% in 1991 turned into a deficit of -4.3% by 1996 and -10% later on by 1998, with the national debt to GDP ratio reaching 100%. Consequently, Japanese government had to bailout banks and inject massive fund to corporations seen as too big to fail, which practically made these corporations zombie corporations, and marked the 1990s as Japan’s Lost Decade.
In the midst of this chaos, the Japanese government implemented a near zero-interest-rate policy to stimulate the economy (a practice also implemented by Fed chairman Ben Bernanke to stimulate the US economy since the 2008 crash). The ultra-low Japanese interest rates encouraged a practice called carry trade, i.e. investors borrowing the cheap yen and invest it in other places that give higher return, such as the high-yielding investments like US tech stocks thus also played a significant role in creating the dot com bubble. While in return these surging bubble economies created a robust demand for Japanese goods, where ultra-low interest rates subsequently made yen to weaken, and thus making Japanese exports cheaper once again.
This low Japanese interest-rate became a blessing in disguise for South East Asian borrowers, as it provided cheap Japanese money that were borrowed heavily by local Tiger businesses, thus also played a significant role in creating the Asian Miracle bubble. With the entire Tigers’ currencies pegged to the US dollar, and with huge presence of Japanese FDI in the region for their export manufacturing sector as well as heavy borrowings from Japanese banks, the USD/JPY rate became the key determining factor for the fate of South East Asian economy. For example, when the yen was strong (and the dollar is weak, hence the local currency is cheap) the textile, electronics, automotive and petrochemical exports that Japanese corporations manufactured in South East Asia were more lucratively priced for export.
Hence in the early 1990s when Alan Greenspan cut interest rates, the Tigers’ economies not only enjoying their peg to the weakened dollar but also the strengthening of yen, where the corporations exporting its good to Japan made more profits. But this also raised a serious question, what will happen if the USD/JPY rate shifted to stronger dollar/weaker yen? Not surprisingly nobody commented on this anomaly, as it was in a good period. But it wasn’t long until this shift occurred.
The first sign of trouble appeared in January 1994 in the Japanese bond market. With their economy already in the Lost Decade, the yield in 10-year Japanese government bond had plunged to a historic low of 3%. But then, bond buying in Japanese credit market ran out of steam, with some investors moved from bonds into stocks in a possible speculation of an economic recovery, with bond yield unexpectedly jumped to 3.4%. Some big US investment banks that had bought heavily into the Japanese market suddenly found themselves unable to cut their bonds exposure, as there was no willing buyers, and thus were forced to dump their US Treasury holdings to cover their losses in Japan.
By that time, the euro currency project had gathered political steam and was on the process of becoming a single currency by 1999 and with notes and coins to begin circulation by 2002. As the euro project was on the process of converging various currencies and bonds towards a single currency and interest rates, a type of trade called convergence trade became the dominant theme in European foreign exchange and fixed income market. Convergence trade works by taking long positions on currencies and bonds that will rise in value towards the single euro, such as weaker economies of Spain and Italy, and taking short positions on currencies and bonds that will decrease in value towards the single euro, such as stronger economies of Germany and France.
However, in practice, to hedge their long European government bonds positions from currency depreciation, many US hedge funds, banks and other financial institutions did not actually short the stronger euro zone currencies and bonds such as German mark or French franc, but instead they shorted the Japanese yen. According to Tom Steffanci, head of Fidelity Investments’ bond operations, investors figured that with Japan in their Lost Decade the yen was due for a sharp drop against the dollar, and the profits that they might earn from shorting the yen would far exceed what they could make by hedging their bonds in the issuing countries.
But then after a continuous trade frictions especially since the late 1980s, trade talks between US president Bill Clinton and Japanese prime minister Morihiro Hosokawa collapse, with the US immediately imposing trade sanctions on Japan. While the sudden jump in Japanese bond’s yield to 3.4% prompted investors to dump their US Treasury holdings, the trade friction caused the yen to soar close to 100 to the dollar and unravelled currency traders’ hedging positions. This in return, prompted them to start selling their hedging bets in long European bonds positions that were already disturbed by European trade frictions and the bundesbank’s reluctance to slash German interest rates due to high inflation in their country as an effect of West-East German unification.
And then came the biggest blow that triggered the bond market rout. In February 1994 Fed Chairman Alan Greenspan raised the overnight US interest from 3% to 3.25%, which surprised the market, and began a series of rate hikes that ended the era of easy money in the early 1990s. It was a surprise move that caught the market off guard because it was implemented in the face of buoyant economy, with the US economy had recovered from the S&L recession, real GDP grew at an annual rate of 4.1% the highest growth rate since 1984, inflation dropped to only 2.6% the lowest since 1986, while unemployment rate declined to 6.7% by January 1994.
