How to succeed in business by really trying

Asia has incredible disparities in wealth not just within nations, but between nations. China, Japan and South Korea are among the biggest economies on earth, with the latter pair also ranking high in terms of per capita wealth and output. Southeast Asian nations rank much further down those lists, despite many geographic and natural resource advantages. In How Asia Works, author Joe Studwell convincingly explains the dichotomy.

In his earlier book, Asian Godfathers, Studwell focuses on how tycoons in Hong Kong and Southeast Asia game the system to make themselves richer and keep their compatriots poor, holding back development in the process. Southeast Asia’s billionaires have yet to create a manufacturing company that can play in the global big leagues.

How Asia Works looks at the opposite side of the Asian gulf. It explains how Japan, Taiwan and South Korea, which had per capita GDP comparable to Malawi 60 years ago – created globally competitive companies and entered the top echelon of world economies. As a bonus, Studwell includes an insightful analysis of China’s progress as a global economic power.

As my Asia Times book review notes, Studwell’s observations, based on a century and half of history, contradict free market doctrine. The invisible hand of the market works in rich countries but needs the strong arm of government to help developing economies progress. The formula for transforming a poor country’s economy includes land reform to increase agricultural productivity, since small plot yields outstrip those of plantations; government-led industrial policy to create homegrown export industries, using local entrepreneurial talent and competition at the national and global level rather than bureaucrats, to pick the winners; and financial market regulations to ensure capital flows support industrialization. Studwell’s conclusions are at once radical ideas in an age of blind faith in free markets as the one true engine of economic growth and almost comically obvious to anyone reading economic history without ideological blinders.

A century and a half ago, German economist Friedrich List characterized Britain’s advocacy of free trade as a cynical and hypocritical attempt to reinforce its economic preeminence achieved through centuries of mercantilism. In that spirit, How Asia Works urges rich countries and their institutions such as the World Bank and International Monetary Fund to stop pushing developing nations toward free market policies that keep them poor. What’s good for the goose isn’t necessarily good for the gosling.

Totally globalized native New Yorker and former broadcast news producer Muhammad Cohen is author of Hong Kong On Air, a novel set in his adopted hometown during the 1997 handover about television news, love, betrayal, high finance, and cheap lingerie. See his bio, online archive and more at www.muhammadcohen.com; follow him on Facebook and Twitter @MuhammadCohen.

Asia tycoons thrive on government handouts

Earlier this month, I attended the Forbes Global CEO Conference. Discussion panels that were supposed to inspire great business minds to brainstorm on big questions turned out to be puff interviews. Media were walled off from the executives, as if they were royalty. Few of the CEOs even bothered to take questions from the media – Air Asia CEO Tony Fernandes being one notable exception (and he agreed to investigate my issue with the budget airline) – or make themselves available for interviews; my thanks to Apollo Hospitals managing director Preetha Reddy for sitting down to discuss medical travel.

The conference’s overwhelmingly self-congratulatory tone was perhaps to be expected. However, the outright lies spouted by some bigwigs, for example children of billionaires recounting their struggles to reach the top of the family business, shocked me. You expect public relations people to fib on the behalf of the client, but bosses born on third base telling counterparts how they invented the triple exhibits a vast reservoir self-delusion.

That level of detachment from reality confirms the gulf between conventional wisdom and reality revealed in Asian Godfathers, a groundbreaking book by journalist Joe Studwell that’s even more relevant now than when it debuted in 2007.

(I’m looking forward to reviewing Studwell’s latest book, How Asia Works: Success and Failure in the World’s Most Dynamic Region, released earlier this year.)

Subtitled Money and Power in Hong Kong and Southeast Asia, Asian Godfathers debunks myths and solves key mysteries surrounding Asia’s richest people. For example, most tycoons present rags-to-riches stories, but the book shows that most inherited their money or married the boss’ daughter.

The most devastating revelations are about how these tycoons typically make their money. They like to claim that they’ve done it through bare knuckle capitalism free of government interference but in most cases, these moguls have long gotten preferential government treatment, from colonial concessions for opium plantations to modern crony capitalism’s import licenses and telecom concessions. In many cases, these government handouts provide the keystone of what have grown into sprawling international empires.

Studwell has no time for the lie that Hong Kong and Singapore are the world’s freest economies. He also demonstrates how tycoons abuse capital markets, leading to the weak performance of Asian shares compared with the region’s economic growth.

Government favoritism toward tycoons undermines another pillar of Asian commercial mythology: ethnic Chinese superior business skills. Studwell notes that ethnic Chinese in Southeast Asia benefited disproportionately from government largesse going back to colonial times because they posed no threat to the indigenous political elite. That’s a well known story.

But Studwell also challenges the Asian Values myth championed by Singapore’s founding father Lee Kuan Yew. Lee contends that Confucian values underpin the accomplishments of Chinese tycoons’ in Asia, but Studwell shows their success is due to an ability to assimilate and adapt to whatever regime happens to be in power, just as Lee did for decades under British rule when he called himself Harry. In fact, Studwell portrays Lee as the ultimate chameleon who’s stood for nothing consistently throughout the years except his own perceived self-interested.

Above all, Studwell shows that, aside from their ability to blow with the wind and game the system, there’s little special or brilliant about Southeast Asia’s tycoons. They haven’t created any globally competitive brands or produced a single technological breakthrough. Rather than driving Southeast Asia’s growth, they’ve ridden the wave on the backs on tens of millions of poor people. And they could hardly be more proud of it.

Totally globalized native New Yorker and former broadcast news producer Muhammad Cohen is author of Hong Kong On Air, a novel set in his adopted hometown during the 1997 handover about television news, love, betrayal, high finance, and cheap lingerie. See his bio, online archive and more at www.muhammadcohen.com; follow him on Facebook and Twitter @MuhammadCohen.