Posts Tagged ‘globalization’

Failure Is An Option

January 2, 2010 Leave a comment

If the reports are to be believed, there’s nothing quite like a Chinese student.

The attitude that I have towards China and its administration is that it’s better for them to make mistakes that cost them economically, because I would rather have British companies making money from the Chinese than have Chinese companies making money from British people. Thomas Friedman pointed this out in one of his columns for the New York Times, recounting how he addressed a Chinese motor show audience and he told everyone that he wanted everyone in China to continue to use fossil fuels, and ignore renewable energy.  The point was that while fossil fuel consumption was going up, there was little in the way of development of renewable energy – and this was important because not only would it do the environment some good, it would also give the fastest developer a greater advantage in what would be the next global market.

The money is better in your pocket than in theirs.

Unfortunately, I haven’t told many Chinese people this, and for some reason, they don’t want to cooperate with my vision of seeing thousands upon thousands of Chinese people buying products that were designed, invented and manufactured in Europe.  The scary thing is that, as you might well expect from the fastest growing economy in the world, the people that are going to make the difference in China aren’t even a generation away from us.  They’re about 10 years behind us.

As anyone who’s taught English in China will know, Chinese people place a premium on education.  The English training sector is booming to the point of saturation, and the rise of China’s middle class means that more people than ever are going to universities across the middle kingdom.  It seems that in one respect, like Communism, Confucianism is working.  All this from a country whose founding father shut down most of the learning centers in China to fuel his own cultural revolution.

30 years ago, Chinese writer Jung Chang was taken on a tour of her native Sichuan.  The idea was that young students would see all how beautiful China was, and would never forget to return once they had completed their studies.  30 years ago, all of the students that had their “backgrounds” approved for overseas study fitted on one bus; last year 57,451 graduate students along with 26,275 undergraduate students were sent to the US alone.  The language problems are already showing that there are large rifts between the US students and the Chinese students.

Writing for the Boston Globe, Kara Miller noted that “My “C,’’ “D,’’ and “F’’ students this semester are almost exclusively American, while my students from India, China, and Latin America have – despite language barriers – generally written solid papers, excelled on exams, and become valuable class participants.”.  Of her American students, she said “too many 18-year-old Americans, meanwhile, text one another under their desks (certain they are sly enough to go unnoticed), check e-mail, decline to take notes, and appear tired and disengaged.”.  It seems that where the Chinese students lack comprehension skills, they make up for with their work ethic, eagerness and contributions to their classes.

Of course, anyone who has had to explain to a Chinese student that British people don’t actually celebrate Thanksgiving, and that “going shopping” is not the proper way to celebrate Christmas would call into question Millers numbers that all is lost for the Americans.  She writes that “a National Geographic-Roper survey found that most 18- to 24-year-olds could not find Afghanistan, Iraq, or Japan on a map, ranking them behind counterparts in Sweden, Great Britain, Canada, Italy, Japan, France, and Germany. And in 2007 the American Institutes for Research reported that eighth graders in even our best-performing states – like Massachusetts – scored below peers in Singapore, South Korea, and Japan, while students in our worst-performing states – like Mississippi – were on par with eighth graders in Slovakia, Romania, and Russia.”.  The reason for all this is, of course, that no one bothered asking the Chinese or the Japanese any of the basic, general knowledge questions that were on this survey.   Most pig farmers in Wuhan would have problems pointing out where Australia was on the map, as would too many of the unemployed, fluent English speaking Japanese housewives that keep all the English school owners nests feathered inTokyo.  In Japan, a white man who speaks English is obviously an American, and a black man in China is obviously a drug dealer.

My first impressions of Japanese students were not good.  For a developed country, and one that had a rising economic behemoth on it’s doorstep, the level of spoken English in Japan was much, much poorer than the level that I had come to expect from my Chinese students.  Usually in China, I couldn’t get on the bus without someone coming up to me and practicing their English with me.  In Japan, the same thing happened twice in 15 months.  The width, and indeed depth of the gulf between the two old rivals was put into perspective when I was engaged in a conversation about British and Chinese history with the guy who was making my coffee in a Dongzhimen coffeeshop.  To have this type conversation with a barista in Japan would almost be unthinkable.

So, the Chinese are going to be ruling the world in the future?  Not really.  What’s interesting is that for every Chinese person who goes to American to study now, there are probably the same number of American students who have arrived in China with the firm intention of learning Chinese.  In December 2009, I ran into at least six Americans who were studying up on their HSK exam.  Most of them were 22 or 23 years old, and all of them spoke, read and wrote pretty decent Chinese.  Education is one of those things that everyone can get involved in.  While there are always slackers – and I met more than my fair share of them while I was teaching English in Beijing – the slackers are almost always outnumbered by the nerds and the geeks.  And it’ll be the geeks that inherit the earth.  Or at least, a decent apartment in Ya Yun Cun.

