Economics

Economics Globalization International Trade The International Economy

COVID-19: Globalism’s Achilles Heel

As COVID-19 spreads around the world, everyday life for hundreds of millions has been drastically altered. Full-scale quarantines have been imposed on countries hit hardest by the outbreak. Italy is under lockdown as its northern region faces sharp challenges in limiting new infections. In the United States, schools have closed, travel disrupted, and mass fear illustrated in the clearing of grocery store shelves.

Perhaps the most consequential disruption – aside from the direct human toll the virus has had – is the economic volatility felt across global markets. In America, ominous signs have pointed to a looming recession. Markets have hit bear territory, meaning securities prices have fallen more than 20% from recent highs. On Monday, March 16th, the Dow Jones Industrial Average saw its steepest single day drop in 33 years. Pessimism and panic have taken hold of economic sentiment. People under quarantine and social distancing measures are less inclined to go out and purchase goods or services. Broad layoffs throughout the job market have begun while the Trump administration seeks nearly $850 billion in stimulus to keep the United States economy afloat.

One of the greatest threats the pandemic has imposed on the global economy is its sheer impact on supply chains. 75% of companies in the U.S. have had their supply chains disrupted as a result of the virus.

Decades of globalization and interconnecting economies have developed a system in which finished products are not made in any single place. Their parts and manufacturing span oceans and continents. The manufacturing of a single Apple IPhone Touch ID button requires over 12,000 miles of movement to reach the place where the iPhone is assembled. All-in-all, “the iPhone has a transportation footprint at least as great as a 240,000-mile trip to the moon, and most or all of the way back.”

It is difficult to fathom the level of complexity that goes into the production of simple products many of us take for granted on a daily basis – at least until COVID-19 hit. Today the world is facing an inflection point surrounding globalization. It has uncovered both its limits and weaknesses.

The unprecedented movement of goods and people has cultivated the perfect environment for a virus which began in a seafood and livestock market in central China to wreak havoc on the world. In a mere three months it has spread to virtually every part of the globe and tanked markets.

It has also demonstrated to governments and its leaders advocating for a turn inwards that isolation is not always a feasible option. What happens in one place inevitably affects another. Companies which operate under a just-in-time (JIT) inventory system, a strategy that opts to maximize efficiency by limiting inventory, face existential threats to their supply of goods. Apple, which produces many of its products under this scheme, is now set to miss its forecast for the second quarter and is facing a sharp constraint in its ability to produce the IPhone.

The more tangible impact that the outbreak will have on globalization is difficult to determine as of now since the spread of COVID-19 has only begun. From a political level, Philippe Legrain of Foreign Policy Magazine has argued that the “outbreak has been a gift to nativist nationalists and protectionists, and it is likely to have a long-term impact on the free movement of people and goods.”

Political leaders espousing these ideas may end up with the ammunition and legitimacy they need to put the final nail in the coffin in their fight against globalization. The world could come out of this more divided and uncooperative than it was before.

This prospective reality is frightening because it is a response to a problem requiring the exact opposite. Forces outside of the control of politicians or their rhetoric are in fact integrating the world to greater degrees as time moves forward. Advancements in technology and infrastructure have enabled more people than ever to travel around the globe. Developing nations are increasingly integrating into the world as hubs of business and travel. Businesses and governments would find it infeasible to truly de-integrate based on the reality that modern globalization has enabled companies to produce products better, faster, and cheaper via the construction of highly efficient supply chains. Reversing this course of direction would be a daunting and nearly impossible task. Globalization is not just some policy choice, it is a consequence of advancements in human ingenuity. In reality, governments ought to be coming out of this realizing the need to invest more in domestic and global preventive measures/capacities. Cooperation and information sharing should become the centerpiece to fighting and preventing future outbreaks. The construction of a more robust global health regime bolstered by true initiative and sustained investment in domestic measures are key to tackling future pandemics.

Although people may feel inclined to see globalization as a threat to humanity in the face of COVID-19, the world continues to change in ways that make turning inwards and shutting the door virtually impossible. People must come to terms with the fact that civilization faces many challenges ahead that do not respect borders. If anything, our current predicament shows us all that many times the only way forward is by uniting and cooperating in the face of shared adversity. The reality is that pandemics transcend many of our common conceptions of national interest and multilateralism. Preventing and combating them requires an immense level of global cooperation and an outgrowth from the daily trivialities that plague interactions between political entities, both domestically and globally. They are one of the starkest delineations of a “global challenge.” Transnational threats to humanity must demonstrate to us all that, in the end, we are in it together.

March 17, 2020 1 comment

Economics Globalization The International Economy United States

McDonaldization and its Discontents

written by Katie Jones

In the summer of 2019, McDonald’s debuted a special international menu with four delicious fan favorites from abroad in participating U.S. franchises. Stop and appreciate what an oddity this is. How can a brand so quintessentially and aggressively American return home with a menu that is unapologetically foreign? However, this product promotion presents an opportunity to reframe our perception of the corporation— and rightfully so. McDonald’s characterization as absurdly American may be an oversimplification of what is actually a complex and shifting identity. Yes, McDonald’s is classically viewed as, and has historically functioned as, an agent of America and Americanization both at home and abroad, but what exactly about America McDonald’s is conveying and how this message has evolved with time is still up for debate.

