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Asian Godfathers
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328 pages, Paperback
First published October 10, 2007
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November 25, 2012
Interesting. Lots of information. Read it with an open mind and reflect. There are big implications here for both China and the USA.
East Asia (Japan, Korea, Taiwan) have developed domestic companies that invent technology and compete globally. East Asian's have first world standards of living. South East Asia (Malaysia, Indonesia, Philippines, Thailand) rented labor to global businesses, but have never built their own globally competitive businesses. Hong Kong and Singapore are the Switzerland of Asia, providing offshore financial services to the rest of the region.
The "Godfathers" of South-East Asia like to portray themselves as Horatio Alger, but they were either born into or married into wealth, and parlayed it into far larger sums. With the exception of cronies of the most corrupt (Marcos, Suharto, the UMNO) none of the "Godfathers" were self made in a single generation. They are an economic aristocracy of outsiders that works hand in glove with local political élites. Culturally, the godfathers are chameleons who tend to be well-educated, cosmopolitan, polylingual and thoroughly insulated from the humdrum cares of their supposed kinsmen.
The tycoons are just highly effective traders in rent-offering environments. The economic effect of this has been to make domestic goods and services – whether an apartment in Hong Kong or flour in Malaysia – more expensive than they would otherwise be and to limit the growth of globally competitive companies.
The key to obtaining godfather status is "core cash flow". Each of the godfathers was able to use early money to purchase a concession concession. Most of the concessions available are gambling related (casions, lotteries) but if you look carefully, there are concessions available everywhere. There is only one company authorised to bring sand to Hong Kong for construction. There is only one company authorised by the FDA in the USA to de-cocanize coca leaves, one company authorised to sell Duty Free at many American airports. Once core cash flow is obtained, godfathers can afford to take big risk, to make a lot of mistakes, and to ride losses long enough to turn into wins. Real Estate and associated development projects are the risk of choice. Historically, the economies of South-East Asia have been dominated by the godfathers and their concessions, where these are a relatively small part of typical advanced economies.
Vertical integration is also attractive because it gives tycoons considerable discretion over how much income shows up in profit and loss accounts at a particular stage of a business. Freight charges, for instance, might be increased to divert earnings into shipping, which is an offshore, tax-free activity. In Hong Kong, the families behind the publicly listed real estate companies that operate in an effective cartel all own private construction firms. This, in theory, provides an excellent mechanism to drain profit from the listed developers. The construction firms, being private, do not have to publish accounts under Hong Kong law.
An operating environment in which guanxi, political favour and licences are relatively more important than the inherent efficiency and global competitiveness of a business make this inevitable. Godfathers, and their immediate support staff, spend inordinate amounts of time making sure photographs of the tycoons with ascendant politicians are on display in their offices (and that images of out-of-favour politicians are taken down), organising golf games, putting tycoon homes, yachts and hotels at the disposal of persons who need to be ingratiated, resolving the problems of politicians’ wayward children and sending gifts around the world.
On a typical day in the life of Li Ka-shing, Asia’s richest tycoon, Li will be up before 6 a.m. and off down the hill from his home on Deep Water Bay Road, on the south side of Hong Kong island, to the nine-hole golf course next to the bay in time for a tee-off before 7 a.m. He speaks English, but prefers to read Chinese, so relevant parts of the English language papers are translated before his [office] arrival. Li also pays close attention to what brokerage reports say about his companies. The phone system alerts them that it is the Big Boss calling. At 11.30 a.m. Li is ready for a massage. Thereafter, there is time for further administrative tasks before a 1p.m. lunch, inevitably of the working variety.At 5 p.m. he will likely take another massage and then, perhaps, a game of cards with business associates at 6.30 p.m. Finally, a business dinner before he retires at 10 p.m. and the cycle begins again. But the task of actually running their businesses, and putting deals cut over golf or lunch into practice, falls to managers.
There is an extended discussion on the Import Substitution Industrialisation ISI the trend in development after WWII. ISII tariff protection gave rise to manufacturing joint ventures with Nissan, Toyota, Mitsubishi, Hino, Daihatsu, Isuzu and Honda, but no genuine domestic production. The norm was for a product’s importer to become its local assembler in an arrangement with the foreign supplier. Import substitution produced large companies, but it did not achieve the objective of making local businesses originate internationally competitive manufactures.
From the 1970's, South-East Asia abandoned ISI in favor of Export Oriented Industrialisation EOI. Exports grew to a point where they actually exceeded gross domestic product. South-east Asian EOI was very much driven by assembly operations using imported components. EOI brought growth and jobs, but it was not a mirror image of the north-east Asian experience. In Japan, South Korea and Taiwan, exports were developed by indigenous companies while governments blocked foreign investment. The sustainability of the model came from firms’ rising ability to manage research and development of new products, and slowly build international brands.
There is also a repeated discussion about the economic purpose of Singapore and Hong Kong:
He also includes the leaked email that caused Morgan Stanley’s chief economist in Asia, Andy Xie, to resign:
East Asia (Japan, Korea, Taiwan) have developed domestic companies that invent technology and compete globally. East Asian's have first world standards of living. South East Asia (Malaysia, Indonesia, Philippines, Thailand) rented labor to global businesses, but have never built their own globally competitive businesses. Hong Kong and Singapore are the Switzerland of Asia, providing offshore financial services to the rest of the region.
The "Godfathers" of South-East Asia like to portray themselves as Horatio Alger, but they were either born into or married into wealth, and parlayed it into far larger sums. With the exception of cronies of the most corrupt (Marcos, Suharto, the UMNO) none of the "Godfathers" were self made in a single generation. They are an economic aristocracy of outsiders that works hand in glove with local political élites. Culturally, the godfathers are chameleons who tend to be well-educated, cosmopolitan, polylingual and thoroughly insulated from the humdrum cares of their supposed kinsmen.
The tycoons are just highly effective traders in rent-offering environments. The economic effect of this has been to make domestic goods and services – whether an apartment in Hong Kong or flour in Malaysia – more expensive than they would otherwise be and to limit the growth of globally competitive companies.
This has led to what one of the earliest critics of the godfather economies, the Japanese scholar Yoshihara Kunio, termed ‘technologyless industrialisation’. South-east Asia has all the trappings of a modern economy – high-tech factories, stunning high-rise buildings, contemporary transportation systems and utility providers – but no indigenous, large-scale companies producing world-class products and services. As a result, there are no global brands. Real competitiveness is limited to relatively small-scale businesses because tycoons have plucked all the fat economic fruits for themselves.
The key to obtaining godfather status is "core cash flow". Each of the godfathers was able to use early money to purchase a concession concession. Most of the concessions available are gambling related (casions, lotteries) but if you look carefully, there are concessions available everywhere. There is only one company authorised to bring sand to Hong Kong for construction. There is only one company authorised by the FDA in the USA to de-cocanize coca leaves, one company authorised to sell Duty Free at many American airports. Once core cash flow is obtained, godfathers can afford to take big risk, to make a lot of mistakes, and to ride losses long enough to turn into wins. Real Estate and associated development projects are the risk of choice. Historically, the economies of South-East Asia have been dominated by the godfathers and their concessions, where these are a relatively small part of typical advanced economies.
Vertical integration is also attractive because it gives tycoons considerable discretion over how much income shows up in profit and loss accounts at a particular stage of a business. Freight charges, for instance, might be increased to divert earnings into shipping, which is an offshore, tax-free activity. In Hong Kong, the families behind the publicly listed real estate companies that operate in an effective cartel all own private construction firms. This, in theory, provides an excellent mechanism to drain profit from the listed developers. The construction firms, being private, do not have to publish accounts under Hong Kong law.
An operating environment in which guanxi, political favour and licences are relatively more important than the inherent efficiency and global competitiveness of a business make this inevitable. Godfathers, and their immediate support staff, spend inordinate amounts of time making sure photographs of the tycoons with ascendant politicians are on display in their offices (and that images of out-of-favour politicians are taken down), organising golf games, putting tycoon homes, yachts and hotels at the disposal of persons who need to be ingratiated, resolving the problems of politicians’ wayward children and sending gifts around the world.
On a typical day in the life of Li Ka-shing, Asia’s richest tycoon, Li will be up before 6 a.m. and off down the hill from his home on Deep Water Bay Road, on the south side of Hong Kong island, to the nine-hole golf course next to the bay in time for a tee-off before 7 a.m. He speaks English, but prefers to read Chinese, so relevant parts of the English language papers are translated before his [office] arrival. Li also pays close attention to what brokerage reports say about his companies. The phone system alerts them that it is the Big Boss calling. At 11.30 a.m. Li is ready for a massage. Thereafter, there is time for further administrative tasks before a 1p.m. lunch, inevitably of the working variety.At 5 p.m. he will likely take another massage and then, perhaps, a game of cards with business associates at 6.30 p.m. Finally, a business dinner before he retires at 10 p.m. and the cycle begins again. But the task of actually running their businesses, and putting deals cut over golf or lunch into practice, falls to managers.
There is an extended discussion on the Import Substitution Industrialisation ISI the trend in development after WWII. ISII tariff protection gave rise to manufacturing joint ventures with Nissan, Toyota, Mitsubishi, Hino, Daihatsu, Isuzu and Honda, but no genuine domestic production. The norm was for a product’s importer to become its local assembler in an arrangement with the foreign supplier. Import substitution produced large companies, but it did not achieve the objective of making local businesses originate internationally competitive manufactures.
From the 1970's, South-East Asia abandoned ISI in favor of Export Oriented Industrialisation EOI. Exports grew to a point where they actually exceeded gross domestic product. South-east Asian EOI was very much driven by assembly operations using imported components. EOI brought growth and jobs, but it was not a mirror image of the north-east Asian experience. In Japan, South Korea and Taiwan, exports were developed by indigenous companies while governments blocked foreign investment. The sustainability of the model came from firms’ rising ability to manage research and development of new products, and slowly build international brands.