Hot, Flat and Repressed

September 10, 2009 Leave a comment

China, in its present state of government will never be the global power that it wants to be.  The reign of the ruling Chinese Communist Party will only last so long as they have the energy for the Chinese people.

The unprecedented growth and industrialization of China is, by any measure, remarkable, and fuelling this growth is, well, fuel.  Specifically, oil.  China has little in the way of its own oil reserves – optimistic estimates say that there’s about 14 years of oil left given the trend of growth and consumption.  The government needs to import oil.  A lot of it.  The problem was that most developed countries that were willing to sell oil to the Chinese would always add the condition that one of the situations, be they the human rights situation, organ harvesting, censorship or any other of the distasteful activities that the CCP indulges in should stop.  The rather inventive solution to the problem was to invest in countries that didn’t have the money or the resources to drill for their own oil, and these are usually the countries that don’t have the best human rights situations themselves, so they’re in no place to pile criticism on the Chinese government.  The upshot is that the Chinese are ruffling more feathers in the human rights community, signing million dollar deals with countries that White House hawks would consider rogue states.

The big question that is asked by most young Chinese is: “When America and Europe were industrializing, they didn’t have anyone telling them they should use less coal or burn less oil, or pipe less gas.  They polluted with wild abandon and everyone in the west is rich and fat because of it.  Why can’t we do the same?”  The answer is: China can. Not only “China can”, but “China can and I want it to do so”.  Why?  Because the interest in renewable energy sources is gathering more and more momentum every day.  More tax dollars and more private companies are pouring money into solving the world’s energy crisis.  They’re not doing this in order to save the world, they’re spending money because they know that renewable energy will become, in the very near future, the next global market.  Holland exports its wind turbine technology, and Holland has 2% unemployment.  It’s no coincidence that they were one of the first countries to reduce their dependence on Middle Eastern oil to zero, while also becoming one of the first countries to seriously invest in renewable energy technology.  The more time that China wastes arguing with Japan about where it can drill for oil, the more time Europe, America and Japan (Japan, being the most energy efficient developed country, which will be able to exploit a market of 1.6billion people in China) have to be the first to make a product that everyone will be relying on.  Of course, I want this product to be designed and patented by a British firm, rather than a Chinese firm.

And if you think that this is all just prevarication, the bad news that this has already happened.  Pennsylvania train maker GE Transportation is selling energy efficient, eco-friendly train locomotives to Chinese rail and freight companies.  The American trains last longer, don’t use as much fuel (they have 10-cylinder engines instead of the Chinese 12-cylinder) and don’t break down as much as the older, more inefficient engines that China has been using for years.  Already an American company has a foothold in the Chinese economy.  All of this has been done while the Chinese are partying hard, singing Hu Jintao’s praises and raising a glass to Wen Jiabao.  While the officials are taking bribes and looking after their own, the Americans are starting to take over major Chinese industries, thanks to their clear regulation and inventive innovation.  Some money is going to the Chinese, it’s true, but the big money is going to the US.

How does innovation follow on from regulation?   When the auto industry in American was told that they must install all their cars with catalytic converters, only one company looked at how it could get around these rules that were, on average, adding $1300 to the production cost of every car.  The chairman of Honda told its engineers that they must look at how to reduce emissions before they got anywhere near the tailpipe.  The result was a new engine with a pre-burn chamber that reduced the toxicity of the gas/air mix before it went into the piston chamber to be ignited.  Honda not only created a solution that saved their company millions of dollars and helped to combat climate change, they also started licensing the technology to other automakers.

When the movie Kung-fu Panda was released worldwide, there were two camps in China that were critical.  The first crackpot camp claimed that the move exploited the memories of those who had died in the Sichuan earthquake.  The second group asked the rather more valid question of why hadn’t the Chinese movie makers themselves been able to produce a smash hit animated comedy set in ancient China?   Americans were selling Chinese to the Chinese.  With the government still in control of the TV and of movie production, this is the way that it’s always going to be.  China will always be the one picking up the crumbs, living off the pale imitations and pirate copies of things that other people produce.   Americans make movies that sell, the Chinese have to make movies that conform to a haphazardly enforced political and moral agenda.

