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I want to thank David and Gordon for asking me to be a guest blogger for the next few weeks. I look forward to getting to know the Conglomerate community.

My post for this week could easily have been entitled "How the Shipping Container Changed the World." You probably have never given much thought to shipping containers, but you really should. Those narrow, windowless 40 x 8 feet steel structures, ubiquitous in port cities, revolutionized business. In fact, it would not be too much of a stretch to say that without shipping containers globalization would not have been possible. How? Before Macolm McLean invented the shipping container in the 1950s, goods were individually and manually loaded onto a ship piece by piece in "break bulk," an expensive process that often took days to complete and subjected goods to theft or breakage. Worse yet, when they arrived at their destination port, the process had to begin all over again. The shipping container allowed goods to be packed at the place of production; later, the same container would be transported by rail or truck to a seaport where it would be hoisted by crane onto a ship and delivered to the ultimate consumer.

McLean’s invention did for maritime shipping what Henry Ford’s assembly line did for the automobile industry—making the system faster, more efficient and cost effective. Businesses could now cheaply export (and import) computers, bicycles, clothing, toys, and all manner of goods. And that, in part, led to the globalization explosion. Today, over 90 % of world trade in goods moves by container, but that’s not all it brings.

Only one month after the September 11 attacks, the shipping container was transformed from a link in the trade supply chain to a possible means of exporting terrorism. On October 26, 2001, Italian officials intercepted Rizik Amid Farid, an Egyptian national and reputed Al-Qaeda member, in a container bound for Canada. Farid carried with him a Canadian passport, along with several airport security passes, and an aircraft mechanic certificate that allowed him entry into sensitive areas in New York’s John F. Kennedy airport, as well as Newark International, Los Angeles International and Chicago-O’Hare. Unfortunately, this was not the first high-profile example of people using shipping containers to advance potentially dangerous ends. In 2004, Abdul Qadeer Khan, the father of Pakistan’s atomic bomb, confessed to smuggling nuclear equipment and technology to Libya, Iran and North Korea in a smuggling network that spanned 15 years. Khan purportedly shipped all of his nuclear materials inside containers.

If a shipping container could house an Al Qaeda operative and nuclear paraphernalia, could it also hold a "dirty bomb"? Could a terrorist stow a nuclear device in a container, ship it to one of the nation’s busiest ports, and then detonate that device by remote control upon arrival? The "nuke-in-a-box" scenario, which would have seemed far-fetched before September 11, now drives U.S. container security policy.

In 2002, U.S. Customs adopted The Container Security Initiative ("CSI"), a program designed to "extend [the United States'] zone of security outward," by stationing U.S. Customs agents in ports all over the world (with consent of the host) where they can work with officials to identify suspect containers and inspect them before they ever arrive on U.S. shores. CSI has been called a "hidden revolution," because it has quietly but radically altered the way international maritime trade is conducted. In the process, it has transformed the world trade system creating winners and losers.

Next week, I want to explore who gains and who loses under the new CSI system. For a more detailed version of this post (and to preview next week’s arguments!) please visit my website.

Cross posted at www.intlawgrrls.blogspot.com

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I'm not sure what is more ironic -- that the car industry is now focused on making smaller rather than bigger vehicles or that as developed countries ponder how to get cars off the road, developing countires are trying to get more cars on the road.  India's Tata Motors Ltd. is getting a lot of press about its plans to sell its "Nano" car later this year for $2500.  This price tag will allow many more middle-class Indians to be able to afford a new, entry-level automobile.  I'm ashamed to say that my first kneejerk response to this news was, "But the last thing we need is for everyone to have a car."

Sure, as long as I already have a car!

I've always heard that conservation is a luxury of developed countries, and I guess that is true.  Obviously, the costs of automobiles given current technology are high -- environmental costs, fuel dependence, but I think we've forgotten what the benefits of automobiles are.  Cars allow the unemployed to look for work in a far larger geographical area than before, and even allow the unemployed to move to other areas to find work.  Being able to drive to work as opposed to walking or riding a bicycle reduces commuting time (and laundry time) and creates more free time to be with family and children.  Sure, it's easy for us to say that we should choose to ride our Trek bikes in nice, safe bike lanes to work for the environment and our own health, but that ignores the reality of most "unplugged" commutes in the developing world.  Cars allow people to visit family, have vacations and take children to school. 

No, the planet can probably not support six billion cars, but I still think this development should be applauded.

