Saturday, October 14, 2017

America Saudi Divorce...Save it for another Knight

In my 10 Years Hence lecture The Emergence of the Fusion Economy at the University of Notre Dame’s Mendoza College of Business, I correctly forecast (to the month) the “news” that has markets buzzing this week.  When Chief Economist and Managing Director at High Frequency Economics Carl Weinberg posited that “yuan pricing of oil is coming” it was neither news nor newsworthy.  Yes, China and Saudi Arabia struck the framework of an economic cooperation agreement in March – 10 years after my forecast of the exact event.  But it was not news then either. 

And because the “fake news” is being treated as “news”, the derivative concerns are as much in error as the attribution of news.  This is not about the nearly $800 billion in oil related dollar exchanges.  This is much more profound.  But let me first digress.

I learned a very important lesson from my divorce.  For three decades, I operated under the mistaken assumption that my loyalty and fidelity were a gift to my marriage.  With the world echoing with the cacophony of dishonor and infidelity, I thought that I was offering something of great value.  Unfortunately, I didn’t realize that these were assumptive attributes in my partner.  “Of course you're loyal,” she thought.  “That’s what being married means.”  She couldn’t value what I worked at each day because I conflated my identity as a husband with loyalty and thus saw both devalued.  She didn’t devalue me.  She just didn’t value my principle attribute the way I wanted.  And I couldn’t understand why my efforts were not seen as effort worthy of recognition.  For the past 73 years, the U.S. has assumed that the world agreed to Bretton Woods accords.  While the U.S. variously subsidized and manipulated commodity supply and demand across the globe, it blamed others for “manipulating” currencies and market dynamics.  Like my partner, the U.S. assumed loyalty just is – an effortless assumption requiring no recognition or appreciation.  Like me, the rest of the world said, “Hold on a minute!  We’re sick of being taken for granted.”  Let me abundantly clear.  Neither party is “right”.  What is wrong is the absence of dialogue and deep, reflective understanding on fundamental expectations.

We live in a perverse society in which the narratives of chivalry echo in our collective value consciousness for a few more waning moments.  A gallant knight swears to serve and protect.  In the rare event that he does, his beneficiaries go back to the feast when the danger is past and the knight rides off alone with nothing but his elusive monastic honor – something he values, something for which he trains each day, something that sets him apart…and curses him to a life of being alone.  Saudi Arabia was our knight.  With the reciprocal agreement that the great democracy of the west would prop up the monarchy of the peninsula, the U.S. could go about its global hegemonic consumptive orgy without genuinely appreciating the Saudis.  Sure, they were invited to a ball or two.  Sure, the U.S. gave them access (at a price) to some powerful weapons.  But, at the end of the day, the Saudis did not get to sit at the table with the kings.

And now, with the One Belt One Road diplomacy of another global power (and, notably with a new king in Saudi Arabia), China is not “compelling” a damn thing.  They are sitting down with a respected new leader, treating him with respect, and notably NOT taking his resources (or loyalty) for granted.  This is NOT about oil or petrodollars.  This is about a generation of economic model transformation.  This is about the end of Bretton Woods.  It’s America’s great divorce.

Remember, with oil wealth came purchases of arms.  And with arms came alliances.  The U.S. has long confused alliances with loyalty.  Just because someone is an ally does not mean they’re LOYAL to you or your cause.  It simply means that in a pragmatic assessment, alignment is self-serving.  And the dissociation of oil trade from the dollar means that China is now positioned to be an arms, chemicals, and power technology supplier destabilizing MUCH more of the U.S. economy than simply the “petrodollar”.  China is not making a “power grab” as much as they are recognizing the consequence of the U.S. government’s blatant disregard for the value of loyalty.  And into that emotional void, they realize that engagement and cooperation lead to a “harmonious relationship” (language that the State Council has lavished on their partners for years).  Harmony sounds a lot more attractive than hegemony.  And while there’s no question that China is being shrewd, it will be a massive shame if the U.S. doesn’t pull itself up and examine its role in the great divorce.

From August 23-25, 2017, Chinese Vice Premier Zhang Gaoli signed about 60 agreements worth about $70 billion with Saudi Arabia.  Xinhua reported that the agreements covered investment, trade, energy, postal service, communications, and media.  What most Western media overlooked was the rather important meeting with 31 year-old crown prince Mohammed bin Salman.  Sure, he’s the crown prince and the President of the Council for Economic Development Affairs.  But most importantly, he’s the de facto Minster of Defense and China knows that very well.  Giving this young prince honor and respect is an excellent example of a Confucian / Lao Tzu diplomacy that eludes the West.  We just witnessed the first step on the Journey of a Thousand Miles.  And, because we don’t value loyalty, we didn’t report on it.  That’s the real news.  And it will have more than a 10 years hence effect.


1 comment:

Thank you for your comment. I look forward to considering this in the expanding dialogue. Dave