For the last five years both Boeing and Airbus have been in a head-to-head battle to market their new airplanes; the midsize, efficient 787 “Dreamliner” and the super large and comfortable Airbus A380. Despite their differences both planes can be seen as substitutes as not many airlines will buy both models.
2004 was a tense year for Seattle. Once again, the company’s leaders’ forecasts — 200 B787 Dreamliners to be sold by the end of the year— failed to come true. As the company scrambled to restore its reputation from a defense procurement scandal, CEO Harry Stonecipher started a trade war with Europe — and was then forced out in disgrace over sexual indiscretions. Toby Bright became the latest of a line of Boeing commercial directors to be cast out . The strategies of Boeing, the long standing industry leader and that of its European rival Airbus are quite different. While they share a view of market size, there is one big difference in the two companies’ market forecasts. Airbus sees a very large 20-year market for widebody aircraft, accounting for 10 percent of deliveries and 22 per cent of revenues: 1,250 passenger aircraft and almost 400 freighters. Boeing latest market forecasts suggest that airlines will need barely more than 300 passenger aircraft larger than the B747, and around 400 aircraft in the B747 bracket. In fact, Boeing expects that the average size of commercial aircraft will decline as airlines turn to intermediate and large twin engine aircraft for long-haul routes, bypassing hubs. That view has in turn driven the companies’ major investments. Airbus has pumped more than $12bn into the A380 program, including overruns. Boeing never reveals development costs (much less overruns), but the company has spent a large budget on the development of the new Boeing 787 as can be derived from the new factories and production tools that were developed to support production of the new airplane.
The 787 is a modest successor to the iconic 747-400 and the 767. It’s smaller and more fuel efficient. The Airbus bets on the trend that airlines will carry more passengers in fewer flights. The Airbus A330 on the other hand is a very large super jumbo that can carry 555 seats in a three class and 853 in a single class configuration. This is 35% more than the Boeing 747. Singapore Airlines, the first that received an A380 even has super first class “cabins” on board that have their own beds.
Boeings outsourcing strategy versus Airbus in-house production.
For Boeing one of the major challenges to overcome was the unprecedented outsourcing of production. To keep cost down, third party contractors were used to design and build a large amount of the tens of thousands of parts, a majority of which would be made out of carbon fiber instead of the more traditional aluminum alloys. Direct fixed costs would be larger than those of Airbus because of the specialized new machinery needed to work with carbon fiber but variable and labor cost were expected to be much lower because of the outsourcing and off shoring of production. Boeing set up an internet based “world community” to design the then unnamed 7E7 that later would be renamed 787. Top level design however was done in Everett as Boeing holds closely to it’s store secrets. In this Boeing is moving from an airplane manufacturer to a designer and system integrator like Apple Inc. Applying a lean manufacturing process could help expand margins like it did for Toyota which uses a similar process for its cars.
The wings are manufactured by Japanese companies in Nagoya, e.g. Mitsubishi Heavy Industries; the horizontal stabilizers are manufactured by Alenia Aeronautica in Italy; and the fuselage sections by Vought in Charleston, South Carolina, (USA), Alenia in Italy, Kawasaki Heavy Industries in Japan and Spirit AeroSystems, in Wichita, Kansas, (USA).Final assembly employs just 800 to 1,200 people to join completed subassemblies and integrate systems. Despite cost savings the long supply line proved vulnerable, causing delays in production. The 787-8, which previously was listed at $148-$157.5 million was re-priced tot $157-$167 million after re-evaluation of cost and materials. The production delays not only cause penalties to be paid to the airlines but devaluation makes payment in dollars less attractive for the Seattle Company. In economic terms: every dollar not in the Boeing account makes production more expensive. Production abroad is becoming more expensive as well because local wages and fees have to be paid in higher value local currency.
Airbus took a different approach by keeping development largely in house. By keeping supply lines relatively short and designers closer together it was able to develop faster. Major structural sections of the A380 are built in France, Germany, Spain, and the United Kingdom. Due to their size, they are brought to the assembly hall in Toulouse in France by surface transportation. Since all EU countries except the UK settle accounts in Euro’s there was much less currency risk. Airbus is still acting like a traditional manufacturer that keeps everything in house. Even so, the multinational roots of the company make it difficult to work as a team. The French and German engineers often misunderstood each other. The delays in manufacturing were more caused by extra demands from the airlines and hold ups in the design process then from the production process itself. A big difference with the Boeing approach is that by manufacturing in house, labor cost is more a fixed part of the total cost then a variable part. Boeing can pick and choose whom to hire for its production, Airbus doesn’t have that luxury. Meanwhile, the two competitors continue to sell head-to-head in every market segment. In single-aisle aircraft, Airbus has no plans for any major changes to the A320 family.
The aircraft market is in fact a duopoly with very high barriers to entry. So far, Boeing’s success with the B787 has not changed the fact that the two rivals’ market shares are close to 50:50; and both, recently, have stated that profits matter more than market share. Both companies, also, share an optimistic overview of the market — projecting well over 800 new aircraft deliveries a year for the next 20 years, a market that Airbus values at $1.9 trillion.