There’s regulation in America, but there’s little in the way of censorship.  And look what has happened there – there are hundreds of companies now that actually sell people software that will censor the Internet for them.  Worried parents don’t want their kids to be able to access, so they pay companies to give them software that will block pornographic websites or websites that can teach teenagers how to make pipebombs.  If the Great Firewall was removed, then it would free up a monopoly that Chinese companies would be able to take advantage of.  If there was an open list available and updated reguluarly by the government, then companies would be able to take that list and create filtering software around it.  Laws could be passed that made sure that whichever institutions the government wanted these filters to be installed at had the software properly set up.  It’s still censorship, but it’s honest censorship, the criteria would be in the open, and everyone would know where they stood.

What’s happened is that people are scared to develop and innovate, because there are no clear guidelines telling people what they can and can’t do.  Copies of existing works are being made because they’ve been around for a while and haven’t caused trouble in other countries.  What the Chinese Internet needs isn’t censorship and prison terms, it’s stable, reliable, open regulation.  With the regulation will come innovation, Chinese software engineers will be able to clearly see what they can’t and can do, and soon they’ll start creating rather than copying.  Copying is only a short-term stop-gap solution, sooner or later, foreign companies will get tired of having their products pirated, and they’ll start coming down hard on the Chinese manufacturers by imposing hefty taxes on Chinese imports.

So, let’s assume that there’s a rising middle class in China, and that incomes, on average, are going up too.  The money that’s generated from taxes collected from the wealthy middle class give the government a huge pool of money with which to effect massive social improvement.  There’s more money to get the best doctors in better hospitals which now have the best equipment.  The parks are clean, as is the water that’s piped into the apartments.  On sunny days, lovers may stroll in the many clean, quiet parks dotted around the city.  The public transport system is being overhauled with new subway lines and cleaner buses being introduced.  In short, there’s enough money going spare to pour into big, flashy projects that do two important things: they keep people happy, and they keep people from asking questions.  If you’re happy and you know it, then you’re less likely to demand accountability and transparency from your government. The CCP is still able to bank on the growing economy to keep people happy because the famines and the hardships that were endured during the Chinese civil war are remembered by people who are still alive, so it’s easy now to sing the praises of the CCP and the apparent economic wonder that they’ve orchestrated.   The trick of politics isn’t to make people happy, it’s to keep people happy.  In order to keep the Chinese people happy, and to keep the lucrative manufacturing contracts China now finds itself reliant on an unsteady foreign oil supply, and oil is a resource that is definitely close to extinction.

The fact that the CCP can so effectively crush opposition shows that the government has enough money to not only to keep the people happy on a superficial level, but they’re also able to spend large amounts of cash developing sophisticated internal intelligence services, and preventing groups that have an agenda different to that of the ruling political party from forming.  The rise of China’s middle class and the migration of ethnically Han Chinese to remote areas of the country has made it easier than ever for people to compare their economic status with that of others.  Needless to say, these people at the losing end of the equation are not happy.  Thousands found solace in the sword verses of the Koran, not because they found Allah, but because they were sick and tired of being the losers all the time.  The Muslim men that were unemployed and destitute in their home countries are the ones that migrated to the terror training camps, and they turned that dissatisfaction into a hatred so directed and so pure that they were willing to commit acts of mass murder.  There’s no billionaire oil sheik on the planet who feels he needs to sacrifice his life and kill countless others in order to enter paradise.  Wherever there are have and have-nots, there’s always terrorism.

The creation of a Chinese middle class has given the Chinese government access to a money pot deeper than it could possibly fantasize of, and so long as people are getting richer and are paying their bills, the more money the government has to strengthen its grip on dissidents.  The problem that comes is when the energy that is needed to finance the business ventures that enables the rich to get richer runs out, there’s going to be a problem.  More than likely, the CCP will be forced to do as Bahrain had to do – reform its basic, fundamental ideas of how society is supposed to be run.  People are not likely to give it all up and go through another North Korea-style great struggle; they aren’t going to trek for miles on the second Long March and dig for coal with their bare hands.  They’re much more likely to riot in the streets, and demand that the government fulfill their half of the bargain.

The balancing act that Beijing is faced with in unenviable.  While their yearly 8%/9% growth is spectacular, and the effect that this has on the nation’s millions that live on $1 a day has been a phenomenal achievement for a country that started its days 60 years ago bankrupt with no gold supplies, there is no question that this growth has to be sustained.  Or else.   What has been created now is a strange economic cycle where the economy grows, and must keep growing to satisfy the general population (and to help secure to continued governance from the CCP), in order to keep the economy growing, the country needs oil.  The country doesn’t have oil so it has to import from rogue states and at some point, that’s definitely going to come up at the next WTO meeting.  If you think this is a big problem, I haven’t even mentioned that America is going after the same oil supplies in order to sustain its own addiction to the black stuff.

