William J. Holstein
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SEOUL, South Korea--INTO THE PRESSURE COOKER
JULY 10, 2010--
To fly into Seoul is to arrive in a great geopolitcal and economic pressure cooker. Many foreigners might expect that pressure to be coming from North Korea. The Demilitarized Zone is only 35 miles north of Seoul. It is one of the world’s tensest military standoffs, with more than 1 million in the North Korean army poised on the other side of the border. They possess enough missiles to flatten much of Seoul, one of the world’s five largest cities with perhaps 20 million people in the metropolitan area (out of a total national population of 48 million.)
But the real pressure on South Korea isn’t really from the North. The Koreans appear to have an implicit consensus that full-scale conflict is not what either side wants. The South Koreans, backed by the U.S. military, could break the backbone of the North’s political and military leadership. Everyone knows that. So aside from relatively minor provocations, neither side wants war.
The real pressure comes from the fact that South Korea is caught between Japan and China. Like in the board game Risk, where players use their armies to conquer countries and continents, the Korean Peninsula is a high-conflict area. The peninsula has been invaded 400 times from the Chinese to the North and by the Japanese to the south. The Japanese invasions have been more recent and are more top-of-mind. When you visit the palaces in Seoul, the signs and guides talk about how the Japanese burned everything down in 1592. Most recently, the Japanese occupied Korea from 1910 to the end of World War II in 1945. They forbade the speaking of the Korean language and forced hundreds of thousands of Koreans into menial or degrading occupations—the women became “comfort women” for Japanese troops. Men worked in the mines or served as guards in POW prison camps.
Today the biggest challenge facing the Koreans is that the Japanese dominate the upper reaches of technology, manufacturing and finance. The Koreans have eked out some gains against the Japanese—Hyundai Motor is taking some market share from Toyota and other auto manufacturers. And Samsung Electronics, now the world’s largest technology company, is hurting Sony. Samsung’s brand name is just as well accepted in the United States as that of Sony. (Samsung Electronics is one company in the overall Samsung chaebol, or industrial group. The total sales of the whole group are estimated at $500 billion, making it one of the largest such groups in the world.)
But overall, the Japanese have held the line against the Koreans. Their ability to continue to do that is an issue of hot debate and I’m looking forward to making up my own mind when I visit Japan next. At the same time, from the bottom of the economic pyramid, the Chinese are pushing up and out into the world. The great threat is that the Chinese will learn to compete in autos and semiconductors and high-tech. Because of their much lower cost structure, they could simply blow the Koreans out of industry after industry. The most vulnerable might be steel and shipbuilding.
The Koreans also are caught in the middle in cultural and population respects. The Koreans, Japanese and Chinese have probably 5,000 years of history both collaborating and fighting each other. The cultural, linguistic and religious flows from China to Korea and from Korea to Japan, in all directions really, have been profound. These relationships are something that an American can never hope to fully understand, such is their complexity. In terms of population, the Chinese now have 1.3 billion people and are growing. The Japanese have 127 million and are declining. They may settle at 110 million, but they will still be much larger than South Korea’s 48 million people. Even if the two Koreas were able to reunify, over the opposition of both the Chinese and Japanese, they would still be the smallest player. North Korea has about 20 million people, so Korea could never have more than 70 million people even under the best of circumstances.
Rita and I had a fascinating glimpse into these cultural dynamics when we went to see a performance called Miso (“pretty smile.”) It is a classical tale of a beautiful young woman who falls in love with a bright young man who goes off to the capital to take the civil service examination and becomes the emperor’s secret inspector. While he’s gone, the local warlord makes a play for the affections of the young woman and, when he is rejected, he imprisons her. The young man soon returns from the capital and deposes the evil warlord. It’s a classic love story. The Koreans staged the old tale with multimedia effects and lighting. They contempor-ized it and popularized it.
As we entered, we could tell that we would surrounded by Japanese tourists. They filed in, in single file, and quietly took their seats. Some of the tour guides had little flags to lead the groups in. They sat very quietly, in precise order. But then just before the show started, a big group of Chinese tourists stormed in. (Large scale Chinese tourism is just beginning and they spend money like crazy.) The Chinese shouted across the theater at each other and scrambled to find seats and then changed their minds and took other seats. It was the classic Chinese firedrill, with many people running in different directions. They were loud and pushy and somewhat crude. I was wondering, How is this all going to work?
Well, the Korean performers charmed everyone and had them all clapping in unison. The Koreans are an attractive people, physically and emotionally, and have a very distinctive sensibility, owing in part to the way they have absorbed so many cultural influences. One Korean soap opera star, a man, is hugely popular with Japanese women because he combines strong masculine traits (something they find lacking in their own men) with an emotional sensitivity to women (which they also find completely lacking in their own men.) He has his own stores and his own line of clothing and Japanese women tourists spend big amounts of money on his products and watching his videos.
In view of all the cultural cross-fertilizations that have taken place among these three people over the centuries, and still today, it’s a curious contradiction that they tend to use their languages and cultures as buffers against each other. One feels almost that the Koreans have created their own cultural bubble and the Japanese have created theirs. (The Chinese are much more confident about their culture and are not as defensive.)
My point is that a majority of South Koreans seem very inward looking. The Samsungs and Hyundais account for perhaps 20 percent of the economy and one assumes that roughly 20 percent of Koreans have some stake in the international economy. Far more Koreans speak English as a percentage of the total population than the Japanese do. But the rest of the Korean population is not internationalized and as a result the society is not achieving all that it could in the world. It’s just human nature to create a protective shell when one has been invaded 400 times, but if the Koreans are going to get out of their jam of being stuck in the middle, they need to adopt a more pro-international mindset. That could be an advantage over the Japanese. I made this argument at the Seoul Forum, which was the reason I was in Seoul. I argued that Korean companies need to develop a more internationalized Korean culture not an inward, xenophobic culture. Even the most international Korean companies have almost no foreigners in senior management or on their boards. That’s a mistake in my view.
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There has been some speculation that the Koreans, Japanese and Chinese will get together and create their own version of the European Union and also create a common currency. Top leaders of the three countries have had a couple of meetings to discuss those issues.
But I don’t think it will be possible within my lifetime. History lies just beneath the surface in a way that is more powerful than what you experience in France and Germany. While we were in Seoul, a Korean man threw a brick at the Japanese ambassador in protest of an obscure territorial dispute. And the Chinese issued a protest that South Korean and American forces were going to stage war games in waters near Chinese territory. Raw self-interest still dominates and there is no chance that the three countries will be able to achieve an EU kind of framework.