There is also a repeated discussion about the economic purpose of Singapore and Hong Kong:
The possibilities for tax evasion and transfer pricing between different south-east Asian jurisdictions have also produced vast funds in need of off-shore havens. Hong Kong and Singapore’s banking secrecy, their willingness to bank the accounts of exotic shell companies with nominee directors, and Hong Kong’s exemption of private companies from the need to produce public accounts, have offered the perfect, readily accessible refuge. As the European Union finally brought pressure to bear on Switzerland and other European private banking centres to block tax evasion and introduce withholding tax for some non-nationals, Singapore moved to fill a global – as well as its regional – niche. The city increased account secrecy provisions and changed trust laws in a manner designed to attract the kind of money Switzerland had dealt in; the number of foreign private banks in Singapore almost doubled between 2000 and 2006.
He also includes the leaked email that caused Morgan Stanley’s chief economist in Asia, Andy Xie, to resign:
People at the meeting, he said, ‘were competing with each other to praise Singapore as the success story of globalization … Actually, Singapore’s success came mostly from being the money laundering centre for corrupt Indonesian businessmen and government officials … To sustain its economy, Singapore is building casinos to attract corruption money from China.’
February 5, 2019
If you enjoyed "Crazy Rich Asians", and know a little of economics and finance, you have something of a moral responsibility to read this book. Through exhaustive research, Studwell shows how Asia's super-rich (including the family on which CRA's Youngs are directly based) made their wealth: extracting monopoly rents, rigging political systems, and along the way helping to impoverish their already-poor countries.
Seen through anything other than the narrow lens of representation (which, I'll admit, is important), Crazy Rich Asians becomes a moral travesty. It's a celebration of how Asia's Trumps and Kushners party on the backs of Southeast Asians languishing in poverty.
Seen through anything other than the narrow lens of representation (which, I'll admit, is important), Crazy Rich Asians becomes a moral travesty. It's a celebration of how Asia's Trumps and Kushners party on the backs of Southeast Asians languishing in poverty.
July 6, 2013
Plenty of reviews have already been written on Asian Godfathers, but it is the type of book you feel compelled to write your own on, if only to process some of the pertinent information and themes in contains, so thought-provoking are its revelations.
At the heart of the book is a complete indictment of the so called “South-East Asian Miracle”, which the author explains by comparing that region with the more successful North-East Asian countries. In North East Asia, Japan, Taiwan and South-Korea have made the successful transition from developing to developed, through focusing capital and investment (that came through their populations’ high savings rates) on creating indigenous, globally competitive manufacturing companies (Toyota, Hyundai, Samsung). In South-East Asia, by contrast, Malaysia, Indonesia, the Philippines and Thailand failed to do this. Instead, these nations outsourced their cheap labour to foreign businesses, thereby creating the illusion of development through rapid growth, but without the emergence of indigenous global competitive companies to fall back on. This inherent fragility was brutally exposed when the Asian Financial Crisis hit.
Studwell also includes Hong Kong and Singapore in his analysis. These city-states have gained the appearance of success via three avenues. Firstly, they have served South-East Asia and China as parasitic offshore asset protection hideaways. Secondly, their ports (being their one natural and geographical advantage) have provided a means for imports and exports to flow through the region (as well a platform through which goods could be smuggled in breach of UN embargo against China, post 1949). Thirdly, they have operated a successful arbitrage, by providing services a little bit more efficiently than their hinterland neighbours thereby attracting capital inflows.
The ultimate cause of South-East Asia’s non-miracle, Studwell sights as being a failure of politics which again can be contrasted with North-East Asia’s success. In North-East Asia, governments determined to push through land-reform, creating a broad and equitable distribution of start-up capital for everyone. The resulting savings from their populations were then channeled by governments into making the transition from agriculture to manufacturing through the development of world class competitive companies. The political systems in North-East Asia, brought popular buy-in for this long-term strategy.
In South-East Asia, by contrast, land remained concentrated on the wealthy few (i.e. landlords who reaped enormous wealth from tenants) who were then able to purchase monopoly rights from the political elites with whom they worked hand in hand. Through this mechanism, this wealthy elite were able to become even more wealthy by creating for themselves businesses protected from the discipline of foreign competition, but still able to generate massive wealth for their owners through the operation of domestic cartels. These cartels perpetuate today, by charging high prices to the domestic population (particularly for residential property), ensuring the populations high savings rates (40%) continue to be diverted into the cartel owners’ coffers, rather than to investment where it is needed.
The result of this dynamic has been the rise of a Tycoonocracy in South-East Asia – an incredibly wealthy set of billionaires (termed by Studwell as “Asian Godfathers”) - and a massive disparity of wealth in the region (the Gini coefficient for Hong Kong and Singapore is 0.5, double that of Japan).
The failure of politics in South-East Asia which gave rise to this, has been characterized by too tight a relationship between governments and the Asian Godfathers. At one extreme this has resulted in the blatant plundering of assets by governments able to get away with it, because they gave the Godfathers what the wanted (the Suhartos in Indonesia and Marcos in the Philippines which Studwell graphically describes as ‘kleptocracies’). At the other extreme we have seen the seemless merger between government and Godfather in the form the tycoon-politician (Thaksin Shinawatra in Thailand and Tung-Chee Hwa, Hong Kong’s first chief executive), or its institutionalization (for example, with the functional constituencies in the Hong Kong Legislative Council, there to represent business/Godfather interests).
As politics is the cause, so politics must be the cure, Studwell suggests, as only a change in politics can break the stranglehold between government and Godfather, and enable proper regulation of anti-competitive Godfather behaviour to allow others to get a look in. Once this happens, the dynamic of competition will serve to reduce prices for the indigenous population, increase their standard of living and finally lead to the emergence of globally competitive companies (for which the hard put-upon population deserve to work).
In this regard, Studwell can see the genie coming out the bottle in certain places. The politicization of the Hong Kong population, impatient with the slow progress of political change and fed up with Tycoon bad behaviour, has been one of the main stories of South-East Asia. He sights the 1st July 2003 rally in which an amazing 500,000 people (including the author of this review) took peacefully to the streets to stop failed-Tycoon and soon-to-be removed, governor/Chief Executive Tung Chee Hwa from bringing in an anti-sedition law, as symbolic of the emergence of a separate Hong Kong political identity. So too is the rise of minority shareholder activism in Hong Kong, as represented by the likes of David Webb, a crusader trying curb the gross anti-minority shareholder antics of the cartel controlling Tycoons. In Singapore as well, the opposition Worker’s Party has been giving the People’s Action Party one bloody nose after another (although Studwell does not expect true change until Lee Kwan Yew has passed from the scene).
The above then is the premise of Asian Godfathers. But where the real strength of the book lies is in the biographical anecdotes on the lives of the Tycoon’s themselves and in deconstructing how they operate to keep themselves rich and fleece hard-done by minority shareholders who invest in their businesses. This analysis is as much eye-opening as it is fascinating and alarming.
I recently went to a talk by Studwell at the Foreign Correspondents' Club in Hong Kong. One of the audience in the Q&A which followed, described “Asian Godfathers” as the best business book about South-East Asia ever written. Having read it for myself, I have to agree with this glowing testament.
August 8, 2008
Hard to believe Studwell hasn't been taken to court for defamation by the Lees (or any number of other candidates).
Some entertaining excerpts:
"HK and Singapore perform a simple economic trick: they arbitrage the relative economic inefficiency of their hinterlands."
"...T.J.S. George's observation that 'he detected in Lee the insecurity of a man alienated from his Chinese morrings, a man who, because he does not quite belong anywhere, has had to remake Singapore in his own image to compensate for his own alienation'."
"Asian godfathers are not the product of social mobility. The notion that they are, however, is part and parcel of the tycoons' self-image. It is important to their personal sense of pride and it is critical to the maintenance of authoritarian political structures and unfree markets in the region."
"The good thing about Confucianism is it makes Asian people willing to suffer pain... (HK tycoon Ronnie Chan in FinanceAsia magazine, 2002)"
Some entertaining excerpts:
"HK and Singapore perform a simple economic trick: they arbitrage the relative economic inefficiency of their hinterlands."
"...T.J.S. George's observation that 'he detected in Lee the insecurity of a man alienated from his Chinese morrings, a man who, because he does not quite belong anywhere, has had to remake Singapore in his own image to compensate for his own alienation'."
"Asian godfathers are not the product of social mobility. The notion that they are, however, is part and parcel of the tycoons' self-image. It is important to their personal sense of pride and it is critical to the maintenance of authoritarian political structures and unfree markets in the region."
"The good thing about Confucianism is it makes Asian people willing to suffer pain... (HK tycoon Ronnie Chan in FinanceAsia magazine, 2002)"
September 19, 2023
Even though the author's tone is very subjective and negative, the ending was lighter and positive. I learned from this book more about contemporary Southeast Asia and its modern history. However, some of the financial and economic terms were difficult to grasp. His conclusion hints at the possibility of development and progress in this region. Most of the exports coming out of Southeast Asia (and China) are from multi-national companies, meaning that these countries don't really profit from it, although a lot of hard (and cheap) labor is put into it. It'll be interesting to see what happens after these godfathers pass away, seeing that most of their children are incapable of leading an enterprise. Indeed, an interesting read that not only provides insight into the past, but maybe the future!
March 30, 2014
This is a relatively old book published in 2008. Many things had happened since then. However, it still gives a good historical account on some of the rich and famous tycoon in Asia. It is interesting to know how these individuals manipulated the system and back door dealings to their advantage. Through the years, I have actually admired many tycoons through printed media, interview etc. After reading this book, I realised that many are just smart marketing and PR work. I wish more would read this book and realized how the public has been short changed by the government and these individuals. Exactly what can we do? I am not too sure as these individuals has dug deep in the roots of our life's necessity. Electrical power, communications, transport etc. I recommend this book, as your view will change.
May 27, 2015
Superb sketch of South East Asian economies using the basis of "godfathers", or big tycoons. Viet Nam is not mentioned, for obvious reasons. This book opened my eyes to one of the economic realities of the region. Will be reading a lot more on certain places and people thanks to this experience.
Certain parts are overtly dry, but there is nothing to critique regarding this, as the level of detail justifies it.
Certain parts are overtly dry, but there is nothing to critique regarding this, as the level of detail justifies it.