Greenspan reasoning was with the economy booming he became concerned about a potential increase in inflation. Hence to prevent the economy from being overheated and to slow the economy down to a sustainable growth rate Greenspan raised interest rates 7 times from 3.25% in February 1994 to 6% by February 1995.
Date (Interest Rate): 4 Feb 1994 (3.25%). 22 Mar 1994 (3.50%). 18 Apr 1994 (3.75%). 17 May 1994 (4.25%). 16 Aug 1994 (4.75%). 15 Nov 1994 (5.50%). 1 Feb 1995 (6.00%)
Given the sizeable leveraged positions that had been built up in the low interest rates environment in the early 1990s, this unforeseen trend reversal subsequently create a great bond market massacre, where global bond traders were caught in rate miscalculation and trapped in inverse effect of the falling market. Richard Noble, then a bond strategist at Salomon Brothers, commented “leveraged players said they could not afford to be in a falling market and that was the trigger for the sell-off.”
3 months after the first hike, the 10-year US Treasury notes yield moved from 5.87% to 7.11%, while European bonds also began to unravel. The sell-off was further compounded as leveraged positions were unwound and margins were called, created a vicious cycle of forced selling. Caught in the middle of bond and currency losses, investors started dumping whatever they could to keep the margin calls at bay, which mean dumping their European bonds, high-yielding Latin debt and US Treasuries. “They’re all scrambling to get liquid,” said Chicago Board of Trade Chairman Patrick H. Arbor, “this thing is of cascading proportions.”
This, as a consequence, caused long-term interest rate to soar and put further pressure on bond positions. 30-year US Treasury rates rose from 6.2% at the beginning of the year to 7.75% in mid-September, with Fortune magazine estimated that more than $600 billion has been wiped off the value of the US bonds. Worldwide decline in bond values have also erased around $1.5 trillion, with economies like England and Italy, who are still in the aftermath of a recession, and former Soviet East European countries face the threat of rising long-term interest rates.
Moreover, the global bond rout also spread to the derivatives market where companies such as P&G and Gibson Greetings suffered major losses as their hedging positions went against them. And by December 1994 Orange County, California, the wealthiest county in the US at the time, filed for bankruptcy as interest rate derivative structure imploded, and became the biggest municipal bankruptcy in recorded US history, which subsequently extended the effect of Greenspan’s surprise rate hike to a meltdown in the municipal bond market.
Furthermore, the first 10 months of 1994 where Greenspan increased the fed funds rate by 83% from 3% at the beginning of the year to 5.5% by November 1994, also saw the value of US dollar increased in value by 15%. And this steep rise made it difficult for countries to maintain its currency peg to the dollar, especially for Mexico.
1994 was presidential election year for Mexico and the incumbent president Carlos Salinas de Gortari – whom was in the last term of his sexenio (6-year administration) – implemented a high spending splurge amounted to 7% of GDP current account deficit to create a temporary and artificial period of low inflation and prosperous high growth, to boost his party’s chance of winning the election. To finance the spending splurge Salinas issued a tesobonos, a short-term (90+ days) dual-currency treasury bond that paid redemption in Mexican pesos but paid the USD/peso currency rate at maturity.
During the election campaign, presidential candidate Luis Donaldo Colosio was assassinated in March 1994 and the assassination further deepening Mexico’s political risk especially after an uprising broke in Chiapas since January. The uprising in the southern Mexican state of Chiapas began on 1 January 1994, on the same day the North American Free Trade Agreement (NAFTA) came into effect. The uprising was conducted by the Zapatista Army of National Liberation (EZLN), a group inspired by Emiliano Zapata’s revolution of 1910-1919, whom was fighting for the preserverance of Article 27 in the Mexican constitution, in which Indian communal land holdings were protected from sale or privatisation.
Under NAFTA, however, with trade liberalisation installed between Canada-US-Mexico, Article 27 was considered as a barrier for investment, hence Indian farmers would be threatened with the loss of their remaining lands, with the passage of NAFTA allowed corporations to buy their sacred land and use it to produce exports. This also put a strain on local merchants and farmers who had to compete with multinational corporations. Moreover, on the other hand local industry would also be destroyed as cheap imports (substitutes) from US and Canada would flood the liberalised and unprotected Mexican market. Hence, on the same day NAFTA was passed, EZLN in effect came out against trade liberalisation and attack the local and national government in protest.
