Globalization

On Sunday, the New York Times published an article exposing problems with the wildly popular microfinance organization Kiva, a person-to-person lending site whose virtues Oprah Winfrey and Nicholas Kristof have extolled.

Most people thought Kiva works like this: Entrepreneurs in poor countries explain their need for a small loan on the site. Then, donors select a project they support, give an amount of their choosing, and watch the donations tally up on the page. Kiva trumpeted that "the people you see on Kiva's site are real individuals."

That was true. But it really works much differently, David Roodman of the Center for Global Development figured out. Kiva doesn't take dollars from one person and send them directly to another. All of the recipients are vetted, approved, and given loans by another organization -- then put on the site after the fact. Roodman wrote a meticulous (and ultimately complimentary) blog post debunking Kiva's story of itself and touched a nerve, ginning up thousands of comments and spurring the start-up to respond.

The problem wasn't just that Kiva misrepresented itself as a person-to-person microlender -- but that Kiva misrepresented itself as a hypertransparent organization. The information about the financial pathways was on the site, sure, but you had to dig around to find it.

Kiva has responded by changing the language on its site and clarifying the loan process. I'm happy to see it becoming more accountable and transparent, particularly as it becomes a larger organization. (Just this month, it lent its one-hundred-millionth dollar.)

But, at the end of the day, a $10 donation backstopping a pre-existing loan to a Colombian farmer doesn't seem so different to me than a $10 donation helping create a loan for that Colombian farmer. And if pooling the donated funds helps keep overhead costs down (high overhead being the main argument against person-to-person direct microlending), I'm all for that.

At the opening session of the U.S.-China Strategic and Economic Dialogue yesterday, President Obama made a point of referring to one of China's most impressive exports:

“President Hu [Jintao] and I both felt that it was important to get our relationship off to a good start,” Obama said. “Of course, as a new president and also as a basketball fan, I have learned from the words of Yao Ming, who said, ‘No matter whether you are new or an old team member, you need time to adjust to one another.’”

The ties among our people have deepened, as well, and more and more Americans of Turkish origin live and work and succeed within our borders. And as a basketball fan, I've even noticed that Hedo Turkoglu and Mehmet Okur have got some pretty good basketball games.

And as a resident of Washington, D.C., I continue to benefit from the contributions of Russians -- specifically, from Alexander Ovechkin. We're very pleased to have him in Washington, D.C.

Maybe it's just a rhetorical pleasantry, but what if this indicates a new foreign policy doctrine for the Obama era, namely: No matter a country's regime type, economic system, or foreign policy goals, as long as they are represented (well) in U.S. professional sports leagues, there is at least the basis of a productive bilateral relationship with the United States.

This augurs well for a rapproachement with Hugo Chavez's Venezuela, which has made substantial contributions to Major League Baseball -- including the manager of Obama's White Sox. Cuba could be a bit problematic, since Cuban baseball players tend to be defectors, but the country's potential baseball contribution is vast, so diplomatic progress will likely be slow but deliberate.

The U.S.-China relationship will remain at least as strong as Yao's knee, but Taiwan can at least count on Chien-Ming Wang in their bid for U.S. support.

Zaza Pachulia's new contract with the Atlanta Hawks should reassure Georgians worried about being abandoned in the Obama administration's Russian reset. Israelis worried about Obama's hard line on settlements should take heart in the recent signing of Omri Casspi by the Sacramento Kings. They may want to keep an eye on the Iranian Hamed Haddadi of the Memphis Grizzlies though, not to mention the NFL's half-Iranian T.J. Houshmanzadeh.

Kim Jong Il as well as his son and probably successor Kim Jong Un are both known to be big basketball fans. If they really want to get the U.S. to the negotiating table, perhaps what they need is not their own nuke, but their own Yao Ming. 

SAUL LOEB/AFP/Getty Images

Barack Obama's new media team at the White House is serious about reaching out to Africans in advance of Obama's July 11 speech in Accra, Ghana.

Obama will respond to questions submitted this week by text message (SMS) in a recording made sometime before his speech at the Ghanaian parliament. The tape will be released to African radio stations and other media after his speech, and the speech will also be broadcast simultaneously on African radio stations and on the internet.