What they have achieved, however, is an implicit consensus that they will not engage in military conflict. They all want to pursue the creation of wealth. That is the No. 1 objective, and none of them wants to allow geopolitical or cultural strife to interfere with that. The longer they can keep the peace, the wealthier they will become. Already, this corner of the world can make the argument that it is the largest and most important economic region on the planet. Japan is the world’s second largest economy and China is going to displace it at some point. The Koreans rank about No. 12 in the world. Collectively, they have blown past the Europeans and it seems just a question of time before they are larger than the American economy as well. The center of the global economy is shifting and the people at the heart of it speak their own languages and have their own values and own interests.
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We felt that shifting reality flying from Seoul’s Gimpo airport to Tokyo’s Haneda. Both of these are airports closer to downtown than the sprawling Incheon and Narita airports, which are 90 minutes or more from downtown. All the airports are far more modern than LaGuardia or JFK. In terms of public infrastructure, the Americans have been left in the dust.
At Gimpo, Koreans and Japanese tourists were snapping up $400 designer wallets like candy. They just go nuts over Ralph Lauren. Everyone also seemed to be very fashionably attired. We didn’t choose to spend our money in those ways and I certainly was not dressed as fashionably. I could sense the gap in relative wealth.
We were the only Westerners on a fully loaded Japan Air Lines Boeing 747 and English was definitely the third or fourth language being spoken by pilots, stewardesses, airport people, etc. We heard and saw a great deal of Korean and Japanese with a smattering of Chinese. It was yet another reminder that the center of the universe has shifted to the cultures and economies of East Asia.
Puerto Rico Statehood--A Cautionary Note
Who’s for Puerto Rican statehood?
OLD SAN JUAN, January 6, 2009—I came here for a break in the sun but, as often has been the case, I stumbled into a story. Better to be lucky than smart.
A new governor, Luis Fortuno, has been elected and he was inaugurated during my stay. One of the planks of his candidacy was statehood for Puerto Rico, instead of leaving it as a mere territory of the United States.
It’s an interesting proposition. You land on this island of 4 million and do not need a passport to enter. They use U.S. dollars. The National Park Service maintains the old Spanish forts like Morro, which is quite a sight to behold, and the National Forest Service maintains the Yunque rain forest. The Coast Guard has a base and provides security for Puerto Rico. The locals have access to Medicare. And English is widely spoken, at least by everyone I met who had a connection to the tourism industry.
So on some levels, the United States has already adopted Puerto Rico. Its citizens flock to New York to earn higher levels of income than they can at home; I was told that it was mostly younger Puerto Ricans who go to New York. I’d estimate that there must be about 1 million in the New York area. Then when they get older, they return to Puerto Rico to enjoy the sun and easy-going lifestyle.
American control has clearly benefitted the local economy in many ways. Because of a tax break, large pharmaceutical companies have set up shop on Puerto Rico. Eli Lilly has a huge factory complex in Carolina, the city just east of San Juan. This manufacturing activity is the second largest industry, after tourism. Agriculture is third. The Puerto Ricans do not appear to have created large scale enterprises to compete against the usual suspects from the U.S.—Wal-Mart and K-Mart are here, as are McDonald’s, KFC, Starbucks and all the fast-food outlets. A wide variety of American, Japanese and European cars are visible, but none of them are assembled on the island. The government’s role looms large in the economy—it directly employs 30 percent of the population and another 30 percent of the population benefits from government contracts.
About half the people of Puerto Rico don’t really want to become part of the United States because they fear that would challenge their local Spanish-speaking culture and their local lifestyle, including such things as traffic laws and how late the bars are open. These folks seem to reckon that Puerto Rico has got a pretty sweet deal right now—its economy is reasonably strong despite current economic jiters and they have access to the offerings of American companies, yet they maintain their local culture. They pay taxes only to Puerto Rico, not to the United States. And they have representatives in Congress who can observe, but not vote. They cannot vote for the U.S. president.
I talked about the Puerto Ricans with a Venezuelan shop keeper, where I did enough buying to lubricate her sensibilities. She felt that the Puerto Ricans don’t work as hard as Venezuelans or Colombians. “They don’t work,” she said. “They live off of checks from the U.S. government. They want to keep all their holidays as well as all the holidays of the Americans.”
I saw this last bit in action. The Puerto Ricans celebrate Christmas on Dec. 25, with Santa Claus making his gift-giving deliveries. But then the holidays continue until Jan. 6, which is the Three Kings celebration. There are the three Magi who visited the Christ child, bearing gifts from the East. The town remains essentially shut down. “If you want to find a doctor or a lawyer right now, you can forget it,” said the shop-owner.
I understand from a security point of view why the United States might want to deepen its control over Puerto Rico. If you look at a map, Cuba isn’t that far away. Haiti and the Dominican Republic are right next door. Toward the south is Hugo Chavez and his aspirations for la revolucione. The U.S. Army, for one, is clearly in favor of statehood. When I walked over to where the governor was being inaugurated, a friendly National Guardsman explained that the Army was preparing to fire a 19-gun salute for the new governor, rather than 17, because of his position on statehood.
But in the absence of any real reporting, I was left with the impression that the U.S. ought to be careful of encouraging Puerto Rican statehood, particularly if it would involve more extensive social payments from Washington. The American ability to pay for its own bills, such as a large stimulus package, is very much in doubt. Ultimately, the Chinese and Japanese may not keep buying U.S. Treasuries. If I felt that fully absorbing Puerto Rico would unleash major innovation or productivity gains in the American economy, and would reflect a net contribution to digging out of our fiscal hole, I’d be all for it. But that’s not the conclusion I draw. It might be best—for everyone--to leave Puerto Rico just the way it is.
Australia, May 2008
It’s somewhat disorienting to be in Australia. When I went for a jog this morning in Melbourne, I had to be very careful about crossing roads because they drive on the English-side of the road here. It’s also autumn and the leaves are turning colors. So that’s a neckwrench, coming from New York, where spring is a-bloomin.
As I jogged through Como Park along the Yarra River, I saw people walking their dogs and carrying what appeared to be weapons. They were about three feet long and seemed to have round knockers of some sort on the bottom. I thought they might be called “bean knockers” of some sort, for hitting people on the head. But it turns out they were ball-throwing devices; they put balls on the cuplike device on the end and hurled the balls greater distance for the dogs to chase. Turns out it’s based on how the aborigines throw their spears. Go figure.