When McDonald’s first opened in San Bernardino in 1948, it was the first restaurant to apply the assembly line production model to food service, and in doing so changed the American dining experience forever. McDonald’s expanded rapidly by serving reliable, delicious, standardized and commodified food and as such came to represent innovation and progress, in a significant sense mirroring the larger success and prosperity of the United States throughout the 1950s and 1960s. McDonald’s then exploited this ultra-American image they had been instrumental in creating, in their “United Tastes of Europe” Campaign; the corporation’s first big push into the international market in 1970s.

In 1990, McDonald’s made another big step, this time into the communist U.S.S.R.. The employees at the Moscow McDonald’s were trained in the traditional American style of hospitality, and eventually even told to smile less to fit in better with local customs. Nonetheless the Soviets loved McDonalds, it softened their views towards America after lifetimes of Anti-U.S. propaganda. This is not the first, or by any means the last example of this phenomenon either.

Unfailingly, in countries with limited contact or ideas about the United States, the initial impression left by McDonald’s has ultimately been very positive. The dining experience legitimately promotes lovable liberal values like democracy and accessibility in small yet significant ways. McDonald’s champions democracy by responding to the local tastes and preferences of customers around the world. For example, in India McDonald’s does not serve beef and offers many vegetarian options in order to accommodate Hindu preferences. In France, McDonald’s has acclimatized to the French cafe model by making restaurant seating areas more warm and inviting. Cultural modifications like these demonstrate to consumers that their thoughts-and purchases- will affect change, which can be a revolutionary notion for the world’s politically oppressed. McDonald’s additionally encourages accessibility in the equalitarian nature of the dining experience. No matter your individual economic status you’ll get the same big mac- it’s an inherently populist meal. McDonald’s promotes ideas of efficiency and standardization through the quick service assembly line model, and American congeniality in their aforementioned ‘service with a smile.’

McDonald’s ability to capture and perpetuate these American values, is in some sense a precursor to a larger acceptance of western values and ideals. Herein lies the essential purpose of soft power: to introduce America abroad in a lighthearted and inviting way that may ease relations and create a sphere of influence. McDonald’s, along with other leviathan corporations like Coca-Cola, are tasked as a sort of trojan horse for American cultural imperialism. They distill ideas, distinct but similar, that together culminate into brand America, a stepping stone on the way to capitalism and globalization.

This process may sound overbearing or invasive, and it may be, yet aspects of it are also mutually advantageous. Consider economist Thomas Friedman’s Golden Arches Theory of Conflict Prevention: that no two countries with McDonald’s will ever go to war. The theory is imperfect, but it’s logic is infallible.When two countries both participate in the free market they inherently have a degree of economic integration and a shared interest in prosperity that greatly discourages conflict. And it is not just America that engages in this system. Other nations are quick to grasp at the opportunity for economic growth. According to former McDonald’s International Chief James Cantalupo there “wasn’t a country that they haven’t gotten inquires from;” illustrating the inflated extent to which McDonald’s represents America abroad.

Association with American identity has been very advantageous for the corporation’s growth, but it is a double edged sword. McDonald’s was attacked, rather than the American embassy, by anti-American interventionism protestors in Chile. McDonald’s was removed from Iran during the Islamic Revolution of 1979. All three McDonald’s locations in Crimea were shut down following Russian annexation in 2014, and the list does not end there. These rejections are clear cut. They are based on fundamental disagreements with American foreign policy. Yet there is another more nuanced faction of dissent against McDonald’s and what it represents in America as well as other western nations. These viewpoints signal a shift in the way people want their countries to behave and to be viewed.

In 1999, McDonald’s Millau was disassembled as a statement in the “fight against free trade global capitalism.” The movement was led by French politician José Bové, who along with other anti-globalists were disenchanted with what they viewed as the homogenization of food and culture. Yet the closing of other McDonald’s locations in France has met resistance amid claims that they provided jobs and, more importantly, a sense of community for immigrants. This perhaps reveals the dissonance between those with privilege that speak for workers and the actual material needs of workers. For many socially disenfranchised groups, including the homeless, elderly, and low income, McDonald’s provides a refuge in a society that is leaving them behind. McDonald’s offers seemingly insignificant services that are important to people, such as affordable coffee, clean bathrooms, access to electrical outlets and permittance of patrons to stay for extended periods of time. It is an accessibility that is taken for granted by more privileged groups. The disdain that some in such groups show to McDonald’s is at least to an extent exemplative of the marginalization of poor narratives rather than simply the fight for economic and cultural justice. This is not an exoneration of McDonald’s by any means but an attempt to bring awareness to a portion of the prejudice that clouds the conversation.

