Category: O’Neil-Chapter 10

The Sectarian Division in the Middle East

The revolutions in Tunisia and Egypt have prompted similar uprisings in many other countries of the Middle East and North Africa. Though the vast majority of the populations in each of these countries are Muslim, the societies are far from homogeneous. In addition, to social class and ethnic cleavages, Brian Ulrich–Assistant Professor of Middle East History–notes the Sunni/Shi’a sectarian split within Islam:

The sectarian split between a Shi’ite majority and Sunni monarchy and minority matters, but not in a straightforward way. The country’s rulers have played a game of divide and rule, one which seems to have accelerated over the past few years which have seen an increase in anti-Shi’ite discrimination. Presumably hoping to keep smaller the popular base to which they must dispense patronage while tying that base to them ideologically, the Al Khalifa dynasty has portrayed Shi’ites as potential Iranian catspaws and pointed to Iraq as an example of the negative consequences of Shi’ite democratic empowerment. What you see in the government’s rhetoric is an attempt to cast the Shi’ites themselves as the sectarian ones primarily on the grounds of their Shi’ism, much like the Mubarak and Ben Ali regime claimed to suppress Islamic extremism.

Bahrain has also seen major protests before, with a 1990’s “intifada” almost exclusively Shi’ite demographically. During that period, the key to the uprisings’ longevity was a social base in the winding narrow streets of the Shi’ite neighborhoods in and around Manama that the mostly South Asian police had trouble penetrating.

Here’s the video of an interesting debate on the Shi’a/Sunni division in Islam, with some very interesting guests, including U. of Michigan Professor of Middle Eastern History, Juan Cole, who has a very informative blog on Islam and Middle East politics.

Washington Post Reports that China no longer as Attractive an “Outsourcing” Target

The average person may not know the difference between “offshoring” and “outsourcing”, but one would think that it would be a condition of employment for someone who writes for the business section of the Washington Post. In an otherwise informative story on the decreasing attractiveness of China as an “outsourcing” location for US companies, we are witness to another example of a member of the traditional media seemingly uninformed of basic facts.

Outsourcing is simply the idea that a company chooses to have another company produce a good or service rather than produce that same good or service in-house.  Outsourcing has been happening for a long time, and an example is when the Ford Motor Company decided that it would be better to use their productive capacity to produce engines, and outsource the task of making tires to a different company rather than make tires itself.  This helped increase productivity by allowing Ford to concentrate on the making of engines, and have the other company (Goodyear, Bridgestone) focus on making better tires.

Offshoring simply means sending work beyond one’s national boundaries.  Notice that not all offshoring is also outsourcing.  In fact, I have previously read (but I can’t find the source) that most offshoring is, in fact, not also outsourcing.  How can this be?  Well, what happens when General Motors decides to close down a car factory in Flint and make begin producing vehicles in Windsor, Ontario instead?  That production (and the jobs accopanying it) has been offshored (moved to a different country–Canada) but it hasn’t been outsourced, since GM is still producing the vehicles.  Here’s a little chart that will help you understand the difference.

As for the article itself, it demonstrates that rising fuel costs have increased the cost of shipping to such an extent that the potential savings for a US company of producing in China are completely eliminated.  One such company has repatriated production to the US from China (I suppose that’s called “onshoring”?)   We read:

SHANGHAI — Harry Kazazian built his business on sleeping bags that are made in China and shipped across the ocean to the United States, but he realized recently that the math doesn’t work anymore.

With fuel prices at record highs, the cost of sending a standard 40-foot container of goods has gone from $3,000 in 2000 to about $8,000 today, squeezing profit.

So this summer Kazazian, chief executive of Exxel Outdoors, a Los Angeles-based maker of recreational equipment, did something radical: He moved the manufacturing back to Haleyville, Ala.

Soaring energy costs, the falling dollar and inflation are cutting into what U.S. manufacturers call the “China price”– the 40 to 50 percent cost advantage once offered by Chinese producers.

The export model that has powered China and other Asian countries for three decades will be compromised if fuel prices continue to rise, said Stephen Jen, a managing director for Morgan Stanley.

“Globalization has gone a little bit too far. It has overshot,” Jen said. “We’re not saying Asia is going to crumble, but we are saying Asia enjoyed extraordinary conditions in the past. Now the conditions are changing very quickly because of the energy shock, and Asia is coming under pressure.”

The ripple effects have been far-reaching. The trade imbalance between the United States and China — a source of political tension for years — is beginning to right itself as Chinese exports fall and U.S. exports rise. Global trade routes are being transformed, suggesting a possible return to a less integrated world economy.