And the sports they play here are all odd. I went to an Australian-Rules Football game last night. They had 70,000 people watching a game in which 18 guys on each side use a ball that resembles an American football run up and down a 150-meter field with complete abandon. They didn’t have “plays”’ like American football does. And the ball has to touch the ground every 10 meters, so the players would actually bounce the ball once in a while as they ran. Of course, that would halt the play in American football, but here is is required. And in a pub with Mike Keats, my old boss from Hong Kong, we watched Australian women play Netball, which had some similarities with basketball, but only vaguely. And then they play rugby here, which is a completely alien undertaking.
So they speak the same language we do, albeit with a different accent, but their practices and habits are so very different. And oh yes, because it’s in the southern hemisphere, the water goes down the drain in the reverse direction of how it does in the United States. Water goes clockwise down the drain at home; here it is counterclockwise.
I spent three days in Melbourne, which is a lovely city. It’s further south than Sydney so it’s colder. (Remember, south here is toward Antarctica.) The city is surprisingly cosmopolitan with tons of new Chinese and Indian immigrants. In fact, we enjoyed a Mother’s Day lunch with Mike and Sybil Keats and their daughter and grandson in a dim sum resaurant in Chinatown. I’m told that the reason so many immigrants are coming to Australia is that the United States has really tightened up. I wonder if we are depriving ourselves of talent.
Mainland Chinese are all over the place. They’re hungry for coal, iron ore, uranium, wheat, etc. One visiting economist was quoted in the newspaper as saying, “Whatever you have here in Australia, the Chinese want it.”
I noticed that there is no sense of fear here. There are almost no police on the streets, whereas in New York we have guys with submachine guns standing near Grand Central Station and other key pieces of infrastructure. And incredibly, there is no security clearance in the lobby of office buildings. You simply go right up to your floor. In New York, getting through secuity and letting them screen your bags is almost as much hassle as getting through security at an airport. So they are not worried about crime or terror.
Not that it is utopia. There is clearly a kind of racism here that they are maybe just beginning to deal with. The aborigines are now called indigenous people and an art museum in Melbourne has a display of their art, but the wounds between white Australians and the aboriginals are deep, just as deep as between white Americans and native Americans (whom we used to call Red Indians.) And they still do things like tell Polish jokes on the radio. That’s so very 20 years ago in the States. (Okay, here’s the joke. A Polish guy goes to see an optometrist who proceeds to give him an eye test. When he reaches the last line of the eye chart, with the letters Q Z Y X T P, the optometrist asks, ‘Can you read that?’ To which the Polish guy responds, ‘I can not only read that. I know that guy.’)
The funny linguistic differences keep surfacing. In asking for a coffee, you either ask for a “flat white” or a “long black.” When you ask for a lemonade, they bring you a Sprite. People ask me funny questions like, “What did you get up to today?” None of your damn business, is my immediate New York thought.
The gap in sporting lingo is profound. I discover that there are two kinds of rugby here; one is the Australian version which has 13 players a side and the other is the original European version with 15 players on a side. What we call soccer in America, but what the Europeans call football, is also called soccer here. At least we agree on that.
The sports metaphor gap is profound in business discussions. An Australian PR lady took me to see an American executive involved in a business in which I was interested. As I was conversing my fellow Yank, we began talking about how hard it is to get through "the final yard" in any business effort. I turned to her and asked if she understood what we were talking about. “No idea, lov,” she said. Of course, we were talking about the final yard in American football, an endeavor that completely escapes the Australian sensibility or comprehension.
Back up in Sydney, I had a moment of supreme disorientation, almost like something out of Hitchcock. One morning, I ran into the park that surrounds the Sydney Opera, and an art museum and a tropical plant center. As I ran along the trail in the tropical area, I heard what I thought were very loud birds. I looked up and HOLY SHIT, they were these big hairy bats hanging upside down. Bats in America are small and weigh a few ounces. These suckers must have weighed five to 10 pounds. I asked a fellow recreationist, what are those creatures? “They’re flying foxies,” he said, quite calmly. I later discovered, upon deep research, that their fruit bats and if they defecate on your car and you don’t remove it within a day, it will strip the paint from the car. I guess they eat so much fruit with citric acid that their feces is deadly.
American brand names are everywhere: Starbucks, FedEx, Westin, Marrikott, Citibank, General Motors, Ford.
From Sydney, the plane heads north and flies over Australia for about four hours. It looks like the wastelands of Nevada the whole way. Absolutely nothing down there. When we reach the northern shore near Darwin, I can see the northern shore of Australia, but the Great Barrier Reef is to the east, so I can’t see that. The Australians have a phrase—“the tyranny of distance” to describe the huge distances they have to contend with within Australia (where the vast majority of the population lives along the coastlines, much like 90 percent of Canadians live within 50 miles of the U.S. border.) But the phrase also applies to how far Australia is from everywhere else. Getting to and from Australia requires a big investment of time, any way you cut it. If Melbourne and Sydney were closer to America, or the population centers of Asia, it would be positive in some respects, but they’d be overrun with more tourists and immigrants. Their character is appealing precisely because they are so far away
From Darwin north, we fly over remote islands in Indonesia, like the Moluccas, skirting Borneo and New Guinea. Some of the most exotic islands in the world, but also the scene of combat between the Americans and Japanese in WWII. We seem to skirt the southern Philippine island of Mindanao and then head straight across the South China Sea to Hong Kong. My Australian journey is over.
France, April 2008
After the rugged countryside along the German border, the terrain in France flattens out. As a result, the train starts to really move along, hitting speeds of at least 100 mph. On the few times that I see an expessway, the train races ahead of the cars traveling at or near the speed limit of 100 kph. For the most part, and incredibly so, the scenery is nothing but farm land turning green in spring. For hours, it is like this.
I had long known, in the policy sense, that the French subsidized their agriculture like crazy because they have this idea that agriculture is so important for La Culture Francaise. But this is nuts—I later learned on this trip that the average cow in France (yes, many of them are Holsteins) receive an average daily subsidy of $2. While I am thankful that the French think so highly of Holsteins, the fact is that there are hundreds of millions of people in the world for whom $2 a day would spare the indignity of going to bed hungry. A certain balance is lacking.