There are valid criticisms. The critiques of the corporation reflect larger issues facing the United States such as unchecked corporate power, environmental degradation, and quality of life. These criticisms have been effective at forcing the company to make positive changes such as more sustainable meat production and the introduction of healthier menu items. However, the substance and validity of these claims, or lack thereof, is ultimately irrelevant. What is important is that they have affected McDonald’s reputation and thereby representation of America. McDonald’s reputation has been continuously tarnished and there is growing disillusionment with the brand. The same could be said for the U.S., that things have grown more politically and socially contentious. That less people believe in the feasibility of the American dream. And while some of these changes are undoubtedly negative, maybe a little loss of ego can be seen positively, as “America too” rather than “America first.”

McDonald’s importation of foreign menu items into the United States represents a stark shift: from cultural imperialism to syncretism. A shift from American domination in international relations, to many nodes of power radiating from Beijing to Rio to Sydney. McDonald’s is an exemplary corporation in this regard because it has adapted to the times. It responds to customer desires and changing markets, whether that means giving an organic option or introducing food delivery. It is also willing to adapt and learn from other places. Like taking the European six to eight week menu cycle for products. Maybe this is what we as Americans should learn too. To be proud, to promote what we do best, but also to listen, learn, and not be afraid of change.

February 17, 2020 0 comment

Economics

There’s No Positive Side to Negative Interest Rates

written by Katie Jones

Every day, week, month, and year, the money in your bank account loses purchasing power due to inflation. This means that if in 2019 you had $100 dollars to spend on goods, in 2020 you would need $101.90 dollars to buy the same amount of goods. This difference may seem insignificant but it becomes much more relevant when you apply it to large sums or consider that inflation compounds annually. But wait, you may ask, isn’t this canceled out by the interest that you earn on your money in the bank? The average interest rate paid by banks on savings accounts in the United States is 0.09%, which unfortunately does not make up for the 1.9% you lose with inflation (The Fed target is 2%- read more about why a little inflation is optimal here). Yet, soon this abysmal 0.09% interest rate might not look too bad– in light of potential negative interest rates.

A negative interest rate entails an inversion of the banking system as we understand it today. Instead of banks paying savers interest to hold their money, they will charge them. And instead of banks charging interest to borrowers, they will pay them to borrow money. The logic behind this is that it will encourage borrowing and discourage saving, which will stimulate economic activity through increased investment.

How Did We Get to This Point?

Negative interest rates are introduced to kickstart very depressed economies that have too much saving and not enough spending. This “savings glut,” as it is often termed, seems to be the new normal for advanced economies like Western Europe, Japan, and to a lesser extent the United States— for several reasons. First, aging populations mean that there’s more saving and investment in retirement funds, as well as, in some countries, a decrease in the working age population. Additionally, wages are not keeping pace with economic growth, meaning that there’s a poor distribution of money in the economy. Instead of money being in the hands of lower and middle income consumers, who have high propensities to consume, money is increasingly concentrated in corporate profits and with high income consumers, who have relatively low propensities to consume. Essentially, rising income inequality is depressing demand and thereby contributing to the need for negative interest rates.

Countries like Switzerland and Japan are also attracted to negative interest rates to pull down the value of their currencies. Lower interest rates are linked to currency depreciation which is necessary to counteract their current and historical overvaluations. The Swiss Franc and Japanese Yen have become overvalued because of their reputation as “safe haven” currencies, meaning that they are safe and stable currencies to hold during economic downturns. This damages their respective economies because high currency valuations make exports more expensive, hurting their competitiveness on the international market.

What’s the Status of Negative Interest Rates Today?

Intuitively, the economics and reasoning behind negative interest rates checks out; yet, nations that have already instituted these measures have seen unexpected results materialize. Denmark, Sweden, Switzerland, the Eurozone, and Japan implemented negative interest rates between the period of 2012 and 2015. Yet despite this radical step, they still suffer from stagnation and are now discovering that reversing these rates is near impossible; all of the aforementioned nations still have sub-zero rates. The only reason there hasn’t been a more complete financial breakdown in these foreign economies is their heavy investments into higher yielding U.S. securities. In turn, these investments have appreciated the value of the U.S. dollar, making exports less competitive and increasing the trade deficit. The trade deficit is one of the primary reasons why President Trump has been consistently pressuring the U.S. central bank, the Federal Reserve, to push rates down to zero or even negative. Additionally, there is a controversial idea that the astronomical U.S. debt of $22 trillion dollars could be refinanced at a negative interest rate.

The Federal Reserve has yet to cave to the demands of President Trump and is able to maintain this position because of its political independence. Despite three rate cuts in 2019, the Fed has indicated that they will be holding rates constant at 1.50- 1.75% in 2020. However, prevailing conditions in the global economy may force the Fed to push rates down. Worldwide, interest rates today are at record lows despite great economic growth and prosperity. Unfortunately though, this means that when we eventually do enter another recession, and actually require the stimulus that low rates provide, the only way to produce it will be for interest rates to go negative.

What Does This Mean for Consumers?

So far, negative interest rates have primarily affected banks. The negative interest rates imposed by central banks apply to the rate banks earn (or are charged) when they hold excess funds with a central bank or make interbank loans. Banks being charged to hold money at the central bank does not seem necessarily detrimental to consumers as long as they are still paying interest to account holders. However, many banks that have had to do this, have had their profits choked, and as a result have passed on some of the costs to account holders.