November 2, 2020
It must have cost Joe Studwell a good deal of work to integrate his knowledge of Asian business and politics and produce this exceptional book.
He has a facility for gaining access to Asia's rather secretive Chinese billionaires since they are obviously not in the habit of sitting around and sharing their fine French wine with any regular gweilo. It may be because he actually quite likes them (and this comes across in the book) which helps but at the same time it doesn't make his job of a balanced analysis any easier.
Nevertheless he succeeds, with the book being built around his statement that, "It is the politicians job to defend societies interests." In some countries they do, such a Japan, South Korea, Taiwan and to a lesser extent China, and in some they don't such as the Philippines, Indonesia, Malaysia and Thailand with a general divide between NE Asia (successful) and SE Asia (unsuccessful).
He concludes that it is systems, not people that make a country rich, with efficient political and social institutions being the key to prosperity rather than the empty but fashionable idea of "Asian values".
He makes it fairly clear that the traditional Chinese merchant class of SE Asia has successfully exploited weaknesses in their respective governments in classic special interest fashion to gain favours and capture spectacular excess profits. It's the people of these countries that lose as they pay higher prices and stumble from one financial crisis to the next while they are trapped in poverty.
The basic deal is that cash generating monopolies such as gambling, land development rights, mobile telephones, importing and trading foodstuffs, flour manufacturing etc. are granted by politicians to the Chinese "Godfathers" in exchange for a cut (remarkably identified as 10%) in the profits. It doesn't seem to matter in SE Asia what type of government is involved. Democracies, military dictatorships, right and left wing all fall into the same corrupt system with the 10% cut being a recognized prize of political success.
Also the system is so ingrained that the Godfather monopolies have more or less become the only viable economic organizations left standing so SE Asian governments are have to reach agreements with them.
A major and not so obvious conclusion that Studwell emphasizes is that there is no place in these setups for internationally competitive manufacturing businesses with high levels of research and development and skilled labour of the South Korean type. On the contrary, Godfather businesses are designed to avoid competition through licences and tend to concentrate on trading and raw material extraction. So the rather surprising reality is that the Godfather businesses have very little to do with the Asian manufacturing success story. This success is due to large scale western outsourcing to mostly small asian manufacturers starting in the early 1980's and aided by NE Asian governments making a determined effort to educate their populations, develop technical skills and climb the value chain while providing a manufacturing environment that suits foreign corporations.
SE Asia does participate in the lowest level of outsourced manufacturing but the minimal profits are of no interest to the Godfathers although they do benefit indirectly for the generally increased Asian demand for the raw materials provided by their monopolies.
The author essentially shows the SE Asian Godfathers developing a finely tuned system for exploiting their respective countries in close alliance with corrupt politicians of the ethnic majority. This involves a high degree of artistry and Studwell shows in interesting detail for example how they manipulate their bank ownership to obtain 0% financing and play with Public/Private ownership of their corporations to capture all the upside while dumping all the risk on the public.
A central aspect is of course "Guanxi" (being plugged in/connected) whereby major efforts are made to bribe/entertain/give gifts/praise/be the best friend of those with political power or who may gain political power (Godfathers back all factions), with the interesting result that Godfathers develop a chameleon like nature, changing their names and presenting themselves for example as Thais in Thailand, Filipinos in the Philippines while simultaneously being Chinese with the Chinese.
As a relative of Henry Fok (one of the biggest Godfathers) says, "tycoon behaviour should be viewed through the prism of Eric Berne's 1960's bestseller "The Games People Play", adding..They all want a shrink ... to get it of their chest."
In any event it is the people of SE Asia who lose as their countries stumble from one crisis to the next with a good example being the Philippines. As the 2006 World Development Report said, "15% of Filipinos were living in absolute poverty, and 47% subsisted on an income between US$1 and US$2 a day. Half of the 12 million population of Manila lives in shanty towns that line the expressways, rail tracks and waterways of the metropolis. After 25 years of repeated economic crises, the Philippines economy is now critically dependent on the overseas earnings of an estimated 10 million, mostly female workers - out of a population of 80 million - employed as child carers, nurses and more in richer states around the world."
Studwell quotes the Philippine's best known living author, Francisco Sionil José (from an interview in the far Eastern Economic Review December 2004) saying quite simply, "We are poor because our élites have no sense of nation" and he seems to be right.
This is really a book for our times. Special Interests vs. National Interest.
He has a facility for gaining access to Asia's rather secretive Chinese billionaires since they are obviously not in the habit of sitting around and sharing their fine French wine with any regular gweilo. It may be because he actually quite likes them (and this comes across in the book) which helps but at the same time it doesn't make his job of a balanced analysis any easier.
Nevertheless he succeeds, with the book being built around his statement that, "It is the politicians job to defend societies interests." In some countries they do, such a Japan, South Korea, Taiwan and to a lesser extent China, and in some they don't such as the Philippines, Indonesia, Malaysia and Thailand with a general divide between NE Asia (successful) and SE Asia (unsuccessful).
He concludes that it is systems, not people that make a country rich, with efficient political and social institutions being the key to prosperity rather than the empty but fashionable idea of "Asian values".
He makes it fairly clear that the traditional Chinese merchant class of SE Asia has successfully exploited weaknesses in their respective governments in classic special interest fashion to gain favours and capture spectacular excess profits. It's the people of these countries that lose as they pay higher prices and stumble from one financial crisis to the next while they are trapped in poverty.
The basic deal is that cash generating monopolies such as gambling, land development rights, mobile telephones, importing and trading foodstuffs, flour manufacturing etc. are granted by politicians to the Chinese "Godfathers" in exchange for a cut (remarkably identified as 10%) in the profits. It doesn't seem to matter in SE Asia what type of government is involved. Democracies, military dictatorships, right and left wing all fall into the same corrupt system with the 10% cut being a recognized prize of political success.
Also the system is so ingrained that the Godfather monopolies have more or less become the only viable economic organizations left standing so SE Asian governments are have to reach agreements with them.
A major and not so obvious conclusion that Studwell emphasizes is that there is no place in these setups for internationally competitive manufacturing businesses with high levels of research and development and skilled labour of the South Korean type. On the contrary, Godfather businesses are designed to avoid competition through licences and tend to concentrate on trading and raw material extraction. So the rather surprising reality is that the Godfather businesses have very little to do with the Asian manufacturing success story. This success is due to large scale western outsourcing to mostly small asian manufacturers starting in the early 1980's and aided by NE Asian governments making a determined effort to educate their populations, develop technical skills and climb the value chain while providing a manufacturing environment that suits foreign corporations.
SE Asia does participate in the lowest level of outsourced manufacturing but the minimal profits are of no interest to the Godfathers although they do benefit indirectly for the generally increased Asian demand for the raw materials provided by their monopolies.
The author essentially shows the SE Asian Godfathers developing a finely tuned system for exploiting their respective countries in close alliance with corrupt politicians of the ethnic majority. This involves a high degree of artistry and Studwell shows in interesting detail for example how they manipulate their bank ownership to obtain 0% financing and play with Public/Private ownership of their corporations to capture all the upside while dumping all the risk on the public.
A central aspect is of course "Guanxi" (being plugged in/connected) whereby major efforts are made to bribe/entertain/give gifts/praise/be the best friend of those with political power or who may gain political power (Godfathers back all factions), with the interesting result that Godfathers develop a chameleon like nature, changing their names and presenting themselves for example as Thais in Thailand, Filipinos in the Philippines while simultaneously being Chinese with the Chinese.
As a relative of Henry Fok (one of the biggest Godfathers) says, "tycoon behaviour should be viewed through the prism of Eric Berne's 1960's bestseller "The Games People Play", adding..They all want a shrink ... to get it of their chest."
In any event it is the people of SE Asia who lose as their countries stumble from one crisis to the next with a good example being the Philippines. As the 2006 World Development Report said, "15% of Filipinos were living in absolute poverty, and 47% subsisted on an income between US$1 and US$2 a day. Half of the 12 million population of Manila lives in shanty towns that line the expressways, rail tracks and waterways of the metropolis. After 25 years of repeated economic crises, the Philippines economy is now critically dependent on the overseas earnings of an estimated 10 million, mostly female workers - out of a population of 80 million - employed as child carers, nurses and more in richer states around the world."
Studwell quotes the Philippine's best known living author, Francisco Sionil José (from an interview in the far Eastern Economic Review December 2004) saying quite simply, "We are poor because our élites have no sense of nation" and he seems to be right.
This is really a book for our times. Special Interests vs. National Interest.
December 21, 2019
A unfortunate case study of what happens when manipulated democracies and concession-based economies take precedence over a free market and true competition. If bank fraud on Wall Street left Mark Baum (for anyone who has seen the Big Short) frothing, the political manoeuvring and financial deception by the select few at the expense of the rest of SEA's population (read: taxpayers and shareholders) make Wall Street's investment bankers look like schoolboys; all a byproduct of opaque, broken political systems which have resulted in SEA lagging behind the rest of Asia (e.g. Japan and South Korea).
For the uninitiated, the closing paragraph of this book offers a better summary than I can conjure, a truth that nobody really foresees changing anytime soon; an anecdote from one of the "godfathers" reaching for a parable to capture regional reality in a few sentences:
"In more youthful days, the tycoon in question had as a favourite recreation long fishing trips in the South China Sea. He and family and senior managers in his businesses would go off for days at a time. On these voyages, the putative godfather was much taken with a man who had a tiny shop on the beach of an island where he and his crew would stop for provisions. This person, an ethnic Chinese, worked all hours of the day and was regularly woken in the middle of the night by local fishermen wanting diesel and other necessities before they set out for the fishing grounds at dawn. Often the fishermen were without money and demanded credit, which was invariably given. The storekeeper was an individual of unrelenting personal generosity. He married a single mother (hardly the done thing), a Hainanese woman, and took on responsibility both for her and for the daughter she already had. Over the years, the godfather and this man became good friends. The only difference between them, the tycoon observes, was that he was already rich by birth and superbly educated and went on to be a multi-billionaire, while the storekeeper never made any money from his ceaseless endeavour and dropped dead at a young age. "And that," concludes the godfather matter-of-fatly, "is the real story of south-east Asia". At this point he assumes the look of a man enjoying fond memories and proffers your correspondent a glass of very fine French wine."