We eventually hit the suburbs of Paris and then pull into Gare de l’Est. I find the driver who is going to take me about 50 miles southeast of Paris to Fountainebleu. (I discover that it is pronounced Fountaine-BLOW, not Fountaine-BLEU.) This is a really neat little city where Louis XV, (or XIV--one loses track of all the Louis’s) and Henry IV (forget about keeping track of all the Henrys) and Napoleon I (there were only three Napoleons) all loved the chateau. A town of about 10,000 has sprung up around it, and this is where INSEAD is located. I spent a jolly first evening with a group of journalists from Germany, Holland, Finland, Portugal, and Ireland, who were concluding a journalistic conference of some sort. I didn’t care what kind of conference it was as long as the companionship was amiable, and it was.
I began to notice some differences between the Germans and French. The cars are suddenly all different. They are Citroens and Renaults, with the occasional Ford (I don’t think I saw any Fords in Germany.) Suddenly, there are almost no German cars. In three days in FountaineBLOW and Paris, I saw only a relative handful of German cars. The French simply don’t want them. The language barrier also seems intense—on the train, there was a German national woman who was making announcements on the German side of the border in three languages—German, French and English. It was obvious to me that she was slaughtering the French. The minute the train hit the border, the announcements were made by a French national woman. She slaughtered the German. Their command of English seemed better than their command of their respective languages.
And the Germans and French read entirely different newspapers and magazines, which completely filters their perceptions of the world. You don’t see any French publications in Germany, nor any German ones in France. It’s almost like there is a force field between the two cultures, a cordon sanitaire (to tilt in the French direction). And I notice when I check into my hotel in Fountainebleu that there is music playing in the lobby. Music! I hadn’t heard music, of any sort, in any public place in Germany.
So the two nationalities may co-exist in the European Union and share a common currency and more. But on another level, they are unlikely partners. In the American vernacular, they are not happy campers together.
The INSEAD conference is fascinating for me, with top class business and academic leaders taking part. We talk about the role of Western multinationals in the world—how politicial and social activists want them to be “socially responsible” and save the whales, end female genital mutilation in Africa, stop global climate change, etc. I’m slightly on the skeptical side about the corporate responsibility to achieve all this, but others argue that governments are failing. There are limits to political power—so who else is going to change the world?
I had an interesting conversation over lunch with Frank Brown, the dean of INSEAD and an old conversational partner of mine (and the man who paid for me to fly across the Atlantic.) He travels more than I and more to the Middle East and Singapore. I asked him about the American position in the world. He said that the process of the American election, with the obvious display of democracy, is commanding lots of attention in the world. People respect this process that we’re going through, and are excited by it. I was surprised to hear that.
From there, it is on to Paris, where I have reservations in a small hotel, Hotel Muguet. When I say small, I mean small. If I hung my bag in the closet by the door, I couldn’t open the door to the hallway. The whole room is basically a closet. And it cost about $160 a night. But I am not displeased. I am in central Paris, close to the Eiffel Tower.
To return to the theme of environment and energy: it appears that the Europeans, both German and French, place a premium on buying things of quality, even if they are expensive, because they will consume less energy and last longer. The cars are mostly tiny by American standards, the rooms tiny, etc. They ask that their guests in hotels reuse their towels from day to day. All this is the exact opposite of the American mentality of buying huge quantities of things or poor quality (with money we have to borrow) and then throwing them out. I even have this feeling with the coffees I order. When I ask for “café,” I get about two thimbles full of very rich expresso coffee. It does the job. In the United States, if I ordered coffee, I would expect unlimited quantities of so-so watered-down coffee. It is a totally different mentality. We Americans can never be exactly this way, but there are some things we can learn as we go through a difficult economic period. We need to consume less.
On Saturday night, I spent time with John Rossant, a former Business Week colleague who is now with Publicis, the huge advertising agency, and his wife Antonella. They live in shadow of the Eiffel Tower. She’s from Calabria, the poor rural “boot” of southern Italy. John speaks English, French and Arabic. She speaks her native Italian plus Arabic, French and English. They share an interest in the Middle East. She’s involved in NGOs attempting to help the Iraqis and has been there on multiple occasions. With an Italian passport, it’s much easier than with an American passport. The bottom line is that the Americans are strengthening local tribes and militias to create stability at the local level. But they haven’t been able to do much to strengthen the authority or power of the central government, as we saw with the disastrous attempt to challenge the Shiite militias in Basra.
But John and Antonella (who have three sons) have great joie de vivre. We went to a party hosted by the head of the American Chamber of Commerce, whose wife is a stunning Venezuelan. Turns out he was a jazz saxophonist and he jammed with some of his buddies. There were a smattering of American diplomats and other people who had traveled widely. Paris has such a wonderful cosmopolitan feeling. Berlin is wonderfully interesting, but Paris still feels more worldly.
I wandered all over the Left Bank, from the Eiffel Tower to Notre Dame, through St. Germain. I was pleased to discover that I was able to communicate in cafes, hotels and taxis in French. I could master the language, given the opportunity.
Parting thoughts about Germany and France: it’s a shame more Americans are not interested in Western Europe. Almost none of the hundreds of college students who apply for my OPC Foundation scholarships write about Europe—they’re interested in China, Africa and the Middle East. ((I know, I know. Here’s Bill, who’s beaten the Asian drum for so many years and made fun of the slow-growth Europeans, changing his tune.)) But it’s such as important part of the world for Americans culturally and economically, and the Euros do have some very positive instincts about the environment and energy. It’s a mistake to just write off Western Europe. The world would be a better place if we paid just a bit more attention.
Germany, April 2008
I’m on the Inner-City Express (ICE) headed for Paris. I got on one train headed south from Frankfurt and then changed trains in Mannheim. This train is making a direct shot for Paris, stopping in a few places like Kaiserslautern and Saarbrucken (both of which sound like kinds of cole slaw.)
Judging from the geography, it’s clear why Hitler’s Panzers didn’t come this way. The countryside is very rugged and there are a lot of tunnels. From what I can see on the map, we’ll pass by Nancy in France and end up at Paris Gare de l’Est. (east station.) From there, I’ll take a car to Fountainebleu.
I had an interesting time in Russelsheim, near Frankfurt, and then my driver in an Opel Insignia drove me to Eisenach in the former East Germany. (He hit speeds of 125 mph on the autobahn but was frustrated he couldn’t go any faster. Too much traffic, including trucks from places like Romania—now that the EU has opened more to the east. I didn’t even bother about asking whether I could drive. I’m sure there was some regulation against it.)
