A financial zud has fallen on the Mongolian steppe:
Waves from the global economic downturn hit Sodnomdarjaa Khaltarkhuu when bank officials showed up at his tent on the edge of the Gobi desert and threatened to foreclose on his goats, sheep and camels.Falling demand for cashmere among recession-hit shoppers in the West is cutting into earnings among nomadic herders in Mongolia, whose goats produce the soft fiber used in high-end sweaters, scarves and coats. The result: herder loan defaults.
Mongolians are calling the current situation a financial zud, invoking a local term for unusually harsh winters that devastate herds. After Mr. Sodnomdarjaa couldn’t pay back a $2,700 loan, he says bank officials pressed him to sell his livestock — which he used as collateral. The bank says he misrepresented the number of animals he owned, which he denies. Now a judge has ordered the seizure of Mr. Sodnomdarjaa’s family home — a tent — if he doesn’t come up with the rest of the money soon.
It’s a familiar story:
Some herders, betting on continued strong cashmere prices, borrowed more than they should have, and spent the money on the Mongolian equivalent of conspicuous consumption: motorbikes and solar panels to provide electricity for their tents. Banks, looking to cash in on rural prosperity in the good years, didn’t pay enough attention to risk management and lent too freely, some bankers say. [...]
Many banks have cut back on new lending. And a flood of forced sales has helped drive down prices for animals, skins and meat.
David Foster notes that the story reminds him of a passage from Hendrik Willem Van Loon’s The Story of Mankind, published in 1921:
Unfortunately in the year 1914 the whole world was one large international workshop. A strike in the Argentine was apt to cause suffering in Berlin. A raise in the price of certain raw materials in London might spell disaster to tens of thousands of long-suffering Chinese coolies who had never even heard of the existence of the big city on the Thames. The invention of some obscure Privat-Dozent in a third-rate German university would often force dozens of Chilean banks to close their doors, while bad management on the part of an old commercial house in Gothenburg might deprive hundreds of little boys and girls in Australia of a chance to go to college.
It also reminds him of some dark thoughts from Ralph Peters, published in 2006:
Globalization is real, but its power to improve the lot of humankind has been madly oversold. Globalization enthralls and binds together a new aristocracy — the golden crust on the human loaf — but the remaining billions, who lack the culture and confidence to benefit from “one world,” have begun to erect barricades against the internationalization of their affairs. And, from Peshawar to Paris, those manning the barricades increasingly turn violent over perceived threats to their accustomed patterns of life. If globalization represents a liberal worldview, renewed localism is a manifestation of reactionary fears, resurgent faiths, and the iron grip of tradition. Except in the commercial sphere, bet on the localists to prevail.When the topic of resistance to globalization arises, an educated American is apt to think of a French farmer-activist trashing a McDonald’s, anarchist mummers shattering windows during World Bank powwows, or just the organic farmer with a stall at the local market. But the swelling resistance to globalization is far more powerful and considerably more complex than a few squads of drop-outs aiming rocks at the police in Seattle or Berlin. We are witnessing the return of the tribes–a global phenomenon, but the antithesis of globalization as described in pop bestsellers. The twin tribal identities, ethnic and religious brotherhood, are once again armed and dangerous.