The White House page with all the details is here, including the numbers Africans can use to submit their questions. Ghana, Nigeria, Kenya and South Africa have dedicated local shortcodes with longcodes available for other Africans. According to Kenya's Daily Nation, local SMS rates will be charged, and mobile users can choose to receive excerpts from the speech via SMS in French or English. 

Erik Hersman, a new media guru who blogs at White African, worked with the White House on the platform and has a great post on logistics and some of the reasoning behind the various outreach platforms. Hersman says that U.S. citizens cannot participate in the SMS platform because of cold-war era legislation on public diplomacy, but other efforts including a live chat on Facebook and a dedicated Twitter tag (#obamaghana) will try and encourage global discussion. News site allAfrica is also collecting questions for Obama.

With no glitches, this demonstration of interest in the views of Africans will probably boost Obama's global approval ratings, which already are almost double those of the United States. At Accra's tourist market, Obama t-shirts and paintings are flying off the shelves and Ghanaians are hoping for a boost in tourism after the visit.

More on Obama's decision to visit Ghana can be found in a recent post by FP editor Elizabeth Dickinson. 

SIMON MAINA/AFP/Getty Images

New U.S. employment numbers out this morning indicate things are getting worse at a less-breakneck pace. A mere 345,000 Americans lost their jobs in the month of May.

The New York Times sunnily reports that the numbers are "a welcome sign that the decline in the job market would not continue forever."

People will say this means the recession is bottoming out. They will call it a green shoot. They will glass-half-full it. Pollyannaism is Pollyannaism. 

But the report is dismal: that graph on the front web page of the New York Times shows change, not the absolute unemployment. The employment-to-population ratio is under 60 percent, the underemployment number is 16.4 percent, and unemployment is worse than the provisional numbers used the stress tests. 

Plus, a Deutsche Bank report notes, "the length of the workweek declined by 0.1 hour to 33.1 hours, which is the aggregate hour equivalent of an additional loss of about 350k jobs" -- making May look much more like April.  

Still, there are signs that even if the employment numbers in the U.S. are really bad, things worse elsewhere. Here's a fascinating graph from Stratfor:

The chart is missing a few key countries, most notably China. (Stratfor says it did not include China because its economy is too different to compare. Fair point.) Stratfor argues the recession is hitting the U.S. much more softly because "the American system is far more stable, durable and flexible than most of the other global economies, in large part thanks to the country’s geography."

It makes some sense: each country's economy grows to take advantage of its geography. Russia, with its massive oil and gas reserves, benefited from the massive surge in commodity prices through 2008; it has been hit hard since because the economy is highly dependent on that one industry. The U.S. economy is much more resource- and industry-diverse.

I wonder what Robert D. Kaplan would have to say about all of this...which countries' have advantageous geographies for downturns? Is this why Australia seems to be doing relatively well?

(h/t The Monkey Cage and Ezra Klein)

The Guardian tells the story of how Florida-resident Steve Herzfield turned to globalization in order to care for his aging parents:

[O]nce staff had been found, he could give his parents a much higher standard of care than would have been possible in the US for his father's income of $2,000 (£1,200) a month. In India that paid for their rent, a team of carers - a cook, a valet for his father, nurses to be with his mother 12 hours a day, six days a week, a physiotherapist and a masseuse - and drugs (costing a fifth of US prices), and also allowed them to put some money away.

Last year, I wrote a short piece for Net Effect's previous print incarnation on a company taking a "Priceline" approach to connect U.S. patients with hospitals in Asia and Latin America for surgery. 

The whole idea of "medical tourism" is a bit disturbing in what it says about the United States' inability to provide its citizens with affordable medical care, but the future growth of this field seems inevitable so it may be time for both the U.S. healthcare industry and government to take steps to enforce a measure of safety and accountability to this sector. 

Hat tip: Marginal Revolution

Want to get a sense of just how bad things are? Take a spin on Google Earth.

The latest issue of International Economy, edited by FP contributor David Smick, has a clever graphic showing the depth of the economic crisis, so I thought I'd share.

The above image, pulled today from Vesseltracker.com's Google Earth file, shows container ships languishing off the Singapore coast. Welcome to the  largest parking lot on Earth. International Economy explains:

The world's busiest port for container traffic, Singapore saw its year-over-year volume drop by 19.6 percent in January 2009, followed by a 19.8 percent drop in February. As of mid-March 2009, 11.3 percent of the world's shipping capacity, sat idle, a record.

