In Box

Chug for Growth

Drink and be merry -- it's all for the common good.

The myth of the smug teetotaler is no joke. Many of the most popular theories of economic growth in wealthy countries, dating back to the Protestant work ethic of Max Weber, emphasize the abstemious and sober virtues of the well-to-do. And from the 18th-century Gin Acts in Britain to Prohibition in 1920s America to a certain class of modern-day economists, there's a long tradition of blaming intemperance for the persistence of poverty.

But in fact, mounting evidence suggests that beer in particular, and the beer industry that surrounds it, may be as good for growth as excess sobriety. In some of the world's toughest investment climates, beer companies today are building factories, creating jobs, and providing vital public services, all in the pursuit of new customers for a pint. It's the brewery as economic stimulus: a formula even a frat boy could love.

In a time of unprecedented global prosperity, there are an ever-growing number of beer guzzlers worldwide. Liesbeth Colen and Johan Swinnen of the University of Leuven report that beer consumption in China in 1980 was minimal. By 2005, however, the country consumed more than 40 billion liters per year. In 1961, Brazilians drank 630 million liters of beer; in 2007 that number was 7.5 billion liters.

And it isn't just those in booming economies: Even the poorest of the poor will spend money on alcohol. Abhijit Banerjee and Esther Duflo of MIT have shown that people living on a dollar a day or less can spend 6 cents or more of that on alcohol and tobacco. Add those pennies up and you get a potential market worth billions of dollars a year. Robust demand in even the poorest places is one reason that breweries invest where other industries fear to tread. In just the last few months, Heineken won a bid for two state-owned breweries in Ethiopia for $163 million; Rwanda's stock exchange recorded its first-ever initial public offering that involved a local brewery; and SABMiller dropped an additional $15 million on top of an initial $37 million investment in its brewery operation in Juba, the main city in the aspiring breakaway country of Southern Sudan.

These investments aren't just good for Big Beer. In Juba, SABMiller's brewery will provide tax revenue, lease payments, more than 200 local jobs, and increased demand for local agricultural produce. In more stable markets, breweries can be a considerable economic force. In 2005, East African Breweries was the first company in Kenya to reach $1 billion in market capitalization, and the company paid about $44 million in corporate income tax last year.

Of course, when it comes to booze, you can have too much of a good thing. The World Health Organization has estimated that as many as 76 million people suffer from alcohol disorders and that alcohol is a causal factor in 20 to 50 percent of all cases of liver cancer, homicide, epileptic seizures, and motor-vehicle accidents worldwide. And one has to wonder about the choices of those living on a dollar a day in rural Mexico who are spending more on alcohol and tobacco than on education, or South Africans, who spend more than three times as much on those private vices as on education and health care combined.

But the dangers of excess are much lower in poor countries like Zambia (average beer consumption: 5 liters a year) than in rich countries like the United States (more than 80 liters per year). And those risks need to be balanced by beer's potential to bring about improvements in the quality of life, if only by providing taxes and employment income.

Indeed, beer may have been a force for growth for a long time. Colen and Swinnen note that beer consumption is higher in Protestant countries. What if the early success of Protestant-dominated economies wasn't about Weber's famed work ethic at all, but about the impact of breweries? Of course, it may be just as outlandish to argue that progress is driven by hops and barley as by the fear of eternal damnation -- but at least it's more fun to discuss over a pint.

In Box

Track II Diplomacy: A Short History

How the left-field idea of diplomacy without diplomats became an essential tool of statecraft.

The brainchild of a handful of academics, free-thinking State Department bureaucrats, and public intellectuals in the 1970s, "Track II" diplomacy grew out of the observation that private individuals, meeting unofficially, can find their way to common ground that official negotiators can't. Put bluntly, "citizens could take some action rather than simply being bystanders while the grown-up governments acted like jerks," says Joseph V. Montville, the former Foreign Service officer who first put the term down on paper in the pages of Foreign Policy 30 years ago. Governments once viewed Track II as a kind of feel-good exercise at best, and at worst as a genuine threat -- freelance diplomacy, after all, can damage the real kind. But three decades later, most of them have come to understand that an era of unconventional conflicts requires unconventional solutions.

