The world loves American culture. Castro's favorite liquor is Maker's Mark. One of Vladimir Putin's favorite songs is "Blueberry Hill." He has sung it with a piano solo.
In the global stream of consciousness, there was a time when the U.S. was perceived as being well-meaning. Shock, Awe and technology changed all that. My Lai and Abu Ghraib carved a representation of the U.S. into the consciousness of the world.
Shock, Awe and technology constitute the U.S. nation-building Investment strategy. The ROI is dismal; the deaths of the best of humanity, my brothers and sisters at arms, the physical and mental maiming of warriors, the unemployment and homelessness of the "recovering warrior," the vast waste of treasure, environmental degradation are its ROI. Worse of all is what at the corporate level is called "reputational risk," the reputational risk of the U.S.was framed in the human consciousness by the iconic photos of a girl burned by napalm and the self immolation of monks in Vietnam and by the iconic images of Abu Ghraib. The self-immolation of Mohamed Bouazzizi started the Arab Spring. The Spring of hope in Tunisia became a Winter of global discontent. These iconic images and that of the Twin Towers have become a part of the global stream of consciousness, part of the indelible global mental imagery of the reputation of the U.S.
Vietnam was not an exercise in cultural dignity. We called the Vietnamese "gooks." We later called the Iraqis and Afghans "towelheads," "wogs" and worse. By denigrating the culture of others, in My Lai, Abu Ghraib, Kabul, we changed the global perception of the U.S. as being well-meaning. The reputational risk to our nation is ingrained in the human consciousness as evil to say nothing of our investment in nation-building.
From a nation-building and economic point of view, George Will summed it up; "We can't rebuild Detroit; how are we to build Iraq?"
The way that capital goods are being sold globally has been revolutionized by Alibaba, Amazon and EBay Inc's PayPal. Financial technology has changed the way that financial services are being delivered to the global consumer. The upheaval represented by the innovations of financial technologies are the subject of a slew of findings issued by the World Economic Forum to which a recent article in Reuters relates. The article is called "Fintech Explosion Puts Banks in Digital Firing Line." More on this later.
The way that power for villages, homes and cars is delivered, is increasingly disrupted by a migration from the central utility to the micro-hydro, micro-solar or wind system and rooftop solar supplemented by battery storage. Energy efficiency is being delivered by systems that are localized in individual buildings, homes, cars.
Hurricane Sandy, the Fukushima earthquake/tsunami have brought into sharp focus the risks associated with relying on centralized utilities, with relying on the grid.
In India, thousands of street lamps are converted to solar/battery power in replacement of diesel fuel. Solar, wind, sustainable energy initiatives and projects now dot the globe thanks to U.S.-based, Indian-born exporters. Grofers, a food delivery system is changing the way in which food is distributed and food purchases are financed in India. This is all part of the adaption of new concepts in the delivery of services made possible by financial technologies.
Savings from energy efficiency add to the kitty, the funds available for investment in economic development by savings. Distributed energy from highly efficient gas turbines, coupled with cogeneration and LED retrofit, not only save building owners great sums of money, they assure the inhabitants of these building a steady stream of efficient energy in the event of a disaster.
Capital Goods and Intellectual Property
The production of capital goods and financing of intellectual property are key to the economic development of any state, region or nation. In the U.S., Europe and Japan this production has been principally conducted by the large corporation. The deep pockets of such corporations have funded R&D, one of the seven critical elements of economic growth. The development of Innovative capital goods, related services, spares and intellectual property by the entrepreneur, in the Electronic Age is not confined to corporate R&D and large corporations. It has migrated to SMEs and the entrepreneur.
The way in which global trade is financed is revolutionizing economic development.
The traditional view of community and economic development in the U.S. is a top-down affair. In this scenario funds are allocated by a federal government that grants development funds to states which then filter these funds down to municipalities and local developers who bid on select projects. The pipeline is well lubricated by a reverse flow of political contributions. The role of the private investor is thereby restricted to "public private initiatives." This "trickle down" process evaporates before it can become transformative.
The role of the investor in community development, economic development and national growth and job creation is about to change. Fintech will not alone change this.
The production of capital goods, innovative capital goods, economically disruptive and transformative capital goods, services and intellectual property, ideas, is no longer restricted to large corporations. The critical economic benefit provided by selling innovative capital goods and ideas in foreign markets is no longer restricted to large corporations. Cultural relevance has led Kedar Gupta of ARC Energy and Baldev Dugall of Lumi-Solair to sell very sophisticated products to India and other countries from places ranging from Brooklyn, NY to Nashua, New Hampshire. It was Archimedes who said, give me a place to stand and I will move the world.
In the future, platforms will enable investors to profit share directly into companies and projects that improve the lives of those to whom they are culturally related.
The process of investment into international trade transactions will be greatly simplified. There are precedents for this in Lending Club and Prosper. Investment is actually the simple part. The persistent problems will be to gain a comprehensive view of the credit worthiness of the buyer and to ensure performance on the part of the exporter. These risks can be mitigated by export credit insurance and with the credit default and payment guaranties of Export Credit Agencies to financial institutions. What cannot be mitigated is reputational risk.
The participation in large exports of capital goods is formerly the realm of giant commercial banks. In the U.S., community banks and credit unions play an increasingly larger role in these export loans. Credit Unions can syndicate and participate out loans. Apple Bank for Savings, a community bank, has made over $300 million in aircraft export loans. Apple is able to sell these loans to Pefco. Pefco, the Private Export Funding Corporation is a single corporation created by the U.S. Treasury and the Export-Import Bank of the U.S., that facilitates funding of exports that have not been subsidized. The PEFCO does this with the purchase of loans in the secondary market from commercial lenders. The loans are then used to finance U.S. exports.