As an American company, Boeing has a big competitive advantage; the military. There is no threat that the US government will negotiate away Boeing’s access to Washington state tax breaks or to any of the foreign markets that are depended on US military aid. Airbus simply can’t compete to replace the USAF’s tanker planes. Airbus has to compete in each European country separately if it wants to sell its aircraft for military purposes.
Conclusion
Offloading part production is a sound method for producing complicated products like aircraft. Boeings outsourcing has become more flexible because production can be switched to other factories or countries if bottlenecks occur. Asia is a large target market for Boeing and as such the availability of production and maintenance facilities close to the customer are a good sales argument. There are drawbacks however. Airbus can invest in improving processes — for example, using lasers rather than physical gauges to inspect composite skins — test it on one product (the A320, for instance) and then apply it immediately to the rest of the line and thereby amortize its costs. Boeing can’t do that because their sub-contractors are more or less independent, outside the company. Boeing’s aircraft have no parts in common while Airbus strives at inter-operability of parts.
Airbus decision to develop an airplane in an entirely different segment of the market was both risky and necessary. Boeing sought to take advantage of a truly globalized world while Airbus wanted shorter production lines and more control. Off course nationalistic factors should also be taken into account. As a crown jewel of the American industry, the US government is bound to support Boeing as much as possible. Japan has been a close ally of the US since WO2 and could be used as a safe outsourcing destination. Airbus on the other hand has EU politics to contend with. Its decision to spread out production between EU member states is as much a political as a strategic decision. At the launch of the A380, French president Chirac, Prime Minister Blair from the UK, The German Chancellor Schroeder, and Prime Minister Zapatero from Spain were all present, underlining the political commitment to make Airbus a successful business. This was much to the dismay of the US officials who (officially) oppose any kind of government intervention in the marketplace.
For Boeing to be proved correct the A380 must not attract substantial new business and existing customers must cease buying the aircraft beyond their initial orders. This does not seem likely. The duopoly will continue until a third player enters the field. This player might well be of Chinese origin .
Monday, June 30, 2008
Monday, June 23, 2008
Stakeholders and Wal-Mart, an analysis
1. Wal-Mart, a history of success.
In 1962, Sam Walton expanded his retail career by opening the first Wal-Mart Discount City Store in Arkansas. Walton had had significant success with a discount shop he called “Walton’s Five and Dime Store” in Bentonville by putting sales volume before prices. Accepting a slightly lower margin, he had managed to drive out the competition and achieve an image of low prices without compromising quality. Walton continued the growth of his Bentonville store at accelerated pace and soon expanded to 24 stores across Arkansas, reaching $12.6 million in sales.
The company was incorporated as Wal-Mart Stores, Inc. on October 31, 1969. In 1970, it opened a home office and first distribution center in Bentonville. It had 38 stores operating with 1,500 employees and sales of $44.2 million. It began trading stock as a publicly-held company on October 1, 1972, and was soon listed on the New York Stock Exchange. The first stock split occurred in May 1971 at a market price of $47. By this time, Wal-Mart was operating in five states: Arkansas, Kansas, Louisiana, Missouri, and Oklahoma; it entered Tennessee in 1973 and Kentucky and Mississippi in 1974. As it moved into Texas in 1975, there were 125 stores with 7,500 employees and total sales of $340.3 million.
The growth continued, indicating that Wal-Mart’s strategy was solid. In 1987 there were 1,198 stores with sales of $15.9 billion and 200,000 associates. In 2006, Wal-Mart was 67th most profitable corporation (profits divided by total revenue), behind retailers Home Depot, Dell, and Target, and ahead of Costco and Kroger. Today Wal-Mart employs more than 2 million associates worldwide, including more than 1.4 million in the United States with over $374 billion in sales worldwide for the fiscal year ending Jan. 31, 2008
With success often come concerns over the way this is achieved. Labor unions, religious organizations and environmental groups have criticized Wal-Mart for its policies and business practices. Other areas of criticism include the corporation's foreign product sourcing, treatment of product suppliers, environmental practices, the use of public subsidies, and the company's security policies . Wal-Mart has also been criticized for some of the products that it carries. Diverse groups have accused Wal-Mart of selling anti-Semitic, anti-black, anti-Christian or other objectionable materials or of not selling products like “The Daily Show's America (The Book)” that depicted a US Supreme Court judge nude, calling it censorship.
Despite the criticism, Wal-Mart seems to stick to the core strategies that carry its success.
2. Wal-Mart strategies and their impact.
The way that Wal-Mart Stores Inc. creates growth is summarized by the company’s new slogan:
“Save money, Live better”
When Sam Walton created Wal-Mart, he declared that three policy goals would define his business: respect for the individual, service to customers, and striving for excellence. By choosing clearly identifiable strategies and sticking with them, Wal-Mart has achieved de-facto cost leadership and sustainable value for the company’s shareholders.
Wal-Mart achieves Cost Leadership by four main strategic goals .
1. Dominate the Retail Market wherever Wal-Mart has a presence.
2. Growth by expansion in the US and Internationally.
3. Create widespread name recognition and customer satisfaction with the Wal-Mart brand, and associate the retailer with the reputation of offering the best prices.
