Sunday, March 31, 2013

Dogs and Demons: Tales From the Dark Side of Modern JapanDogs and Demons: Tales From the Dark Side of Modern Japan by Alex Kerr
My rating: 4 of 5 stars

Alex Kerr is angry. He’s angry at the Japanese bureaucrats, construction industry, media and, not least, education system that have all destroyed not only the natural beauty of the unique archipelago, but also the culture and psyche of the ancient country. The book is very well researched and Kerr knows his subject, the country where he has lived for decades. All in all, the book is an important antidote to the Japanophiles who look at the country through rose-tinted glasses—and as Kerr points out, there are many of those (and to a point I have to confess being one myself). At the same time, this is a rather tedious read because of its gloom and hopelessness. Furthermore, at 432 pages, it’s somewhat overlong and somewhat repetitious. Still, it’s an important book, which I hope many Japanese would read. However, there’s probably not much risk of that, for the very reasons that Kerr outlines in the book.

Kerr takes us through virtually all sectors of Japanese society, pointing out systematically what is wrong. He takes the title of the book from an old Chinese story where an emperor asked a painter: “What are the hardest and easiest things to depict?” The artist replied, “Dogs and horses are difficult, demons and goblins are easy” (pp. 145-146). The metaphor here is that focusing on small everyday things is difficult, but constructing new, big and expensive things is easy. Japan in the past half century has focused only on the latter and in the process destroyed the former.

It all comes down to an all-powerful and completely unaccountable bureaucracy that is unimaginative, undemocratic and tone deaf to alternative voices. It has been empowered by an education system that discourages free thinking and emphasizes rote learning and military style obeisance. Of course, no such system could stay in place for long unless there were powerful groups that benefited. Kerr shows the collusion between the bureaucrats, politicians and industry that by any Western standard could only be condemned as corrupt. The long-standing principle of ‘poor people, strong state’ was born after the American occupation when Japan was determined to catch up with the West at any cost. Which it did, but at an enormous cost to the environment, nature and, yes, the poor people.

Probably the strongest part of the book focuses on the power of the construction industry and the Ministry of Construction, which have systematically destroyed the natural beauty and ecological balance of this unique archipelago. By the mid-1990s, Japan used about 30 times more concrete per square kilometre than the United States, channelling virtually every river and stream, constructing ‘erosion control’ measures on the most remote uninhabited mountainsides, building roads into the forest to allow for logging, destroying most of its shoreline with ‘coastal protection’ works, and paving over virtually anything that can be paved. This construction frenzy has been a huge boon to the industry and to the bureaucrats who benefit from it, not least in the form of amakudari—cushy post-retirement jobs in the industry. It’s been enabled by many factors. Importantly, the huge government subsidies flowing to rural areas, but only if they accept construction works determined in Tokyo. These are in many smaller towns and villages the main sources of employment and income (although Kerr shows how many a town has also ended up in unsustainable debt because of the demons that have been brought upon them).

The government propaganda has been effective in making many Japanese genuinely believe that theirs is a small (semai) country with not enough of space for the population (in reality, Japan is by far larger than any country in Europe, barring Russia; it’s a third larger than France or Spain and has a lower population density than Holland or Germany). Another aspect that the propaganda has been successful in is instilling the fear of danger into the population: everything is abunai (dangerous) and anyone doing manual labour (including, e.g., ambulance drivers) wear helmets. Although the Japanese culture traditionally admires nature, it has also been seen as something to be controlled.

The education system has been consciously devised to create an obedient, unquestioning and hard-working labour force for Japan’s industry. Inquisitive minds are discouraged from the beginning and authority is to be respected. My wife remembers from her Japanese childhood being punished when she asked questions from the teachers at school. Education is centred on discipline and group think—starting with the school uniforms: strictly militaristic for boys, sailor outfits for girls. One story from the time I lived in Tokyo in the 1990s has stuck in my mind as typical. It was about a boy who was expelled from school on the grounds that he had dyed his hair. The parents got a doctor’s certificate that the poor boy actually had been born with brown hair. The school authorities reluctantly reversed the decision, on the condition that the boy dyed his hair black. School bullying is rampant in Japan and the victims often are kids who are somehow different. All this has resulted in a complacent public. For instance, environmental NGOs are few and far between, their members considered radical outliers.

If school is tough, university is not. On the contrary, once you’ve secured a place in a prestigious university, the four years spent in higher education are commonly the only time in a person’s life when you can slack off freely. Employers hire graduates on the basis of which university they went to, not their grades or field of study. That’s because the next stage of socialization is at work: the employer wants to re-educate the new staff member and mould him to fit the company culture. Only those intent on becoming academics go to graduate school. Unfortunately, graduate schools are equally hierarchical, as young scholars get affiliated with one senior professor who has complete authority over their research and lives. Peer review is basically unheard of in Japanese academia; it would be a logical impossibility, as it would involve a critique of a researcher who is affiliated with an unassailable senior professor. In the West, peer review is the foundation that guarantees academic quality. A Japanese friend of mine who did his doctorate in the States, but got hired by one of the better private universities in Tokyo, told me that his publications in the best international journals have no bearing for his career or status; the university only requires him to write two pieces per year, in Japanese, to its own non-peer reviewed journal. Another acquaintance, an American professor in a recognized university in the Kansai region strongly discouraged me to join the faculty, as I remember him telling me, “these are the stupidest professors in the world.”