These attacks, alongside the assassination of Luis Donaldo Collosio and a crisis of confidence on the rotten banking sector have made the country risk premium on Mexican bonds high. And with their peso pegged to the dollar, the higher risk premium gave pressure to the fixed exchange rate, while Mexico lacked the sufficient amount of foreign reserve to maintain the currency peg level in the increasingly high US interest rate. Hence, when Greenspan hiked the interest rates the Mexican government had no other option than to devalue the peso, and this action prompted investors to cash out from the country and thus further raising the risk premium.
This forced the Mexican government to take action, either by raising their interest rates and choke its own economic growth or let their currency further dwindle and risk capital outflow. The government settled on a poor mix of the two, with the central bank approving an immediate 12.7% devaluation in the peso. Hence the inevitable happens, on 20 December 1994 the Mexican peso crashed. Without the central bank’s support, the peso collapse through its trading band, dropping from 3.46 pesos to 3.92 pesos to the dollar in just 2 minutes. And in the space of 1 week, under a floating regime, the peso crashed from 4 pesos to 7.2 pesos to the dollar. The Mexican stock market also collapse alongside the currency, and panic spread to Mexico’s South American neighbours and created a crash that was to be known since as the Tequila Effect.
With the global bond massacre and the Tequila Effect were in full downward effect, the international mood became anxious. And before long panic also broke out to foreign exchanges market and stock markets in Asia, especially after the US dollar appreciated by more than 50% between April 1995 and January 1997. Due to their own respective currency peg towards the US dollars, South East Asian currencies also appreciated, and thus slowly eroded their competitive advantage and gave a serious threat towards the managed exchange rates systems.
By this point, the structures of South East Asian economies were too fragile, with ever expanding current account deficits. And while the switch towards a stronger dollar / weaker yen made these countries’ exports uncompetitive and can no longer deliver surpluses that would compensate for their domestic weaknesses, the rise of mighty China as a serious competitor for low-cost manufacturing states after Deng Xiao Ping’s reform in late 1980s – which once again emulated the economic formula used by the likes of Britain, the US and Japan – gave the biggest blow to date.
And then towards the middle of 1997, in response of global financial pressure, Japanese banks were finally forced to increase their reserve requirements, something that they previously managed to avoid, and in response these banks became less incline to roll over short-term debts. For many South East Asian businesses that have borrowed heavily from Japanese banks since the liberalisation of cross-border borrowing, this drying up of liquidity – compounded by a sudden rally in yen in May 1997 – was a recipe for disaster. They suddenly have to pay up their dollar-denominated debts using the income that they generated in their local currencies, with dollar getting more expensive by the day, thus became the 2nd determining factor after US rate hikes that trigger the Asian Market Crash.
With the threat of liquidity dry out, many Western banks then became afraid to roll over debts to South East Asian companies, in a fear of default. And their decision to back off became a self-fulfilling prophecy that made the defaults inevitable.
To make matter worse, with Japanese liquidity dry out and the continuous rise on the value of US dollar, speculative attacks became frequent on South East Asian currencies, with speculators believe that currency devaluation will eventually take place, considering the alarmingly low foreign exchange reserve that these central banks have left to support their currency peg. This is where the likes of George Soros and Julian Robertson stepped in and gave pressure to the dollar peg, with them believing that the central banks would eventually forfeited from the pressure, un-peg their currencies to the dollar and let it devalue to a devastating effect.
In summer 1997 the speculators’ prophecy came true. By June market pressure on the currency peg was so big that the Thai central bank almost ran out of foreign exchange reserves, and inevitably on 2 July they finally admit defeat and gave up the dollar peg altogether and let the baht to float. The currency devaluation news triggered more panic and dropped the value of the baht even more by -20% against US dollar, and spread a panic-selling pressure on other South East Asian currencies.
Foreign fund managers then wanted to get out from the local stock markets as quickly as possible, and crashing the stock and bond markets by doing so. Foreign banks tried to limit their exposure by calling in their short-term loans, while in response the local borrowers were then scrambling to buy US dollars to cover their borrowing positions, which add fuel to the fire and led to systemic sell-off pressure for these currencies. Within the next 3 months the dollar peg in Indonesian rupiah, Malaysian ringgit and Philippine peso will all follow suit the Thai baht and be abandoned, with Indonesian rupiah – where local corporations had foreign exchange borrowings up to $80 billion versus central bank forex reserve of only $20 billion – being the hardest hit.
Just like in the collapse of the British pound in 1992, currency speculators like George Soros kept on shorting the South East Asian currencies, which prompted Malaysian Prime Minister Mahathir Mohamad to publicly blame Soros as the main cause of the crash in an annual IMF meeting on September. However, an IMF inquiry after the crisis found little evidence that hedge funds and other leveraged investors had a significant role on the currency collapse in the region. In fact, as we shall see, capital flight was to be a much bigger problem than currency speculation, which the IMF themselves had a huge role in creating it.
