The Judgment Call section of today’s Financial Times asks:

Last week, Volkswagen chairman Ferdinand Piëch announced the company was interested in buying Alfa Romeo, the Italian brand. While at Fiat, chief executive Sergio Marchionne says the company is “Italian based but not an Italian company.” In the era of global business, does a company’s national identity matter?

Here’s my answer:

It depends who you are talking about.

For companies, nationality is becoming less important. Their products have to be in the major markets, no matter where they are. You need to source stuff where the capabilities and the prices are right. One thing I learned way back in the 1980s and 1990s, when I was studying the globalisation of auto manufacturing, is that it’s often harder to upgrade and transform existing plants at home than it is to set up not just new factories but whole new work systems in new places. For unions, nationality matters because factory jobs are tied to locations: it’s not as though existing workers can be transported abroad. Workers can benefit when foreign companies invest in new countries and generate new jobs overseas but often those companies prefer to operate without unions. Countries, meanwhile, worry that globalisation will hollow out their economies.

Domestic companies, politicians believe, are more inclined not just to create jobs but to invest in national projects. Maybe so, but foreign companies have considerable interest in making their offshore locations more productive and engaging local employees and communities more effectively. Corporate nationality is losing ground to globalisation. Those that try to prop it up only stand in the way of their own progress.

The rest is here.

Photo Courtesy of White-Stripes-Lyrics.com

Ludovic Hunter-Tilney elaborates in the Financial Times noting the shift from the shredding solos of Hendrix, Clapton, Page, and Beck to the “shimmering” contextual tones of U2’s Edge or Jonny Greenwood of Radiohead. What about Jack White?

Housing starts dipped to record lows in April. Just 357,000 single family homes were started last month, while total starts feel to 458,000 – an all-time record low. Calculated Risk charts the trend.

The Financial Times highlights the global scale of the real estate crisis:

The slump across global commercial property markets has accelerated since the turn of the year, with the emerging markets in particular struggling under the combination of capital value and rental falls. The pace of decline in capital values accelerated in the first quarter, while almost every country in the world is reporting a slide in rents …

Over at the Financial Times, David Roche argues that current approaches prolong the inevitable because they fail to deal with its underlying cause.

In the U.S., about 90 percent of all the measures to deal with the credit crisis aim to prevent asset prices falling to market levels, at which they would clear… A substantial proportion of the fiscal measures enacted and planned, as well as the initiatives to restructure mortgages either through private sector banks or government-sponsored entities, are intended to bail out borrowers and prevent the repossession of houses. This will stop the ultimate cause of the crisis, lack of household thrift, being addressed rapidly. Such measures train the Pavlovian dog not to learn new ways when that is precisely what it needs to do…

It is a matter of simple arithmetic to work out that the new layers of state debt to deal with the credit crisis are not a substitute for private debt, but an addition to it. This is because the state debt does not extinguish the private debt, but merely finances it, so increasing the layering of leverage that lies at the heart of the credit crisis. Worse, bigger budget deficits and borrowing requirements will increase the U.S. and the UK need for foreign capital. The foreign funding may not be forthcoming, which could cause the dollar to crash. The increased role of the state will crowd out more productive uses of capital and create a bigger bureaucratic role in the economy.

With all eyes focused on the crisis, we forget that the key axis of economic competitiveness remains the global competition for talent. In my 2005 book, I argued the greatest threat to U.S. long-run competitiveness was the twin pincers – on the one side, increased ability of the emerging economies – particularly India and China – to retain or re-attract their top talent and on the other side by growing efforts among a slew of advanced countries to compete more aggressively for global talent.

What I did not or could not know is how the crisis would accentuate and accelerate these forces. The Financial Times provides this report on how the crisis appears to be accelerating the flow of expat talent from the U.S. Here’s another from the Globe and Mail:

Precise figures of professionals returning home aren’t available, but reverse migration has become a major issue in a number of countries. The financial sectors in India and China are being bolstered by a reverse exodus of highly trained but suddenly jobless bankers and analysts. Brazil and Turkey have observed the same effect. The trend is also visible in smaller developed countries, such as Israel and Australia, that have avoided the worst of the crash. And Malaysia may have gone the furthest in exploiting the phenomenon: Its higher-education minister announced recently that his country’s institutions should launch an international program “to identify Malaysian professionals who lost their jobs abroad to return and work.”The reversal is particularly dramatic in India, where human resource managers for finance firms are reporting hundreds of résumés from New York and London arriving on their desks each week.