4. Branching out into new sectors of retailing such as pharmacies, automotive repair, and grocery sales.
Wal-Mart management strategy emphasizes its workforce and its corporate culture. It wants to create an image of a morally conservative, religious, and family-oriented business. Wal-Mart emphasizes how it listens to the needs of its workforce as stated in the “factsheets” on the corporate website. Store employees are called “associates” and are treated part of the Wal-Mart family. Wal-Mart states that “Unlike the employees of many of our retail competitors, Wal-Mart associates – both full and part-time – can become eligible for health benefits”. However; the bulk of Wal-Mart's employee base that work at Wal-Mart stores are part time workers who are paid the local minimum wage. Most employees are not entitled to any benefits, as it takes a part-time employee over five years to become eligible for benefits, profit-sharing, or other such compensation . On April 17, 2006, Wal-Mart announced it was making a health care plan available to part-time workers after 1 year of service, instead of the prior 2 year requirement.
Wal-Mart's corporate management strategy involves selling high quality and brand name products at the lowest price. To keep costs low, Wal-Mart negotiates deals for merchandise directly from manufacturers, eliminating the middleman. This often leads to accusation that Wal-Mart misuses its market power to deliberately underpay its suppliers. In Walton’s philosophy, the essence of successful discount retailing is to cut the price on an item as much as possible, lowering the markup, and earn profit on the increased volume of sales. However, when the markup is as low as the company can bear, the burden is often transferred to the supplier, who is depended on Wal-Mart to sell his products. In a modern globalized society, Wal-Mart no longer buys its products on the domestic market but in low-wage countries with often questionable labor practices. More than 70% of the goods sold in Wal-Mart are manufactured in China .
3. What are the stake holder groups and what are their expectations?
A large company like Wal-Mart has a diversity of stake holders, each with their own agenda. Like any commercial entity, the first group is most important for the company’s survival. Stakeholder groups can be divided into internal and external stakeholders:
1. Internal stakeholder interests:
1.1 Shareholders.
As a listed company, Wal-Mart is accountable to its shareholders. Despite growing revenue, share price development has been trailing over the years, only recently picking up. Shareholders are most interested in profit generation and dividend, although in recent times there have been calls for more transparency. Wal-Mart donates generously to political causes without detailing exactly who they are donating to, or how much. Wal-Mart says that full disclosure is already required in many states, but the proponents for this resolution would prefer a centralized source for determining Wal-Mart's state-based political contribution levels. However, as long as the share price of Wal-Mart has a positive trend, shareholders remain upbeat.
1.2 Employees
Wal-Mart’s strategy in keeping prices low translates into an effective “low as possible” wage strategy. Associates at Wal-Mart have often little education, work part-time and have little or no alternative job perspective. Labor conditions and wage are for most an important factor. Recently Wal-Mart has faced issues on both which has led to criticism by labor unions and other external stakeholder group. By the end of 2005, Wal-Mart had launched the website Working Families for Wal-Mart to counter criticisms. Additional efforts to counter criticism include launching a public relations campaign. In reality, the core issues haven’t been addressed yet since they can impact Wal-Marts bottom line severely. Wal-Mart claims to listen to its employees but doesn’t seem to engage their staff.
1.2 Management
Although management is part of a company’s employee corps they can have different interests and priorities. In 2007 when Wal-Marts growth seemed to come to a halt, the company re-organized its top management layers rigorously. It is this groups responsibility to turn the core strategies into practice while at the same time balancing stakeholder interests.
1.3 Suppliers
Suppliers are often seen as external stakeholders. In the case of Wal-Mart, the connection between suppliers and the company is so close that they can be considered internal. Wal-Mart’s cost leadership strategy means that the company will offer only a minimal margin to its suppliers. For a lot of suppliers, Wal-Mart is their major, if not only, customer. As mentioned before, Wal-Mart buys the majority of its products in China. The US labor market just can’t compete with the low wages and large workforce available. Suppliers often use questionable local labor practices to be able to offer the lowest possible price to Wal-Mart. Wal-Mart has been accused of using market power to force its suppliers into self-defeating practices. For example, it is argued that Wal-Mart's constant demand for lower prices caused Kraft Foods to "shut down thirty-nine plants, to let go [of] 13,500 workers, and to eliminate a quarter of its products ”.