Of course, Japan is well-known for its technological progress and the situation in hard sciences and engineering is much better than in social sciences or even medicine. Japan is essentially a handicraft culture and, as such, it is extremely detail-oriented and aiming for perfection. It’s not that the Japanese invented the camera, the computer or the car; they just perfected them. Kerr elaborates on this: “Total dedication drives Japan’s self-sacrificing workers, and underlies the quality control that is the hallmark of Japanese production. But the tendency to take things to extremes means that people and organizations can easily get carried away and set out to ‘improve’ things that don’t need improving” (p. 45). I believe he is right when he sees a connection between this tendency and the constant desire to ‘improve’ on the rivers, mountainsides, ancient cities, and the like—if you think of it, even the famed Japanese gardens and bonsai trees are attempts to improve on what the nature has created. Kerr extrapolates further, stating that “there is an unstoppable extremism at work that is reminiscent of Japan’s military buildup before World War II” (p. 45). There is something to this, which can explain the continued destruction of Japan by a single-minded bureaucratic mass not governed by any democratically accountable political leadership.

The wanton way in which the environment has been destroyed in the name of progress is sad. After the war, in the effort to rebuild Japan and to catch up with the West, everything was sacrificed to the altar of industrial development. Minamata, a fishing village with considerable natural beauty on the island of Kyushu, became synonymous to industrial pollution in the 1950s and 1960s. The stunning thing about Minamata—and several other similar, if less publicized cases—was that, for decades, it was the victims who were shunned and ostracized for hampering industrial progress. One might say that Minamata took place half a century ago, but the case has barely been closed now. Perhaps more importantly, similar disregard for human health and life—not to mention ecosystem health or aesthetic values—continues to be demonstrated today, when Japan is rich and there is absolutely no justification for it (if there ever was). It was only in 1997 when the government started half-hearted regulation of dioxins after the publication of extremely high concentration levels of this poison around incinerators. The meltdown of the Fukushima nuclear power plant following the tsunami of 11 March 2011 revealed stupendous breaches in security at the plant, with the government watchdog clearly in collusion with the industry to bypass even the weak regulations.

Taking Kyoto as a prime example, Kerr—understandably and correctly—lambasts the destruction of old neighbourhoods and the cultural patrimony in ancient urban centres. Again, at work are the bureaucrats and construction industry on autopilot and a complacent public with a misguided understanding of progress and modernity.

Had Kerr left it to examining environment, construction and education the book might have read better. But he decided to cover many more areas, including the bubble economy, manga, ikebana, the poor state of Japan’s museums, the movie industry, just to name a few True, he does tie the miserable state of Japanese cinema and other arts to the same root causes, stating how “Japan’s postwar educational system is turning the Japanese into children” (p. 312). Similarly, the critique of ‘internationalization’ of Japan is right on the money. Japan is likely the least international of any industrialized nation. Since the Edo period, foreigners have been isolated in their own ghettos, like the historical Dutch and Chinese merchants off Nagasaki. Today, foreigners (gaijin) have been largely relegated to the position of low-level workers in companies or language teachers with no chance of career advancement. As for unskilled workers, authorities have encouraged primarily ethnically Japanese people from places like Brazil and Peru to take up work in the country. Just a few years ago, I was having dinner in Tokyo with a senior government official. When I mentioned that, given the aging population and dearth of manual workers, Japan would be forced to ease up immigration laws, his answer was (seriously): “No, not at all; that’s why we’re investing so much in the development of robots.” Xenophobia is alive and well in Japan.

Kerr also talks about creative Japanese people who choose to leave the country. Japan has never appreciated the maverick, even if the person was a genius.  He mentions leading scientists (like Shuji Nakamura, inventor of important breakthroughs in blue lasers; Dr. Ken Kakere, a cancer specialist long with NIH in the USA), business people (Nobuya Okabe who makes SciFi effects for movies and TV) and musicians (Seiji Ozawa, Ryuichi Sakamoto) who all have decided to go abroad. “In Japan’s medical world, young people, women, the outspoken, and the inventive stand no chance of recognition” (p. 339). The same could be said of many other fields. At the same time, many young people decide to leave for studies abroad where they can “enjoy” life and study, rather than just “endure” like in Japan (p. 357).

This book was published more than a decade ago, in 2001, and its examples come largely from the 1990s. One could therefore expect it to be outdated. Many things have changed since the publication and, perhaps, things are no longer equally bleak. In fact, Kerr himself sees some hopeful signs for change, although he does have his doubts: “Change will get harder, not easier, as the population ages. At the very moment when Japan needs adventurous people to drastically revise its way of doing things, the population has already become the world’s oldest, with school registrations on a strong downward curve … Meanwhile, youths, whom one would ordinarily expect to be full of energy and initiative, have been taught in school to be obedient and never to question the way things are” (p. 367). Kerr points out that Japan has demonstrated an ability to abruptly change course, twice, but both times there was an external impetus: first in the late-Edo period when Commodore Perry forced Japan open to outsiders; the second time after World War II with an American instigated new constitution. This time Japan is on its own: “Nobody outside Japan is concerned about the fate of its mountains and rivers; nobody will arrive in a warship to demand that Japan produce better movies, rescue bankrupt pension funds, educate its children to be creative, or house its families in livable houses. The revolution will have to come from within” (p. 360).

But many things have indeed happened. The recession has shaken up the lifelong career structure and unemployment has risen. More young people have been forced into self-employment or have even dropped out. At the time when Kerr wrote his book a dozen years ago, Japan’s economy was still larger than the combined economy of the rest of East Asia, including China. Since then, China has surpassed Japan as the world’s second largest economy. Then there was the tsunami and the nuclear disaster, which surely must have shattered any remaining trust people may have had in the bureaucracy and big business.