On the brink of a complete economic meltdown the 3 most hard-hit countries of Indonesia, Thailand and South Korea all then seek desperate help to the IMF, with Thailand eventually granted a $17 billion loan, Indonesia with $40 billion and South Korea with a then-record $57 billion. However, in an unmistakably Washington Consensus manner the IMF grant these loans with the conditions of wide ranging Chicago School reforms, under the name of Structural Adjustment Program (SAP).
In Thailand, in exchange for IMF loan the Thai government had to impose murderous tax hikes and close down 56 ailing finance companies, thus destroying 30,000 while-collar jobs. In South Korea the government was forced to expedite financial reforms and open its financial market, on top of mass layoffs required to get the IMF loans. In Indonesia SAP included postponing 15 major government-subsidised projects, eliminating the government’s monopolies and state subsidies (which instantly increased prices for basic food staples by as high as 80%), and closing 16 financially insolvent banks.
Moreover, according to Joe Studwell in Asian Godfathers, in the special case of Indonesia, when president Soeharto signed the first letter of intent with the IMF for the loan the condition imposed to Indonesia included the dismantling of his network of godfather cronies, which marked the beginning of the end game for Soeharto. This included the dismantling of Bob Hasan’s Plywood cartel, Liem Sioe Liong’s Bogasari flour mining monopoly, and even Soeharto’s own son Tommy Soeharto’s clove import monopoly for kretek cigarettes.
Among the 16 insolvent banks forced to shut down, Bambang Soeharto’s bank Andromeda and a bank controlled by Soeharto’s half-brother Probosutedjo were amongst them. This was a fundamental shift for Indonesia, because for 3 decades Soeharto had managed to create a relatively stable economy that heavily rely on his flow of corruption and his network of cronies. Thus it is not an exaggeration to say that he WAS the economy, and therefore the dismantling of his corrupt regime made the economic foundation of the country even more fragile.
To make matter worse, the IMF bailout money provided the Asian Tigers with the means to temporarily sustain their exchange rate at an unsustainable level. And the Godfathers took advantage of this situation to convert their money into dollars at the favourable exchange rate, and whisk them out from the country, thus created a capital flight, most of which went to neighbouring tax havens of Singapore and Hong Kong. To illustrate the big capital flight problem, on the onset of the crisis $200 billion of Indonesian capital was in Singapore alone, compared with Indonesian GDP of $350 billion.
In addition, once it got in the governments’ hand, the majority of the IMF bailout money were mostly channelled back to the ailing Godfather entities and to bribe several central bank officials and parliament members that stand within the money flow. In Indonesia, where the practice was most scandalous, this was to be known as the BLBI scandal, where 48 failing banks were privatised by the government and then re-sold back to the owners at a much cheaper price. This scandal involved many of the high ranking government officials and parliament members, which are still powerful and politically-connected across all parties, and thus making them immune from prosecution till this day.
Nevertheless, these problems were not a concern for IMF, as according to Joseph Stiglitz in his book Globalization and its Discontents, from IMF’s point of view much of the money was intended to enable the countries to provide dollars to local banks and companies that had borrowed from Western banks, to repay their loans. In other words, it was more of a bailout to the Western banks – so the lenders did not have to face the full consequences of making bad loans – than to help the national economy.
Upon the intensification of the crisis in 1998, SAP also dictated the Indonesian central bank to raise interest rates up to a whopping 65%, thus destroying weak banks and already struggling domestic corporations. The IMF Managing Director Michel Camdessus then argued that to reverse currency depreciation the currency has to be more attractive, hence their move of raising the interest rates to “restore confidence in the currency” regardless of the catastrophic consequences. This differ greatly from the thinking of John Maynard Keynes when he masterminded the birth of IMF, in which the organisation was created to exactly deal with these kind of economic crises with the formula of increasing government spending, propping up major companies and LOWERING interest rates (something that the US is currently conducting to tackle its economic problems).
Not surprisingly, the IMF crisis management met by fierce protests from the people, with anti-IMF and anti-neoliberalism protests began to appear in the streets of Jakarta, Bangkok and Seoul, and eventually gave way to political changes in the region. Thai Prime Minister General Chavalit Yongchaiyudh was the first victim of political reform caused by the crisis as he was forced to resign amid pressure from many political movements. 1 month later, in a Presidential election South Korean President Kim Young Sam was defeated by Kim Dae Jung, the first ever President elected from the opposition party.
