At one point, Thomas Friedman pauses briefly but significantly in The World is Flat, his gushing endorsement for how technology is moving all kinds of American jobs to places like India. He chuckles, a little nervously. “Thank goodness I’m a journalist and not an accountant or a radiologist,” he writes. “There will be no outsourcing for me. . .”
But why not?
* Friedman has failed abysmally as a foreign affairs commentator.
* Accomplished columnists in India who are writing eloquently in English right now could replace him by tomorrow morning.
The New York Times is presumably paying Friedman for his knowledge and experience, but he has been wrong too often and for too long. He is supposedly an expert on the Middle East, but his analysis of the American invasion of Iraq and the calamitous, violent decade since then has been chronically misleading and worthless. Before the 2003 U.S. attack, while the genuine experts counseled diplomacy and caution, he told Americans: “My motto is very simple: give war a chance.” A few months after the invasion, he said that it “was unquestionably worth doing.” Some of his most offensive comments have been immortalized on Youtube, during an outburst in which he used a crude sexual metaphor that insulted people in the Middle East as part of an embarrassing rant that ended: “We hit Iraq because we could. And that’s the real truth.”
Let us set aside the immorality of cheerleading for a war in which nearly 4500 Americans and at least 160,000 (and possibly more) Iraqis have already died. Friedman failed to do his job – which was to accurately explain a far-off, foreign reality to his readers so that they could make informed choices. Among those he let down were: the U.S. voting public; business executives who may have been considering whether to invest in the Mideast; and, quite possibly even young people deciding if they should join the American army.
Friedman is fond of emphasizing that globalization is producing a competitive new world, which has no tolerance for inefficiency. If he worked for one of the big corporations that he likes to glorify, his blunders would have gotten him fired before the Iraq war had dragged into even its second year.
Fortunately, The New York Times would not suffer by losing him. There are newspaper columnists in India who could step right in immediately.
Palagummi Sainath, based in Mumbai, is the rural affairs correspondent for the English-language The Hindu. Sainath, who is one of India’s best known and respected reporters, is an elegant man in his late 50s, with a shock of gray hair. He has spent decades traveling through rural India, giving voice to the poor majority who have been left behind by the economic boom (which Friedman celebrates at every opportunity). Sainath spent part of 2012 in the United States, where he also wrote original columns about America. (His work is readily available on The Hindu’s website.) In today’s flat world, all he needs is his computer terminal, and his columns could be in the hands of his New York Times editors in nanoseconds.
Praful Bidwai, of New Delhi. Bidwai is a bearded bear of a man in his 60s, a tenacious, independent thinker. He spent years at the Times of India, but at present he freelances; thanks to the miracle of globalization, some of his work is instantly accessible at prafulbidwai.org. He writes about a broad range of subjects, including his regular indictments of India for developing nuclear weapons. By criticizing New Delhi’s atomic arsenal, he has shown the courage that a great newspaper columnist must have by speaking out about a subject on which the majority of India probably disagrees with him.
Arundhati Roy, of New Delhi. Americans who only know Roy through her remarkable novel The God of Small Thingswill be delighted to learn that she uses her mastery of the English language in outspoken essays on world politics, human rights, and war and peace. Some of her most effective articles denounced the 2002 anti-Muslim pogroms in the state of Gujarat, during which the state’s chief elected official stood by in complicit silence as mobs of Hindu extremists murdered 2000 people. (That official, Narendra Modi, is a strong candidate for India’s prime minister in this spring’s’s elections. Friedman’s 635-page-long The World is Flat is full of rejoicing about India’s high-tech industry, but he does not mention Modi and the mass killings once.)
This list of potential replacements for Friedman is only a beginning. Harsh Mander concentrates on hunger in India, which persists despite the much trumpeted economic miracle. Shubhranshu Choudhary spent seven years courageously reporting on the Maoist insurgency in east-central India, an uprising triggered partly by mining companies stealing land from the rural poor.
By replacing Friedman with one of these highly-qualified Indian candidates, The New York Times would not only improve its accuracy. The newspaper could also save money, which Friedman would agree is surely part of its responsibility to its shareholders. Back in 2005, he may have unwittingly composed his own pink slip.
“When the world is flat,” he wrote, “your company both can and must take advantage of the best producers at the lowest prices anywhere they can be found.”
A decade ago, they almost brought down the global financial system. Now they rule it.
When two of Europe’s corporate titans sat down to negotiate a merger this year, they called American banks.
Fiat Chrysler Automobiles hired Goldman Sachs Group Inc. as its lead adviser. France’s Renault SA hired a boutique bank stacked with Goldman alumni. In a deal that would reshape Europe’s auto industry, the continental banks that had sustained Fiat and Renault for more than a century were muscled aside by a pair of Wall Street deal makers.
A decade after fueling a crisis that nearly brought down the global financial system, America’s banks are ruling it. They earned 62% of global investment-banking fees last year, up from 53% in 2011, according to Coalition, an industry data provider. Last year, U.S. banks took home $7 of every $10 in merger fees, $6 of every $10 in stock commissions, and $6 of every $10 paid to hold and move corporate cash.
urope’s banks are smaller, less profitable and beating a hasty retreat from Wall Street.
Barclays is the lone holdout with an ambition to be a universal global bank. Under Chief Executive Jes Staley, an American who rose to prominence at JPMorgan Chase & Co., the bank has resisted shareholder calls to go back to its roots serving British consumers and companies.