Then again, East Village is still full of Japanese kids who did not fit in and Ryuichi Sakamoto still lives in New York. Japanese speaking henna gaijin are still paraded on TV variety shows as curious freaks. Construction is continuing unabated with government subsidies. And LDP—neither liberal nor democratic—is again in power. One can only hope for the best.

If this review—like the book itself—comes across overly negative, it is because Kerr focused on the critical aspects. Japan, of course, has so many good aspects to it. That’s why Kerr, I and many a Japanophile cares. At the end, this is a work of love. As Kerr points out, the overwhelming majority of books written about Japan by gaijin focus on the lovely aspects—the aesthetics, the traditional culture, the food, the politeness of people, the efficiency, the beauty that remains in nature and in culture—therefore, a critical look that doesn’t overlook the troubling side is useful. Taking an analogy from what is missing in new ikebana, Kerr concludes Japan has strayed too far from jitsu, or reality, and there is a need to getting back in touch with this reality. He concludes: “The result of Japan’s war with jitsu has been to tear apart and ravage most of what Japan holds most dear in its own culture, and this lies at the root of the nation’s modern cultural malaise: people are sick at heart because Japan has strayed so far from its true self … The challenge of this century will be how to find a way home” (p. 385).

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Tuesday, March 26, 2013

A Better India: A Better WorldA Better India: A Better World by N.R. Narayana Murthy
My rating: 4 of 5 stars

This is a refreshing book by an important business leader. When an Indian colleague first lent it to me, I wasn’t thrilled to read it but felt obliged. I was very much positively surprised. N.R. Narayana Murthy, the founder and chairman of Infosys presents a rather coherent and positive vision to the world according to himself. If only many more business leaders thought like him, one might even feel tempted by this thing called ‘compassionate capitalism.’  Narayana Murthy has thought much about India, his homeland, and its contradictions. In the introduction to his book, he outlines these:

“The enigma of India is that our progress in higher education and in science and technology has not been sufficient to take 350 million Indians out of illiteracy. It is difficult to imagine that 318 million people in the country do not have access to safe drinking water and 250 million people do not have access to basic medical care. Why should 630 million people not have access to acceptable sanitation facilities even in 2009? When you see world-class supermarkets and food chains in our towns, and when our urban youngsters gloat over the choice of toppings on their pizzas, why should 51 per cent of the children in the country be undernourished? When India is among the largest producers of engineers and scientists in the world, why should 52 per cent of the primary schools have only one teacher for every two classes? When our politicians and bureaucrats live in huge houses in Lutyens’ Delhi and the state capitals, our corporate leaders splurge money on mansions, yachts and planes, and our urban youth revel in their latest sport shoes, why should 300 million Indians live on hardly Rs 545 per month (US$10 at current exchange rate), barely sufficient to manage two meals a day, with little or no money left for schooling, clothes, shelter and medicine?” (pp. xiii-xiv).

His starting point is Franklin D. Roosevelt’s ‘four freedoms’—freedom of speech and expression, freedom of religion, freedom from want, and freedom from fear (p. xiii). He later elaborates on what a ‘civilized society’ entails: “a society where everybody has equal opportunity to better his or her life; where every child has food, shelter, health care and education; a society where duties come before rights; where each generation makes sacrifices to make life better for the next generation” (p. 11). Obviously, many of these tenets are increasingly not present in today’s USA and, worse, many Americans on the right would dispute these principles as smacking of socialism.

Narayana Murthy is a well-read and well-travelled, learned man who clearly thinks a lot about societal issues. In the introduction his acknowledged three books that have influenced him deeply: The Protestant Ethic and the Spirit of Capitalism by Max Weber; My Experiments with Truth by Mahatma Gandhi; and Peau Noire, Masques Blancs by Franz Fanon (p. xiv). This rather eclectic selection shows the breadth of his reading and attests to an open mind. He builds his own philosophy on these disparate strains of thought, emphasizing the importance of values and leadership. He sets out early in the book that, “I do not know of any community—a company, an institution or a nation—that has achieved success without a long journey of aspiration, hard work, commitment, focus, hope, confidence, humility and sacrifice” (p. xxiii).

His student years in France in the 1970s were very important in forming his thinking. In the first chapter, a lecture to students, he compares France to India for its civil-mindedness: “In France, everybody acted as if it was their job to discuss, debate and quickly act on improving public facilities. In India, we discuss, debate and behave as if the improvement of any public facility is not our task, and consequently, do not act at all” (p. 11). His conclusion: being a developing country is a mindset. Here he breaks clear of the Left, placing the onus on the individual, as well as the society as a whole, to take responsibility for its own destiny. He tells a story of how he lost any sympathy for the Left after having been incarcerated by Bulgarian authorities when traveling back from Paris to India in 1974 (pp. 4-5).

This is a collection of 37 essays and speeches given at a variety of fora during the 2000s and selected for the book by the author himself. They are divided into sections: Address to students; Values; Important national issues; Education; Leadership challenges; Corporate and public governance; Corporate social responsibility and philanthropy; Entrepreneurship; Globalization; and, finally, three short chapters on Infosys. In such a collection it is inevitable that there are overlaps between the chapters and many recurrent themes. I’ll pick a few themes that I found interesting here below.

He addresses students in a variety of schools, ranging from prestigious institutions like INSEAD, Indian Institute of Technology, IESE Business School in Barcelona and NYU, to various other universities in India. He exhorts his values: “You must believe in and act according to the principle that putting public interest ahead of private interest in the short term will be better for your private concerns in the long run.” … “Ego, vanity and contempt for other people have clouded our minds for thousands of years and impeded our progress. Humility is scarce in this country.” … “No county that has shunned merit has succeeded in solving its problems.” … “The reason for the lack of progress in many developing nations is not the paucity of resources but the lack of management talent and professionalism” (pp. 14-15).