2. External stakeholders.
2.1 Customers and the community
Suppliers and customers are both defined as product market stakeholders. In Sam Walton’s eyes, the customer is the most important stakeholder for the company. The demands and priorities of Wal-Marts customers are conflicting creating the largest and potentially most important issues. In an economic downturn, the results of Wal-Mart improve showing that customers shop at Wal-Mart because of the low prices. To maintain low prices, Wal-Mart needs scale, which means opening large stores in small places. This results in a perceived negative impact on communities. Additional, Wal-Mart is often seen as an unfair competitor because local stores can’t compete against the company’s low prices. The recent media attention has focused on the negative aspects although a recent study has shown that the impact of Wal-Mart on small local stores is less than is assumed. It is suggested that Wal-Mart even has a positive impact on small business. A study conducted in 2006 argued that while Wal-Mart's low prices caused some existing businesses to close, the chain also created new opportunities for other small business, and so "the process of creative destruction unleashed by Wal-Mart has no statistically significant impact on the overall size of the small business sector in the United States. "
2.2 Unions and NGO’s
Wal-Mart has been criticized for its policies against labor unions. Other nongovernmental organizations have accused Wal-Mart of using sweatshops and child labor in low wage countries. Wal-Mart's anti-union policies also extend beyond the United States. The documentary Wal-Mart: The High Cost of Low Price, shows one successful unionization of a Wal-Mart store in Jonquière, Quebec (Canada) in 2004. Wal-Mart closed the store five months later because the store had become unprofitable due to the costs of union demands. The priorities of unions are sometimes conflicting. If Wal-Mart fires employees and closes a store it will result in un-employment and loss of benefits. However if they insist on higher wages and better benefits, the result will be unprofitability, causing the store to close.
4. How does Wal-Mart manage stakeholder issues and expectations?
After Wal-Mart’s labor and supplier issues became publicized the company hired public relations firm Edelman to interact with the press and respond to negative or biased media reports. It has used TV commercials emphasizing the health benefits of Wal-Mart associates. Wal-Marts efforts are mainly focused on the positive affect the company can have. In October 2005, Wal-Mart announced it would implement several environmental measures to increase energy efficiency. After Hurricane Katrina struck, Wal-Mart gave $20 million in cash donations, 1,500 truckloads of free merchandise, food for 100,000 meals and the promise of a job for every one of its displaced workers.
The real issue however is that Wal-Mart’s cost leadership strategy doesn’t leave room for higher than minimal wages or excellent labor conditions. Wal-Mart argues that it provides millions with jobs and passes on the saving to millions more.
5. What can Wal-Mart do to improve?
Like many large and not-so-large companies, Wal-Mart has been caught by its own success. As employer and supplier of millions it is open to criticism and needs to be aware of that. By engaging stake holders early and by being transparent in its actions many issues can be prevented. Modern consumers and other stakeholders need to be taken seriously. This doesn’t mean cater to every whim but major problems can’t be covered up anymore in the internet age. Customers on the other hand need to be aware that higher wages, better benefits and labor conditions mean higher prices because Wal-Mart’s margin is already minimal. So far, there hasn’t been a competitor that leveraged on an ethical way of business and cost leadership. Wal-Mart can leverage its market advantage to divert a fraction of the savings it now passes on to the consumer to improve the outstanding issues as long as it can explain to the customer why it is doing so.
Wednesday, June 11, 2008
Is the PVV similar to the NSB?
Since the death of Pim Fortuijn, politicians in The Netherlands have been scrambling to fill the lucrative void that opened up at the far right of the political spectrum. Central to the themes of most wannabes is the (perceived or not) threat formed by immigrants, especially those with Islamic backgrounds. Emphasizing every negative aspect of Islam they can find, the two main contestants vying for right wing votes are Geert Wilders with his PVV and Rita Verdonk with Trots op Nederland (Proud of The Netherlands).
Wilders founded his Party for Freedom (PVV) in February 2006. The PVV started out as a one man fraction when Geert Wilders decided to leave the People Party for Freedom and Democracy (VVD) in September 2004. Wilders could not reconcile himself with the VVD positive stance towards Turkey's possible accession to the European Union, and left the party disgruntled. Wilders decided to go on as “Group Wilders” even though the fraction consisted of only one person. Later, when more people joined his cause, the Group Wilders was renamed PVV even when the party is still revolving around Wilders and his ideas.
Wilders' party is committed to "freedom of the individual"; Wilders believes that the Netherlands has been held hostage by elitist (mostly social democrat and left-wing liberal) politicians for decades. In this his views differ from the “nation above self” doctrine of national socialism. The Party for Freedom combines economic liberalism with a conservative programme towards immigration and culture. The party seeks tax cuts (€16 billion in the 2006 election programme), de-centralization, abolition of the minimum wage, and limiting child benefits and government subsidies. Towards immigration and culture, the party believes that the Judeo-Christian and humanist traditions should be treated as the dominant culture in the Netherlands, and that immigrants should adapt accordingly. The party wants a halt to immigration from non-western countries. It is skeptical towards the EU project, is against future EU enlargement with countries like Turkey and opposes the presence of Islam in the Netherlands. The party is also opposed to dual citizenship.
Wilders has been called a crypto neo-nazi and his party similar to the national socialist movement (NSB) that became symbol of German oppression during the second World War. But is this comparison valid? The NSB, founded in 1931 by Anton Mussert and Cornelis van Geelkerken, started out as an ultra nationalist party with a program based on Italian fascism and German National Socialism. It didn’t target any group in particular until after the German invasion and even had Jewish party members.