The places that are best able to retain and attract talent during and coming out of the crisis will gain significant long term advantage.

Question: Is the crisis altering the global playing field for competing for talent and, if so, how?

Over at the Financial Times, Michael Skapinker writes that New York and London will rebound for three reasons:

[O]ne day, with new regulations in place, companies will return to raising funds, banks to lending and financiers to making money. New York and London will remain the best places to do this because they retain the advantages they had before. The first is language. Lehman Brothers may have gone overnight, but it takes centuries for a language to disappear. A global generation has invested years learning English, which has no ready challenger. The two cities’ second advantage is law. The US may be excessively litigious and lawyers may charge outrageous fees in both cities, but where else would you look to the law to defend your corporate rights? Shanghai? Moscow? The third advantage is collective brain power. This may seem laughable, given where bankers’ supposed intelligence has landed us now, but the solutions to this crisis will come in cities most open to raucous debate from whoever has anything to contribute. The next 30 years will be different, but New York and London will rise again.

Maybe – but we’re also likely to see some shift in financial power, especially to Asia, over this time. I also think it’s a huge mistake to read NY and London as financial centers. My own sense is that it is their broadly based creative economies that have propelled NYC and London to economic heights. I’d like to see the two cities spread their bets even more broadly across entertainment and creative industries and other forms of innovation.

And Charlotte looks to be hard-hit, according to the Wall Street Journal:

“The sale of Wachovia bank to Citigroup Inc. has thrown this city — obsessively proud of its status as the nation’s second-leading banking center behind New York City. Construction continues on the new Wachovia headquarters in Charlotte, N.C., even as the bank is absorbed. Overnight, Charlotte faces the prospect of losing not just thousands of jobs but its civic identity.”

Worse yet, cities and states are already feeling the effects of tight credit, according to the New York Times:

“Cities, states and other local governments have been effectively shut out of the bond markets for the last two weeks, raising the cost of day-to-day operations, threatening longer-term projects and dampening a broad source of jobs and stability at a time when other parts of the economy are weakening. The sudden loss of credit, one of the ripple effects of the current financial turmoil, is affecting local governments in all parts of the country, rich and poor alike.”

This will surely get worse in the weeks and months ahead so expect more cutbacks. And it will hit everything from badly needed infrastructure projects to schools and even great state universities. This kind of retrenchment will surely affect the ability of U.S. cities and regions to compete globally for investment, business, and talent in the long run.

Most of what I read on the topic is wishful thinking or fluff. But John Kay writing in the Financial Times provides intriguing perspective:

Gloomy commentators have always argued that scarce resources will halt economic growth and their prognostications have always been wrong. Human ingenuity has found new resources and substitutes for old ones – oil and gas replaced coal, the artificial fixation of nitrogen solved the scarcity of bird droppings for use as fertiliser, and plastics substituted for pretty much everything.

But economic growth in affluent societies does not mean an increased claim on resources because growth is now mostly about better stuff, not more stuff. Alan Greenspan, the former Federal Reserve chairman, has been reported as saying that America’s gross domestic product weighs no more than it did a century ago. It is hard to see how even the great sage could know this, but easy to see what he means. At the beginning of the 20th century big companies such as US Steel, Pullman and International Harvester made goods you could stand on or sit in. Their counterparts today are Microsoft, Pfizer and Coca-Cola, whose products fit in your pocket.