Narayana Murthy is a fan of globalization and refers to the ‘global bazaar’ and Thomas Friedman’s ‘flat world’ in several places. In this context, he calls for “an environment of tolerance and respect for multi-culturalism” (p. 19). He sees global warming and environmental degradation as major threats and sees that the answers must lie in global cooperation: “The solution is not to force developing nations to forgo what the developed world has enjoyed for over a century. It is to come together as one planet and use innovation in technology to produce alternate energy solutions and reduction of carbon emissions.” His thinking reflects the intergenerational equity perspective embedded in the original definition of sustainable development: “After all, this is the only planet we have. Conduct yourself as if you have borrowed it from the next generation. Remember that you will have to give it back to them in good shape” (pp. 20-21).

He is also very critical of laissez-faire capitalism, a theme that resonates throughout the book: “Unfortunately, the greed of several corporate leaders, the meltdown of Wall Street, the increasing differences between the salaries of CEOs and ordinary workers, and the unbelievable severance compensation paid to failed CEOs have called into question whether capitalism is indeed a solution for the benefit of all, or if it is an instrument for a few cunning people to hoodwink a large mass of gullible middle-class and poor people. Never before in the history of capitalism have so few people brought so much misery to so many.” His views of how to manage a company are in line with his broader beliefs: “The only way you can save capitalism and bring it back to its shining glory is by conducting yourselves as decent, honest, fair, diligent and socially conscious business leaders. In every action of yours, you have to ask how it will make the lowest level worker in your corporation and the poorest person in your society better. You have to learn to put the interest of the community—your corporation, your society, your nation and this planet—before your own interest.” Again emphasizing the need for sacrifice, he states that, “(T)o succeed in these days of globalization, global warming and laissez-faire capitalism, every worker in your corporation will have to accept tremendous sacrifices in the short term and hope that goodness will, indeed, succeed in the long term and make life better for every one of them” (pp. 21-22). Certainly not the thinking en vogue on this continent!

Naryana Murthy is also rather harsh on India. In a chapter entitled ‘What Can We Learn from the West?’ he chastises his own nation for faulty values: “Indian society has, for over a thousand years, put loyalty to family ahead of loyalty to society.” … “Unfortunately, our attitude towards family life is not reflected in our attitude towards the community. From littering the streets to corruption to violating contractual obligations, we are apathetic to the community good.” … “Apathy in addressing community matters has held us back from making progress which is otherwise within our reach. We see serious problems around us but do not try to solve them. We behave as if the problems do not exist or as if they belong to someone else” (pp. 47-49). He continues, “our intellectual arrogance has also not helped our society. I have travelled extensively and, in my experience, have not come across another society where people are as contemptuous of better societies as we are, with as little progress as we have achieved.” He identifies things that India should learn from the West, including accountability, dignity of labour (“everybody in India wants to be a thinker and not a doer”), and professionalism (punctuality, respect for other people’s time, respecting contractual obligations), concluding that “the most important attribute of a progressive society is respect for others who have accomplished more than they themselves have, and the willingness to learn from them” (pp. 50-51)

Elaborating on individual responsibilities, he adds one more: discipline. “There are several ingredients for national development—natural resources, human resources, leadership, and finally, discipline.” … “The utter lack of discipline exhibited by our people is rendering these other three powerful factors ineffective for fast-paced economic growth. We see umpteen examples of undisciplined behaviour around us every day. What is even sadder is that this behaviour has become the norm even among the powerful and the elite.” … “Discipline is about complying with the agreed protocols, norms, desirable practices, regulations and the laws of the land designed to improve the performance of individuals and societies. Discipline is the bedrock of individual development, community development, and national development” (p. 57). In this category, Narayana Murthy includes aspects, such as lack of discipline in thought, or intellectual dishonesty (objectivity to focus on outcomes and results, rather than politics or focus on caste and religion; corruption). To achieve discipline, India needs role models (honest, accountable, disciplined leaders committed to change), swift and harsh punishment of offenders, transparency, political reform, and an improved bureaucracy (p. 65).

The part focusing on important national issues considers a wide range, including the role of population in economic development in India. Talking about population growth as a strain to development risks getting attacked from both the Left and the Right these days, but Narayana Murthy barges right into the issues. He highlights the need for ‘good human capital’ (p. 94) but also warns that “a failure to stabilize India’s population will have significant implications for the future of India’s economy” and that “high population densities have also led to overloaded systems and infrastructure in urban areas” (p. 95). He links the population debate to environment and resources, in particular energy demand, noting how the combined demands from India and China will put pressure on world resources: “The rapid growth in emerging economies cannot be sustained in the face of mounting environmental deterioration and resource depletion” (pp. 96-97). He sees a clear role for the government, which must “focus on conservation-friendly policies. For example, subsidies on conventional fuel make it difficult for renewable energy sources to compete and should be removed at least for rich and middle-class people.” … “The government can play a key role as a regulator in making Indian industry environmentally responsible” (pp. 99-100). Would someone please tell that to the politicians in Washington, DC?

