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Tuesday, October 21, 2008

It may Sound Crazy but Please, No More Starbucks Economies, Okay?


I loved this story, “The more Starbucks a country has, the bigger its financial problems,” By Daniel Gross at Slate.com.

Like the convoluted Bizarro World of Republican illogic, Gross looks at the financial meltdown is a detailed way that would make even them flush with envy.

Remember Thomas Friedman's McDonald's theory of international relations? The thinking was that if two countries had evolved into prosperous, mass-consumer societies, with middle classes able to afford Big Macs, they would generally find peaceful means of adjudicating disputes. They'd sit down over a Happy Meal to resolve issues rather than use mortars. In the same spirit, I propose the Starbucks theory of international economics. The higher the concentration of expensive, nautically themed, faux-Italian-branded Frappuccino joints in a country's financial capital, the more likely the country is to have suffered catastrophic financial losses.

It may sound doppio, but work with me. This recent crisis has its roots in the unhappy coupling of a frenzied nationwide real-estate market centered in California, Las Vegas, and Florida, and a nationwide credit mania centered in New York. If you could pick one brand name that personified these twin bubbles, it was Starbucks.

Starbucks' frothy treats provided the fuel for the boom, the caffeine that enabled deal jockeys to stay up all hours putting together offering papers for CDOs, and helped mortgage brokers work overtime processing dubious loan documents. Starbucks strategically located many of its outlets on the ground floors of big investment banks. (The one around the corner from the former Bear Stearns headquarters has already closed.)

Like American financial capitalism, Starbucks, fueled by the capital markets, took a great idea too far (quality coffee for Starbucks, securitization for Wall Street) and diluted the experience unnecessarily (subprime food such as egg-and-sausage sandwiches for Starbucks, subprime loans for Wall Street).

Well, when you start poking around Starbucks' international
store locator, some interesting patterns emerge. At first blush, there's a pretty close correlation between a country having a significant Starbucks presence, especially in its financial capital, and major financial cock-ups, from Australia (big blowups in finance, hedge funds, and asset management companies; 23 stores) to the United Kingdom (nationalization of its largest banks). In many ways, London in recent years has been a more concentrated version of New York—the wellspring of many toxic innovations, a hedge-fund haven. It sports 256 Starbucks. In Spain, which is now grappling with the bursting of a speculative coastal real-estate bubble (sound familiar?), the financial capital, Madrid, has 48 outlets. In crazy Dubai, 48 Starbucks outlets serve a population of 1.4 million. And so on: South Korea, which is bailing outs its banks big time, has 253; Paris, the locus of several embarrassing debacles, has 35.

We haven't heard much about bailouts in Central America, where Starbucks has no presence. My tentative theory: Having a significant Starbucks presence is a pretty significant indicator of the degree of connectedness to the form of highly caffeinated, free-spending capitalism that got us into this mess.


I'm just wondering if American families have to worry about the presence of the not so innocent drip coffee machines in our kitchens. I don't even wanna get started on the stealth cappiccino makers affects on my own family income.

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