Banks in Switzerland, Denmark, and the Euro zone started by charging wealthy savers negative interest, like a quasi tax, to keep their money in savings and checking accounts. At first, banks like Jyske Bank in Denmark were charging individuals with over the equivalent of 1.1 million USD interest on their savings, then this was halved by UBS Switzerland’s charges beginning at the equivalent of $560,000 USD and account balances have continued to creep down from there. Today, at German Bank Volksbank Fürstenfeldbruck, negative interest applies to all accounts, of any balance. As a result, there have been calls for the German government to guarantee that anyone with 100,000 Euros (the equivalent of approximately $110,000 USD) or less in their account be protected from negative rates. In all fairness, most banks that charge negative interest do not begin until a balance of at least 100,000 Euros. However, considering the cost of living, this balance is still far too low and disproportionately disadvantages the middle class and retirees.

What can an individual account holder do to protect their savings? Most people’s first reaction is to withdraw funds from the bank and hold the money in physical cash. Mass withdraws are a distinct possibility from the policy and will likely prevent interest rates from becoming significantly negative (below -.5% or -.75%). However, holding money in physical cash or other commodities like precious metals has low security and gives savers a low yield.

Theoretical Investment Ideas

The question that remains is how to possibly find at least moderately yielding assets or even possibly take advantage of negative interest rates. Based on a rudimentary understanding of economics and finance, I propose these theories for navigating the brave new world of negative interest. Please note I do not accept liability for any losses that may be incurred.

First, let’s talk about where not to invest. All the traditional avenues of investment, while still great options, are currently overheated as people search for stability. The stock and real estate markets are both popularly understood to be overvalued at the moment, yet if you believe that we are in a “rational bubble” this may still be a good investment. The bond market on the other hand is showing historically low returns. The German government recently released 30-year negative yielding bonds, which if held to maturity guarantee to pay back less than they were purchased for. However if you are extremely pessimistic about the market, these bonds may be a good investment for resale, under the logic that assets will have even lower yields in the future.

Yet, there are some investments that may not only remain viable, but actually improve with negative interest rates. One of these investments entails trading in the foreign exchange market. Money can be made in the forex market when there is dissonance between interest rates and exchange rates, which according to the idea of interest parity must be symmetrical to prevent arbitrage. However, in actuality, interest parity does not always hold, making arbitrage possible. For example, investors have historically made profit by taking out a very low interest rate loan in Japanese Yen, converting the Yen into a higher yielding currency such as the Australian Dollar, and lending money in a high rate loan with Australian Dollars. Then the investor can pay back the loan with the same principle and the profit will be the difference of interest rates. Between April and June of 2018 this Yen “carry trade” earned investors a profit of 4.5%. Now imagine how these profits could grow even further if hypothetically negative interest rates on loans were extended to everyday borrowers. Instead of earning the difference between the rates, one would earn the sum. However, currency speculation does have ethical implications, as when conducted on a large scale it can lead to recession. For example, in the Black Wednesday crisis of 1992, George Soros profited $1 billion dollars, but at the expense of the British economy, which entered into a painful recession.

Another good avenue for investment could be shorting bank stocks. As aforementioned many banks are struggling to pay both interest to the central bank and to account holders. This is of course especially pertinent in European banks where negative interest rates are already in effect (in opposition to U.S. banks, where negative interest is still only hypothetical). It especially affects banks whose sole operation is European, while banks like the Spanish Santander still see growth in their Latin American operation. In my opinion, the best stock to short is pitiful giant Deutsche Bank, which has shown sorry financials for the past decade and limited signs of improvement. Deutsche Bank, along with other struggling European banks, are beginning to close branches and conduct layoffs, with even more cutbacks likely to follow as rates continue to drop.

Finally, one can choose to opt out of the Western banking system altogether, and this does not just include living off the grid or buying Bitcoin. An increasingly attractive alternative is Islamic finance. Islamic finance is banking in accordance with Sharia law, which means no interest can be solicited. Alternatively to interest, there is a flat sum charged or a “profit/risk sharing” scheme established. As such, the Islamic market cannot be affected by negative interest rates in the same way as Western markets, and thereby may be becoming a more profitable investment. Moreover, the Islamic world is not facing the same economic issues as the West, and in many cases has opposing problems. For example, inflation and unemployment in Islamic markets is typically high, similar to the United States in the 1970s, but the opposite of the United States today. Islamic nations are additionally not facing the same underlying demographic issues as the West, which further discourages the implementation of negative charges. However, the global markets are very integrated so ruling out a negative flat sum is not possible, especially for currencies that are pegged to the U.S. dollar, which greatly complicates matters. Yet, the entire issue, through all the aforementioned investment options, reinforce that emerging markets are likely the global way forward.

Closing Thoughts

The best possible solution to negative interest rates would be for governments to work on the underlying problems that originally necessitated them. How this should be achieved is politically divisive, but popular ideas include increasing immigration to mitigate aging populations and increasing corporate taxes to fund increased government spending, which would then increase demand across the economy. Negative interest rates were originally imposed as an emergency measure- what does it say about our economic future that this state of emergency may be permanent?