Russelsheim is where Opel is headquartered. We in America haven’t heard much about Opel but it is a very proud car company, which GM bought in 1929 as sales fell off a cliff during the Depression. I’m surprised that GM hasn’t fully absorbed Opel’s name. I interviewed interesting people, most memorably a 39-year-old woman born in East Berlin in the Communist system. Now she’s at the heart of helping a Western multinational design cars. Opel has world responsibility for designing GM’s medium-sized and compact cars. The new Saturns are being designed there, for example.
Eisenach is in Thuringia, a rolling wooded area. The East Germans made their Wartburg cars there, but when their system collapsed in 1989, the company fell apart. GM secured the rights to building a plant there and hired many workers, but only a relative handful. I spoke, for example, with the union chief who was a toolmaker in the old Wartburg plant. “It didn’t matter what you said or what you suggested. Nothing changed. So we said nothing.”
Because the East Germans were willing to try anything to save their way of life, GM was able to establish the Toyota method of production in Eisenach before they did it anywhere else in the world. That was my primary interest in it—for freaky reasons of history, it was where GM learned how to make cars the Toyota-way.
I had bad weather in Germany—snow when I first arrived, then rain, quite chilly. I wasn’t quite prepared for that, but I managed. I can see why the Germans go crazy at their summer wine festivals or when they hit the beach in Portugal, or wherever. The lousy weather combines with a very demanding culture makes it a very controlled, very disciplined place. I ate dinner by myself one night and watched an extended family eat next to me (two children, two parents, four grandparents.) They had very little conversation and no big laughs. Very tight.
I stayed in a little hotel in Oppenheim, about 25 minutes from the Russelsheim plant, on the banks of the Rhine River. (There was a big show in Frankfurt and Wiesbaden that filled hotels there.) It was a cute little town, set on a small mountain with the Katrinekirche at the top. This cathedral was built first in about 1225. There was an extensive network of tunnels and even a labyrinth built into the hill, I suppose for reasons of defense.
The surrounding countryside had a lot of vineyards, including some on very steep terrain, much steeper than anything I have seen in Oregon. They need specialized equipment to harvest it.
The Americans fought near Oppenheim in WWII, my driver told me, because it was close to where they wanted to cross the Rhine. The German army made a big stand there, attempting to prevent the Americans from crossing by blowing up bridges and such.
Things are frightfully expensive in Europe, with the euro at 1.58 against the dollar. This train ride is 170 euros, or about $250. A bottle of water at dinner one night was 5 euros, or about $8. That was very expensive water. Petrol (gasoline) is also very expensive, about $1.40 a liter or $5.60 a gallon.
Other quick observations—I was able to put a different sim card in my new Verizon Wireless World Phone. So I got calls from the States, and made a couple back. I was also able to make calls within Germany, to PR people and drivers and such. Wireless coverage here is much better than it is in the States. We are behind in this regard.
We’re also behind environmentally. The Germans use monitors to detect when someone is entering a room or public space. Then, and only then, do the lights go on. Esclators don’t run all the time. They sense when someone wants to ride them, and then they turn themselves on. And the Germans use a lot more diesel for their cars. The Opel I was in was diesel and offered great performance and great fuel efficiency. We ought to have more diesel-powered cars in the States, but we’ve had a bias against diesel because we think of diesel engines as dirty and not as powerful as gasoline engines. But that’s no longer true, if it ever was true.
The Europeans also are ahead of us with their train system. As energy prices keep increasing, we’re going to have to finally get more serious about rail systems.
In general, it’s been easy these past few years to be dismissive about the European economic style. I certainly have dissed them as the Old World. But in view of the current economic upheaval in the U.S., in which millions of Americans are going to lose their homes, it appears the Europeans have done something right. They’ve maintained a high standard of living that doesn’t seem as vulnerable as America’s.
We cross the border. There is no passport check. The same currency, the Euro, works so I don’t have to chance currencies. And my phone seemlessly moves from the German system to the French system.
Much of eastern France is completely rural, with the occasional village. It all reminds me of Vic Morrow in the old TV series, Combat, or Saving Private Ryan. It’s amazing how much of the American perception of Germany and France is still shaped by the past…
TOKYO, May 2007
The eternal question about Tokyo and Japan is, “What has changed?”
The Imperial Palace still dominates the heart of Tokyo, and I ran around it, just as I did when I spent so much time in Japan in 1989. I always think of the palace as a symbol—at the heart of the Japanese system lies much mystery, just as the palace itself is heavily guarded and usually impenetrable.
So much of the fabric of life for both the resident and the visitor is shaped by the subway and train system, which is the most advanced of any I’ve seen in the world. I didn’t take a single taxi, and I moved all around Tokyo. The trains stop at precisely the scheduled moment at precisely the right spot where people have lined up in anticipation. (I witnessed only one rush hour scene in which people pushed their way on. The normal deference to others suddenly changed, and real brute physical force was employed. No one complained.)
I find it amusing that Japanese pedestrians of all ages and walks of life still wait at intersections when the light is against them but no traffic is coming. If the signal says “Don’t Walk,” they don’t cross. They are a very disciplined people. It’s not that the police force them to obey; it’s a social control mechanism. In years past when I’ve charged across the street against the light, I could read the body language of Japanese disapproving of me. This trip, I obeyed. Maybe I’m being Japan-ized.
On the subways, they have “courtesy seats” reserved for old folks or disabled people. Little signs tell other people seated nearby to turn their cell phones off, presumably because the radio signals might trigger someone’s pacemaker. People do not talk on their cell phones on either the subways or trains. It’s another social dictum. Everybody is scanning their emails, but no one is talking. You never hear a phone ring even though everybody has a phone in their pocket or purse.
Because I spent a lot of time on subways and in trains, I spent a lot of time looking at Japanese people, up close and personal. Their clothing is very expensive and stylish, particularly in the trendy Roppongi Hills area where I stayed. The vast majority of businessmen wore dark suits. I felt such overwhelming social pressure that I didn’t even bother to get out my tan khaki suit; I didn’t want to be conspicuously out of step.
But I thought I could detect that, overall, the Japanese are relaxing a bit in terms of how they wear their hair and in the range of clothing styles that you see. The straightjacket of conformity has eased somewhat. I think it is a reflection of increased wealth and increased confidence in who they are as a people.
