An insightful adage states that a best friend dispenses "tough love." If so, then Michael Backman is surely one of Asia's best friends.
His sharp eyes perceive how several Asian economies became drunk on a sweet, but dangerous cocktail they giddily mixed, using corruption, family politics, lack of accountability, and flouted laws.
Consequently, Korea and Indonesia almost collapsed in the financial meltdown of 1997-98, and the region's superstar, Japan, remains in an economic and political stupor, neither passed out nor vigorous.
The author starts his tour d'horizon of Asia by analyzing Asian values. He is a realist who astutely assesses a subject that Asians themselves obfuscate. The latter often insist that they naturally love harmony and cooperation; these are manipulative bromides that many Westerners believe out of ignorance, good will or apathy. Rarely do Asians candidly focus on power relations, as Backman does.
The author begins by challenging the simplistic, yet somehow comforting notion that culture leads and politics follows. The Confucian emphasis on family, on high savings and on thrift, he states, derive from a society with poor legal structures, one in which the government ignores the frugal. He adds that while Asians rigidly honor social codes, they apply legal strictures situationally. It is amazing how many Westerners fail to grasp the implications of this. Even Backman understates it: What Westerners call hypocrisy or expediency, Asians call flexibility and adaptability. However, the Westerner usually cannot bend and ignore law, as his Asian counterpart can.
The author is right to state that Asians still see business as a zero-sum game, and that Confucian values simply do not dignify those outside the group. Therefore, the foreigner is dealt not with reciprocity, but through stratagems.
Backman eventually begins to analyze Asia's long drinking binge. Corruption flourishes in China and Indonesia partly because the civil servant is poorly paid. A higher form of corruption, namely copyright violations, can be astounding. In Indonesia, a merchandiser selling fake Pierre Cardin clothes tried to sue the real Pierre Cardin -- for selling the same clothes as the Indonesian. In addition, bankruptcy laws are, well, bankrupt in Thailand partly because it is better to keep losing money than to lose face. Precise auditing, insists Backman, is unAsian. It is better to shop around for an auditor who will come to a sympathetic assessment.
As for the business media, it cannot be a watchdog because it is kept a puppy by censorship, as in Indonesia; low wages, as in Southeast Asia; and control by corporate owners, as in Korea. Regarding the Korean and Japanese media, one might add that a reflexive nationalism, and outright bribery by special interests, often result in chauvinistic coverage of trade disputes. Corporate plutocracy wins and consumer democracy loses.
The result of all of the above is that the "lack of constraints on corporate Asia leaves it a law unto itself." The consequences span: banks keeling over in a sea of red ink; conglomerates marooned on the shoals of bloat; and stock markets that do not protect minority stockholders, or the little guy. In a tragic-comic chapter on polygamy in Southeast Asia, Backman reports that warring factions can develop around each mother (it is best to have girlfriends). A family feud weakened a firm in Thailand before headstrong family control decimated it.
Backman's analysis of Indonesia implicitly argues that every legal, economic and political failing one can imagine has plundered this tropical paradise. The general-dictator's children, unfortunately, took after their father. One son wanted Indonesia to have a national car. As it was impractical, he imported a car ready made from Korea and forced bewildered and resentful government officials to buy one. Perhaps because he lived in Indonesia, Backman's writing on this despoiled, beautiful country seems especially lively and knowledgeable.
As for Japan, this still-recessed economy has some serious problems. Japan is ruled by bureaucrats, conservative politicians and businessmen who interlock, so any attempt to reform one node is resisted by the interdependent other nodes. Outside pressure is needed, but what is most urgent is an end to banks that squirt money at profligate firms, toothless free trade laws, and stunning corruption in sectors like construction. China, ostensibly the rising dragon, warns Backman, may descend rapidly if it ties itself down with the dead weights of unwieldy conglomerates, rampant corruption, a weak legal regime and crony capitalism.
When Backman opines that "Asia might have its unique cultural values, but at the end of the day, a crony is a crony, poor disclosure is poor disclosure, and a shonky bank is a shonky bank," one laughs with him; but then one laughs at the high-powered MBA's and pontifical Asian nationalists of the 1990's who were long on pride and short on sheer common sense. Asians who want to compete will have to modernize their minds, not just their production lines. They must learn to be transparent, accountable, accurately audited, legalistic, and not family-owned. Asian journalists must fear unprofessionalism, not the censor.
The book is fun because Backman is witty. For instance, he writes, "Sound corporate governance, like virginity, is under constant threat from temptation." In addition, he often enriches the main text with entertaining case studies chock full of powerful people wrecking their empires -- or enjoying them, such as the naughty Prince Jefri of Brunei who named his yacht's two lifeboats "nipple one ... nipple two."
Since no friend is perfect, Backman too makes mistakes as he counsels Asia on regaining its sobriety. To start, he is amazed that the crisis of 1997-99 did not transpire sooner. One wonders if he wrote or lectured on the impending crash? Strangely, he does not say. Second, when Backman expounds on "Asian" values, he usually means Confucianism, leaving out the Islam of Southeast Asia.
The author attributes Japanese values to its rice-growing past. Here he wrongly reverses his earlier insight that, often, power produces culture and ends up repeating a cliche about rice growing that the Japanese smilingly invoke to justify insularity and collusion. In truth, the twin crucibles of Japanese values are the Tokugawa Shogunate (1603-1868), which exalted obedience, and late modernization after 1868, which entrenched bureaucratic rule. Rice growing explains why Japanese eat rice.
One hopes that Backman will continue to play the role of Asia's stern, but sober friend and to write a progress report on the same bibulous economies he profiles here. Our destructive habits can be pleasurable. But if we do not break them, then the habits break us, no matter whom our friends are.
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