From their central perch in London and with close ties to developing countries, Europe’s banks were primed to benefit as financial services went global. They charged onto Wall Street in the 1990s and pressed their advantage as U.S. banks limped out of the 2008 crisis.
Then, “they handed the whole system on a platter to the Americans,” said Colm Kelleher, the Irish-born former Morgan Stanley executive.
Coming out of the crisis, U.S. banks quickly raised capital and shed risk, unpleasant tasks that Europeans put off. American businesses recovered quickly, and its consumers are eager to borrow and spend. A tax cut in 2018 boosted profits. Interest rates have risen.
Central bankers have cut interest rates below zero, which leaves banks struggling to eke out a profit on loans. Banking policy in Europe remains fractured, with national and continental regulators pursuing often conflicting agendas.
“It is not our remit to promote national, or even European, champions,” said Andrea Enria, the European Central Bank’s top banking regulator.
Twenty-five years ago, European banks charged into the U.S. They bought storied firms like Donaldson, Lufkin & Jenrette and Wasserstein Perella and dangled big paydays for rainmakers. When Deutsche Bank announced a $10 billion takeover of Bankers Trust in 1998, it promised at least $400 million in bonuses to retain top bankers.
The challenges of merging a conservative European commercial lender and a U.S. derivatives shop gave competitors pause. Goldman’s CEO, Hank Paulson, shared his doubts with a hotel ballroom of his bankers: Deutsche Bank “just signed up for 10 years of pain,” attendees remember him saying.
Henry Paulson is sworn in as Treasury secretary by Supreme Court Chief Justice John Roberts in 2006. Before he headed the Treasury, he ran Goldman Sachs.PHOTO: JIM YOUNG/REUTERS
But in an era of cheap debt and light regulation, the land grab seemed to pay off. Deutsche Bank had a $3 trillion balance sheet in 2007 and that year earned twice as much as Bank of America Corp. in securities-trading. Royal Bank of Scotland was briefly the largest bank in the world, wielding a balance sheet bigger than Britain’s entire economy.
Even the financial crisis looked at first like an opportunity. When Barclays PLC bought Lehman Brothers in a fire sale, it got 10,000 of the firm’s U.S. bankers and few of its bad debts. On Lehman’s Times Square trading floor, the loudspeakers played “God Save The Queen.” Deutsche Bank pounced on Wall Street’s clients.
The high-water mark was in 2011, when global investment-banking fees were roughly split between European and U.S. firms.
The good times didn’t last. A 2012 sovereign-debt crisis across the continent put new pressure on the region’s biggest banks. Economic growth slowed across the continent. Central bankers turned interest rates negative in 2014. German media calls them “Strafzinsen,” translating roughly to “penalty rates.”
UBS slashed 10,000 jobs and cut big parts of its trading operation. Royal Bank of Scotland fired thousands of investment bankers and sold its U.S. retail arm to focus on the U.K. Three-quarters of the Lehman bankers Barclays picked up in 2008 were gone within five years, according to Financial Industry Regulatory Authority records.
Meanwhile, U.S. banks were quietly encroaching on European rivals’ territory. In 2009, JPMorgan completed an acquisition of Cazenove, the U.K. investment bank. Every year since 2014, JPMorgan has generated more investment-banking revenue across Europe than anyone else, according to Dealogic. (The London-listed owner of Peppa Pig, a British cartoon character, hired JPMorgan Cazenove to advise on its sale in August to U.S. toy giant Hasbro Inc. )
As U.S. banks got stronger and their European rivals weakened, client loyalties began to change.
Today’s companies are increasingly global. They make more of their money in the U.S. and have swapped a shareholder register stacked with old-line European families and trusts for the likes of BlackRock Inc. and other U.S. investment giants, where Wall Street banks are better connected. The percentage of U.K. companies’ stock owned by foreigners rose from 16% in 1994 to 53% in 2016, according to government statistics.
Fiat, the Italian car maker that pursued a tie-up with France’s Renault this year, makes two-thirds of its money in the U.S., where it owns Chrysler. Its shots are called by John Elkann, the New York-born scion of the family that founded Fiat in 1899.
One of Mr. Elkann’s closest advisers is a Goldman Sachs banker who for the past 15 years has organized a yearly gathering of European billionaire business owners, according to people who have attended. They swap stories, share advice and, more often than not, hire Goldman for deals.
Globalization has cost the Europeans not just on headline-grabbing mergers, but in the everyday business of managing money for clients. Deliveroo, a food-delivery startup based in the U.K., sought to ramp up in Europe and the Middle East. Instead of hiring local banks in each market, it consolidated its money flows with Citigroup , which has local licenses in 98 countries and a global digital platform.
JPMorgan has made a big push to expand transaction banking for European clients. In 2010 it established a new unit of global bankers to pitch day-to-day transaction services to big companies, and later took over dozens of European transaction relationships from RBS.
UBS’s Stamford, Conn., trading floor in 2005. It was able to accommodate 1,400 traders and staff.PHOTO: RICK FRIEDMAN/CORBIS/GETTY IMAGES
Most recently JPMorgan said it is extending its commercial banking business globally, targeting hundreds of midsize businesses across Europe. It has sought to take on a more local flavoring, doing things like sponsoring math-and-science programs for students in France, Germany and Italy.
Last year, Citigroup and JPMorgan were two of the three biggest providers of day-to-day transaction banking globally, along with Britain’s HSBC Holdings PLC, according to Coalition. U.S. banks accounted for 57% of the global transaction-banking revenue pool among the biggest banks in that business, versus 22% for Europeans, Coalition said.