February 6, 2020 0 comment

Economics

Is King Cash Facing a Coup D’etat?

written by Katie Jones

Data privacy today is of greater importance and cognizance than it has ever been in the past. Among American consumers there is mounting distrust of both the government and corporations with respect to invasive data collection methods and unethical data uses. Most of the conversation thus far has revolved around the internet, social media, and giants in this realm such as Facebook and Google. And while they are well deserving of critique, why is the same skepticism not applied to Visa and Mastercard? Credit card behemoths and banks have the ability to collect, analyze, and monetize data on every purchase ever made— with the exception of cash transactions. Cash provides an essential consumer protection from the government and corporations as an inherent data opt-out. Yet, it is slowly losing relevance and in effect being phased out by newer technologies. The preservation of cash as an option to consumers is of paramount importance despite its shortcomings. Cash’s eventual disappearance will cause far-reaching and insidious consequences, which we can already witness starting to take hold abroad.

The-For-and-Against-Cash

The US dollar, in both its physical and digital iterations, is the most important world currency. In recent years, as money demand has grown alongside the digitization of many transactions, the question has been raised – where is our physical currency being held? About 5% is in bank reserves, another 5% is in American households, and an unbelievable 90% of U.S. currency remains unaccounted for. Much of it is held in foreign countries; estimates range from 50% to 70% of U.S. paper currency is abroad. Most of this is kept in hundreds as a store of value by Russian oligarchs, international drug kingpins, and of course other countries’ treasury reserves. However, this ghost currency is also floating around in America’s informal economy; from illegal activity to under the table employment. Many critics argue against physical currency precisely because of its use in illegal activities. Harvard macroeconomist Kenneth Rogoff postulates that a transfer to a cashless society would hurt the economy in the short term because of a decrease in demand for illegal products and services. However, he also states that if just a fraction of the lost tax revenue from unreported activities (which could make up as much as 7-10% of overall GDP) were recovered, this would more than make up the difference. But the same reason for which cash is chosen to evade the law – anonymity – it is also essential for consumers. And the use of cash for tax avoidance is not a strong enough reason to go completely digital. In fact, other theorists believe that getting rid of cash would not necessarily solve the problem. According to the UK Treasury and Home Office, cash is only the third most popular channel for money laundering, behind banks and accounting firms. Moreover, if the desire is to stop tax evasion, governments should concentrate their energy on the use of offshore financial centers, not cash.

Governments may additionally argue that the discontinuation of cash would help economic growth in other ways too. With a cash society, the movement of money is slow and expensive. Operating in cash is claimed to cost the U.S. approximately .5% of its GDP every year. This is undoubtedly an attractive reason to switch, but in the grand scheme it is unwise to sacrifice freedom for marginal revenues and growth.

It’s not just governments that find cashless society attractive though. There are certain interest groups that also see going cashless as ultimately beneficial. Small businesses, for example, argue that going cashless makes them more secure. They feel safer without the use of cash- there is no risk of money being stolen on site. However, this neglects a serious flaw with cashless economies in general: they are much more vulnerable to cyberattacks. Cyberattacks pose a risk to the stability of the entire national and even global economy long-term, but more tangibly, an immediate theft risk to consumers. Based on existing protections from banks, consumers are often at higher risk than they may realize. In digital banking, banks generally claim any transactions conducted online with an individual’s password is of their volition, so money is not replaced or refunded.

Even more pressing is that in a cashless world, there is an entire forgotten echelon of society that would be completely disenfranchised – the low income. Low income individuals, along with the elderly, homeless, recent immigrants, minors, and other groups often cannot open bank accounts and thereby could not at all participate in a cashless economy. This has to date been recognized as a significant problem and is the reason that in many U.S. cities and states there is existing legislation that mandates businesses to accept cash. However, this is not true everywhere; many countries, particularly in Europe, allow businesses to refuse cash. This could be possible too in the United States, perhaps if the Swedish model of government subsidized bank accounts for low income individuals were introduced. Regardless, the looming issues of data privacy remain.

The Consequences of Cashlessness

The most pivotal issue with a cashless society is data privacy and the preservation of anonymity. The presence of currency in general, who holds it, and who controls it, is a statement of power in itself. Cash counteracts this and acts as a public good. Since it is held in common, the power is widely dispersed throughout the economy and between consumers. There is no central point of failure or central point of control. However, governments around the world are seeking to gain control over their currency flows and have the ability to do this very effectively through digitization. This can manifest itself in one of two ways.

One is that all money must be held in bank accounts, giving banks, credit card companies, and other financial services providers, already unruly characters, an unprecedented amount of control over an individual’s personal finances. These companies work together to record purchases, share and compile information, and exploit spending patterns for targeted marketing. Take Paypal for example: they claim they are protecting user data, but their terms and conditions outline the non-associates which they may pass data onto, including Facebook, Axium, Oracle, and more. However, this option may still be more attractive than the following because there are a number of financial service providers to choose from. The competition between them can be used to drive demand for greater transparency and consumer protections. Already growing awareness over privacy issues has lead to the new Apple Card. It is unique from Visa or Mastercard in that it only shares data with credit agencies and no further partner corporations.