Who are they as a people? That’s a delicate question. If you study the faces, it’s clear that some have high cheek bones and narrower eyes, giving away their origins in Manchuria or China, while others are rounder people with rounder eyes, suggesting Southeast Asian origins. They also have many different kinds of hair, some curlier than other. Skin colors vary considerably. So the idea that they are a homogenous people is just bunk. Different waves of migration to Japan many centuries ago from different directions created a mixed race. The national ideology is that they are a homogenous people, and perhaps they are culturally and linguistically. But not racially.
One of the most amazing things about their physical appearance is the bad dentistry. They have just awful teeth. Even a beautiful, well-dressed woman can open her mouth and reveal the need for thousands of dollars worth of braces and cosmetic dentistry. Cindy Kano, who works at Fortune and organized much of my schedule, says the Japanese don’t wear braces as children because they are worried about being singled out for being different and therefore bullied. She says that slowly younger Japanese are turning to braces. Certainly the Japanese now have the wealth to fix their teeth. It’s a huge business opportunity, I would say.
One clear sign of change: The Japanese don’t work on Saturdays as they once did. Prosperity is giving them much more leisure time.
The shopping is all very high-end, particularly in the new areas of Tokyolike Roppongi Hills and the new Midtown complex, which is anchored by a Ritz Carlton Hotel. You’ll find all the Armani, Zara and YSL you could possibly want, plus other shops I’ve never heard of. Novespazio, anyone?
One of the ways you can see the technological progress that the Japanese are making is in their toilets. Every single toilet I saw, whether in a hotel or in a little restaurant or bar, had a heated seat with a panel of controls that allows you to give yourself a little douche. An arm shoots out and sprays whatever part of your anatomy needs spraying, with water whose temperature you can control. And the driers that dry your hands after washing are very newfangled. You insert your hands into these devices, and air blows at you from two directions, greatly speeding up drying time. Paper towels are rarely used. All in all, the bathrooms are a bit intimidating. I often had to spend more than a moment trying to figure out how to flush.
I also felt stupid when it came time to throwing away a bottle or can or just plain garbage. The vast majority of trash receptacles are divided into three or four categories for purposes of recycling. If there wasn’t a sign in English saying “Plastic” or “Glass,” I had to peer inside to see what I was supposed to throw away.
So, all in all, the Japanese have built a very sophisticated, intricately organized society. The notion that they “lost a decade” and are somehow dying a slow death as their population ages is poppycock. It’s tragic that the American media has withdrawn most of their reporters from Tokyo, because I continue to believe that it’s a place that really matters. If nothing else, the Japanese are going to be competing against U.S. companies ever more strongly. They are not going to disappear. I know I’ve been giving this lecture for decades, but it bears repeating: We either come to understand who the Japanese are and how we should engage with them, or we will continue to be marginalized in this part of the world, and we will continue to see our own standard of living eroded. Thus endeth the sermon.
HONG KONG, May 2007
I’m settled in, in Business Class, on a Malaysian Airline flight from Hong Kong to Kuala Lumpur. I just asked my flight attendant where she is from. Borneo. I don’t think I’ve ever met anyone from Borneo. (I would guess she has some Chinese blood; she doesn’t look like a full-blooded Malay.) And I can see the Vietnamese coast down below. The land is under the cover of clouds, but I can see the river delta that runs through Saigon into the ocean. So Saigon, or Ho Chi Minh City, is just below.
But before I launch into the last leg of my journey, into what the British called Malaya, here are my reflections on Hong Kong.
It’s still an incredibly dynamic place on the eve of the 10th anniversary of China’s takeover. Hong Kong has completely repositioned itself since I first arrived in 1979. Then it was a manufacturing hub for the U.S. and Europe mostly; today, it has moved virtually all its manufacturing across the border into China. It is joined at the hip with China in ways that once would have been unimaginable. Chinese tourists speaking Mandarin are all over the place, including at the Island Shangri-La Hotel where I stayed. I’d guess they were paying $400 a night. So they have big money. A lot of the shopping at the swank malls and designer shops is also being done by Chinese tourists.
You can feel the tug of Mandarin Chinese and the ebb of the English language. My government driver and I could sometimes communicate better in Mandarin than in English.
The Chinese government has kept its end of the 1997 takeover agreement. You can see the Chinese Communist flag on government buildings, and the People’s Liberation Army maintains forces in Hong Kong, but the Chinese have largely kept their hands off Hong Kong. The joke at the time was, who’s taking over whom? Will the Chinese take over Hong Kong, or will the Hong Kong Chinese export their style of capitalism to the mainland? Today the evidence is that it’s been a two-way street, and the Hong Kong folks may have had greater impact on the mainland than the mainland has had on them.
The place has gotten wildly expensive, by the way, as expatriates flock in. It is now standard for an expatriate on a full corporate ride to pay $25,000 U.S. for an apartment annually. A lot of my old friends have been priced out of Hong Kong Island and are commuting on ferries from other islands like Lantau.
The infrastructure boom in Hong Kong continues unabated. More land has been reclaimed from the harbor that separates Hong Kong Island from Kowloon, and huge skyscrapers dominate the skyline more than ever. Some of them are Chinese buildings—the Bank of China and the Industrial and Commercial Bank of China are two of them.
The airport at Chek Lap Kok is vast. I got a car ride into town last weekend, but today I took the train from a stop near my hotel. I checked my bags at the central check-in point and then rode the train to the airport. I never touched my bag again. (I hope it made it on this flight.) New York certainly has not built this kind of airport infrastructure.
Hong Kong is really riding on the Chinese dragon. What’s attracting so many people to Hong Kong is the financial sector, which is deeply tied to China now. The Chinese are trading roughly $22 billion a day (!) on the Shanghai and Shenzhen exchanges, compared with about $7 billion in Hong Kong. Clearly, the Chinese have a stock market bubble on their hands. People in Hong Kong expect a correction, but they have big confidence that the long-term direction is only one way—up. For one story I’m working on, I met people from Merrill Lynch, Citibank and Morgan Stanley who are involved in all the Chinese IPOs (Initial Public Offerings). Many Chinese enterprises and also private companies are raising billions of dollars in Hong Kong.