In Indonesia political reformation began with student protests demanding the resignation of President Soeharto after he was “re-elected” on 11 March 1998 for the 7th time and appointed the most bizarre cabinet members, including appointing Soeharto’s crony Bob Hasan as the minister of trade and industry and Soeharto’s daughter Tutut Soeharto as minister for social services. The protest was further enhanced when on 5 May Soeharto implemented an IMF-imposed fuel-subsidy-cut, which spiked the fuel price in the country by 70% and transportation fares by similar amount. But none of the protests made a significant impact on Soeharto’s grip on power, that is until on 14 May 1998 the national troops open fire to a peaceful protest in a university and killed 6 students, which sparked a full-blown riot and looting across the country, a deadly event that eventually forced Soeharto to finally resign on 20 May 1998 after 32 years in power.
In retrospect, the IMF money not only helped the likes of Soeharto to safeguard their cronies’ wealth, but it also bailed out the Western lenders, leaving the overall economy in a more fragile state. Moreover, through SAP the IMF actually exacerbated the downturns with the excessive rapid financial and capital market liberalisation and government deregulations, which became one of the main causes that drag the region into a full-blown crisis. But this was by all means not a naïve mistake in IMF’s part, as the dismantling of the last remaining barriers towards free market was indeed deliberate.
As soon as the crisis began, a surprising number of financial professionals and political leaders stepped forward with a unified message: don’t help Asia. For instance, Milton Friedman made a rare appearance on CNN and declared that he oppose any kind of bailout, and opined that the market should be left to correct itself. This view was echoed by George Shultz, a board member at the brokerage house Charles Schwab and Friedman’s colleague at the right-wing Hoover Institution, and also echoed by Walter Wriston, a former head of Citibank and Friedman’s old friend. Even Bill Clinton downplayed the economic catastrophe as “a few little glitches in the road” at an APEC summit on November 1997.
Their intentions were clear. Alan Greenspan stated that the crisis is “a very dramatic event towards a consensus of the type of market system which we have in this country” and that it is “likely to accelerate the dismantling in many Asian countries of the remnants of a system with large elements of government-directed investment.” Robert J. Pelosky, a global strategist at Morgan Stanley, then elaborates this view by saying “what we need now in Asia is more bad news. Bad news is needed to keep stimulating the adjustment process.” Pelosky reasoned that if the crisis was left to worsen, all local companies would eventually have to go bankrupt or sell themselves at rock bottom prices to foreign companies, both of which are beneficial for the likes of Morgan Stanley. And that was exactly what they did.
Together with Treasury Secretary Robert Rubin and Deputy Treasury Secretary Larry Summers, Alan Greenspan then ensured that his prophecy will come true, by pushing forward their neoliberal agenda both directly and indirectly through the IMF in the form of SAP. As a result, according to Naomi Klein in her book the Shock Doctrine, with the SAP exaggerated the crisis and thus making Asian companies more desperate to sell at lower prices, pretty much everything in Asia was now up for sale.
The Wall Street Journal captured the moment by running an article with the headline of “Wall Street Scavenging in Asia-Pacific” two months after the IMF conclude its final agreement with South Korea. Coca-cola bought a South Korean packaging company. Nissan bought one of Indonesia’s largest car companies. General Electric obtained a controlling stake in South Korea’s LG. Motorola obtained full control over South Korea’s Appeal Telecom. While Britain’s Powergen bought LG Energy, an electricity-and-gas company.
Furthermore, Carlyle became a major shareholder in one of South Korea’s largest banks, as well as snapping up Daewoo’s telecom division and Ssangyong Information and Communication (one of South Korea’s largest high-tech firms). JP Morgan obtained a stake in Kia Motors. AIG bought Bangkok Investment for a fraction of its worth. Merrill Lynch bought Thailand’s largest securities firm and Japan’s Yamaichi Securities. While Travelers Group and Salomon Smith Barney bought several companies in South Korea including their largest textile companies. Interestingly, at the time the chair of Salomon Smith Barney’s International Advisory Board, which provides advice on mergers and acquisitions to the company, was Donald Rumsfeld, with Dick Cheney was also on the board.
Former US undersecretary of commerce, Jeffrey Garten, predicted that when the IMF was finished “there is going to be a significantly different Asia, and it will be an Asia in which American firms have achieved much deeper penetration, much greater access.” And he was right, although it was not only American firms that have achieved much deeper penetration and greater access. Bechtel got the contract to privatise the water and systems in eastern Manila and to build an oil refinery in Sulawesi, Indonesia. British Telecom obtained a large stake in Malaysia’s and South Korea’s postal service. Indonesia’s water systems were split between France’s Lyonnaise des Eaux and Britain’s Thames Water. Bell Canada purchased a piece of South Korea’s telecom Hansol. While New York-based energy giant Sithe obtained a large stake in Cogeneration, Thailand’s public gas company.