The second option for digitization is the government holding everyone’s money in central bank bank accounts. This would solve the issue of unbridled corporate power, and to be fair the government is generally held to relatively higher standards of transparency. However, it presents its own issues.

Governments could use their financial power to isolate certain individuals from participating in the economy, potentially for politically or socially motivated reasons, whereas this is not possible in a cash economy. Already, the U.S. government can seize funds from an individual or company bank account without even a formal conviction. This is a power that has historically been abused. During “Operation Choke Point,” in which the U.S. government claimed that it was simply cracking down on predatory lending, it also financially went after moral opponents such as the pornography, gambling, and firearms industries. Private credit card companies do this too. Many pornography providers have switched to using crypto-currencies like Bitcoin in order to avoid the excessive fees that are charged by credit card companies. Moreover, even if many are sympathetic to these quasi-sin taxes, it’s not long before they may creep into more ambiguous areas, dictated by partisanship and special interest groups.

For example, consider a future in which the government places a charge on individuals that make donations to abortion providers such as Planned Parenthood. One’s inability to make anonymous donations would threaten the existence of certain organizations and voices, arguably violating the constitutional right to privacy. This right is not explicit in the U.S. Bill of Rights but can be reasonably implied from the fourth amendment right against unreasonable search and seizure (“to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures”) and by the fifth amendment right to avoid self incrimination (“shall be compelled in any criminal case to be a witness against himself”). An even broader interpretation, such as that favored in the U.S. Supreme Court case, Citizens United v. FEC, could cite the first amendment freedom of speech as granting freedom to make anonymous donations. Considering unchecked political donations and their implications does slightly complicate this argument. However, the aim of this article is not to comment on whether or not dollar limits should be applied in political finance, or if corporations deserve the same rights as people, but to stress the importance of anonymity for citizens. Without the preservation of anonymity, of which cash is an integral part, citizens are vulnerable to corporate and governmental abuse.

Global Digital Currencies

The disappearance of cash, while seemingly not immediately relevant to the United States, is likely not a distant future. There is an ongoing international digital currency race that will only continue to gain traction at an accelerating speed. The most malicious and determined character in this race is China. China’s central bank is set to release the first digitized domestic currency in an act of financial innovation and suffocating state control. China’s new digital currency will be unique and morally questionable in that it allows the central bank to not only track the movement of money but in some cases supervise transactions. They plan to use big data analytics to seek and find money laundering. This will supposedly help to expose corruption — if you accept the presupposition that the Chinese government is not corrupt itself. The new currency, which will initially be available in banks and on the Chinese equivalent of Apple pay, Alipay, will trigger several effects upon its highly anticipated release. First, it may push Chinese consumers to switch their money into anonymous crypto-currencies like Bitcoin. This would cause a depreciation of the Yuan, benefitting the Chinese export market but harming morale. Yet, it may be stopped by the Chinese government, which has previously criticized crypto-currencies like Facebook’s Libra, stating only governments have the right to create digital currencies. The simple fact that the government would even have the ability to stop this, and further dictate which purchases consumers can make, is inherently the issue with digital currency. Moreover, when considering the Chinese are already world leaders in artificial intelligence and facial recognition, it is not hard to see that this is a further power grab. As for the worst case scenario of increasing Chinese authoritarianism— look to the Uyghurs.

The possibility of creating state run digital currencies has also attracted the interest of North Korea, Venezuela, Russia, and Iran. North Korea, a pioneer in digital crime, has already made headway in mining, crypto-jacking, and hacking exchanges in existing digital currencies. The North Korean government has already stolen over two billion dollars worth of digital currency in order to fund its weapons program. And, its own crypto-currency would give it the power to avoid U.S. sanctions to a greater extent. Iran and Russia are similarly motivated to avoid sanctions and attempt to weaken U.S. supremacy in the global financial system. The Venezuelan case on the other hand, is unique and a testament to the government’s continued mismanagement of the economy. Maduro has released a digital currency, the “petro”, whose value is linked to the value of a barrel of oil, and is claimed to provide a solution to the country’s runaway inflation issues. However, “petro” hasn’t yet been successful- it can be found almost nowhere. Some independent crypto-currencies have made headway in Venezuela, though. The crypto-currency “Dash,” for example, is now being accepted as a form of payment at select locations of Church’s Chicken in Venezuela.

There are some democratic nations working to develop digital currencies, too. Sweden, for one, is hoping to soon release the E-Korna. But, Sweden is a special case. The country already functions on a mostly cashless basis, the EU has strong data privacy laws, and the Swedish people have an unusually high degree of trust in the government and new technology. However, even given all these positives, the most important factor is that cash will still be accepted legal tender. The Swedish government even cautions that every household sets aside cash in the event of mass power failure or hacking.