One negative aspect of Hong Kong’s ever deepening embrace of the mainland is the air quality. I couldn’t feel it because I had some very nice weather. But, at other times, apparently the bad air from factories on the mainland hangs over Hong Kong like a pall. Of course, part of it is coming from factories that the Hong Kongers have built north of the border, so they have only themselves to blame for that pollution. The really big question is, what are the Chinese going to do to get a grip on the air pollution before the Olympics next year? The only answer so far is that they are going to have to shut down every factory for two weeks before the Olympics and then during the Olympics, plus maybe place tight restrictions on auto use in Beijing.
The HK government, which sponsored my trip and organized a very good, jam-packed schedule for me, laid on a helicopter tour one day. It was mildly touristy, but I like helicopters and I said, What the heck? The most memorable part of the trip was flying along the Hong Kong border with Shenzhen, the Chinese district just north of Hong Kong. When I first started covering China’s Four Modernizations and their opening to the world, I can distinctly recall visiting Shenzhen and seeing peasant girls wearing conical Hakka hats who were prodding water buffalo down the dirt trails between rice paddies. There were no buildings to be seen. It was a panorama of green.
But looking out my window now, I could see a city of 11 million people crammed into skyscrapers and other very tall structures. Hong Kong’s population is 7 million, but now an even larger city has sprung up in the rice paddies north of the border. By all accounts, it is not a pleasant place. Peasants and migrant workers come to Shenzhen from all over China looking for work. But there just aren’t enough jobs, so many newcomers resort to crime. And pollution is much worse there than in Hong Kong because so many factories are in Shenzhen.
I had a funny incident one day that in some ways is revealing about how things get done in Hong Kong. It was late in the afternoon on Monday and I had a 5 p.m. appointment with a principal economist for the Hong Kong government, a woman. Getting into my car I had to stretch my leg out in a slightly funny way and RIP! There went the seam in the crotch of my pants. About five inches. I could look down and see my underwear hanging out of my pants. I thought, Holy Shit! How am I going to get through this interview? And how will I manage to find the time to buy a new suit? I am traveling with only two lightweight suits, plus a spare blue jacket.
Well, I kept my jacket on, rather than removing it, because that covered one or two inches of the gaping hole. And I simply kept my little legs squeezed together during the conversation. I don’t think the lady economist noticed anything. The next morning I called housekeeping at the hotel and they sent someone up to look. The key questions were, can you fix this today and how much will it cost? Does it make more sense to get a new suit? I left my driver’s cell phone number and went on my way.
Within an hour, the hotel had called to say they could repair the seam for free as long as I would pay to dry clean the suit. Bam! Problem solved. My suit was fixed and back in my room within hours. (Of course, I paid more than $100 U.S. for that plus laundering three days’ worth of shirts and underwear. Getting laundry done while on the road is always a rip-off.)
I didn’t do much shopping in Hong Kong because I’m traveling so heavily and there’s just a limit on just how much I can carry. I bought only two Giordano knit shirts for $180 H.K., which is about $25 U.S. I would guess that each of these would cost $30 to $40 U.S. at retail. Hong Kong remains a great place to shop.
I saw tons of friends. Rob and Sheri Dorfman were good friends when Cathy and I lived in Yonkers, and they’re still there. Generations ago, his family fled Russia to Harbin and then Tokyo and then Hong Kong. She’s a nice Jewish girl from the States. Their children are both grown now. We talked a lot about Cathy and old times. Rob runs a company of $200 million in sales and has nine factories in China. He supplies Target stores.
Then there is Jim Laurie, formerly of ABC News, whom I knew in Beijing. He’s now teaching journalism at Hong Kong University and is married to a younger Vietnamese wife who keeps running back to Vietnam to invest in real estate. I saw Kerry McGlynn, who handled PR for longtime Governor Chris Patton, the last Brit. Kerry, who is 65, also lost his wife to cancer after a five-year battle, so we compared notes on all that. He’s now a special advisor to Cathay Pacific. (I asked for an upgrade to first class on my return flight from Hong Kong directly to New York. We’ll see what wonders he can work.) I saw Peter Randall, a Brit, who worked for the Hong Kong government in New York. Now 64, he’s currently doing contract writing for the Tourist Authority. He lives with a slightly younger Hong Kong Chinese woman. Sarah Monk, who was once a journalist but later went into PR for the Hong Kong Trade Development Council, came to the Foreign Correspondents’ Club for drinks and dinner. (I spent a lot of time at the FCC—the prices are just so reasonable, and I don’t have anyone to pay my Hong Kong expenses. I’ll take them against my taxes, but obviously I wanted to keep them as minimal as possible.) On and on I could go. Suffice it to say that I am deeply connected in Hong Kong, more connected than I had expected and certainly even more connected now that I’ve spent a week making the rounds.
It’s a great place. I am scheming on ways to spend more time there. I don’t want to live there full-time, but in my new life I need to figure out a way to arbitrage between all that’s happening in Chinese-speaking Asia (and indeed Asia as a whole) and what Americans need to know and must know. The sense you get from being in Hong Kong is that people are building futures and are very confident about their prospects. It’s a very different feeling than the one I get from so many Americans, who are just trying to hang on to what they’ve got. Certainly my two weeks in Tokyo and Hong Kong reinforce my conviction that Rome was and is positively Third World. The jury is still out for New York and for America as a whole—we can either go the way of Europe and become one great big museum dedicated to the past, or we can try to innovate and build and create wealth. Here endeth the lecture.
KUALA LAMPUR, May 2007
I had remembered Malaysia from our visit in the 1980-81 time frame as being quite interesting because of its ethnic mix. It’s a place where you can sense the clash of civilizations. The Malays are the dominant grouping, with about two-thirds of the population of about 20 million. The Chinese, who came as traders or merchants from the north, make up 30 percent plus. And Indians, many of whom the British imported as laborers in the rubber plantations, make up 4 or 5 percent. After a nasty bout of racial strife in 1969, Malaysia had become something of a sleepy place, quite insulated from the rest of the world, it seemed.
So, upon arrival at Kuala Lumpur’s vast new airport, I proceed to immigration, and there a young Malay woman wearing a scarf on her head and the robes befitting her Islamic tradition starts to inspect my passport. I hear a faint drift of music in the background. I drill in my limited auditory faculties, and it sounds like American rap. It IS American rap. It’s Eminem. I can’t resist asking her, “Is that rap?” Yes, you knew, she says.
Doesn’t everybody?