For the uninitiated, the closing paragraph of this book offers a better summary than I can conjure, a truth that nobody really foresees changing anytime soon; an anecdote from one of the "godfathers" reaching for a parable to capture regional reality in a few sentences:
"In more youthful days, the tycoon in question had as a favourite recreation long fishing trips in the South China Sea. He and family and senior managers in his businesses would go off for days at a time. On these voyages, the putative godfather was much taken with a man who had a tiny shop on the beach of an island where he and his crew would stop for provisions. This person, an ethnic Chinese, worked all hours of the day and was regularly woken in the middle of the night by local fishermen wanting diesel and other necessities before they set out for the fishing grounds at dawn. Often the fishermen were without money and demanded credit, which was invariably given. The storekeeper was an individual of unrelenting personal generosity. He married a single mother (hardly the done thing), a Hainanese woman, and took on responsibility both for her and for the daughter she already had. Over the years, the godfather and this man became good friends. The only difference between them, the tycoon observes, was that he was already rich by birth and superbly educated and went on to be a multi-billionaire, while the storekeeper never made any money from his ceaseless endeavour and dropped dead at a young age. "And that," concludes the godfather matter-of-fatly, "is the real story of south-east Asia". At this point he assumes the look of a man enjoying fond memories and proffers your correspondent a glass of very fine French wine."
April 22, 2019
It's an interesting economic history of Asian countries, but I think the author is biased.
Money and power have influences in Asian countries. This is true. But I don't think it's very different from western countries either. It's common sense and reality. What is more interesting is that Asian godfathers had most of their businesses in utilities, property development, telecom and raw material import. What is unfair is that these industries should either be run by government (utility) or should be open to competition (import). The author is biased because he didn't make a distinction between Hong Kong/Singapore to the rest of ASEAN countries. Even with powerful tycoons, Hong Kong and Singapore are two most efficient countries in the world with the lowest level of corruption. This is a fact, but ignored by the author.
Lastly, the book was a little bit outdated. The author was trying to give an example of successful economic development in Asia, and he pointed to Japan, Korea and Taiwan, and he didn't mention China at all. If he writes the book today, he will probably need to do some serious work on China. And he would probably rethink whether Japan, Korea and Taiwan are really good examples - all of them have stale economic development for 10 years, facing serious demographic challenges. Even Taiwan and Korea, the biggest and most successful industry - semiconductor, is a protectd and government directed industry.
Money and power have influences in Asian countries. This is true. But I don't think it's very different from western countries either. It's common sense and reality. What is more interesting is that Asian godfathers had most of their businesses in utilities, property development, telecom and raw material import. What is unfair is that these industries should either be run by government (utility) or should be open to competition (import). The author is biased because he didn't make a distinction between Hong Kong/Singapore to the rest of ASEAN countries. Even with powerful tycoons, Hong Kong and Singapore are two most efficient countries in the world with the lowest level of corruption. This is a fact, but ignored by the author.
Lastly, the book was a little bit outdated. The author was trying to give an example of successful economic development in Asia, and he pointed to Japan, Korea and Taiwan, and he didn't mention China at all. If he writes the book today, he will probably need to do some serious work on China. And he would probably rethink whether Japan, Korea and Taiwan are really good examples - all of them have stale economic development for 10 years, facing serious demographic challenges. Even Taiwan and Korea, the biggest and most successful industry - semiconductor, is a protectd and government directed industry.
November 2, 2018
This book methodically dismantles the myth of the astute business tycoon and tells the real, often-unflattering stories behind the "success" of the people that make up Southeast Asia's economic elite (which, in my opinion, is a more interesting angle compared to the fawning hagiography typically reserved for persons of their ilk).
Rather than business acumen or management sophistication, the author points out, many Southeast Asian business leaders have historically relied on their web of mutually-beneficial relationships with the governing class in order to gain an unfair advantage and build rent-seeking monopolies or cartels in heavily regulated and anti-competitive industries, with the rest of the population paying artificially high prices as a result.
After pondering the book's concluding anecdote (a prominent Hong Kong billionaire's musings about a small-time merchant he meets in a fishing trip), the little free-market ideologue in me could only wistfully imagine how different things would have turned out had Southeast Asia's economic environment been more open to competition and less embracing of state intervention.
Rather than business acumen or management sophistication, the author points out, many Southeast Asian business leaders have historically relied on their web of mutually-beneficial relationships with the governing class in order to gain an unfair advantage and build rent-seeking monopolies or cartels in heavily regulated and anti-competitive industries, with the rest of the population paying artificially high prices as a result.
After pondering the book's concluding anecdote (a prominent Hong Kong billionaire's musings about a small-time merchant he meets in a fishing trip), the little free-market ideologue in me could only wistfully imagine how different things would have turned out had Southeast Asia's economic environment been more open to competition and less embracing of state intervention.
July 21, 2019
Southeast Asian (which, in this book, includes Hong Kong and Macau) economic history as seen through the eyes of the billionaires that so captivate that region's attention. Studwell critiques the trajectory of economic development throughout the region, and attempts to overturn several enduring myths in the process. Studwell notes that Hong Kong and Singapore are not "free" economies, despite Western interpretation. The billionaires are not astute businessmen, instead they build vast wealth through monopolistic concessions, and then use that wealth to enrich themselves and expand into sectors that they are not optimized for. Along the way, Studwell gives anecdotes and biographies of the rich and powerful in the region, and these anecdotes serve as the necessary flavor to an otherwise dry book.
Even though this book is a decade old by now, it is still worth a read for those interest in the economic development of the region, how it contrasts with Northeast Asia, and how it might change as China increases its own economic gravity in SOutheast Asia and the rest of the world.
Even though this book is a decade old by now, it is still worth a read for those interest in the economic development of the region, how it contrasts with Northeast Asia, and how it might change as China increases its own economic gravity in SOutheast Asia and the rest of the world.
August 26, 2017
Fewer books are written about South East Asian crony capitalism with such candor and lucidity as this one. Highly recommended for anybody venturing into doing business in South East Asia
November 2, 2010
Studwell tries to debunk what he regards as the myth of the SE Asian Horatio Alger-type tycoons, whose successes largely owe to political corruption and government protected cartels. This cozy relationship between the political and merchant class produces monopolies in gaming, commodities, and domestic distribution to the detriment of homegrown businesses that could be competitive on an international level. He has particular animus towards Lee Kuan Yew for his racialist theories and elitism and LK Shing for his popular portrayal as a shrewd and frugal businessman whose massive fortune is entirely a product of Hong Kong's highly regulated domestic economy.
His more interesting points are:
1) The popular narrative that the Chinese are inherently or culturally better capitalists (and therefore seemingly run the economies of SE Asia) is confounded by their having been self selecting immigrants. Ergo immigrants are likely to be more successful capitalists regardless of race (he refers to Muslims and Indians who have succeeded to make this point).
I think this is a compelling argument, but you also have to explain why this trend exists over 150 years later. Furthermore, Studwell argues that most of the Chinese diaspora is well assimilated into their adopted ASEAN countries, but this then begs the question: why are they still disproportionately represented amongst the wealthier merchant class?
I did a regression of percent population Chinese in ASEAN countries and GDP per capita, which yields a 98% R^2 -- of course correlation isn't causation and it would be interesting to see a study of forced vs. voluntary migration and economic variables (Indians under Britain might be most helpful...though I don't know how in/voluntary indentured servitude was). Of course the biggest counter point is that China is basically 100% ethnically Chinese and poorer than Malaysia and Thailand still -- but this is an unfair comparison having suffered through a whole quarter century of Maoist communism. So to put it shortly I'm not entirely convinced.
2) Hong Kong is not the capitalist oasis that right wingers purport it to be and Singapore’s success owes to its Switzerland status (and LKY is a malevolent dingbat). Studwell shows that the great fortunes of HK are rooted in government regulations of the domestic economy that create inefficiencies in convenience stores, real estate, ports, etc., etc. The entrenched interest of the tycoons and their suasion over the oliography/plutocracy now headed by Donald Tsang prevents the dissolution of corporate statism (Studwell does some very detailed research into the shenanigans of the tycoons who defraud their investors and seemingly fail at any venture outside of those protected by government).
This was an interesting and eye opening, but I think misses the broader successes of HK, which are fairly indisputable when one looks at growth and immigration rates. HK is not a domestic story anyway – it’s a financial center, trading hub (trade is multiples that of GDP), and gateway to China…to focus on the LK Shing misses the fact that every multinational corporation has an office there and foreigners flock there to do business (particularly in financial services). This could not have happened without the relatively business friendly, low tax, small government environment.
Studwell also dismisses Singapore’s success as an inevitable beneficiary of hinterland growth and the banking services required to launder the money. He points to the $200 billion stash of Indonesian money parked in the relative safe haven of Singapore, which itself is home to many (rightly) paranoid wealthy Indonesian merchants. I think this is serious survivorship bias – if you read LKY’s autobio (which is also biased), Singapore came pretty close to being taken over by Maoists so there’s no certainty that a city state will become wealthy (look at Macau!). The truth is obviously somewhere between LKY’s “savior” and Studwell’s “deterministic” view of Sing’s history.
Some of the more questionable arguments of Studwell:
1) SE Asia risks turning into banana republics a la Latin America.
Studwell is by no means a Neo-con, but he certainly has an obsession with spreading democracy as a cure all for the problems of entrenched corporate statism. While transparency would certainly help the region rid itself of rampant corruption, it would likely come at the cost of gimme populism that plagues the Latin American states that he so fears. I wouldn’t be so quick to open up the political process to peasants with little education (hell I’m scared of opening up political processes to Ivy Leaguers) and no economic interest so that they can go coercively redistribute the wealth of the merchants. HK, Singapore, and the US/UK in the 19th century work/ed quite well when ruled by those with economic stakes.