After all the fear-mongering and doomsaying, for the first time in a long time, I have hope for China.  To put it more accurately, I have a little more hope than I did.  The hope comes in the form of the members of the very same middle class that are, according to one economic theory, helping the CCP stay in power, the ones who own the massive Chinese companies, and the ones who protested so vehemently about the absurd idea to install the Green Dam/Youth Escort software on all the computers that were to be sold in China this year.  It’s the biggest victory that the Chinese people have scored over their government in a long time.  One thing that is apparent after spending so much time in China is that people are able to tell you how great the country is, but the list of achievements is always in the past tense. China and it’s people must look to the longer term, they’ve got to turn their “did”s into “will”s, and the one thing that they can’t afford to do is to wait till later to clean up the mess, once they’ve become rich; they’ve got to clean up to become rich.

Unflat Japan: Living in the Shadow of the Dragon

August 22, 2009 1 comment

There are many things that a trip to your old stomping ground can do to you. Some people lose themselves in remiscences, others realize why they left in the first place, and others just give up and acknowledge that nothing is going to change much no matter how much they hope they will. I belong to the latter group, with a little dash of the second. Over the Japanese Obon holiday I got the chance to return to the Beijing after nearly a year hiatus.

With my ex-girlfriend badgering me on MSN to check her university paper, and adverts for the 2008 Olympics playing constantly on the subway lines, I could’ve been forgiven for thinking that the plane had inadvertently shot itself through a worm hole over the South China Sea. Given that the plane appeared to be piloted by a drunken eight-year-old, the worm hole and the ground were probably the only two things that we did manage to avoid on the Air China flight.

Due, in part, to the fact that I’m close to finishing Thomas Freidman’s excellent The World is Flat, and mostly due to the astonishing sense of complacent insulation that a lot of Japanese people seem to be hardwired with, it seems clear that something bad is going to happen to Japan and it’s people sometime soon. The problem is, as Friedman would put it, Japan is not flat.

Flattening of the world, for the uninitiated, comes about when technology enables people to communicate and do business with other people in other countries. When call centre jobs are outsourced to India, there is flatness – cheap fiber optic cabling allows someone to be routed from their home in New York to a call centre halfway across the world in Bangalore. Software engineers in China are writing applications for Dell, IBM and Google – three programmers in China can be paid twice the national average wage and still be three times cheaper than. Flattening, and therefore increased globalization (and thus increased interaction and competition with a global ecosystem) comes about through one thing: cheap tech. In Japan, there’s no such thing as cheap tech.

Yes, Japan has one of the world’s highest penetrations of broadband internet in the world. Yes, Japan’s Internet access is both cheaper and faster than anywhere else in the world, and yes, I know that Japan is one of the first countries to completely move to a 3G mobile phone network. I know these things, but, the problem comes about when you realize that innovation in Japan is not encouraged from the bottom up. In Japan, gadgets, gizmos and toys are doled out by closed companies that only conform to their own, closed, proprietary network or format. A Docomo phone works on the Docomo 3G networks with which you can only access the Docomo website, i-mode. To get onto the Docomo network, you can’t just use your cheap Softbank phone, you have to go out and get a Docomo phone with a new Docomo SIM card. Everything is branded, stamped, sealed and walled up.

You might think that this is all well and good, that this is nothing new, and why should Docomo allow free roaming Internet access on its mobile phones, anyway? No one else does. The problem isn’t the mobile phones or the business model, it’s the Japanese population, which is shrinking, and it’s shrinking fast. The over 65’s now account for nearly 45% of the entire populous, and if there’s one thing that over-65’s do not do, it’s play around on i-mode hoping trying to get a dancing panda dance in time with the music. The people who spend the most money on mobile phones are the teenagers, the ones who desperately need a mobile phone to stay in touch with the people they see every day, and have a large disposable income. This pool of rich kids is rapidly diminishing, and so are the profits of Japanese fun-providers everywhere.

There are two important factors that will contribute to Japan’s economic downfall. The first is that the Confucianist culture that promotes the second: top-down innovation. This essentially means that instead of people going out and grabbing tools – be they lathes, scythes or laptops – the companies and government tell people what they can use and then make available a series of models to choose from. Giving people the widest possible choice of how to do their business – or bottom-up innovation – is what has driven economies since the first industrial revolution. When I went to buy a mobile phone, I was told that there were only 4 models that were available with my pre-pay SIM deal. Two of the models were out of stock and the two remaining choices were a black Samsung and a white Samsung.