So, how to deal with the issue of excessive population growth? Well, there’s the need to meet unmet need of contraception and the issue of how Indian states have failed to implement family planning programs. Narayana Murthy recognizes that there’s been a significant decrease in population growth in certain southern states, such as Kerala, Tamil Nadu, Karnataka and Andhra Pradesh, where “state governments here focussed on human development, opened up local economies, and improved social services … Rising female literacy in these states contributed to the success of family planning … A focus on women’s and children’s health also contribute to population control.” He concludes, in line with what is also known from empirical literature: “human development goes hand in hand with lower population growth” (pp. 98-99). What he doesn’t mention is that states like Kerala have for decades been run by parties from the Left.

His ‘Framework for Urban Planning in Modern India’ also recognizes the importance of planning but calls for “radical, immediate reform in the planning and management of our cities” that “must adequately address the shortage of low-cost housing” (pp. 104-105).

Moving to corporate governance, he extols the virtues of good corporate governance to enhance corporate performance while ensuring that corporations conform with the interests of investors and society by “creating fairness, transparency and accountability in business activities among employees, management and the board” (p. 174). “The abuse of corporate power results from incentives within firms that encourage a culture of corruption. … Clearly, good governance requires a mindset within the corporation which integrates the corporate code of ethics into the day-to-day activities of its managers and workers” (p. 181). “Corporate leaders have to create a climate of opinion that values respectability in addition to wealth” (p. 184).

So what is this ‘compassionate capitalism’ that Narayana Murthy longs for?  According to him it is about “bringing the power of capitalism to the benefit of large masses. It is about combining the power of mind and heart, the good of capitalism and socialism … The benefits of growth have to be distributed widely” (p. 215). While this does not exist anywhere, Narayana Murthy does pay some respect to what he calls the ‘Swedish model.’

He returns to the theme of the lack of credibility of capitalism today: “Greedy behaviour from corporate leaders has strengthened public conviction that free markets are tools for the rich to get richer at the expense of the welfare of the general public” (p. 216). Lest capitalism is rejected as the most accepted model for growth in developing countries and by the alienated poor, the business leaders have to regain the trust of society and abide the value system of the community where they operate. Touching on a debate that rages both in America and Europe, Narayana Murthy weighs in on executive compensation: “Business leaders should shun excessive managerial compensation. Managerial remuneration should be based on three principles—fairness with respect to the compensation of other employees; transparency with respect to shareholders and employees; and accountability with respect to linking compensation with corporate performance … We have to create a climate of opinion which says respect is more important than wealth” (pp. 216-217). Indeed.

At the end, this rather visionary and socially aware business leader sees globalization in an almost exclusively favourable light, concluding that “we need a flat world because is spreads the American beliefs in free trade to the rest of the world; it benefits consumers from all over the globe; it helps create a world with better opportunities for everyone; and, finally, it brings global trade into focus, shunning terrorism and creating a more peaceful world” (p. 256). The self-confessed admirer of the United States would be bitterly disappointed with the level of political discourse here today.

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Thursday, March 14, 2013


The sun was setting over the Himalayan range across the valley. From this distance the snowcapped mountains appeared peaceful, but the reality up there would be different, I mentioned to my friends Roland and Madeleine sitting next to me enjoying their drinks and some succulent momos on the terrace. These were the highest mountains in the world, with several peaks reaching up to more than 7,000 meters above sea level. Many climbers had perished in the violent blizzards, sudden storms and avalanches during their attempts to the summit. Mount Everest (8,848 m) shone bright between peaks that appeared much larger than this highest of them all in the distance. Here in Nagarkot, away from the noise and pollution of Kathmandu valley, there was true peacefulness. It was wonderful to sit down and relax with good old friends who recently relocated to Kathmandu from Cairo.
I had spent the week in Kathmandu attending the Evaluation Conclave organized by the South Asian Community of Evaluators, a gathering of more than 300 evaluation professionals. When the Conclave ended at lunchtime (with no white smoke), I checked out of my hotel and hooked up with my friends to drive out of town. We drove through the chaotic city traffic across the ring road, past Bhaktapur where finally urban sprawl gave way to open fields. It was very dusty, although it had rained just a week before. In the beginning of March, there were no crops in the fields. Here people would grow rice in the summer on their terraced fields. In the winter, another crop of wheat, rapeseed, millet would be harvested.

Soon the road started climbing up the hillside. The traffic was not heavy on the winding road but there was a constant flow of vehicles: cars, small SUVs and trucks, buses, minivans carrying tourists and, most of all, motorbikes. We all shared the road with pedestrians, dogs, goats, the occasional cow. Traffic is hazardous on Nepal’s mountain roads, but here we were progressing safely in the VW Tiguan steered by Roland.

As we reached higher ground, we saw many small bars and restaurants perched perilously above steep slopes with gorgeous views giving out to the valley. Resisting the temptation, we pushed onwards. There were also several military camps along the road. Nepal is still emerging from a prolonged Maoist insurgency and lawlessness that rendered much of the countryside uninhabitable, contributing to the uncontrolled growth of the capital city region.

Nagarkot, just 40 km outside of the city, has developed into a major tourist destination thanks to its proximity to the capital and natural beauty. The town of Nagarkot is not much more than a messy conglomeration of houses in a crossing where two roads diverge, but it is bustling with activity. On all sides, there are smaller and larger establishments under the general rubric of ’resort,’ with names like Paradise Inn, CafĂ© du Mont, and The Hotel at the End of the Universe. We continued past the town and the sprawl of resorts ended. We drove until we came to another fork in the road where a soldier advised us to take the path to the left. The road became increasingly rough with potholes on the unpaved surface. At the end of the road we reached Bhangeri Durbar Resort. A reservation had been made by Amogh, a friend of my New York –based Nepali friend Anish. Bhangeri Durbar turned out to be a lovely choice. A new hotel, opened only at the end of 2011, it was made with good taste and occupied a pristine location with a view to the Himalayan mountain range. The altimeter in Roland’s wristwatch clocked over 1,800 meters above sea level.