Wilders has presented himself as anti-Islamic from the start. After the murder of Dutch cineast and polemist Theo van Gogh by an islamic extremist, Wilder’s references to what he calls “The book (..that..) incites hatred and killing and therefore has no place in our legal order” became more pronounced, culminating in a movie he dubbed “Fitna” or "Strive" that was meant to prove that Islam had no place in Western society. It was more the press coverage and hype that incited worries about reprisals from extremists than the actual movie. Fitna was no more than a compilation of 9/11 clips and beheadings of hostages by terrorists.
Like the German NSDAP, the NSB followed a political ideology concerned with notions of cultural decline remedied by placing the nation or race above the individual. Wilders' views are different in some aspects. Individual freedom is of great importance in the PVV programme. However; in Wilders' eyes, Islam is an authoritarian religion that is not compatible with the "Western" definition of freedom. The selective use of 'freedom' for different groups was also done by the NSB after 1936. Jews where seen as a thread and must therefore be eliminated from society. The PVV doesn't go as far as to propagate extermination but in demanding Muslims to abandon their faith and the Koran to be declared illegal, the party goes at least for a cultural equivalent.
There are more differences than similarities between the PVV and the NSB. In fact, the PVV has stronger views against a named group than the NSB had before 1936. It's not difficult to see however that the PVV uses rethoric and symbols that are eerily similar to that of the (post 1936) NSB. In “Historisch Nieuwsblad” of June 2008, political historian Gjalt Zondergeld posed the question why the PVV had chosen the seagull as its symbol. This symbol was also chosen by the NSB in the 30’s and 40’s as a symbol of freedom. Wilders furiously denied the allegation but wouldn’t explain the motives behind the obvious similar choice.
The reaction of Wilders resembles that of Eugene Terre’Blanche, leader of the racist South African Resistance Movement (Afrikaner Weerstandsbeweging) during the apartheid era. Terre'Blanche viewed the end of apartheid as a surrender to communism just as Wilders views modern day politics in The Netherlands as a surrender to Islam. Symbol for the AWB were 3 black 7’s in a white circle on a red background. When it was mentioned that the symbol strongly resembled the German swastika, Terre’Blanche was furious and denied any similarity. The explanation he gave can be read here.
The PVV does not call itself National Socialist and ideologically there are more differences than similarities. But the words and actions of Wilders and company push the party ever further to the right and with it, the whole tolerant, pragmatic climate of The Netherlands. In this may lie the real threat, because in today's modern world the influence of other cultures and religions can't be ignored anymore.
Wilders founded his Party for Freedom (PVV) in February 2006. The PVV started out as a one man fraction when Geert Wilders decided to leave the People Party for Freedom and Democracy (VVD) in September 2004. Wilders could not reconcile himself with the VVD positive stance towards Turkey's possible accession to the European Union, and left the party disgruntled. Wilders decided to go on as “Group Wilders” even though the fraction consisted of only one person. Later, when more people joined his cause, the Group Wilders was renamed PVV even when the party is still revolving around Wilders and his ideas.
Wilders' party is committed to "freedom of the individual"; Wilders believes that the Netherlands has been held hostage by elitist (mostly social democrat and left-wing liberal) politicians for decades. In this his views differ from the “nation above self” doctrine of national socialism. The Party for Freedom combines economic liberalism with a conservative programme towards immigration and culture. The party seeks tax cuts (€16 billion in the 2006 election programme), de-centralization, abolition of the minimum wage, and limiting child benefits and government subsidies. Towards immigration and culture, the party believes that the Judeo-Christian and humanist traditions should be treated as the dominant culture in the Netherlands, and that immigrants should adapt accordingly. The party wants a halt to immigration from non-western countries. It is skeptical towards the EU project, is against future EU enlargement with countries like Turkey and opposes the presence of Islam in the Netherlands. The party is also opposed to dual citizenship.
Wilders has been called a crypto neo-nazi and his party similar to the national socialist movement (NSB) that became symbol of German oppression during the second World War. But is this comparison valid? The NSB, founded in 1931 by Anton Mussert and Cornelis van Geelkerken, started out as an ultra nationalist party with a program based on Italian fascism and German National Socialism. It didn’t target any group in particular until after the German invasion and even had Jewish party members.
Wilders has presented himself as anti-Islamic from the start. After the murder of Dutch cineast and polemist Theo van Gogh by an islamic extremist, Wilder’s references to what he calls “The book (..that..) incites hatred and killing and therefore has no place in our legal order” became more pronounced, culminating in a movie he dubbed “Fitna” or "Strive" that was meant to prove that Islam had no place in Western society. It was more the press coverage and hype that incited worries about reprisals from extremists than the actual movie. Fitna was no more than a compilation of 9/11 clips and beheadings of hostages by terrorists.
Like the German NSDAP, the NSB followed a political ideology concerned with notions of cultural decline remedied by placing the nation or race above the individual. Wilders' views are different in some aspects. Individual freedom is of great importance in the PVV programme. However; in Wilders' eyes, Islam is an authoritarian religion that is not compatible with the "Western" definition of freedom. The selective use of 'freedom' for different groups was also done by the NSB after 1936. Jews where seen as a thread and must therefore be eliminated from society. The PVV doesn't go as far as to propagate extermination but in demanding Muslims to abandon their faith and the Koran to be declared illegal, the party goes at least for a cultural equivalent.