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Ireland is often lauded as a marvel of economic engineering.  With a few tweaks of policy, the story goes, a country of rural and bumbling charm (see, e.g., the classic "traffic jam in Ireland" postcard below) transformed itself into an exploding economy with Europe's second-highest per capita GDP in about twenty years.

That is, from this:

To this:

I can personally verify that something very dramatic has happened during my own sentience.  Contrast my earliest trips home, which featured rampant unemployment and fancy dinners consisting of a soggy clump of chips in a soggy wad of newspaper, versus my latest visit this summer when everyone I met seemed to own a couple of houses and was heading off to New York for a cheap weekend's shopping.

My hometown of Midleton, County Cork, has exploded to about triple its original size, and along its high street, I now find a Thai restaurant.  Dinner for two: $75.  Though they did have very good chips.

All this wealth and development is forcing Ireland to confront new problems, such as how to cope with immigration, urban sprawl, and the choice of Fendi or Chanel sunglasses.

And my interests have begun to diverge quite a bit from my relatives'.  They're delighted with the boom, the jobs, and the income, whereas I wouldn't mind having the quaint roads, charming pubs, and cheap prices back.

The broader question is how to replicate this success -- or at least the beneficial parts of it -- in other parts of the world.  Evidently, the Chinese premier and Irish Taoiseach are in regular contact.  But what about the poorest countries of sub-Saharan Africa, south Asia, and so on: is it merely a matter of lowering the corporate tax rate, encouraging financial innovation, and making secondary education free and universal, as Ireland has so famously done?  Or is it also essential to situate your country right in between the United States and Europe, to retain U2 as cultural ambassadors, and to lay down a few centuries of genealogical ties to the world's most powerful economy?

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. . . until I went to Ethiopia:

1.    The world's highest capital city is LaPaz, at 11,913 feet above sea level.  The world's second highest capital city is Quito, at 9,350 feet.  These elevations make the mile-high city seem like small beer, right?  These capitals dwarf even the peaks of many ski resorts in the US.  So why do these factoids matter for Ethiopia?  Well . . .

2.    The world's third highest capital city is Addis Ababa, elevation c. 8,000 feet.  At least according to local lore, this ranking is accurate.  The city's elevation is important for at least two reasons. 

First, the elevation means mild weather all year round and no mosquitos.  During my short stay (the last week of June), it was cooler in Addis than in Atlanta.  No mosquitos also means no malaria, no yellow fever.  So while I got the full panel of vaccinations before I left (hep A, polio, typhoid, meningitis, DPT, as well as yellow fever), at least the weather was mild, and mosquitoes and the mosquito-borne diseases were not a worry.

Second, the elevation in Addis, according to local sports fans, helps explain Ethiopian dominance in distance running.  Many (most?) of Ethiopia's elite runners train in Addis, where the thin air makes for superior conditioning.  When they race at locales closer to sea level, the advantage is apparently similar to blood doping (which increases red blood cell counts to improve performance).

3.    Addis has a growing Chinese population!  My first night there, I'm sitting in the lobby of my hotel having a beverage when I hear Mandarin being spoken behind me.  Two Chinese fellows had just walked in, and they sat down at the next table.  We started chatting, and it turns out they work for a Chinese engineering/ construction company that has a big road project going on in Addis.  One of the fellows said he'll probably be staying in Addis for a couple of years until the project finished. 

Addis is clearly booming with construction projects--buildings and roads.  Apparently all the roads are being built by Chinese contractors.  Both cabbies and my lawyer companions at the Ministry of Justice confirmed that Chinese firms are the dominant players on infrastructure projects in Addis, and that apparently Chinese firms are involved in construction all over Africa.  One night, I also noticed a table of Chinese expats at one of the nicer Italian restaurants in town.  I guess I knew in the abstract that China always saw potential strategic partners in Africa.   It was interesting to actually see Chinese involvement in the region.

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I'm just back from a week in Ethiopia, where I consulted with the Ministry of Justice on reform of Ethiopia's Commercial Code.  (Yes, you can actually read the Commercial Code online.  This did not surprise me before I left, but seems much more surprising now that I have spent time there, where "broadband" is not so broad.  More on that later . . .).  My short stay there--my first time in Africa--left me with many impressions about business, law, economics, and society, which I am still processing.  I expect I'll blog periodically about Ethiopia over the next few weeks as I sort out my thoughts (and inflict them on you).  That's me there on the left, with lawyers from the Ministry of Justice--warm and gracious hosts to a person--and my friend Claire Dickerson from Rutgers Law, who got me involved in the project.

