The Magazine

When East Meets West

The Americanization of Asia

May 28, 2001, Vol. 6, No. 35 • By MELANA ZYLA VICKERS
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Of all the dinner-party questions that arose among the small band of conservative journalists from Europe and America who lived in Asia during the 1990s boom years, the one probed with greatest curiosity was whether Asians would need democratic reform to make their capitalism successful.

We hoped so, though quite frankly the evidence was not easy to come by. A few Asian governments (led by Hong Kong and Singapore) seemed to recognize that the rule of law was essential to protect economic freedoms and to understand that small government and low taxes were useful as well. But, sadly, the big stuff -- free elections, openness to dissent, independent democratic institutions -- wasn't much in evidence. Meanwhile the benign-authoritarian capitalism of Asia boomed on.

In the absence of American-style democracy, we were left to content ourselves with discovering new reflections of American institutions and economic strengths. While hardly a substitute, in business-dominated Asia these trends seemed hugely influential. Indeed, seen in the best light, emulation of the United States' economic practices is a precursor to political and societal reform. It is this progress Jim Rohwer has tracked in his new book Remade in America.

Formerly an editor for the Economist and now a contributing editor to Fortune, Rohwer looks at the elements of Asian failure in the crash years of 1997-1998 and predicts how Asia might reform in future. He has identified several encouraging trends, including the advent of professional management and some open-minded thinking in tradition-bound firms, the disciplining effects of the Internet, and the growth of capital markets that let money flow to its highest return instead of to politicians' cronies. Rohwer may be a little over-enthusiastic about the trends he's spotting, but he's clearly onto something. And if he's right, Asia will be better off.

Reform is on the front burner in Asia because the ingredients of the region's past decades of success have gone bad. The classic ascent -- build an export firm, invest your returns in quickly appreciating assets such as property, borrow money through bankers to whom you are politically connected to buy still more of the assets, and watch your wealth grow -- hasn't been working well since the crash of 1997 and 1998. As currencies, stock prices, and property values have plummeted, Asia's old-style firms have been scrambling. Some sought and found government protection, through bailouts and the like. But others embraced change, rejuvenating their management and adopting technological advances, or found themselves bought out by Americans at bargain-basement prices and had change imposed upon them.

Rohwer tracks the latter firms, drawing loose parallels to earlier economic evolutions in the United States. He notes the influence in Asia of American education and the exposure to American ways of doing business. Hong Kong magnate and publisher Jimmy Lai explains the value of that exposure this way: The great hope for Asians mulling how to harness the "technology, American ideas, American values...that will be prying open, will be invading all the world" is that Asians educated in the United States "will come to their senses and no longer rely on their fathers' way of doing things."

Rohwer points to the cross-fertilization of personnel, ideas, and money. In 1990, 20 percent of Silicon Valley engineers were immigrant Asians, and Asians ran 29 percent of the firms started between 1995 and 1998. Almost 20 percent of Silicon Valley firms and 13 percent of sales are by companies with CEOs from China (primarily Taiwan). Regular commuters between Taiwan and Silicon Valley even have a nickname: "astronauts."

Thanks in part to their exposure to American business culture and education, the Taiwanese lead the Asian effort to grow original R&D, provide venture capital, and build national brands. Through such efforts, they hope to break from the old model of manufacturing a few American-originated products efficiently and cheaply, often by subcontracting and selling for export. Rohwer notes similar peregrinations to the United States by Hong Kong and Korean businessmen, and recounts how some scions of family empires have returned to Asia to shape their fathers' firms in the manner they'd observed in the United States. The only trouble with Rohwer's observations is they're almost wholly anecdotal -- he makes little effort to gauge what proportion is being colored by Yankee education or how deep the influence goes.