Western Banks Lending to Asia's Expanding Middle Class: Profit vs. Planet

In April 2013, debt levels in Asia were reaching record levels as international lenders were extending short-term loans to a growing middle class. Non-mortgage consumer credit in Asia outside of Japan had increased 67% from 2007 to reach $1.66 trillion by the end of 2012. This credit included credit cards and loans for cars, electronic products, and appliances. Outside of Japan, Asian car and motorcycle loans nearly doubled from 2007 to 2012, to reach a record $219.7 billion. Appliance and electronics loans also more than doubled, reaching a high of $10.9 billion. Meanwhile, credit-card loans grew by 90% to reach a record $234.1 billion, according to Euromonitor. The incentive for the banks is not difficult to fathom. At the time, more than half of the world’s middle class was expected to be in Asia by the end of the decade. That translates yearly into more than 100 million additional people per year. For the banks, this was an opportunity since at least the beginning of the decade because growth was not possible in the European Union and the United States on account of the financial crisis of 2008 and the ensuing European debt-crisis that extended well into 2013. The European Commission of the E.U. was also working on regulatory proposals that would limit the incentives of mortgage servicers to produce too many “bubble-creating” mortgages. 

So Western banks had an incentive to look east for fruitful markets. Interesting, government regulators in China, Malaysia, and Indonesia had began reining in mortgage, credit-card and auto/motorcycle lending, perhaps in fear of an Asian financial crisis. Had Western bankers learned their lesson, or were they unwittingly bringing their reckless mentality to Asia? Two levels of concerns can be extracted from this case. I contend that the more immediate concerns were crowding out attention that ought to have been paid to the larger, but longer-term, problems.

The full essay is at "Lending to China's Middle Class."

More people=More cars=More pollution    source: Businessweek

Expansion at Volkswagen: Minimizing Risk in E.U.?

It is perhaps common among gigantic corporations, such as the major automobile manufacturers, to assume that current profitability is likely to be augmented by expansion. Economies of scale are presumed to outpace diseconomies as even a large company expands. At a more basic level, it is generally assumed that if a company is not expanding, it is necessarily facing its downfall. The notions of equilibrium and steady state are fundamentally at odds with the more, more, more mantra of mammon. Accordingly, it can be asked whether efforts to strengthen a company’s equilibrium are more in line with long-term profitability. The very expression, strengthening an equilibrium is étranger or foreign to business parlance.


The full essay is at "Volkswagen in 2012: Minimizing Risk in the E.U."

The Fiat 500: The American Taste for Convenience Revealed

One means of doing cross-cultural comparison is by contrasting consumer tastes; such proclivities tend to evince societal mores by which societies can be perceived to be distinctive. In the case of the E.U. and U.S., Fiat, a European auto company that controls Chrysler, an American company, is discovering some societal differences as it refashions the Fiat 500 for American customers.

The full essay is at "American Consumer Tastes."

An Ethical Dilemma for Cell-Phone Companies? Drivers Who Text & Talk

Long before cellphones became ubiquitous, industry pioneers were aware of the risks of multitasking behind the wheel. Their hunches have been validated by many scientific studies showing the dangers of talking while driving and, in 2009, of texting. Despite the mounting evidence, the industry built itself into a $150 billion business in the United States largely by winning over a crucial customer: the driver. For years, it marketed the virtues of cellphones to drivers. Indeed, the industry originally called them car phones and extolled them as useful status symbols in ads, like one from 1984 showing an executive behind the wheel that asked: Can your secretary take dictation at 55 MPH? 

The full essay is at "Drivers who Text & Talk."