There are more differences than similarities between the PVV and the NSB. In fact, the PVV has stronger views against a named group than the NSB had before 1936. It's not difficult to see however that the PVV uses rethoric and symbols that are eerily similar to that of the (post 1936) NSB. In “Historisch Nieuwsblad” of June 2008, political historian Gjalt Zondergeld posed the question why the PVV had chosen the seagull as its symbol. This symbol was also chosen by the NSB in the 30’s and 40’s as a symbol of freedom. Wilders furiously denied the allegation but wouldn’t explain the motives behind the obvious similar choice.
The reaction of Wilders resembles that of Eugene Terre’Blanche, leader of the racist South African Resistance Movement (Afrikaner Weerstandsbeweging) during the apartheid era. Terre'Blanche viewed the end of apartheid as a surrender to communism just as Wilders views modern day politics in The Netherlands as a surrender to Islam. Symbol for the AWB were 3 black 7’s in a white circle on a red background. When it was mentioned that the symbol strongly resembled the German swastika, Terre’Blanche was furious and denied any similarity. The explanation he gave can be read here.
The PVV does not call itself National Socialist and ideologically there are more differences than similarities. But the words and actions of Wilders and company push the party ever further to the right and with it, the whole tolerant, pragmatic climate of The Netherlands. In this may lie the real threat, because in today's modern world the influence of other cultures and religions can't be ignored anymore.
Tuesday, June 10, 2008
What goes around…
As the media are predicting the end of the credit crunch, governments and central bankers are becoming increasingly worried. Especially the US, hardest hit by the mortgage crisis and weary of the efforts to keep the backbone in their banks must see the circular motion of a tornado approaching their financial shore. Oil has hit $139 a barrel and is rising without an end in sight. The dollar on the other hand is still slipping down the slopes of inflation making it even more expensive for the oil addicted Americans to pay for their habit. So what is keeping the bureaucrats in Washington and the bosses on Wall street awake at night? This:
(Click for a bigger picture)
Now let’s assume that the Fed had all this cash in store. What would a sudden influx of money do to the value of the good old greenback? Like any good, whenever the total amount goes up, the value goes down.
The total cost of the credit crisis is around $ 1 trillion, according to the IMF. Who’s going to pay for all that? American tax payers? Seeing the allergy most Americans have for paying tax (and who hasn’t..) and seeing it’s almost election year, I can’t see anyone committing political suicide by proposing sharp and painful tax increases.
According to Wim Bischoff, Chairman of Citigroup, the amount of money available from Sovereign Wealth Funds will be $12 trillion by 2015. Already the funds hold over $2,75 trillion, which is more than all the hedge funds and private equity in the world together. Just realize that SWF’s don’t have to comply with even the minimal standards that hedge funds are held to. Also realize that the entities behind these funds are some of the most undemocratic regimes in the world. Even if they don’t have a seat on the board of the banks and institutions they own what will happen to sustainable business? Can a bank afford not to give a loan to a weapons’ manufacturer that happens to sell to Abu Dhabi, when this same country is controlling the fund that owns most of the bank? The same dollars that were paid to regimes in Saudi Arabia and Kuwait, countries with atrocious records when it comes to the rights of women and countries that throw dissidents in jail without trial are now used to buy large shares in American and European financial institutions. And what will happen with the oil dollars of Iran? The current sanctions against this country prohibit it from outright investing it's US currency. But money is like water and will find a way. Bankers, keep your eyes open and your compliance officers sharp.
(Click for a bigger picture)
(Click for a bigger picture)Now let’s assume that the Fed had all this cash in store. What would a sudden influx of money do to the value of the good old greenback? Like any good, whenever the total amount goes up, the value goes down.
The total cost of the credit crisis is around $ 1 trillion, according to the IMF. Who’s going to pay for all that? American tax payers? Seeing the allergy most Americans have for paying tax (and who hasn’t..) and seeing it’s almost election year, I can’t see anyone committing political suicide by proposing sharp and painful tax increases.
According to Wim Bischoff, Chairman of Citigroup, the amount of money available from Sovereign Wealth Funds will be $12 trillion by 2015. Already the funds hold over $2,75 trillion, which is more than all the hedge funds and private equity in the world together. Just realize that SWF’s don’t have to comply with even the minimal standards that hedge funds are held to. Also realize that the entities behind these funds are some of the most undemocratic regimes in the world. Even if they don’t have a seat on the board of the banks and institutions they own what will happen to sustainable business? Can a bank afford not to give a loan to a weapons’ manufacturer that happens to sell to Abu Dhabi, when this same country is controlling the fund that owns most of the bank? The same dollars that were paid to regimes in Saudi Arabia and Kuwait, countries with atrocious records when it comes to the rights of women and countries that throw dissidents in jail without trial are now used to buy large shares in American and European financial institutions. And what will happen with the oil dollars of Iran? The current sanctions against this country prohibit it from outright investing it's US currency. But money is like water and will find a way. Bankers, keep your eyes open and your compliance officers sharp.