It's a rough time to be an Asian tiger, or to be in the shipping business. The IMF projects that Singapore's economy will shrink significantly in 2009. Globally, bulk shipping rates have dropped more than 80 percent in the past year on weak demand, and orders for new shipping vessels are cratering. In Busan, South Korea, the fifth-largest port in the world, empty shipping containers are piling up faster than officials can manage.

"Things have really started to get bad -- laborers spend their entire day waiting for a call from the docks that they have a job," Kim Sang Cheul, a dockworker at Busan, told Bloomberg. "People spend all day staring at their phone as if staring at it can make it ring. You’re lucky if you get a call."

Green shoots? Not so much.

(For another view of Singapore's port, you can check out Vesseltracker's Microsoft Virtual Earth mashup map.)

Lots of big, depressing, IMF-related news this morning:

• The IMF released its biannual Global Financial Stability Report. The big news: the global economy may need $4.1 trillion in write-downs on around $58 trillion in assets before the crisis is over.  It estimates that the United States leads the world in ripping the bandaid off -- completing about half of necessary write-downs; European countries are lagging. Banks will take the brunt of that cost, around two-thirds. The report included European- and Japanese-originated assets for the first time.

• U.S. President Barack Obama sent a message to members of Congress, asking for them to approve a $100 billion loan to the IMF. The loan is part of, not in addition to, the money the United States promised the organization at the G-20 summit.

• Colombia became the third country to come forward and seek a $10 billion "flexible credit line" loan from the IMF, designed to insure the country's ability to meet its spending requirements.

• Look for the first two chapters of the IMF's World Economic Outlook  to be released within the next hour or so. We'll have an analysis up as soon as possible afterwards. 

Felix Salmon writes up a World Bank report on the returns a vulture fund made off of Liberia:

Liberia, with the aid of the World Bank, has been negotiating with vulture funds holding $1.2 billion of its debt. You know what vulture funds are, right? They’re evil hedge-fund types who buy up debt at pennies on the dollar, and then sue for repayment in full, with interest and penalties and everything.

Just look at the deal they drove in this case! Liberia, one of the poorest countries in the world, is going to have to pay them, er, nothing at all. The World Bank is kicking in $19 million, a few rich countries are matching that sum, and the vultures are walking away with a not-very-princely-at-all $38 million, or just 3 cents on the dollar. Which probably barely covers their legal fees, let alone the amount they paid for the debt in the first place.

Let's read that again: the World Bank and Liberian government negotiated a deal so that vulture funds holding $1.2 billion in debt ended up with a check for $38 million -- three percent!

It's distressing that Liberia got in such a bad fix. It needed to raise funds and banked on future growth to make the payments -- but a bloody civil war meant it couldn't. The original lenders decided to sell the loans off to vulture and hedge funds who drove a hard bargain. Which meant that at one point, Liberia owed seven times its national income to creditors. 

So, the balance sheet -- in redux:

• The vulture funds (name makes it hard to feel bad for them, doesn't it?) lost $1.26 billion on paper. (I doubt they paid the full $1.3 billion for the loans, the World Bank doesn't say.) For better or worse, it means they likely aren't lending anymore. 
• Liberia, struggling with a crushing debt burden, found forgiveness. This is a good thing -- if Liberia's government has put in place measures to ensure security, stability, and economic growth. Johnson Sirleaf's at least making an effort. 
• Liberia's rich friends (the United States included) stepped in with a bit of cash to help a very ailing economy. A good thing.
• The World Bank negotiated what seems to be an amicable settlement. (Though the vulture funds might beg to differ.) A good thing for them.

Ultimately, though, Liberia isn't the story here. Emerging market and developing economies, like Liberia, will be among the hardest-hit in the Great Recession. Unlike OECD countries, they won't be able to issue debt or raise funds easily. They'll need the help of the international community -- and especially international organizations -- to ensure that their loans come with advisement and affordable repayment options. 

The hero here's the World Bank. Suddenly, it and the IMF -- especially the IMF, perhaps -- have become the world's most important international organizations. 

Dan Kitwood/Getty Images