At Wuppertal in Germany, a research group documents our use of the three main kinds of materials with Teutonic thoroughness. Biomass – the product of living and growing things – feeds us, clothes us and furnishes our homes. We eat it and we wear it out. Fuels warm us and power our cars and become atmospheric gases. Metals and minerals make our manufactured goods and our buildings and are then dumped. The quantities grown or mined in Europe can easily be established. But we import not only oil and steel but also items made using oil or steel. They leave a trail of debris that leads back to the mine and the forest. While it makes sense to count this waste, the consequences are strange. A gold ring may weigh only five grams but, since ore contains very little gold, that ring may represent several tonnes of stuff. Precious metals and minerals account for a large proportion of our consumption of stuff.

A new model for growing better – that is for true prosperity – requires moving beyond waste, not only of natural resources but of human creative capabilities. The logic of economic development continues to push us, in fits and starts, in that direction.

1. Copenhagen: out in front by virtue
of its scale, a good airport, all those bike paths and handsome locals.
2.
Munich: almost a winner, but it should have committed to building the Transrapid
airport rail link.
3. Tokyo: the world’s best big city by far. Unfortunately,
last week’s stabbing spree hasn’t done much for its public safety record.
4.
Zurich: more relaxed neighbours would put it in first place.
5. Helsinki: a
European capital with a foot firmly in Asia.
6. Vienna: one of Europe’s greenest
cities.
7. Stockholm: the city wants to go vertical — a tricky mission.
8.
Vancouver: the best of North America in a beautiful frame.
9. Melbourne: the
best neighbourhoods in the southern hemisphere.
10. Paris: its visionary mayor has made the old dame internationally relevant
again.

11. Sydney
12. Honolulu
13. Madrid
14. Berlin
15. Barcelona
16. Montreal
17. Fukuoka
18. Amsterdam
19. Minneapolis
20. Kyoto + 21. Hamburg, 22. Singapore, 23. Geneva, 24. Lisbon, 25.
Portland.

Finally, these may not tick all the normal boxes but there’s something truly
refreshing and more than a little fun about urban living in: 1. Genoa — the
next Barcelona? 2. Buenos Aires — it’s all there and then it’s not. 3. Istanbul
– all of the ingredients to move into the top 25 next year. 4. Beirut — if
chequebook diplomacy Qatar-style put a temporary lid on things, then Beirut
deserves more of it for a proper bounce-back. 5. Phnom Penh — regime issues
aside, love moves at a perfect pace. …

Brule, never one to mince words, has some candid, and in my view useful and needed advice for London (where he lives), Toronto (his hometown) and NYC.

What is still something of a shock is how many cities still get it so very,
very wrong. London doesn’t make the grade for the simple reason that it has
somehow managed to grant planning permission to a most uninspired shopping
centre in Shepherd’s Bush, an area that is rapidly becoming a part of central
London.

Toronto doesn’t qualify because it has allowed its suburbs to become
unconnected, ugly sprawls of hideous houses (garages bolted on to the front of
houses are far better suited to southern California than to southern Ontario)
and has done little of merit to deal with its derelict railway lands. New York
continues to grind to a halt under the weight of automobile traffic, has no
coherent scheme to get more people on to bicycles and still no sign of a
high-speed, non-stop rail link to any of its airports.

If I had to find one word to describe Miami, it would be flamboyant.
It is the only place I have ever had a stranger shout “yeah, baby” as
we walked into a restaurant and send drinks over to our table – no
tribute to my attire, alas, but to my date’s jacket, a resplendent lime
green suede. South Beach is also the only beach where I have ever seen
a lifeguard painstakingly shaving his chest with an electric razor.

Offering
a heady cocktail of glamorous hotels and bars, a club scene to rival
Ibiza and the turquoise waters of the Caribbean, Miami is the natural
home of the poseur, yet also, curiously, a city where anything goes.

In the past, those seeking more than just a beach holiday might have
dismissed Miami as a cultural vacuum. However, the explosion in the
past few years of Miami’s innovative contemporary arts scene has put it
on the cultural map, too, drawing tourists, investors and collectors en
masse.

To get the most out of Miami, I recommend combining the
light-hearted fun of South Beach with forays into the edgy Wynwood art
district for creative inspiration, including detours to the Design
District and Little Havana, where Miami’s vibrant Latin American
flavour is most palpable.