Wednesday, June 4, 2008
Malaysia's brilliant way to deal with high oil prices.
Now oil prices have reached $130 a barrel, the problem starts to affect more than commuting car drivers and budget airlines. Countries like Malaysia, Indonesia and others that heavily subsidize their fuel start to run in trouble. A 2005 article in the Herald Tribune said that an oil price of $65 a barrel would spell big trouble for the Indonesian economy. After the price of gas was increased with 126%, riots broke out in Jakarta and elsewhere. The article never mentioned what $130 a barrel oil would do with the budget. Last month the price had to be revised again resulting in students taking to the streets in protest. I wonder where they get the money to buy a car in the first place?
Malaysia has found another way. Instead of raising the price of fuel, which would make the government undoubtedly unpopular, a wise committee thought long and hard about it and decided that the cause of inflation wasn’t domestic but had to lie with the foreign fuel smugglers. All those rich Singaporeans lining up at the Malaysian pumps were apparently stealing a significant portion of the 56 billion Ringit subsidized fuel. The first idea was to issue every Malaysian a pass to buy subsidized fuel. This turned out to be an expensive and fraud prone project because there are 24,821,286 people living in Malaysia that all would need a pass (or at least the ones old enough to drive). So they decided to outright ban foreigners from buying fuel at stations closer than 50km to the Thai and Singaporean borders.
The committee might have thought a bit longer about this. Singapore has a law that makes it illegal to pass the border with a tank that is less then 3/4 full. Let’s assume that an average fuel tank holds 70 liters. That means that the average Singaporean family can top up their tank with 17.5 liters of sweet subsidized fuel before returning to the land of Laksha and expensive fuel. At the same time this family will probably have lunch and even dinner in Johor Baru, fill the trunk with cheap fruit and vegetables and other groceries, have an ice cream or two or even spend some time at Genting, Malaysia’s version of Vegas. I know how these things go, whenever you’re abroad you always spend more then you intend to. Already the results are visible at the borders with Thailand, where tourism has died down to a trickle. The same will probably be true for Johor, because although the cheaper gas might not have been so cheap after all the extra spending; it’s still a major attraction for thrifty Singaporeans. I wonder how long it will take before the local Johorans will be lining up to buy just a bit of extra gas to sell to Singaporeans and other foreigners. That way the subsidy flows directly into the pockets of the needy. All outside the official gas stations off course…
Fortunately the measure will be effective against the many, many trucks of fuel that were smuggled into Singapore each day. They must have been camouflaged because I’ve never seen them cross the border….
Update. The Malaysian government must have thought a bit longer and decided that increasing the price of gas with 65% will help them a bit more than banning foreigners from buying gas. So far, the country remains quiet...
Update2. Demonstrations are planned this weekend in Kuala Lumpur. Off course this was to be expected.
Malaysia has found another way. Instead of raising the price of fuel, which would make the government undoubtedly unpopular, a wise committee thought long and hard about it and decided that the cause of inflation wasn’t domestic but had to lie with the foreign fuel smugglers. All those rich Singaporeans lining up at the Malaysian pumps were apparently stealing a significant portion of the 56 billion Ringit subsidized fuel. The first idea was to issue every Malaysian a pass to buy subsidized fuel. This turned out to be an expensive and fraud prone project because there are 24,821,286 people living in Malaysia that all would need a pass (or at least the ones old enough to drive). So they decided to outright ban foreigners from buying fuel at stations closer than 50km to the Thai and Singaporean borders.
The committee might have thought a bit longer about this. Singapore has a law that makes it illegal to pass the border with a tank that is less then 3/4 full. Let’s assume that an average fuel tank holds 70 liters. That means that the average Singaporean family can top up their tank with 17.5 liters of sweet subsidized fuel before returning to the land of Laksha and expensive fuel. At the same time this family will probably have lunch and even dinner in Johor Baru, fill the trunk with cheap fruit and vegetables and other groceries, have an ice cream or two or even spend some time at Genting, Malaysia’s version of Vegas. I know how these things go, whenever you’re abroad you always spend more then you intend to. Already the results are visible at the borders with Thailand, where tourism has died down to a trickle. The same will probably be true for Johor, because although the cheaper gas might not have been so cheap after all the extra spending; it’s still a major attraction for thrifty Singaporeans. I wonder how long it will take before the local Johorans will be lining up to buy just a bit of extra gas to sell to Singaporeans and other foreigners. That way the subsidy flows directly into the pockets of the needy. All outside the official gas stations off course…
Fortunately the measure will be effective against the many, many trucks of fuel that were smuggled into Singapore each day. They must have been camouflaged because I’ve never seen them cross the border….
Update. The Malaysian government must have thought a bit longer and decided that increasing the price of gas with 65% will help them a bit more than banning foreigners from buying gas. So far, the country remains quiet...
Update2. Demonstrations are planned this weekend in Kuala Lumpur. Off course this was to be expected.
Tuesday, June 3, 2008
Is it possible to find impartial information on internet?