Other big multinational companies who got a piece of the Asian distressed companies included Nestle, Hewlett-Packard, Seagram’s, Interbrew and Novartis, Ericsson, Tesco and Carefour. These mergers and acquisitions by foreign multinational corporations (MNCs) were intended to snap up the entire apparatus, workforce, customer base and brand value that were built over decades, only to be break apart, downsized, or even completely shut down in order to eliminate competition for these MNCs’ imports. Samsung was broken up and sold for parts: General Electric got its lighting division, SC Johnson & Son its pharmaceutical arm, while Volvo got its heavy industry division. A few years later, Daewoo’s once mighty car manufacturing division, which was valued at $6 billion, was sold off to GM for just $400 million.
All in all, in the span of 20 months, there were approximately 186 big mergers and acquisitions of companies in Indonesia, Thailand, Malaysia, the Philippines and South Korea. And the trio of Alan Greenspan, Robert Rubin and Larry Summers were praised as some kind of a cult hero, and were immortalised on the cover of Time magazine as the “Committee to Save the World.”
To be continued in Part 3: the conclusion
For a book written by an Indonesian historian, who earned his PhD on history from Yale, it doesn’t disappoints. The most important aspect of this book got to be the author’s serious argument that there are many falsehoods and oversimplification in the writings of Indonesian history, and that its versions change with every new regime, in the name of ideology.
For example, he argued that Dutch colonial period taught in school, which lasted for 350 years, is a myth. Dutch’s annexation of Bali, for example, only happened in early 1900s and was more of an occupation rather than colonialism. When the Dutch arrived in Bantam in 1596, it wasn’t a straight-on colonialism but the Dutch arrived in the busy and vibrant port as just one of the many foreign merchants along side the English, Portuguese, Chinese, Arabs, Indians, and many other “Indonesian foreigners” from different parts of the archipelago.
Just like any other tales in history, oftentimes there’s no clear distinction between the heroes and the bad guys, and this book tries to portray that rather than demonised the Dutch for nationalism’s sake and burying the complicated truth. With this approach, he wrote the main subjects of the book through a critical historian’s point of view, and he clearly understands inside out the complex political, economic and social structure of Javanese society in the late 1800s. He then elaborates in detail on how the Dutch play out the local politics to divide and eventually conquer Java, ruining the courts, left the princes in dire poverty, made the people despise the royalty, and became the successor of the kingdom of Mataram.
However, it’s noteworthy that Mataram attacked the Dutch first in Batavia, not because Mataram tried to get rid of the colonial power but because Mataram wanted to expand their kingdom. And they actually became allies against maritime powers like Banten (trading rivals for Batavia and rivals for power and influence for Mataram), with Mataram supplied Batavia with rice and labour in return for financial and political support from the Dutch. The Dutch only began to interfere in Mataram’s and interior of Java’s politics in 1678, when the kingdom of Mataram faced an internal conflict (described in detail in the book, as complicated as any stories from the Roman Empire).
The book also covers how the Dutch eventually run their Indonesian colony, with its day-to-day business, social structures, rules, regulations, and the segregation of different ethic and religious groups down to their strict dress code to prevent unity among the colonised subjects (the roots of apartheid). It also has a special chapter that emphasise the vital (but difficult) role of the Chinese-Indonesian in building the Indonesian capitalism system. And provided the most detailed context on what created wealthy people and at the same time what caused rampant corruption in the VOC, which strikingly resemble the politically-connected business environment in present-day Indonesia.
All in all it is a masterpiece, a serious body of work, that challenges us to unlearn most of the doctrines we learned in school and began to see our history in a more objective way. And it is a book that explains the root cause of events that has shaped the Dutch colony, and provide us with better understanding on contemporary Indonesia. A must read for anyone interested in Indonesia and in how colonies are run. Highly recommended.
France in 1789-99 was a revolution. Russia in 1917 was a revolution. So was Cuba in 1959, as Che Guevara famously remarked that a revolution without guns is impossible. Yes Mahatma Gandhi heroically got rid of the British Empire from his homeland without guns and instead used the act of non-violence, but India’s independence, just like the end of Apartheid in South Africa, was not considered as a revolution.
The end of the Soviet Union, despite rooted in revolutions in the member states, was only done after Mikhail Gorbachev had no other option than to dissolve the country, not through the ousting of Gorbachev by the people.