May 1, 1960
An American U-2 spy plane in Soviet airspace is shot down, leading to a full-blown Cold War diplomatic crisis. President Dwight Eisenhower's friend Norman Cousins, editor of the Saturday Review, convenes a gathering of unofficial American and Soviet delegations at Dartmouth College. The meeting establishes the blueprint for Track II diplomacy, from the cast of characters (a mix of academics and ex-officials) to its agenda: a frank conversation about their countries' differences.

Shrinks discover geopolitics. With backing from groups like the American Psychiatric Association (APA) and the Institute for Psychiatry and Foreign Affairs (IPFA), the new field of political psychology begins convening meetings of Arab and Israeli scholars and retired officials. Egyptian President Anwar Sadat is a believer, telling Israel's Knesset in his historic 1977 visit that "a psychological barrier between us, a barrier of suspicion, a barrier of rejection, a barrier of fear, of deception" divides Arabs and Israelis, and is "70 percent of the whole problem."

December 24, 1979
Soviet tanks roll into Afghanistan, and U.S. President Jimmy Carter cuts off contact with the Kremlin. The following year, California New Agers Michael and Dulce Murphy convene a conference at the Esalen Institute to promote unofficial citizen exchanges with the Soviets. Joseph V. Montville, a Foreign Service officer and participant in the APA's Arab-Israeli meetings, tells attendees, "I suppose you could say what I do is Track I diplomacy, and what you do is Track II diplomacy."


Winter 1981-1982
In Foreign Policy, Montville and William D. Davidson, a psychiatrist and president of the IPFA, put the term "track II diplomacy" in print for the first time. "Its underlying assumption," they write, "is that actual or potential conflict can be resolved or eased by appealing to common human capabilities to respond to good will and reasonableness."

Citizen groups' efforts to leap the Iron Curtain gain momentum, but Track II still faces a cool reception from hawks. "Creating all of these networks that transcend government control has the potential for greatly harming the Free World," the Heritage Foundation's Mikhail Tsypkin warns in 1986.

The American Academy of Arts and Sciences hosts the first of a series of conferences bringing together Arab and Israeli participants to discuss possible solutions to the Israeli-Palestinian conflict. The meetings and others like them snowball into the first major effort to put Track II into practice, laying the groundwork for the landmark 1993 Oslo Accords.

The Soviet Union collapses, leaving diplomatic institutions like the United Nations, forged in an era of great-power conflict, poorly suited to keeping the post-Cold War peace. Policymakers begin considering Track II diplomacy with renewed interest.

June 12, 1994
With the United States and North Korea on the brink of a nuclear crisis, former President Jimmy Carter journeys to Pyongyang to extract Kim Il Sung's promise to halt his nuclear program. "It was a triumph of Track II diplomacy," the Bulletin of the Atomic Scientists later writes. Carter exemplifies the rise in Track II circles of what might be called the Track 1.5 diplomat, an ex-official who meets on behalf of his country with other nations' officials.

September 23, 2002
U.S. Ambassador Marc Grossman, today the State Department's special envoy to Afghanistan and Pakistan, tells an audience at Foggy Bottom that "Track II diplomacy [is] a key part of our efforts."

Once a fringe notion, Track II is now taught in 99 conflict resolution graduate programs in American universities, and many more worldwide.

How Track II Works

The Players: China, its neighbors, and the United States
The Peacemakers: The Center for Strategic and International Studies' Pacific Forum, the International Institute for Strategic Studies, and others

Several organizations began bringing U.S. and Chinese defense officials to the table unofficially after tensions rose over the 1999 U.S. bombing of the Chinese Embassy in Belgrade and the 2001 spy-plane incident on Hainan Island. The meetings have helped ease tensions even as China has begun flexing its military might in the greater Pacific region.

The Players: India and Pakistan
The Peacemakers: The Pugwash Conferences on Science and World Affairs

The Pugwash group, a half-century-old peace organization, managed to bring together Kashmiris from both sides of the long-running conflict for the first time in decades in 2004; a formal peace process (if not actual peace) followed.

North Korea
The Players: China, Japan, North Korea, Russia, South Korea, and the United States
The Peacemakers: The National Committee on American Foreign Policy

When six-party nonproliferation talks stalled in 2005, the NCAFP kept the conversation going by convening a blue-ribbon panel of former diplomatic officials (including Henry Kissinger) in New York that mirrored the talks themselves, only without the lofty stakes.