Compare this with an American going to Starbucks, where the customer is able to create his or her own coffee, mixing and matching from various items on the menu – regular milk or soy milk, low fat or high fat milk, sugar or sugar free, caffeinated or decaffeinated. You can argue that a mobile phone is not a cup of coffee, but the principle of giving choice to the customers is exactly the same. In China, mobile phones are cups of coffee: you can go to a China Mobile showroom and buy the handset of your choosing, then go to the shop on the corner and buy a SIM card (all Chinese phones are unlocked by default) for the network of your choosing. There’s a wealth of choice and payment plans. In Japan, people tell you “these are what we’ve got” and you have to make do with that.

The best example, however, of a flat world (or an unflat Japan) is the actual booking of the flight (for an expat) in Japan to…well, anywhere else in the world but Japan. A local travel agent, No. 1 Travel, takes out adverts in the local press almost every week (every day in the daily English language newspapers). Obviously, they plaster their lowest theoretical ticket prices all over the adverts, and usually the actual price you pay can be double or triple that. The main problem with this particular travel agent was that they add a 5000 Yen fuel surcharge to all their tickets. Thus, a ticket that costs 74,000 Yen can end up costing nearly 80,000 Yen.

So, over Obon, I wanted to fly out to Beijing on the 9th and return on the 16th of August. I was duly informed that because of the busy holiday period, there were no inbound Japanese flights available on the 16th August, and that a ticket on a two and a half hour flight would cost somewhere in the region of 85,000 Yen. I wasn’t particularly happy with this, and spend about an hour scouring the local expat web forums for any website that might be able to give me a cheaper deal. I came across the ANA website, and found that not only were there flights to and from Beijing on the dates that I wanted; there was also no fuel surcharge. In addition, I was able to pay for the ticket at my local convenience store using the same technology that allows me to top up my pre-pay phone credit.

That’s flatness – someone somewhere was offering a cheaper deal that I had to use my laptop to get. Not only did I give my hard earned to the flatter operating business, I took my hard earned away from another, unflat business. If everyone did what I did, sooner or later, the unflat business will be in trouble. And that’s just what’s happening in Japan everyday – unflat, traditionally run companies are being run out of town by flatter companies that are doing Japanese work, but might not be actually located on Japanese soil. If you don’t believe me, take a trip to Dalian and see how many Japanese businesses are outsourcing to Chinese workers.

All this boils down to one simple point: The Japanese economy is in trouble and is going to continue to be in trouble because the tools that people need to compete in a global economy are held in an iron grip by companies that are failing because they won’t give the people the tools they need to compete in a global economy. There are people hungrier than they are who are studying ten times as hard in an effort to race them to the top. In China, there’s evidence that this is happening already, with Japanese companies outsourcing huge tracts of business to Dalian – so much so that the local universities are offering degree courses in Japanese. Of course, the Chinese people in Dalian are also learning English faster and to a higher degree of competence than their Japanese counterparts, so now there’s a labor pool in Dalian of Chinese skilled workers, who speak Chinese, Japanese and English.

These students came from families who worked on farms 60 years ago, and today, they’re leaving behind their contemporaries in developed countries at light speed.

Like many English teachers who work in Japan, I’ve come to both hate the Japanese school system and pity the student drones that it produces. Typically, the average Japanese child goes through about 10 years of English study. This is half the number of years that I studied Spanish at high school, and I could probably get by in Spain on that, some 15 years later. After ten years of English study, Japanese people still have problems asking the time in English (for the record, I can ask the time in Spanish, Japanese, Chinese and English). This lack of decent, effective second langauge education is disempowering every child in every developed country, but not all have a country like China on it’s doorstep. The demand for international English speakers wasn’t created by native English speakers, it was created by domestic and international economic forces – those who spoke English suddenly found themselves in the international market, able to make pots of money, and others wanted to do the same. For the vast majority of Japanese, they’ve been tragically let down by the Japanese education system when it comes to learning English. An Asian school and university system that produces adults who have to think about starting to study English when they’re 22 years old when their counterparts have been studying since they were 12 years old is a school and university system that is falling way short of what is needed in the 21st century.

As the undisputed leader of the great tigers of the Asian economy, Japan is probably in the most dangerous, not the most comfortable, position because China is starting to catch them up, and they’re three times hungrier and three times more likely to study harder in order to become Japan. Pretty soon, products that have “Made in China” stamped on them will be designed in China too. As Thomas Friedman points out several times in his book, developing countries are not racing developed countries to the bottom, they’re competing on the most level playing field that’s ever been available to race us all to the top. Whether you’re untouchable in terms of a skillset when the time comes, is up to you.