The revolutionary significance of job growth
It was striking to hear how encouraged both Klaus Kleinfeld and Dominic Barton sounded when Chrystia asked them about the effects of the recent turmoil in the Middle East on the business environment there. Barton believed the regime changes in Tunisia and Egypt were “the dawn of a new good thing that’s occurring” and noted that it is likely that new capital will come into these countries as a new leadership emerges. Kleinfeld, whose company is in the process of building the world’s largest integrated aluminum system in Saudi Arabia, said that Alcoa is still very comfortable in the region and that the only surprises with their Saudi partners have been positive surprises. For Kleinfeld, the most assured way to bring about stability in a region plagued by unrest is to have businesses come in and create jobs:
If there’s one thing that the Middle East needs particularly for the young — as well as well-educated people — it’s jobs. And it does it in a region which typically has not had much of an economic growth around Ras Azzour. So that’s all very, very good. And not just for us as a company but also for the region. And it’s gonna have a stabilizing as well as a kind of uplifting, positive element
Like Saudi Arabia, China has a large population that accepts a level of repression so long as the leadership can deliver economic growth. Barton, a China expert who headed McKinsey’s Asia operations before ascending to the consultancy’s top spot, said that he did not think that dissent in China would spillover and create a Middle-East-style uprising because the Chinese Communist Party has been able to stay on top of job growth. He had an interesting anecdote about McKinsey’s study on the effectiveness of China’s stimulus plan that illustrated the leadership’s obsession with maintaining growth:
During the financial crisis, there was a stimulation program that was being put in place. And we’d been asked, almost ordered to do work to figure out what sort of discount should you put on TVs in tier three cities? It was a very focused question. And the reason was they were trying to create consumer demand in a very sophisticated manner. Do you sort of drop the price by 25 percent or do you have people buy it and they get a 25 percent rebate from the mayor? That was literally the thing.
And as we were talking about this I was amazed at how sort of precise it was. I said, you know, we gotta make sure that the impact is there and how we do — sort of doing the McKinsey thing, we wanna make sure this happens. And this guy said to me, “I think we have a different definition of impact than you.” And I said, “What’s that?” And he says, “If this doesn’t work, we’re gonna have probably 12 million people that won’t have jobs. And you should know that all of the revolutions in our 5,000 year history have occurred in the countryside.”
And so there is a revolution — it — so he was just trying to explain to me we understand how important this is, you idiot, basically.
Posted by Peter Rudegeair.