Therefore, as much as I hugely admire the 14 million non-violent revolutioners marching for the ousting of Morsi, what happened in Egypt on 3rd of July 2013 was not a revolution but a military coup, in a similar fashion like what happened in Turkey in 1971. This is an important distinction, because it would lead us to ask the right question: what’s behind the military’s agenda?
The #Jan25 movement that brought brave Egyptian sons and daughters to the street had finally succeeded only after the military stepped up and overthrew Hosni Mubarak in a similar military coup. To their credit, the so-called Supreme Court of the Armed Forces (SCAF) did not cling to power like Musharraf did in Pakistan 1999, but instead proceeded with a presidential election, just like what Thailand’s military did in 2006.
Mohamed Morsi from the Muslim Brotherhood then rose to power, which governed Egypt into a deep economic problems with youth unemployment at 25% and job creation almost non-existent. Inflation soared and there are constant shortages of fuel, with frequent power cuts. Meanwhile, murder rate up by 130%, robberies by 350% and kidnapping by 145%. And on top of that women rights and freedom for press were in danger. Hence, massive protests inevitably exploded on the 1 year anniversary of Morsi’s presidency. Thus, the question becomes: by ousting Morsi is SCAF acting on behalf of the people and for the better of the country?
Let’s not forget that Egypt still receives $1.5bn from the US in a form of “military and economic aid.” And it is not a secret that the Muslim Brotherhood have made the US, Israel, Saudi and some EU countries nervous, especially Egypt’s immediate neighbour Israel, where Morsi have said that the country’s peace treaty with Israel will be “reviewed.” By contrast Mubarak was a sure ally for the US for 30 years to be the bodyguard for Israel in the region, who rose to power by being installed by the CIA after the assassination of Anwar Sadat.
With Mubarak ousted and replaced by someone from the Muslim Brotherhood, the US and Israel went into panic mode! But do you seriously think a country who gives $1.5bn annually to Egypt doesn’t have any say? After all there’s no such thing as a free lunch, and the US have got rid of democratically-elected leaders that didn’t comply to US Interest in many occasions, such as Mohammed Mossadegh in Iran, Salvador Allende in Chile and Jocobo Arbenz in Guatemala, to name a few.
So let me repeat the question again: by ousting Morsi is SCAF really acting on behalf of the people, or just piggy backing the power of the people but more acting on behalf of the interest and agendas of the US and its allies? The answer to this question, I believe, is the vital key to understand where Egypt is heading to.
Hugh Sinclair is a former quant trader in London, a heterodox economist, and he once driven a motorcycle from the tip of Alaska down to the edge of Argentina and landed in the Guinness Book of Records. An interesting guy. When he switched to microfinance (first in Mexico, then Mozambique, then 51 other countries) he experienced, saw first hand, and questioned the greed, corruption, manipulation and all the dark side of the industry, which made him ended up in a Dutch court battle, and eventually prompted him to write this book. And what a huge eye opener.
Like many other people, I first learned about the existence of microfinance when Muhammad Yunus won the Nobel Peace Prize. And when I read Muhammad Yunus’ book “Banker to the Poor” I thought, what a great concept! Instead of giving the poor fish, help them to provide the means to buy their own fishing tools, then they’ll eat for a lifetime. I even opened a Kiva account, though I have deleted it ever since I read this book.
It didn’t cross my mind that 90% of loans actually used for consumption and thus trapped the poor in debt spiral. Nor did I realise that microfinance can be treated as some kind of ponzi scheme, or used as yet another financial tool to generate lucrative profit for the investors but screwing the poor through charging murderous interest rates. It never occurred to me that Muhammad Yunus is just a pawn, a PR icon groomed for the sector, though Sinclair had kept it ambiguous throughout the book. But even Muhammad Yunus himself once commented “I never imagined that one day microcredit would give rise to its own breed of loan sharks.”
The result of this plunder can be seen in the Human Development Index that is mentioned in the book, and it does makes me wonder. If Nicaragua’s and Bangladesh’s rankings slipped down after the introduction of microfinance why do we have the microfinance sector at all? It led to suicides, abductions and forced prostitutions in India, while the microfinance institutions and microfinance funds keep on reaping profits. Moreover, the book sometimes give the impression that the big microfinance players such as BlueOrchard, responsAbility, Triple Jump, Deutsche Bank, Calvert Foundation, and Kiva closely resemble the untouchable too-big-to-fail investment banks. And their silence or cover up over their investment in Nigerian microfinance institution called LAPO (the central focus of the book) represent only the tip of the iceberg.
