Wednesday, January 25, 2017

American Incompetence May be Good for the World

I’ve decided that I am going to attempt to be nice about the new US President for a change. No, I haven’t become a rabid dog of the Republican Party’s worst aspects but I think its high time that I sit back and try and say something nice about a public figure I can’t stand.

Mr. Trump has shown that he has a talent for bringing out the worst in people. He campaigned on platform of racism, homophobia, sexism and hypocrisy. While he indulged in calling every one of his opponents “corrupt,” he himself was indulging in practices that would make his opponents looks saintly (think about it, the Clinton Foundation isn’t perfect but at least some of the money goes to causes – the Trump Foundation raises money for the good cause of buying more portraits of Mr. Trump to be placed in properties owned by Mr. Trump.) Once in office, Mr. Trump has not disappointed those who despise him and those who loved him.

 In a Presidency, less than a week old, he’s already picked fights with the media over the size of the crowds at his inauguration, made moves to criminalise abortion and to increase trade protectionism by withdrawing from the Trans-Pacific Partnership or TPP.

Coming from a small trading nation in the Asia-Pacific region, Mr. Trump’s speed in killing the TPP has been viewed a major worry. We, the small Asia-Pacific nations are terrified at the implications. We grew our economies on American investment. Our prosperity for the most part depends on the willingness of the American consumer to buy the goods made in our part of the world. Suddenly, Mr. Trump has thrown a spanner in the works. What do we do?

While the prospect of a more protectionist America may seem gloomy, the rest of the world actually has an important opportunity to do something very important – develop independence. In just about every way, America has been the “vital” nation that underpinned everybody’s social and economic well-being. America was not only the crucial market for many companies, it was also the “policeman” of the world, ensuring that neighborhoods stayed safe. US troops have kept the ASEAN region stable and Singapore, my home remains a safe and prosperous haven for the world to do business and prosper because of it.

So, without America or American involvement in world affairs, what can the rest of us do? I believe the answer would probably be to increase trade and cooperation with other people. The Chinese for one have relished Mr. Trump’s rants about protecting America from the forces of globalization. While Mr. Trump ranted on about the size of the crowds at his inauguration, China’s President Xi Jinping was making the right noises about avoiding a trade war (nobody wins) and how globalization for all its faults has in actual fact been a force of good to the world’s most prominent investors at Davos. The comparison could not be more stark. Mr. Trump looked like a petulant child begging to the smacked while President Xi looked like a statesman.

There’s no doubt that China is a “must-be” in market for businesses around the world. It’s not just the number of consumers in China but their spending power is increasing. One only needs to look at where luxury items are being sold these days to understand the power of the Chinese consumer.

However, as many of us in the small Asian nations can testify to, the increasingly powerful China plays by its own rules. The International Tribunal for the Law of the Seas ruled against China and in favor of the Philippines. The Filipino’s found that their victory was hollow – nobody was going to enforce it on China. More recently, Singapore learnt the same lesson – we sent military vehicles from Taiwan via Hong Kong and hey presto, the said vehicles got held up in Hong Kong customs.  The Chinese hadn’t forgotten how our Prime Minister decided to crack jokes about the pollution in Beijing to an American audience. We trumpeted our “legal” rights over the terrex vehicles and the Chinese gave us the middle finger.

The realities of big power politics will become starker. The Americans like the British before them made a pretense of playing by some sort of rules. The Chinese have shown that the only laws that matter are the jungle variety. Think of what happens in the jungle when the elephants decide they’re going to throw their weight around – there’s not much anyone else can do.

The world will need to accept China’s rise and adapt to it. The most sensible way would be to trade heavily with China and to offer the Chinese the things they don’t have (clean air would be a good start), but to look for and build up alternative markets.

In Asia, the most sensible alternative would be to build up India. The Bloomberg Columnist, Andy Mukherjee argues that Japan should use its technology and wealth to invest in India – something that seems to be possible given the close ties between Narendra Modi and Shinzo Abe.

However, as many business people can attest to, dealing in the India market makes dealing with the Chinese look like a walk in the park.

Still, this is something that needs to be done. The admittedly few parts of India that work, work exceedingly well and what sensible business person does not want to be in two-billion consumer markets.

Asians, Africans and even Europeans need to understand that dependence on one particular market is no longer enough. China and India are two exciting possibilities but there are others. Eastern Europe and Latin America come to mind as do places like the Middle East.
Aside from trade, America has also been the source or the inspiration of ideas and innovation. First it was manufacturing, then it was in IT. America comes up with the revolutionary ideas and the rest of the world eventually gets a share of the pie by trying to do it cheaper. This has especially been true in Asia where we’ve prospered by taking American ideas and doing them cheaper – Chinese manufacturing and Indian IT come to mind.

With Mr. Trump actively making America more isolationist, the world can no longer depend on America as the hot bed of revolutionary ideas. Innovation must come from within the various countries of the world. It’s time to build up our people at home and at world class levels.

I remember explaining the Singapore Scholarship system to an Englishman. He said that he was surprised that we sent our best to the West instead of building up our own institutions to challenge the West. Well, I guess it was easier and quicker to send someone to Cambridge in those days than to build Cambridge or Harvard, but now thanks to Mr. Trump, we need to build our Cambridge’s here.

There are some encouraging signs. Pollution in China is pushing China to do more to move away from heavy manufacturing. In fact, China’s wealth is increasingly being built Silicon Valley style – While the State Own Companies have the size, its companies like Xiaome and Alibaba that excite the world. Chinese innovations like WeChat may have yet to reach beyond the China but as the Economist pointed out, they are beating the likes to Uber and WhatApp in the products and services that they offer.

The smaller Indian Companies are also recognizing that doing things cheaper than the West will not be enough to ensure their survivability. I remember 3i-Infotech and Polaris stressed that they were “product” companies (so much so that Polaris’s service business got sold off to Virtusa and the products remain under a Company called Intellect Design Arena). Raymond, who was my main supporter at Polaris explained it this way – “Services means we think like an IT guy helping make the certain functions for the banks cheaper – Products means we think like bankers and use IT to improve banking.”

The signs of hope are there but Asians, Africans, Arabs and so on, need to effectively grow up and fly the nest provided for by the All Powerful American parent. Mr. Trump has made it clear, he’s not interested in supporting the world. It’s time that the world took the bold step and tried to support itself.

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