Although we were the first to arrive in late afternoon, we would not be the only guests. Two other groups arrived after us. The first consisted of a class of MBA students from Kathmandu who were at a retreat. The students—boys and girls in almost equal numbers—looked terribly young as they frolicked in the garden. The second group consisted of ten Chinese tourists who would stay for one night, admire the Himalayan sunset, eat a specially prepared Chinese meal, and depart for their next destination early in the morning. Chinese tourists are an increasing presence in Nepal (as well as elsewhere in Asia). The assistant manager of Bhangeri Durbar told us that 70-80% of their guests are from China. The Chinese tour modality is like that of the first mass tourists in the West in the 1960s. They travel by bus and cover the entire country in one week zooming from one location to the next.

By the time we arrived for dinner after a rest, both of our fellow traveler groups had already finished eating, so we had the restaurant—and the assistant manager’s attention—all to ourselves. The meal was delicious consisting of chicken curry and fish curry (made from frozen fish, as Nepal is far from sources of fresh fish), spinach and other vegetables and, of course, rice and daal. The vegetables were grown in the hotel’s own fields just below. We asked for raksi, the local alcohol distilled from rice or millet, which the staff went to procure from a nearby farmhouse. He soon returned with a plastic water bottle filled with slightly cloudy liquid, which we sampled for the benefit of our digestion.

Gurung, the assistant manager, was running the restaurant in a highly professional manner, spoke excellent English and was generally very sophisticated. Our discussion revealed that he was originally from this area—Gurung, his name, also implies an ethnic group, as is the case with many Nepali names—but had left for boarding school in Kathmandu in his early teens. He had completed hotel and restaurant school in 2009 and had only recently returned to his home area for the first time in many years.

Darkness fell rapidly and the moon that rose over the mountains was two-thirds full, bright orange and huge. It’s so much closer here, observed Madeleine.

Sleep came easy in the fresh air and absolute silence despite the moonlight. Wake-up was before 6 am when it was still coal dark. This was to get ready to observe the sunrise over the mountains half an hour later. The sky was slowly getting lighter and colored in pink and turquoise hues. Soon the sun appeared behind the range as a small red fire ball. What followed, however, was disappointing. The mountains and the valley were covered in a thick cloud and it would be hours before the snowy peaks appeared behind the haze. We had no choice but to lodge a complaint with Gurung about this over breakfast.

For me this was just a mini-holiday, as I’d have to leave this afternoon for India. However, we still had time for some sightseeing and decided to head up to the highest point in the area, the Nagarkot Tower. I had expected to see hikers there, but was surprised at the scene. Just below the peak, there was a fair field with a large grouping of shops selling snacks and souvenirs. The largest share of merchandise, however, clearly was alcohol of different varieties: there were large bottles of beer, rows of Khukri rum, piles of Ruslan vodka and Himalayan whisky. This was clearly a popular party place.
We climbed up the steps leading to the top (now over 2,000 meters high, according to Roland’s watch) – and found the party! Although it was still early—well before noon—a large crowd had already gathered at the top and more were coming. A makeshift sound system with two large speakers was blasting music, Gangnam Style, and a group of young girls were dancing in a circle. A couple of kids were playing badminton next to them. Families had settled down for a picnic, no doubt consuming some of the beverages from downhill. Young couples were photographing each other with the now visible snow peaks as a backdrop. The day was gorgeous, the sun warming up the cold mountain air. Almost all of the people on the mountain were Nepali. What a great way to spend a Saturday, I thought.

With some time still on our hands, we decided to explore the area a bit more. Nagarkot was clearly booming and new resorts were coming up in every scenic spot. The valleys below were covered with agricultural terraces. Large hawks soared high above them. I couldn’t but help to reflect on the transformation of the landscape caused by this rapid development. Although this cannot be classified as mass tourism, the individual hotels, resorts and restaurants add up to large-scale development, with the inflow of thousands of people every weekend. Then again, tourism is bound to bring in lots of money to the area and generate significant amounts of income for the local people who then do not need to add to the fray in Kathmandu. This development had allowed our friend Gurung to return to his home area. Perhaps, development is inevitable so close to the teeming capital city. So far the style of development has been as benign as could be expected.
As we headed down towards the city, most of the traffic was to the opposite direction. I would not have minded turning around and joining the revelers for another evening of merry-making.

Tuesday, March 5, 2013

Some Small Countries Do It Better: Rapid Growth and Its Causes in Singapore, Finland, and IrelandSome Small Countries Do It Better: Rapid Growth and Its Causes in Singapore, Finland, and Ireland by Shahid Yusuf
My rating: 5 of 5 stars

This excellent small book of just 169 pages provides a systematic analysis of evidence pertaining to a particular development path that a group of three small countries—Singapore, Finland and Ireland—followed.  I read the book with special curiosity, not only due to a general interest in economic and social development, but because I was born and grew up in one of the countries, Finland, and wanted to know whether I would recognize my home country from their analysis. I can now confirm that I mostly did.

Collectively termed Sifire, they experienced strong growth and transformed their economies from middle-income countries to some of the richest in the world in the period since the mid-1980s. The authors’ premise is that: “The path followed by these three countries offers a different perspective on growth. Their approach may be of greater relevance than the well-worn East Asian model in the highly competitive global environment of the early 21st century because it does not necessarily assume heroic levels of investment” (p. 3). Moreover, they suggest that “it may be better tailored to the opportunities available to a heterogeneous group of middle- and lower-middle-income economies …, as well as to late-starting, low-income countries that, because of their youthful, rapidly increasing populations, need to grow at high single-digit rates to create enough jobs and to double per capita income in 10 years” (p. 3).