As a professional anti-money laundering specialist it is my job to keep the bank that pays my salary free of “the bad guys” that want to clean their ill-gotten gains. This means that the millions of transactions that are processed every day have to be scrutinized by a team of highly trained analysts using sophisticated computer programs. It would seem that with the resources available today, it would be easy to determine if a payment going from A to B is just meant to facilitate the export of the latest trendy underwear and not to purchase explosives or weapons or to let Mr. Mafia buy another Ferrari. Unfortunately (or rather, fortunately) there is still no substitute for our human brain. It is this brain that helps us determine if a 14 year old boy named “Muhammad” is the same as the 60 year old terrorist of the same name. To make these decisions an analyst uses every resource he or she can get. The internet is a treasure trove of information and can shorten the research time of every case considerably. As long as professional and neutral organizations are used to provide the necessary information the result will be a professional and neutral conclusion that won’t touch any “innocent” lives and only helps to keep the “bad” and the “good” guys apart. To find these neutral and impartial sources however is much harder then it seems.
Take for instance ‘World Check”. Founded in Switzerland and used by financial institutions and law enforcement organizations world wide, it has become the leader of “bad guy” information business. Its database is both comprehensive and without question neutral. The database is only accessible for paying and screened customers who use it for professional purposes. At the same time the public World Check web site publishes articles that are far less unbiased and neutral.
Lawyer-turned-money launderer for the South American mafia-turned consultant Kenneth Rijock publishes daily about money laundering and terrorist financing concerns. Recently however his articles seem to focus on Venezuela in general and the evils of its president Chavez in particular. No doubt that the oil rich country is waging a socialist inspired war of words with the current Bush administration and no doubt that Venezuela is a country high on the financial crime concerns list,but is it the job of a seemingly neutral information provider to focus on one country? According to mr. Rijock, Chavez and his regime are guilty of everything from from election fraud (not true) to financing FARC (might be true) to bribing US Democrats (really?). The problem is that it is very difficult to find corroborating publicly available evidence for Rijock’s accusations. Even if its all true, where are the articles about Uzbekistan, Myanmar or other countries of concern? Or is it Iran, Chavez's alleged puppet master that is the source of all evil?
Another source of information I read frequently is the Terrorist Finance blog written by David Nordell and a group of contributing experts. Mr. Nordell, like mr. Rijock is an esteemed member of the AML/ATF community and his knowledge is no doubt beyond reproach, but even he can’t hide his preferences. Instead of Venezuela, the countries of choice here are the usual suspects in the Middle East. Again, there’s nothing wrong with campaigning against or for a cause but I always advice my colleagues that there is no issue with using the information of any source on or outside the internet as long as all sides of a story are told in the final analysis. So far, I’ve only encountered a few commercial sites that I consider impartial. Stratfor, ironically called “The shadow CIA” tries it’s best to show as many sides in an international issue as possible. The last few months they’ve become a bit more Readers Digest like in their marketing strategy but the analyses I’ve read are both comprehensive and sound. It might be because they use multiple analysts or it might be because providing information (or intelligence) is what they do best but it seems to help me in unraveling the complicated puzzle that today’s world has become.
Take for instance ‘World Check”. Founded in Switzerland and used by financial institutions and law enforcement organizations world wide, it has become the leader of “bad guy” information business. Its database is both comprehensive and without question neutral. The database is only accessible for paying and screened customers who use it for professional purposes. At the same time the public World Check web site publishes articles that are far less unbiased and neutral.
Lawyer-turned-money launderer for the South American mafia-turned consultant Kenneth Rijock publishes daily about money laundering and terrorist financing concerns. Recently however his articles seem to focus on Venezuela in general and the evils of its president Chavez in particular. No doubt that the oil rich country is waging a socialist inspired war of words with the current Bush administration and no doubt that Venezuela is a country high on the financial crime concerns list,but is it the job of a seemingly neutral information provider to focus on one country? According to mr. Rijock, Chavez and his regime are guilty of everything from from election fraud (not true) to financing FARC (might be true) to bribing US Democrats (really?). The problem is that it is very difficult to find corroborating publicly available evidence for Rijock’s accusations. Even if its all true, where are the articles about Uzbekistan, Myanmar or other countries of concern? Or is it Iran, Chavez's alleged puppet master that is the source of all evil?
Another source of information I read frequently is the Terrorist Finance blog written by David Nordell and a group of contributing experts. Mr. Nordell, like mr. Rijock is an esteemed member of the AML/ATF community and his knowledge is no doubt beyond reproach, but even he can’t hide his preferences. Instead of Venezuela, the countries of choice here are the usual suspects in the Middle East. Again, there’s nothing wrong with campaigning against or for a cause but I always advice my colleagues that there is no issue with using the information of any source on or outside the internet as long as all sides of a story are told in the final analysis. So far, I’ve only encountered a few commercial sites that I consider impartial. Stratfor, ironically called “The shadow CIA” tries it’s best to show as many sides in an international issue as possible. The last few months they’ve become a bit more Readers Digest like in their marketing strategy but the analyses I’ve read are both comprehensive and sound. It might be because they use multiple analysts or it might be because providing information (or intelligence) is what they do best but it seems to help me in unraveling the complicated puzzle that today’s world has become.
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