The Commercial Code incorporates a lot of stuff, including business organization law and bankruptcy law.  The Ministry of Justice and foreign commercial interests are vitally interested in modernizing commercial law--and with it, the economy.  The Minister himself showed up on the first day of our meetings, along with the French ambassador.  The current Code was enacted in 1960 during the reign of Emperor Haile Selassie.  Since then, Ethiopia has been through coups, communism, and contested elections. The current government has committed to privatizing the socialist economy it inherited.

A modern commercial code, of course, is but one (probably not the first) factor in successful development of the economy.  The country is quite poor:  over 80% of the population survive by subsistence farming and livestock grazing.  The capital Addis Ababa feels like a typical third-world capital, in some ways more so.  Traffic is not as bad as Bangkok or Jakarta or New Delhi, but pollution from the cars is probably worse.  Few of the autos seemed to use tailpipes, as the smell of exhaust in the passenger compartment was quite strong in every car I rode in.  There is more livestock herding through city streets than I've ever encountered.

One striking aspect of Ethiopia--that everyone from cab drivers to Ministry lawyers comment on--is its ethnic fragmentation.  A political compromise in 1995 formalized a system of ethnic federalism.  The country is divided into nine ethnically-based administrative regions, each of which has its own official language.  Court proceedings, for example, are conducted in different languages in each region.  Each person's national ID card specifies her ethnic group.  The dominant language in Addis is Amharic, but any attempt to promote a national language--as Mao did by mandating Mandarin education in primary school in China--is apparently fraught with political peril.  Eritrea of course seceded in '93, and separatist movements in other regions are active.

The implications of this ethnic-political structure are of course far-reaching.  Forgive the reduction, but to the American-trained lawyer-academic interested in economic development, this feels like one big transaction cost. Besides language and ethnic fragmentation to make commercial interaction more difficult internally, the country also relies on the Julian calendar and a system of time keeping based on sunrise and sunset.  For example, "one" o-clock in the morning is one hour after sunrise (or our 7 AM).  These latter of course may simply be artifacts--and not causes--of an incomplete engagement with external commercial activity.  On the whole, though, the circumstances suggest that economic progress will be slow.  Commercial law reform is probably necessary, but hardly sufficient.

I met a doctor on the flight home who spends several months of each summer leading US medical teams in Africa doing spot medical relief all over the continent.  He captured my sentiments pretty well when he described his sense of an overwhelming task, where one has to be content with the small steps one can effect in a short time. . . .

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Microfinance has received lots of attention since last year's Nobel Peace Prize was awarded to Muhammad Yunus for his work with the Grameen Bank in Bangladesh.  If you want to get in on the act, Kiva.org is a website that lets you do that.  Kiva links up small entrepreneurs in developing countries with you and me.  It allows us to lend  (in $25 increments via PayPal) to small businesses that need a few hundred dollars to expand--a food stall owner who wants to increase her inventory so she can make fewer time-consuming trips to the market each week; or a woman who makes cheese and other milk products who wants to buy her own cow.

Kiva uses local partners--microfinance organizations--to vet the borrowers.  Our loans are interest-free, though Kiva and the local partners charge interest in order to make the program sustainable.  Kiva admits that microfinance is expensive; charging interest assures the continuity of the program.  One hundred percent of the loan proceeds go to the borrower, so the only way the program pays for itself is through interest charges.  This is a nice feature, since it puts all the capital to work and improves the incentives of the local partners to screen borrowers and monitor loans.

Kiva provides pictures and some background information about each borrower.  It also has a bit of Friendster-ism in it.  You can see pictures of each borrower's existing Kiva lenders, as well as each Kiva lender's portfolio of Kiva loans.  The home page also has a "featured lender."  Most lenders are from the US, with some from Europe as well.

Kiva was recently highlighted in a NYT story by Nick Kristof (TimesSelect, which you can get for free with a ".edu" email address). 

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I am sitting in the 21st Annual Coming Together of Peoples Conference, listening to Lance Morgan, CEO of Ho-Chunk, Inc. Morgan is telling the story of his company, and he begins by fingering tribal trust land as the source of economic development problems among Native Americans. Under the most charitable view of history, trust land was initiated as a way to protect Native Americans from expropriation, but even if it began for good reasons, trust land now stands in the way of economic development. The problem is that trust land cannot be used as collateral.

Enter gambling, which has provided the capital for further community development in Thurston County, Nebraska. Much of that development is now being financed through grants and tax credits, but the ultimate goal, according to Morgan, is to create an economically viable community, which does not exist now.

By the way, Morgan graduated from Harvard Law School.

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