The authors provide a number of reasons for their focus on these particular three countries. Firstly, they acknowledge that “between 1985 and 2005, the three Sifire countries demonstrated a remarkable capacity to learn and, by improving the quality of learning, to achieve technological catch-up, develop manufacturing capabilities of the first rank, and increase their ability to innovate.” Demographically they are of comparable size. Ireland, the smallest, had a population of 4.4 million in 2008, as compared with 5.3 million for Finland, the largest of the three countries. In 1985, Sifire were all middle-income countries, with per capita GDPs ranging from US$6,000 to US$11,000. By 2008, they were among the countries with the highest incomes as a result of steady rates of growth. Singapore’s economy grew the fastest (5.0-6.4% p.a.) on average, followed by Ireland’s, with Finland’s economy in third place (2.9-4.6% p.a.). The authors assert that the Sifire growth was closely linked to “competitiveness, derived in large part from institutional factors and the quality of the countries’ human resources.” (pp. 21-22)

The authors are both economists with no discernible bias for anything but rather classical economics. Shahid Yusuf has a history in the World Bank and is now Chief Economist of Growth Dialogue at the George Washington University School of Business in Washington, DC. Kaoru Nabeshima is Director of Technological Innovation and Economic Growth Studies Group in the Institute of Developing Economies of Japan External Trade Organization (IDE-JETRO). Chapter 1 of the book – Looking for Growth – reviews the conventional wisdom on economic growth before turning more specifically – and more interestingly – to the Sifire group. In this context, they acknowledge the key role governments played in promoting the development strategies in each of these three countries. They recognize how the three countries devised consultative arrangements involving key segments of the business community, labour unions or other influential representatives able to communicate the concerns of workers and exercise a degree of discipline over their constituencies, the financial community, and the education sector (or, more broadly, the learning economy, which includes preschooling and vocational training). This has enabled the governments to “achieve a workable consensus on economic objectives and strategies, and to agree on emergency remedial policies when the nation faces crisis” (p. 16).

Turning specifically to Finland, the authors say it “demonstrates the workings of an advanced democratic system that has perfected the political and labour market institutions for consensus building around key economic objectives and the capacity to arrive at significant macroeconomic results by coordinating the initiatives of a number of small urban centres” (pp. 23-24). When I grew up in the country, ‘consensus’ was the key word. The frequently tough negotiations between the labour unions and central employers’ and industry organizations were a perennial feature. Despite some hard rhetoric, they all eventually ended up in both sides making concessions for the common good. The government played a key role in facilitating these. One feature of the multiparty democracy in Finland is the emphasis on the qualifier ‘multi.’ There have long been many parties active on the national political scene and none of the 3-4 big ones ever reached anything even remotely resembling an absolute majority (in the latest parliamentary elections, the conservatives were the largest party with 20.4% of the vote, while the second, the social democrats, got 19.1%). This forced the country always to have coalition governments, which together with a general consensus regarding the overall development goals guaranteed that there’d never been major disruptions or changes in the chartered course.

In Chapter 2 – How Sifire Compressed Development – the authors move into analysing the context of the Sifire experience. The Sifire developed against a backdrop of globalization (in the case of Finland and Ireland, the integration with EU provided an important context) and this road was not always smooth. In fact, all of the countries faced crises during the late 20th century. In the authors’ analysis, the advantages of a consensus-based development path became apparent during the crises that helped “crystallize options and prod decision makers to choose among alternatives by systematically gathering and evaluating data and by canvassing the views of market participants.” Further, the crises “highlighted the desirability of mechanisms to reduce investment risks for domestic and foreign investors and thereby raise the level of investment through better coordination of the decisions of key players, of public investments, and of policy incentives. (p. 40)

A major crisis for Finland was the collapse of the Soviet Union, which had been a major market for Finnish products over the past several decades. Entire industries had developed around supplying the seemingly endless and hardly discerning eastern market. Fortunes were made by the so called ‘Red Barons’ who manufactured and sold to the communist market, getting paid in hard currency through the government of Finland that in turn imported oil and other goods at advantageous prices (incidentally, this steady supply of energy from the Soviet Union shielded Finland from the worst impacts of the OPEC-induced energy crises in the 1970s). My uncle was in the garment industry, but never bet his fortunes on the Soviet trade. I remember him telling me in the 1980s how his peers on what was then a garment focused street in Helsinki were mocking him: “Uitto goes to Paris for fashion shows; what a waste of time! We manufacture one-size-fits-all boots and frocks in a single model and colour and the Russkies buy as many as we have time to produce!” Well, the Russian market was suddenly gone overnight and so were all of those who had relied on it. Finnish unemployment shot from negligible to over 20%. This forced a rapid restructuring of the economy.

The authors identify a third success element, which is the “governments’ capability to implement decisions, to follow through with promises, and to ensure that incentives were actually delivered with the minimum of transaction costs. Crises in these small economies underlined the advantages of public organizations with a limited number of clear objectives, a readiness to engage with key stakeholders, streamlined structures with few layers, and strict accountability” (p. 41). The long-term strategy for growth was further centred on technology as a driver, which required building capabilities in the countries (p. 44). They conclude the second chapter by stating that: “Globalization and the pace of technological change served as the enabling conditions for these countries – as they did for others as well – but Sifire’s widening lead over other countries emerged from the forging of domestic consensus in support of long-term-development strategies that were keyed to the quality of human capital, intangible factors, and an open, productively networked system of innovation and learning. The focus on human capital committed these countries to building their education and training assets. The importance attached to intangibles and the soft infrastructure undergirding development meant that institutions were given due attention” (p. 48).