Lastly, while Studwell tries to remove cultural explanations from the discourse of economic history in SE Asia, I’m not convinced that certain societies do not have higher proclivities to industriousness. For example, Korea (which had the same GDP per capita as Ghana in 1960) is now a fairly rich country but still invests and work 2500+ hours a year. I’m not sure if you stuck a bunch of Mexicans, Jamaicans, Argentineans, or Brazilians on an island with HK-like conditions that you’d end up with HK-like outcomes (they’d be better for sure, but not rivaling that of the US necessarily). Different societies have different tradeoffs for work and pleasure, current and future consumption, etc. etc. (so I’m not saying that the Anglosphere/Asia is working too hard or Latin America/France/South Europe isn’t working hard enough…it’s their choice and GDP per capita isn't the ultimate measure of well being).
2) SE Asia should start planning its economy to create world class exporters like North Asia (namely Korea and Japan) did. No nation can become wealthy without indigenously driven productivity improvements and research. Reliance on multinationals and their FDI holds SE Asia back.
This kind of falls into the Paul Krugman "Asian miracle myth" camp (superb analysis and excellent read) http://web.mit.edu/krugman/www/myth.html . There's nothing wrong with the diagnosis that SE Asia prospered because of the deployment of labor and not any meaningful increases in productivity...but this does not imply that SE Asia should divert resources to developing its own technologies...why pay for something that will come for free via tech transfer from the West?
Why this argument is wrong:
A. Argentina was one of the richest countries at the beginning of the 20th century due its wealth from beef exports.
B. Countless poor countries have stunted their growth by creating national champions and enforcing partial or total autarky in the chosen industries. This intervention prevents countries from realizing the maximum benefits of comparative advantage. Poor countries consistently see a correlation between industrialization and wealth, but incorrectly conclude that the solution to poverty is industrialization.
C. The companies that succeeded in Japan (I don’t know Korea as well) were the ones that weren’t championed by government (Toyotas, Canons, Sonys, etc.). The industries that were (steel, shipbuilding, etc.) had less success. A MITI-type planning organization in SE Asia would do more harm than good.
Overall, Studwell does a good job succinctly explaining the rise of SE Asia's tycoons. His documentation is superb and well cited and the list of families and their backgrounds is a gold mine. I personally had a hard time keeping track of all the names (good God Thailand), but the snappy and concise writing made this a good read.
His more interesting points are:
1) The popular narrative that the Chinese are inherently or culturally better capitalists (and therefore seemingly run the economies of SE Asia) is confounded by their having been self selecting immigrants. Ergo immigrants are likely to be more successful capitalists regardless of race (he refers to Muslims and Indians who have succeeded to make this point).
I think this is a compelling argument, but you also have to explain why this trend exists over 150 years later. Furthermore, Studwell argues that most of the Chinese diaspora is well assimilated into their adopted ASEAN countries, but this then begs the question: why are they still disproportionately represented amongst the wealthier merchant class?
I did a regression of percent population Chinese in ASEAN countries and GDP per capita, which yields a 98% R^2 -- of course correlation isn't causation and it would be interesting to see a study of forced vs. voluntary migration and economic variables (Indians under Britain might be most helpful...though I don't know how in/voluntary indentured servitude was). Of course the biggest counter point is that China is basically 100% ethnically Chinese and poorer than Malaysia and Thailand still -- but this is an unfair comparison having suffered through a whole quarter century of Maoist communism. So to put it shortly I'm not entirely convinced.
2) Hong Kong is not the capitalist oasis that right wingers purport it to be and Singapore’s success owes to its Switzerland status (and LKY is a malevolent dingbat). Studwell shows that the great fortunes of HK are rooted in government regulations of the domestic economy that create inefficiencies in convenience stores, real estate, ports, etc., etc. The entrenched interest of the tycoons and their suasion over the oliography/plutocracy now headed by Donald Tsang prevents the dissolution of corporate statism (Studwell does some very detailed research into the shenanigans of the tycoons who defraud their investors and seemingly fail at any venture outside of those protected by government).
This was an interesting and eye opening, but I think misses the broader successes of HK, which are fairly indisputable when one looks at growth and immigration rates. HK is not a domestic story anyway – it’s a financial center, trading hub (trade is multiples that of GDP), and gateway to China…to focus on the LK Shing misses the fact that every multinational corporation has an office there and foreigners flock there to do business (particularly in financial services). This could not have happened without the relatively business friendly, low tax, small government environment.
Studwell also dismisses Singapore’s success as an inevitable beneficiary of hinterland growth and the banking services required to launder the money. He points to the $200 billion stash of Indonesian money parked in the relative safe haven of Singapore, which itself is home to many (rightly) paranoid wealthy Indonesian merchants. I think this is serious survivorship bias – if you read LKY’s autobio (which is also biased), Singapore came pretty close to being taken over by Maoists so there’s no certainty that a city state will become wealthy (look at Macau!). The truth is obviously somewhere between LKY’s “savior” and Studwell’s “deterministic” view of Sing’s history.
Some of the more questionable arguments of Studwell:
1) SE Asia risks turning into banana republics a la Latin America.
Studwell is by no means a Neo-con, but he certainly has an obsession with spreading democracy as a cure all for the problems of entrenched corporate statism. While transparency would certainly help the region rid itself of rampant corruption, it would likely come at the cost of gimme populism that plagues the Latin American states that he so fears. I wouldn’t be so quick to open up the political process to peasants with little education (hell I’m scared of opening up political processes to Ivy Leaguers) and no economic interest so that they can go coercively redistribute the wealth of the merchants. HK, Singapore, and the US/UK in the 19th century work/ed quite well when ruled by those with economic stakes.
Lastly, while Studwell tries to remove cultural explanations from the discourse of economic history in SE Asia, I’m not convinced that certain societies do not have higher proclivities to industriousness. For example, Korea (which had the same GDP per capita as Ghana in 1960) is now a fairly rich country but still invests and work 2500+ hours a year. I’m not sure if you stuck a bunch of Mexicans, Jamaicans, Argentineans, or Brazilians on an island with HK-like conditions that you’d end up with HK-like outcomes (they’d be better for sure, but not rivaling that of the US necessarily). Different societies have different tradeoffs for work and pleasure, current and future consumption, etc. etc. (so I’m not saying that the Anglosphere/Asia is working too hard or Latin America/France/South Europe isn’t working hard enough…it’s their choice and GDP per capita isn't the ultimate measure of well being).
2) SE Asia should start planning its economy to create world class exporters like North Asia (namely Korea and Japan) did. No nation can become wealthy without indigenously driven productivity improvements and research. Reliance on multinationals and their FDI holds SE Asia back.
This kind of falls into the Paul Krugman "Asian miracle myth" camp (superb analysis and excellent read) http://web.mit.edu/krugman/www/myth.html . There's nothing wrong with the diagnosis that SE Asia prospered because of the deployment of labor and not any meaningful increases in productivity...but this does not imply that SE Asia should divert resources to developing its own technologies...why pay for something that will come for free via tech transfer from the West?
Why this argument is wrong:
A. Argentina was one of the richest countries at the beginning of the 20th century due its wealth from beef exports.
B. Countless poor countries have stunted their growth by creating national champions and enforcing partial or total autarky in the chosen industries. This intervention prevents countries from realizing the maximum benefits of comparative advantage. Poor countries consistently see a correlation between industrialization and wealth, but incorrectly conclude that the solution to poverty is industrialization.
C. The companies that succeeded in Japan (I don’t know Korea as well) were the ones that weren’t championed by government (Toyotas, Canons, Sonys, etc.). The industries that were (steel, shipbuilding, etc.) had less success. A MITI-type planning organization in SE Asia would do more harm than good.
Overall, Studwell does a good job succinctly explaining the rise of SE Asia's tycoons. His documentation is superb and well cited and the list of families and their backgrounds is a gold mine. I personally had a hard time keeping track of all the names (good God Thailand), but the snappy and concise writing made this a good read.
August 5, 2022
Reading Asian Godfathers after more than a decade since it was published makes you reflect if the political and economic (and cultural) landscape has changed since. The book presents a narrative of Southeast Asian history through anecdotes on the rich and elite class of the region and how their fortunes were maintained and expanded.
The book covers the similarities of the business empires they amassed and the strategic (corrupt) methods and decisions made to take advantage of political inefficiencies in the region. It is interesting to observe how these tycoons navigated several political shifts - from colonialist rule (bar Thailand) towards the wide spectrum of governance styles in the latter part of the 20th century. Beyond business, finance, and economics, the author also provides further stories of their psyche, behaviors, and family relationships of these “Godfathers.”
Perhaps, I would suggest reading descriptions of the list of characters that is located towards the end of the book, before reading the main text. Although this strategy may be cumbersome to some who want to get straight to the story, it would have helped me better grasp the different characters in the book because the author mentions hundreds of names which you can get easily lost in and you will find that many of the relationships and wealth of these godfathers are intertwined.
The book covers the similarities of the business empires they amassed and the strategic (corrupt) methods and decisions made to take advantage of political inefficiencies in the region. It is interesting to observe how these tycoons navigated several political shifts - from colonialist rule (bar Thailand) towards the wide spectrum of governance styles in the latter part of the 20th century. Beyond business, finance, and economics, the author also provides further stories of their psyche, behaviors, and family relationships of these “Godfathers.”
Perhaps, I would suggest reading descriptions of the list of characters that is located towards the end of the book, before reading the main text. Although this strategy may be cumbersome to some who want to get straight to the story, it would have helped me better grasp the different characters in the book because the author mentions hundreds of names which you can get easily lost in and you will find that many of the relationships and wealth of these godfathers are intertwined.
February 9, 2020
One of my favourite books, really eye-opening, especially concerning the subjects that have a lot of myths related to them (Singapore, bamboo networks, etc)
---
Notes to self (cause private notes field is too short):
- tycoons of the XIX century prospered in organising labour-intensive high-volume operations (farming, mining)
- There they created a vertically integrated structure, where they supplied their workers with food and opium.