Final Thoughts – Why Data Privacy is Important The increasing surveillance of our lives limits our freedom and impacts our behaviors. The way we spend says so much about who we are and what we stand for, and our financial freedom is deeply imbedded into our constitutional and human rights. Even more than that though, the effect is insidious, the growing surveillance changes how we think and how we behave. Consider the Foucauldian idea about the connection between panopticon prison and discipline within society. The design of a panopticon prison is similar to a two way mirror. There is a central guard tower surrounded by prison cells on all sides, which guards may see into, but for prisoners it is unknown if the guards are present. Since the prisoners do not know when they are being watched they are on high alert at all times. They internalize the gaze of the guards and thereby permanently change their behavior —whether or not they are actually being watched. This is the underlying idea of the surveillance state and the government’s ability to remove anonymity from money would further enhance this effect. Of course, cash represents only one small part of the overwhelming data privacy problem. Yet, it would be foolish to take for granted the mundane and to wait until it’s explicitly threatened to start paying attention. This is not a condemnation of digital currencies, but a plea to preserve cash as an option for those who would prefer to buy and sell without surveillance.

January 2, 2020 0 comment

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Asia Economics Featured Print Article Religion

New Age Yogis and the Commodification of Spirituality

written by Eden Ballard

This article was published as part of our Spring 2019 print edition, the entirety of which may be found here.

One of the most basic human instincts is to search for a sense of belonging. Often, this is found through religion; believing in a higher power or powers not only facilitates a sense of purpose in life but also helps people connect to one another. However, religion and spirituality are not as cut and dry as they used to be. The global market has had a drastic and transformative impact on belief systems for people all over the world. With religion decoupled from place, sacred things have become commodities that can be traded and adapted to accommodate various cultural demands and ultimately reflect local politics. This effect can be traced by looking at the practice of yoga, a historically spiritual practice that has been processed and transformed into a sellable good that has comfortably integrated into the global market.

A Brief History of Yoga

Today, yoga is worth up upwards of $80 billion[1]the global market as a result of classes, retreats, equipment sales, and associated products. Although its status as a commodity is fairly recent, yoga began being practiced in modern day India around 3000 BCE as a way to achieve harmony between the heart and soul on the path to divine enlightenment and provided a basis for what would stem into Buddhism and Hinduism. As the centuries have passed, yoga has traveled and evolved to fit the demands of markets around the world and now has dozens of variations. In the past, yoga emphasized mindfulness and connection through the pillars of love, kindness, and compassion. In contrast, modern yoga typically prioritizes health benefits over spiritual benefits… although some people embrace the spirituality as well. Even though this ancient practice has a relatively clear history[2], the political and spiritual components of modern yoga are strained and complex and thus, impossible to generalize.

Because of its intimate ties to religion, yoga has caused extensive discourse. The physical benefits of yoga are universally appealing to those who decide to pursue it but for some, practicing spirituality outside of their normal beliefs is unacceptable. This conflict is circumvented in several different ways including prohibiting the mindfulness and spiritual practices of yoga and focusing on it as a sport or adapting the names of the poses relative to the local cultures. These maneuvers have allowed yoga to be adapted into various markets all over the world and made into a global commodity. Pierre Bourdieu, French sociologist, anthropologist, and philosopher, called people like the ones engineering these changes “cultural specialists” and explained that they “ransack various traditions and cultures in order to produce new interpretations and uses that can be consumed.” And consumed it is. Yoga, in various forms and interpretations, is taking off around the world.

Qualifying the Spirituality of Modern Yoga Practices

In many secular places, there is an inverse relationship between the number of people practicing yoga and popularity of organized religion. People that otherwise feel disconnected from the religions they were brought up with find the filtered spirituality of western yoga to be appealing. Brigid Delaney, Senior Writer for the Guardian Australia, wrote about how “Australians are losing their religion but their craving for meaning and moral teaching appears stronger than ever.” This trend is clearly visible in North America as well where religion is on the decline[3] but the yoga industry is booming. One in five Americans[4] describe themselves as spiritual but not religious – partially due to the influence of yoga. Delaney also wrote an article[5] on her attempt at delving into the world of yoga in an effort to clear her mind and strengthen her body. She wrote, “In many respects, yoga is the perfect pastime for our age – the meditative elements give us the opportunity to find peace and stillness in a time of increasingly hectic and crowded information, the instructional bits give us moral lessons in the absence of traditional religion, while the stretchy, bendy, sweaty physical stuff is a great way of countering eight or more hours a day spent hunched over a computer.” Yoga, effectively, has helped meet the demand for connection coming from a generation of people who feel disconnected and disillusioned.

The power of modern yoga extends beyond flimsy spirituality found while stretching on plastic mats laid out on the hardwood floors of rec center classrooms. Yoga, in more secular places, tends to be a mechanism for creating community and connection, and helps people feel grounded in an incredibly turbulent world. Delaney talks about how, secretly, she wants to be one of the yoga mat toting, juice drinking, athleisure wearing yoga fanatics that “loiter in the aisles of the organic fruit and vegetable shop.” By donning leggings and slurping green drinks, these people are finding their “Neo-Tribe”[6] – which Z. Bauman explains “helps the individual gain a sense of identity and belonging through identification with a subcultural consumer group.” Basically, buying into this consumption pattern helps people feel less lonely.