The chapters that follow focus more in detail on these specific success factors. Chapter 3 considers the Elements of a Learning Economy, providing a host of statistics on the major shift in the structure of exports from primary commodities to high-tech products in Sifire. The chapter also provides an overview of the education sector, on the premise that this economic transformation was only made possible by the investment in human capital (p. 65). It focuses on the comprehensiveness and quality of education, as well as research in science, technology, engineering and mathematics. Apart from the broad-based quality education, innovation was spurred by an open economy and the focus on IT and telecommunications industries. The authors conclude that all three countries leveraged “technological advances in key subsectors with the rise of advances in electronics and telecommunications, thereby opening new industrial pathways. Globalization in general – and for Finland and Ireland, integration with the EU – widened market opportunities that were essential for their industrial development. Without access to large external markets, these small countries would not have been able to grow as rapidly and consistently as they have done” (p. 96).

The transition was enabled by an education strategy that responded to the economy’s needs. Sifire focused on providing “universal primary education and expanded secondary and tertiary education as demand for higher skills began rising. High levels of enrolment in the science and engineering fields enabled the Sifire countries to accelerate industrialization and assisted in progressive upgrading of new and traditional industries” (p. 97).

Chapter 4 – Governance and Growth – starts off with recapping some theories of endogenous growth and institutions. Yusuf and Nabeshima then return to the issue of “leadership that forged a consensus on economic objectives and the means for achieving them” (p. 103). They continue that: “A leadership committed to a firm economic agenda that enjoyed broad support could strengthen the economic governance institutions and deepen the organizational capabilities to enforce rules, uphold the law, and frame as well as implement policies” (p. 104).

A large part of this chapter focuses on coordinators that helped the countries en route to a knowledge-intensive economy. In the case of Finland, the system involved a host of actors from the public and private sectors. The government’s Science and Technology Policy Council set policy that individual ministries implemented. Financing for both the private companies and academic institutions was channelled through the Academy of Finland, Tekes (a unit under the Ministry of Trade and Industry) and the Finnish Innovation Fund, Sitra, directly under the parliament. Universities, research institutes, business R&D, industry and academic societies were all harnessed to the task (pp. 105-107). Some of the more hard-core free-marketers in the USA today might condemn such public-private partnerships as unfair competition, but this has been the practice in virtually all successful countries.

The authors also underscore the importance of urban networks, which facilitated the creation of social capital. Admittedly, Sifire benefited from a small number of dominant cities (in Singapore’s case just one) where the people and activities are centred.

The next chapter deals with Delivering Quality Education, the million dollar question that has eluded educators and policy-makers in many countries, not least in the United States. Yusuf and Nabeshima boil the Sifire success to six factors, which they elaborate on and which I quote in an abbreviated form here: (1) Raising and sustaining student performance at high levels are inseparable from non-school factors, such as family circumstances, the value a society attached to education, and the conviction that excellence is necessary for progress toward a better, innovative and more prosperous society. (2) Quality needs to be pervasive, extending from the primary all the way to vocational and tertiary levels. (3) Student performance and the pursuit of excellence must continually be reinforced by family and social environments. (4) Teacher qualifications. (5) Pay and prestige. (6) Teacher autonomy in fine-tuning the curriculum and pedagogical techniques and in evaluating students (pp. 119-123). Several of these factors fly in the face of what educators elsewhere are trying. In the US, the focus is distinctly on the stick rather than the carrot. Standardized testing is seen as a solution and schools that fall below the averages risk having their funds withdrawn. Parents blame teachers for failing their kids, without taking responsibility themselves.

Allowing teachers the freedom to design their own curricula for learning, rather than answering tests, obviously hinges upon having quality teachers. In America, teaching is not a respected profession and the pay is poor. Consequently, statistics show that those graduating from teachers’ colleges have lower than average academic grades. In Finland, all teachers are required to have master’s degrees and the competition to enter teacher training in the University of Helsinki is harder than getting into the medical school. I for one credit my high school teachers in geography, history and languages for my lifelong interest in world affairs. A perverse conclusion of market thinking in America has devalued this most important of professions, which now is seen as not producing direct economic value and therefore doomed to low pay and prestige in the public sector.

The sixth and final chapter attempts to distil the Message from Sifire, condensing it under three main headings: (1) Pragmatic governance; (2) Leveraging global markets and general-purpose technologies; and (3) Quality of human capital. In this summary, I had the feeling that, despite their own evidence to the contrary, the authors seemed to downplay the importance of the public sector and the government. Perhaps this was not fully in line with the ideology of the economists or the World Bank that published the book.

They then draw implications for African countries, while identifying differences in the situations. Yusuf and Nabeshima acknowledge that all is not rosy for Sifire and, especially, Ireland and Finland have later again faced crises. However, they affirm that this “cannot diminish the remarkable economic progress by the three countries against considerable odds. Nor does the postcrisis slowdown detract from the relevance of their experience for ambitious low- and middle-income countries” (p. 132). They conclude: “Whether countries hew to a Sifire-type strategy or choose a different approach, the outcome will be crucially linked to design, planning, institutional architecture, and implementation. The efficacy of these elements will be affected by governance mechanisms” (p. 144). I would argue that the relevance goes beyond the middle- and low-income countries that are explicitly targeted. In fact, many of the lessons are directly relevant to the debates currently raging in the United States.

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