That started my reintroduction to Malaysia after an absence of at least a quarter of a century. The ironies abound—whereas Cathy and I drove from Singapore to Malacca and then to Kuala Lumpur with only goats and motorcycles on the roads, today there are six- and eight-lane expressways running right next to the distinctive onion-shaped domes of mosques. You can see the women in head scarves eating at McDonald’s and Kentucky Fried Chicken. There are Starbucks joints everywhere it seems. “They listen to Britney Spears and eat donuts from Dunkin Donuts,” says my friend Assif. In short, Malaysia is a place where Islam coexists with what we in the Western world regard as modernity. If nothing else, Malaysia is proof that Islam does not have to be in fundamental conflict with modernity. It can be a layer of civilization and culture that coexists with others.
The national language is Malay, but it has absorbed many English words. School bus becomes “bas sekolah,” police becomes “polis,” and central becomes “sentral.”
Here are my notes:
--They drive on the left hand side of the road, as the British mandated. So I now have spent more than two weeks in countries where they drive on that side. I obviously didn’t get killed crossing the street. My worry now is that I’ll get back to Manhattan and get nailed looking the wrong way on 42nd St.
--The explosion of wealth is amazing. My friends Assif Shameen and Laxmi Nakarmi take me to the shopping mall beneath the Petronas Towers, the tallest buildings in the world. There one finds Cartier, Givenchy, Chanel, Hermes, Gucci and all that. Malay women, wearing their head scarves, buy some of it; but the other big shoppers appear to be the Saudis who have adopted K.L., as it’s called.
I was early for what the locals called “Arab season,” but I saw a few dozen Saudis. Their women wear all black, and some of them even wear the veils that cover their faces. Yet, they too have embraced some aspects of modernity—I saw a couple of them talking in a very animated way about their VCR camcorders. I also saw many places that catered to the Arab crowd with Arabic signs and places for Arabs to sit and smoke the hookah.
--A word about my friends. Assif is a Pakistani by birth, a non-practicing Muslim. He has lived all over Asia and Australia over the years, but now he lives in Singapore, about a 40 minute flight to the south. (Singapore is right on the equator, by the way; I’m deep in the tropics here.) Laxmi is Nepalese by birth, but adopted Korea as a story and Korean as a language, even married a Korean woman. We worked together for many years at BusinessWeek. Then in my subsequent incarnations at Chief Executive and elsewhere, I assigned stories to Assif. Laxmi invited both of us to the conferences he organizes in Seoul. The two of them are best friends; together, we are a merry band of three. Laxmi left for Seoul the first night after my arrival, but Assif stayed with me for the better part of four days and organized my schedule of appointments.
--The mix of cars on the road was interesting. The government monopoly is Proton Saga, which got a lot of its technology from Mitsubishi Motors. The Saga is the dominant vehicle plus another Proton brand called Waja. I see lots of Toyotas and Nissans, but in my four days, I only saw one American marque—it was a Chevy product and it was made by GM’s Daewoo unit in South Korea. Not a single other American car. The rich drove Mercedes, BMWs and even a couple of Porsches.
--The food here is just great. I ate a lot at the foreign correspondents’ clubs in Tokyo and Hong Kong for cost reasons, but everything here is half as expensive as. (My Hilton Hotel room costs only $100 a night.) So we ate great curry, great Thai food that made me break out in a sweat, Nasi Goreng from Indonesia, Japanese sushi, etc.
But the alcohol policy is bad. To get my evening vodka was painfully expensive. As a matter of religion and national policy, they make hard alcohol very expensive and portions are miserly. That did not warm my heart. Beer is served in more abundance, and the economics made it the beverage of choice.
--They smoke here more than I am used to—mostly cigars, it seems. But in a handful of cases, I could also smell the distinct odor of the clove cigarettes that they smoke in Indonesia, which I recall from my travels there. There are many Indonesians living in Malaysia because this country has been relatively more prosperous.
--The races are getting along, partly because there has been such an explosion of wealth. If everyone is rich, there’s nothing to argue about. But race lies just beneath the surface. We had one Indian taxi driver, a Sikh, who really vented about the “bumis,” or bumiputras. That’s what the Malays call themselves, the sons of the soil. They must own 30 percent of every company, and the best jobs are reserved for them. They dominate the government. “They are a lazy race,” says the driver, who’s looking for a tip and is trying to engage his passengers.
The Indians in Malaysia come from all over India. Aside from the Sikhs, there seems to be a multitude of very dark-skinned Tamils, from the very south of India. Many of them are dark enough that they would be confused as African-American in the United States. The Indians don’t cooperate among themselves because they are from so many different ethnicities and castes. They tend to be professionals—lawyers, doctors, and the like. But our driver complains that they are discriminated against very badly.
The Chinese come from several places in Guangdong and Fujian provinces, and Hainan Island. There are at least five different ethnicities or tribes represented. For the most part, they are businesspeople. In all my reporting for a story about Malaysia’s stock market, for example, everyone I met was Chinese.
The different ethnicities communicate with each other in Malay or English. But I noticed that, when the Chinese and Indians are among their own kind, they revert to their own dialects and/or languages. The Chinese make jokes about what bad businesspeople the bumis are. I’m sure the Malays would have a few choice words about both the Indians and Chinese, but I didn’t actually get a chance to probe their attitudes.
I see some interracial dating and some interracial friendships—but not many interracial marriages or families. Mainland Chinese are everywhere. Whole busloads of them. They are like the Ugly Americans once were or the Japanese were a couple of decades ago. They are loud and get on their cellphones in coffee shops and places where they obviously should maintain a bit of decorum. They also are arrogant—they have money. Lots of it.
The Japanese are major investors, but are not as visible as the Chinese. They owned the Hilton where I stayed, for example.
--My macro conclusions are that any notion Americans have that countries of the world need American capital or American know-how to raise themselves economically is very dated. Malaysia is still very much a developing nation, much less sophisticated than Hong Kong is. But Malaysia has some strong dynamics for growth. Malaysians can work with the Chinese, Japanese, Europeans and Arabs to get most everything they need. I’m tempted to conclude that nations such as Malaysia are pursuing their own paths in a post-American era. They don’t need our moral approval or our economic guidance. I think many Americans harbor this image of their country as being a moral and economic leader in the world; no one can get ahead unless they have our blessing. That’s a kind of missionary mentality, and it’s all wrong in today’s world. I think we need to recognize it’s a different game, a different era.