- Also, they prospered in revenue-farming because states were weak (not only in Asia) and had problems determining the real price of bids
- In the early XX century, access to capital became important, locals had no access to capital
- Tan Kah Kee rare idealist
- The 20s-30s saw a rise of nationalism everywhere
- Tycoons turned from freelance revenue collectors to joint venture partners
- But in turn, military dictators squeezed out Europeans and Americans
- During the war, the main source of revenue was smuggling
- After that selling of surplus equipment
- Then monopoly concessions
- Then real estate and stock market speculation
- Tycoon - head slave - running dogs
---
Notes to self (cause private notes field is too short):
- tycoons of the XIX century prospered in organising labour-intensive high-volume operations (farming, mining)
- There they created a vertically integrated structure, where they supplied their workers with food and opium.
- Also, they prospered in revenue-farming because states were weak (not only in Asia) and had problems determining the real price of bids
- In the early XX century, access to capital became important, locals had no access to capital
- Tan Kah Kee rare idealist
- The 20s-30s saw a rise of nationalism everywhere
- Tycoons turned from freelance revenue collectors to joint venture partners
- But in turn, military dictators squeezed out Europeans and Americans
- During the war, the main source of revenue was smuggling
- After that selling of surplus equipment
- Then monopoly concessions
- Then real estate and stock market speculation
- Tycoon - head slave - running dogs
May 6, 2019
When living and doing business in Indonesia, you get to notice a lot of cultural differences. Some stuff that is outright weird, tough to understand why. Now this book answers the why, it sets the scene how the current environment has come alive and what are the main differences from other Asian countries like Taiwan, South Korea & Japan & how come South East Asian countries have not been able to follow the same path until now.
Would recommend to read to anyone who's living in South East Asia, it'll be like a quick crash course on the last 100 years of events that are business and local business tycoon related. But in the end it comes down to politics.
Would recommend to read to anyone who's living in South East Asia, it'll be like a quick crash course on the last 100 years of events that are business and local business tycoon related. But in the end it comes down to politics.
May 31, 2020
Very comprehensive book that helps me with a broad picture about how capitalism (and the markets) works(ed) in South East-Asia. The book left me with a feeling of bitterness of being in a dynamic but backward and corrupted region of the world.
April 28, 2022
I rarely give 5 stars but this books deserves it.
It is extremely well informed, and gives you an excellent idea about billionaires in the region.
It is extremely well informed, and gives you an excellent idea about billionaires in the region.
January 1, 2024
Book Review
Asian Godfathers
Joe Studwell
5/5 stars
"Economic history and conditions of Southeast Asia."
*******
Of the book:
-199 pages of prose/ 7 chapters; 28pps/per
-470 (notes+point citations); 2.36/page=well sourced
-6-7 hours of reading time.
-Brief biography of all the Godfathers, arranged by country. About 90 profiles.
-Brief biography of the codependent politicians, arranged by country. About 45 profiles.
-Selected bibliography arranged by topic. (Proponents of race-based interpretations of development. Skeptics of race based interpretations of development. Etc.)
-Deals with: Malaysia, Thailand, indonesia, Singapore, Philippines, Hong Kong, Macau.
Part I (42pps): Historical background
Part III (82pps): Four steps to be a post-war godfather
a. Build a character that is an amalgamation of Chinese and local;
b. Have a government granted Monopoly that creates core cash flow.
c. Create your inner circle of people, some foreign, some local, some chinese.
d. Use government policy lenders to financial projects and keep the gains and socialize the losses. Multiple bailouts. Financial repression details.
Part III (74pps): Fallout and financial crisis in the 1990s and aftermath. There were some modest changes on the edges, but no sea change.
******
This book follows the formula employed in Joe Studwell's "China Dream": It gives necessary historical background in order to to explain and analyze some current (journalistic) phenomenon.
And it's just chock full of information.
In the "China Dream," it was putting into context the centuries old foreign craze to sell into the always-huge-but-never-commercially-fruitful Chinese market.
Here, the goal seems to be to explain the extreme concentration of wealth in Southeast Asia in a few (mostly Chinese, but not exclusively Chinese food okay) hands and to get some discussion on the causes and consequences of the Asian financial crisis. (This book was written before 2008.)
1. First is recapitulation of the fact that even though all of the migrants who came to the countries under discussion were Chinese, that has meant different things at different times.
Even if cultural reasons are a lot of why Chinese came to dominate Southeast Asia, they're not the only reason: political conditions in China at the time were very bad during the collapsing Qing dynasty and that created a motivation for motivated people to go elsewhere and make money.
2. Second is detailing the historical accidents that made it such that: Colonial Powers needed neutral people that they could work with on the ground, and Chinese fit this bill--and they did as revenue tax collectors and monopoly holders.
Because they were in the right position, they also were benefits of colonial government contracts in various places. Also, for some reason, the local people (Thai, Indonesian, etc) were just not interested in doing business (because maybe they thought it would make their hands dirty), and so that was a boon to the Chinese.
It also appears that after independence, the new indigenous leadership (which was often just as corrupt as the governments they replaced, nod to Orwell's "Animal Farm") needed the same type of neutral people. The same PEOPLE, in fact.
Later on, The Godfathers relied on state monopolies for certain things (gambling, etc) in order to make a fortune from DOMESTIC inefficiencies. (Sorry about that, Milton Friedman, but neither Singapore nor Hong Kong are what you think.)
It's never exactly the same story twice, but that's just about it in a nutshell.
Secondary information:
1. Chinese triads (which have a 20-century history) were useful and needful to manage local Chinese coolies / others make several cameos in this book. They're also types responsible for kidnapping of family members of these tycoons in exchange for ransoms.
2. Vis-a-vis Asian Indians, most Chinese people did not return to China, with most of them marrying local people and speaking and living local languages. (It's not that East Asia could not have been Indian dominated, it's just that they didn't stay around long enough in large enough numbers to leave a footprint.)
3. As we have seen before, not everybody from one ethnic group is the same just because they happen to be from that ethnic group. Studwell introduces us to two very separate things: those who are shopkeepers and small business owners, and those that are truly overlords.
4. Wealth and degree of "Chinese-ness" are inversely proportional. There also seem to be a LOT of Evangelical Christians in here (p.50).
5. Singapore has a higher execution rate per capita than either China or Saudi Arabia.
*******
Second order thoughts:
1. All these Chinese men had multiple identities that could be taken on or put off at different times, subject to expendiency.
There is no shame in modifying your identity for the sake of convenience.
2. It is interesting that higher IQ races of people (such as Chinese and Jews) treat identity as malleable-subject-to-context and lower IQ ones (think of black people in North America) treat it as something to be idealized and preserved. (Afrocentrism is a very quirky manifestation of this.)
3. There's nothing wrong with eugenics, and these billionaire's profile in this book have no problem with admitting that some cultures / races are more efficient at producing better results. (This is as opposed to the current Western model of assuming that they are all equal and then explaining away differences and results as "racism.") For example: "Matahir's thinking that one solution for Malay's perceived genetic handicap was intermarriage with other races." Lee Kuan Yew was also a vocal proponent of Chinese genetic exceptionalism.
4. As much as populists talk about "redistributing the wealth," it seems like it works everywhere that people start off as well as wealthy.... There is some dramatic shake up... And the same people stay just as wealthy, or become even wealthier.
5. The best part was the conclusion where the author did a bit of comparative analysis of the South Korean and Taiwanese academies vis-a-vis Hong Kong and Singapore. The former two have recognizable brands because their economies were built on trying to manufacture products, as opposed to the latter two and much of Southeast Asia which has an economy built on rent seeking extractions.
*******
Quotes:
1. All these expressions point to the same thing - - that the use by political power of a wealthy but dependent class of tycoons was too attractive to be ditched merely because of the end of colonialism.
2. We are so accustomed to disguise ourselves to others that in the end we become disguised to ourselves. LaRochefoucald.
3. (p.201) Of the [Russian] commercial Godfathers who have dominated the domestic economy since the end of the Cold war, almost every one is Jewish. They operate entirely at the discretion of a non-jewish political élite, whose whimsy has sent several to prison or exile...... The only big Russian godfather who is not Jewish is Vladimir Potanin.
4. Weather Hong Kong has been ruled by British colonialism, Japanese imperialism or Chinese communism, it has always been managed through the same group of people.
5. Oei Tiong Ham "Had a great interest in women and sex. He had 18 acknowledged concubines and a total of 42 children by them. Eka Tjipta Widaya is associated with at least 30 children. Stanley Ho has only 17 acknowledged children." (p. 59).
6. Southeast Asia is not comparable with the kleptocracies that have ruined many African countries. In most cases Southeast Asian politicians sell public resources and economic rights to private businessmen and do not interfere with the running of the businesses.
7. Racial prejudice went out the window once it was clear the local Godfathers were the key to the banks development.
Verdict: Recommended at the price of $3. The historical events in here are time independent, but the journalistic events are yesterday's news. The book was written in 2007, 16 years ago. (Li Ka-Shing is 95 years old and worth US$36.2 billion as of today.) A lot of the subjects have already died. (Lee Kuan Yew. Stanley Ho. Suharto.) This book could potentially be fun in order to test how well Studwell's predictions have aged.
Vocabulary:
arkatia (Indian recruiters)
perankan (Indonesian Malay speaking Chinese middle men)
cabang atas - Chinese tax Farmers used by the Dutch
priyayi
baba (Malaysian Chinese)
Alibaba (business fronted by Malay but run by Chinese)
One syllable Chinese (those who had not assimilated and adopted local surnames, Lucio Tan, et al)
unctuous
gweilo
Further Reading
Huston, Peter "Tongs, Gangs, and Triads"
Booth, Martin "The Dragon Syndicates"
G. William Skinner, various.
Asian Godfathers
Joe Studwell
5/5 stars
"Economic history and conditions of Southeast Asia."
*******
Of the book:
-199 pages of prose/ 7 chapters; 28pps/per
-470 (notes+point citations); 2.36/page=well sourced
-6-7 hours of reading time.
-Brief biography of all the Godfathers, arranged by country. About 90 profiles.
-Brief biography of the codependent politicians, arranged by country. About 45 profiles.
-Selected bibliography arranged by topic. (Proponents of race-based interpretations of development. Skeptics of race based interpretations of development. Etc.)
-Deals with: Malaysia, Thailand, indonesia, Singapore, Philippines, Hong Kong, Macau.