Yoga Outside of the West

Although yoga is gaining popularity globally, its spiritual components don’t flourish everywhere the way they do in the west. In places that tend to have stronger conventional religious practices yoga is contentious; the spirituality of yoga is seen as incongruent with dominant religious values. In 2013 the BBC ran an article called, “Does doing yoga make you a Hindu?[7]” The underlying question being are non-Hindu religious followers being subversive by practicing yoga? Can the founding spirituality be successfully cleaved from its physical counterpart in order to make a secular activity that poses no threat to dominant local ideology? The answer is complicated. So much so that the question of whether or not yoga is religious a “vexed question[8]” in Indian politics. Orthodox Muslims believe that sun salutations go against Islamic Law as Muslims are not supposed to bend to anyone, or anything, but Allah. Alternately, the practice of yoga in Indian schools causes concern for some because the chanting “Om” during the practice is too connected to Hindu religion. As a result, many leaders have said they are okay with yoga as long as it is disassociated with religion.

Different countries have handled this question in different ways. Iran, where Sharia law is the rule of the land, yoga classes “make no overt reference to spirituality at all.[9]” To avoid what could be called “blasphemy” the emphasis is instead placed on the physical component by calling it “the sport of yoga.” Where teachers in the west tap into consumer spirituality, teachers in Iran are accredited by the Yoga Federation[10]which promotes “Unity through sport” and simply defines yoga as “a holistic health system with Indian roots stretching back 5,000 years.” Their homepage justifies their practice of yoga as a sport with a quote from B.K.S. Iyengar[11]who says that, “there is nothing wrong in holding a competition on the qualitative presentation of the yoga asanas.” He concludes by saying that yoga “should be competition on the artistic level and not on egoistic body cult.” By placing the emphasis on exhibitive competition, they deliberately neglect the spirituality that people cling to in so many other places. Simultaneously, Iyengar is bashing the imagined community that yoga is creating in the Australia and North America and thrusting it in its least flattering light as an egoistic body cult.

Some places chose to forgo working through the complexities of yoga and spirituality in favor of banning it completely. In 2008, a religious ruling in Malaysia banned the sport in five states. However, in Kuala Lumpur, the capital, physically practicing yoga is allowed as long as chanting and meditation are not. This partial acceptance is standard in other Islamic countries such as Indonesia as well. A profitable compromise that introduces a new commodity while preserving and protecting tradition.

Savasana – Wrapping It Up

Since its creation in 3000 BCE in what is now modern India, yoga has evolved and expanded to accommodate demand in cultures around the world. The religious roots of the practice have been the direct cause of discourse around the world and helped shape yoga into a variety of practices and consumable packages that are woven into the global market. The adaptation of yoga in more secular places has accommodated quasi-spiritual consumerism in places that are experiencing a sense of disconnectedness a result in the decline of religion. Alternately, yoga has been adapted as a sport with an emphasis purely on its physical components so as not to interfere with dominant religious ideology. Although modern practices typically bear little resemblance to ancient practices, the addition of spiritual or physical yoga practices have influenced consumers around the world.

[1] Technavio. “Yoga Is on the Upswing in North America.” December 4, 2015. Accessed April 27, 2019, https://blog.technavio.com/blog/yoga-upswing-north-america.

[2] Yoga Six. “A Quick Reference Guide to the History of Yoga.” March 12, 2018. Accessed April 27, 2019, https://yogasix.com/history-of-yoga/.

[3] Religion News Service. “Religion Declining in Importance for Many Americans, Especially for Millennials.” December 10, 2018. Accessed April 27, 2019, https://religionnews.com/2018/12/10/religion-declining-in-importance-for-many-americans-especially-for-millennials/.

[4] Tara Isabella Burton. “‘Spiritual but Not Religious’: Inside America’s Rapidly Growing Faith Group.” Vox, November 10, 2017. Accessed April 27, 2019, https://www.vox.com/identities/2017/11/10/16630178/study-spiritual-but-not-religious.

[5] Brigid Delaney. “The Yoga Industry Is Booming – but Does It Make You a Better Person?” The Guardian, September 17, 2017. Accessed April 27, 2019, https://www.theguardian.com/lifeandstyle/2017/sep/17/yoga-better-person-lifestyle-exercise.

[6] Russell Keat, Nigel Whiteley, and Nicholas Abercrombie. The Authority of the Consumer. Taylor & Francis, 1994.

[7] William Kremer. “Does Doing Yoga Make You a Hindu?” BBC, November 21, 2013. Accessed April 27, 2019, https://www.bbc.com/news/magazine-25006926.

[8] Shefali Anand. “Is Yoga Religious? In India, It’s a Vexed Question.” WSJ, June 9, 2015. Accessed April 27, 2019, https://blogs.wsj.com/indiarealtime/2015/06/09/is-yoga-religious-in-india-its-a-vexed-question/.

[9] William Kremer. “Does Doing Yoga Make You a Hindu?” BBC, November 21, 2013. Accessed April 27, 2019, https://www.bbc.com/news/magazine-25006926.

[10] “International Yoga Sports Federation – Directory,” Accessed April 27, 2019. https://www.iysf.org/directory/iran.

[11] “What Is Iyengar Yoga?,” Iyengar Yoga: National Association of the United States. Accessed April 27, 2019. https://iynaus.org/iyengar-yoga/about.

October 17, 2019 0 comment