But perhaps asking why do we have the microfinance sector at all is like asking why do we have the global financial market at all, after the too-big-to-fail Wall Street banks have spectacularly damaged the world economy. Just because a lot of bad apples are corrupting the sector, doesn’t mean the sector itself is a bad concept. And to his credit Sinclair does provide the best-case scenario on how the microfinance sector should operate, and even give examples of those who do work out very well such as the ones he encountered in Mongolia.
All in all, in this very well-researched book Sinclair managed to explain every single functionality of the microfinance sector within the amazing stories he has to tell, making it a well-rounded book to learn all about the real microfinance sector. 5 stars!
This book reads like a John Pilger or Naomi Klein book, written by an investigative journalist who are personal friends with the likes of Noam Chomsky and Eduardo Galeano, and who has travelled to 145 countries covering numerous wars and conflicts. Passionate, brutally honest, and bitter at times; I can’t think of another way to describe Andre Vltchek rather than an “angry John Pilger.”
To write this book, Vltchek seems to have spoken with all the right scholars, historians and leaders. This including the late former Indonesian president Gus Dur, several ministers and ex-ministers, the late author Pramoedya Ananta Toer and scholars from other countries such as British anthropologist Andrew Beatty from Cambridge University, not to mention the numerous Indonesian historians and frustrated journalists that seems to finally have a proper platform to express their thoughts.
The book provides the same historical background of Indonesia as a “model pupil” and the blueprint for US plunders throughout the world that are inline with what John Pilger, Naomi Klein and John Perkins wrote, but he dig much deeper and understandably paints a more detailed picture about Indonesia (as the main focus of the book) than the 3 authors. He went even further than any other books I know on the “extreme capitalism” installed in Indonesia, discussing at length the Indonesian brand of “law and justice”, the state of the “independent” media, and even analysing the many hot stories happening in Indonesia for the past decades, from Edy Tansil to Lapindo mudflow to Cikeusik massacre. And all are neatly discussed under several sub-headings.
However, his portrayal of Indonesia is so negative and so one-sided (it’s a messed-up place with no hope!), sometimes it gets very insulting and makes me wonder how he differentiate hard facts with his own negative opinion, and where he draw the line between telling the truth and just being plain obnoxious? For example, in numerous occasions he portray the Indonesian word “bule” as a highly offensive word towards white people (equal to n**ger), and goes to length to show that he’s offended, while in reality the word is only a generalisation to describe white people regardless of nationality.
Furthermore, he dedicate 1 full chapter on Islam in Indonesia by focusing on the rise of extremists, which is solid, but he then declared that secularism has died in Indonesia and implies that religious harmony is no longer exist, as if the state of religious conflict in Indonesia is like in Nigeria or Northern Ireland, which is far from the truth. He also criticise Indonesia as not having a culture, whilst failing to mention the fact that Indonesia is home to 300 ethnic groups and up to 742 languages that are VERY rich with cultures.
Nevertheless, in the end of the day after I put down the book, the amount of truth that I have learned from it can somewhat make up for the negative stereotype written by Vltchek. All in all, read this book with careful discretion, best to read it with prior knowledge of what the beautiful country is all about and then proceeds to read the dark version of Indonesia that Vltchek has uncovered. It is the kind of reality check that Indonesians urgently need to know, which makes it the best book I’ve ever read about the truth of the country (though the selection is very limited). No wonder they don’t sell it here in Indonesia.
The US accuses them to be anti-American, while the Arabs accuse them to be pro-American. Israel claims that they are negatively bias at the Israeli government, while the Palestinians complain about their apologetic tone on Israel. The US forces bombed their bureau in Afghanistan during the Afghan invasion, while some of their journalists have been kidnapped and tortured. It is the only network that Osama Bin Laden trusts, while reluctantly the US is also relying to (and almost desperately trying to control) the network.
Their groundbreaking talk shows changed the socio-cultural context of the Arab world, breaking barriers, and discussing things previously considered taboo. Offended and feeling fundamentally being attacked, a lot of highlighted Arab countries threaten to cut diplomatic ties with Qatar, the owner of the network, over and over again. Such is the boldness and the magnitude of the influence Al Jazeera has, in providing nothing but the truth and the balanced arguments that comes with it.
This is a very essential book on the fascinating story of Al Jazeera, from the difficulties of starting the network to their struggles and near-collapse experiences, from their first ever media triumph to breaking the ranks of the world’s top global media.
Written between the story of Al Jazeera, lies a very important knowledge in understanding the vital role of media in a war, the politics in the battle to win the hearts and minds of the viewers, and the very rough journey Al Jazeera had to go through in defending their principle of providing a fair chance to every side, and ultimately providing the truth. This is easily one of the best books I’ve ever read.