Part I (42pps): Historical background
Part III (82pps): Four steps to be a post-war godfather
a. Build a character that is an amalgamation of Chinese and local;
b. Have a government granted Monopoly that creates core cash flow.
c. Create your inner circle of people, some foreign, some local, some chinese.
d. Use government policy lenders to financial projects and keep the gains and socialize the losses. Multiple bailouts. Financial repression details.
Part III (74pps): Fallout and financial crisis in the 1990s and aftermath. There were some modest changes on the edges, but no sea change.
******
This book follows the formula employed in Joe Studwell's "China Dream": It gives necessary historical background in order to to explain and analyze some current (journalistic) phenomenon.
And it's just chock full of information.
In the "China Dream," it was putting into context the centuries old foreign craze to sell into the always-huge-but-never-commercially-fruitful Chinese market.
Here, the goal seems to be to explain the extreme concentration of wealth in Southeast Asia in a few (mostly Chinese, but not exclusively Chinese food okay) hands and to get some discussion on the causes and consequences of the Asian financial crisis. (This book was written before 2008.)
1. First is recapitulation of the fact that even though all of the migrants who came to the countries under discussion were Chinese, that has meant different things at different times.
Even if cultural reasons are a lot of why Chinese came to dominate Southeast Asia, they're not the only reason: political conditions in China at the time were very bad during the collapsing Qing dynasty and that created a motivation for motivated people to go elsewhere and make money.
2. Second is detailing the historical accidents that made it such that: Colonial Powers needed neutral people that they could work with on the ground, and Chinese fit this bill--and they did as revenue tax collectors and monopoly holders.
Because they were in the right position, they also were benefits of colonial government contracts in various places. Also, for some reason, the local people (Thai, Indonesian, etc) were just not interested in doing business (because maybe they thought it would make their hands dirty), and so that was a boon to the Chinese.
It also appears that after independence, the new indigenous leadership (which was often just as corrupt as the governments they replaced, nod to Orwell's "Animal Farm") needed the same type of neutral people. The same PEOPLE, in fact.
Later on, The Godfathers relied on state monopolies for certain things (gambling, etc) in order to make a fortune from DOMESTIC inefficiencies. (Sorry about that, Milton Friedman, but neither Singapore nor Hong Kong are what you think.)
It's never exactly the same story twice, but that's just about it in a nutshell.
Secondary information:
1. Chinese triads (which have a 20-century history) were useful and needful to manage local Chinese coolies / others make several cameos in this book. They're also types responsible for kidnapping of family members of these tycoons in exchange for ransoms.
2. Vis-a-vis Asian Indians, most Chinese people did not return to China, with most of them marrying local people and speaking and living local languages. (It's not that East Asia could not have been Indian dominated, it's just that they didn't stay around long enough in large enough numbers to leave a footprint.)
3. As we have seen before, not everybody from one ethnic group is the same just because they happen to be from that ethnic group. Studwell introduces us to two very separate things: those who are shopkeepers and small business owners, and those that are truly overlords.
4. Wealth and degree of "Chinese-ness" are inversely proportional. There also seem to be a LOT of Evangelical Christians in here (p.50).
5. Singapore has a higher execution rate per capita than either China or Saudi Arabia.
*******
Second order thoughts:
1. All these Chinese men had multiple identities that could be taken on or put off at different times, subject to expendiency.
There is no shame in modifying your identity for the sake of convenience.
2. It is interesting that higher IQ races of people (such as Chinese and Jews) treat identity as malleable-subject-to-context and lower IQ ones (think of black people in North America) treat it as something to be idealized and preserved. (Afrocentrism is a very quirky manifestation of this.)
3. There's nothing wrong with eugenics, and these billionaire's profile in this book have no problem with admitting that some cultures / races are more efficient at producing better results. (This is as opposed to the current Western model of assuming that they are all equal and then explaining away differences and results as "racism.") For example: "Matahir's thinking that one solution for Malay's perceived genetic handicap was intermarriage with other races." Lee Kuan Yew was also a vocal proponent of Chinese genetic exceptionalism.
4. As much as populists talk about "redistributing the wealth," it seems like it works everywhere that people start off as well as wealthy.... There is some dramatic shake up... And the same people stay just as wealthy, or become even wealthier.
5. The best part was the conclusion where the author did a bit of comparative analysis of the South Korean and Taiwanese academies vis-a-vis Hong Kong and Singapore. The former two have recognizable brands because their economies were built on trying to manufacture products, as opposed to the latter two and much of Southeast Asia which has an economy built on rent seeking extractions.
*******
Quotes:
1. All these expressions point to the same thing - - that the use by political power of a wealthy but dependent class of tycoons was too attractive to be ditched merely because of the end of colonialism.
2. We are so accustomed to disguise ourselves to others that in the end we become disguised to ourselves. LaRochefoucald.
3. (p.201) Of the [Russian] commercial Godfathers who have dominated the domestic economy since the end of the Cold war, almost every one is Jewish. They operate entirely at the discretion of a non-jewish political élite, whose whimsy has sent several to prison or exile...... The only big Russian godfather who is not Jewish is Vladimir Potanin.
4. Weather Hong Kong has been ruled by British colonialism, Japanese imperialism or Chinese communism, it has always been managed through the same group of people.
5. Oei Tiong Ham "Had a great interest in women and sex. He had 18 acknowledged concubines and a total of 42 children by them. Eka Tjipta Widaya is associated with at least 30 children. Stanley Ho has only 17 acknowledged children." (p. 59).
6. Southeast Asia is not comparable with the kleptocracies that have ruined many African countries. In most cases Southeast Asian politicians sell public resources and economic rights to private businessmen and do not interfere with the running of the businesses.
7. Racial prejudice went out the window once it was clear the local Godfathers were the key to the banks development.
Verdict: Recommended at the price of $3. The historical events in here are time independent, but the journalistic events are yesterday's news. The book was written in 2007, 16 years ago. (Li Ka-Shing is 95 years old and worth US$36.2 billion as of today.) A lot of the subjects have already died. (Lee Kuan Yew. Stanley Ho. Suharto.) This book could potentially be fun in order to test how well Studwell's predictions have aged.
Vocabulary:
arkatia (Indian recruiters)
perankan (Indonesian Malay speaking Chinese middle men)
cabang atas - Chinese tax Farmers used by the Dutch
priyayi
baba (Malaysian Chinese)
Alibaba (business fronted by Malay but run by Chinese)
One syllable Chinese (those who had not assimilated and adopted local surnames, Lucio Tan, et al)
unctuous
gweilo
Further Reading
Huston, Peter "Tongs, Gangs, and Triads"
Booth, Martin "The Dragon Syndicates"
G. William Skinner, various.
July 7, 2016
I seldom write reviews, but this is a book that deserves to be read by more. It was published nearly a decade ago but remains painfully relevant and contemporary, which is not something that can be said of most titles about Asian (political) economies in general. Studwell is well-researched and has clearly thought out how best to map out his arguments whilst covering macro- and micro-level accounts of the intersection between public, private, and political godfather economics and kleptocracy in Southeast Asia. My only misgiving is that it sometimes attempts too much, and the mostly engaging writing turns unwieldy at parts. The book could definitely have done with a better editor — to streamline the flow of the arguments and building up of character / case studies, to organise the footnotes better, and change the damn cover of the book. (My guess is that it's an attempt to riff off the Random House edition of "The Godfather" by Mario Puzo, but it does it so horrifically to turn off any potential buyers who couldn't be faulted for thinking it's some craptacular noir / crime copycat story set in exotic Asia...)
Anyway, ignore the book cover. Recommended reading.
Anyway, ignore the book cover. Recommended reading.
October 16, 2014
Really important description of how crony capitalism wrecks economies and the hardworking laborers that live in them. It's forgotten now that the northeast and southeast Asian nations were economically equivalent in the wake of the second World War. So why has the southeast languished so long? It's The System there, in which capitalism has meant favoring the few. Why is the purportedly free-market Hong Kong now wracked with protests fueled by the difficulty of making a living there? It's an oligarchy squeezing everyone from common people to even minority shareholders. Learn from the lessons of the Philippines, Malaysia, Indonesia, and Thailand; see the truth of Hong Kong and Singapore; and keep it from happening where you live.
September 30, 2016
A great piece for those that are trying to understand the who's who of Asia. I also think it's a great piece to dispel myths on exactly how Asia developed the way that it did. Perhaps the best part of this book is the glossary in the back that serves as an excellent reference of which person owns which major corporation.
June 17, 2021
Similar work to the other seminal book of Joe Studwell - How Asia Works. The lessons drawn on the failures of South East Asian countries are the same albeit the story is based on personas - Godfather like businessmen and politicians - rather than the economical policies. While reading the book an Indian reader can draw eerie similarities of the politicians businessmen nexus around them too.
September 25, 2017
Essentially a who's - who introduction to the modern history of South East Asian tycoons.
Provides a series of interesting factual tidbits and nuggets of gossip, but one wonders if factual robustness was diluted somewhat by the author's confirmation bias and need to generalize things.
Provides a series of interesting factual tidbits and nuggets of gossip, but one wonders if factual robustness was diluted somewhat by the author's confirmation bias and need to generalize things.
October 28, 2015
The book is too dense and trying to cover too many things. It did not work for me but looking at all the great reviews; Maybe I lack something to appreciate this work.
April 17, 2021
Really informative and well-written book. Below are my notes. More summaries like this can be found at www.libraryof.xyz
The book was published in 2007 by the journalist Joe Studwell and is a review of Southeast Asia’s dominant families. At the time, 13 of the world’s 50 richest families were from Southeast Asia – disproportionately many in relation to the region’s overall economy. The main thesis is that the Southeast Asian godfathers (Southeast Asian oligarchs) exploit political inefficiencies and operate in comfortable domestic markets that are free from global competition. In this way, they have built up great fortunes.
ELITE BACK SCRATCHING. According to Studwell, politicians and godfathers in Southeast Asia have a (too) close cooperation. Both parties are winning at the expense of ordinary residents. The godfathers get licenses and monopolies, the politicians get control and stability. The godfathers are likened to the oil barons of the United States in the early 20th century.
THE CHINESE ARE IN CONTROL. Most of the Southeast Asian godfathers are originally Chinese. In 2004, there were 50 million expat Chinese in Southeast Asia who together controlled 70% of the region’s assets. At the same time, the Chinese share of the populations was lower than 30% in all countries except Singapore.
50 FAMILIES ARE RUNNING THE SHOW. About 50 families control the business community in Southeast Asia through well-diversified conglomerates with interests in banking, real estate, shipping, food and gambling. The Godfathers are active on the region’s stock exchanges and have historically been good at putting companies on the stock market in good times to then repurchase them cheaply in bad times. Common to the industries in which they are active is that they very rarely compete in a global market. Exports, which have largely driven the region’s growth, have instead been financed by foreign interests, often from Northeast Asia or the West. Examples of godfathers are Hong Kong-based Li Ka-Shing (CK Hutchison Holdings) and the late Cheng Yu-tong (Chow Tai Fook Ent.). Both high on the Forbes list with fortunes of $35b and $17b respectively.
“’At the heart of the average godfather’s empire is a concession or license that gives rise to monopoly or oligopoly activity”
THE NORTH TRUMPS THE SOUTH. The proportion of Thais living in poverty has significantly decreased since the 1960s, from 65% to below 10% today. Similar statistics can be found for the neighboring countries. From that perspective, developments in Southeast Asia have been strong. But if one instead compares with Northeast Asia, whose populations are significantly better off than those in the south, it becomes clear what impact economic policy has had over time. Japan, South Korea and Taiwan have all implemented land reforms where almost everyone got to start with some capital – something that did not happen in Southeast Asia. According to the World Bank’s GINI index (which measures economic inequality), economic disparities are considerably smaller in Northeast Asia than in Southeast Asia. In addition, trade unions are also allowed in a completely different way in Northeast Asia than in Southeast Asia.
WEAK STOCK MARKETS. The stock exchanges in South as well as Northeast Asia have historically had a significantly weaker development than the markets in the USA and Europe. Studwell believes that one explanation for the lower returns is the large abundance of savings held in banks. This dampens the price of capital, which in turn lowers the general return on capital. The whole of Asia “suffers” from high savings. This also means that the godfathers, who often control the banks, have access to very cheap capital. And when cheap capital can be obtained from the house bank, the incentives to fight hard to increase productivity decreases.
CITY STATE ARBITRAGE. Studwell believes that Hong Kong and Singapore implement an arbitrage based on the inefficiency of neighboring countries. By offering services that are slightly better than what is offered in the domestic markets, Hong Kong and Singapore get large parts of the region’s business. In addition to this, they both have natural deep ports which has given them the opportunity to act as trade hubs.
THE SWITZERLAND OF SOUTHEAST ASIA. Hong Kong and Singapore have always been where the godfathers turn to for capital preservation. They usually do not dare to keep everything within the home country but secure it in HK or SG. The strong inflow of capital from foreign interests has since driven property prices in the city-states. In HK it has been the Chinese who have pushed up prices and in SG the Indonesians. Since HK’s and SG’s success is based on an image where there is order and safety, there has been much less corruption than in the surrounding countries.
“Since colonial inception they have offered tariff-free trade (with few or no questions asked about what is being traded) and have been places to park money (with few or no questions asked about where the money came from)”
The book was published in 2007 by the journalist Joe Studwell and is a review of Southeast Asia’s dominant families. At the time, 13 of the world’s 50 richest families were from Southeast Asia – disproportionately many in relation to the region’s overall economy. The main thesis is that the Southeast Asian godfathers (Southeast Asian oligarchs) exploit political inefficiencies and operate in comfortable domestic markets that are free from global competition. In this way, they have built up great fortunes.
ELITE BACK SCRATCHING. According to Studwell, politicians and godfathers in Southeast Asia have a (too) close cooperation. Both parties are winning at the expense of ordinary residents. The godfathers get licenses and monopolies, the politicians get control and stability. The godfathers are likened to the oil barons of the United States in the early 20th century.
THE CHINESE ARE IN CONTROL. Most of the Southeast Asian godfathers are originally Chinese. In 2004, there were 50 million expat Chinese in Southeast Asia who together controlled 70% of the region’s assets. At the same time, the Chinese share of the populations was lower than 30% in all countries except Singapore.
50 FAMILIES ARE RUNNING THE SHOW. About 50 families control the business community in Southeast Asia through well-diversified conglomerates with interests in banking, real estate, shipping, food and gambling. The Godfathers are active on the region’s stock exchanges and have historically been good at putting companies on the stock market in good times to then repurchase them cheaply in bad times. Common to the industries in which they are active is that they very rarely compete in a global market. Exports, which have largely driven the region’s growth, have instead been financed by foreign interests, often from Northeast Asia or the West. Examples of godfathers are Hong Kong-based Li Ka-Shing (CK Hutchison Holdings) and the late Cheng Yu-tong (Chow Tai Fook Ent.). Both high on the Forbes list with fortunes of $35b and $17b respectively.
“’At the heart of the average godfather’s empire is a concession or license that gives rise to monopoly or oligopoly activity”
THE NORTH TRUMPS THE SOUTH. The proportion of Thais living in poverty has significantly decreased since the 1960s, from 65% to below 10% today. Similar statistics can be found for the neighboring countries. From that perspective, developments in Southeast Asia have been strong. But if one instead compares with Northeast Asia, whose populations are significantly better off than those in the south, it becomes clear what impact economic policy has had over time. Japan, South Korea and Taiwan have all implemented land reforms where almost everyone got to start with some capital – something that did not happen in Southeast Asia. According to the World Bank’s GINI index (which measures economic inequality), economic disparities are considerably smaller in Northeast Asia than in Southeast Asia. In addition, trade unions are also allowed in a completely different way in Northeast Asia than in Southeast Asia.
WEAK STOCK MARKETS. The stock exchanges in South as well as Northeast Asia have historically had a significantly weaker development than the markets in the USA and Europe. Studwell believes that one explanation for the lower returns is the large abundance of savings held in banks. This dampens the price of capital, which in turn lowers the general return on capital. The whole of Asia “suffers” from high savings. This also means that the godfathers, who often control the banks, have access to very cheap capital. And when cheap capital can be obtained from the house bank, the incentives to fight hard to increase productivity decreases.
CITY STATE ARBITRAGE. Studwell believes that Hong Kong and Singapore implement an arbitrage based on the inefficiency of neighboring countries. By offering services that are slightly better than what is offered in the domestic markets, Hong Kong and Singapore get large parts of the region’s business. In addition to this, they both have natural deep ports which has given them the opportunity to act as trade hubs.
THE SWITZERLAND OF SOUTHEAST ASIA. Hong Kong and Singapore have always been where the godfathers turn to for capital preservation. They usually do not dare to keep everything within the home country but secure it in HK or SG. The strong inflow of capital from foreign interests has since driven property prices in the city-states. In HK it has been the Chinese who have pushed up prices and in SG the Indonesians. Since HK’s and SG’s success is based on an image where there is order and safety, there has been much less corruption than in the surrounding countries.
“Since colonial inception they have offered tariff-free trade (with few or no questions asked about what is being traded) and have been places to park money (with few or no questions asked about where the money came from)”
July 15, 2020
Đông Nam Á nhỏ bé nhưng có rất nhiều tỉ phú đứng trong top những người giàu nhất TG, và tất cả trong đó là người gốc Hoa. Nguyên nhân là do sự di cư ồ ạt của người Hoa đến các nước khác, cùng với thể chế chính trị còn nhiều thiếu sót, cần những “người lãnh đạo người Hoa” để quản lý số dân di cư đông đúc lộn xộn này. Những nhà cầm quyền bản địa quan tâm đến chính trị hơn là làm kinh tế, trong khi cần nguồn tài chính để duy trì quyền lực, họ lại không muốn trao quyền lợi kinh tế vào tay những người bản xứ, vì lo ngại những kẻ đó phát triển lên có tiền, có quyền sẽ trở thành đối thủ cạnh tranh với họ. Do đó, những bố già gốc Hoa – những tinh hoa kinh tế nghiễm nhiên được trao các cartel để cấu kết với các chính trị gia hàng đầu – những tinh hoa chính trị để trở nên ngày càng giàu có.
Tuy nhiên, do họ kinh doanh dựa trên nền chính trị mục nát qua các cartel, độc quyền, việc buôn lậu, lũng đoạn thi trường tài chính qua các ngân hàng, mua lại các công ty niêm yết đã bị làm suy yếu với giá rẻ không qua đấu thầu, chiếm dụng nguồn vốn và đất công, giấu lượng lớn tiền mặt ở nước ngoài (HK và SG)… nên không đóng góp gì cho sự phát triển của quốc gia và khu vực. Trong khi đó, những nhà đầu tư thiểu số, những công ty nhỏ và vừa sản xuất thương mại các hàng hóa có sức cạnh tranh trên trường quốc tế, những công nhân làm việc trong các nhà máy và xưởng sản xuất, là những người đóng góp chính vào sự phát triển kinh tế lại là những người đầu tiên bị lợi dụng và bị ảnh hưởng khi cuộc khủng hoảng tài chính diễn ra.
Văn hóa các bố già:
1. Nhập vai, mắc kẹt văn hóa, không tìm được nhân dạng thật sự: Sự lo sợ về việc người Hoa sẽ xâm lấn văn hóa qua sự bành trướng của các bố già là không cần thiết, bởi lẽ các bố già không hề thông thuộc tiếng TQ và văn hóa TQ. Các đại gia càng giàu và càng có ảnh hưởng lớn thì càng “mất gốc TQ”, họ chỉ giữ mức độ TQ vừa đủ để duy trì hình ảnh một nhà lãnh đạo cộng đồng người gốc Hoa.
Do bị mắc kẹt giữa các nền văn hóa và không hoàn toàn thuộc về nơi nào, họ thường bị bất ổn và ám ảnh tâm lý.
Các bố già cũng rất hám danh, họ yêu thích việc thu thập và trưng bày các huy chương, danh hiệu, bằng cấp, các bài báo ca ngợi họ, … một cách hào hứng.
2. Xuất thân không tầm thường: Câu chuyện các đại gia giàu có đi lên từ tầng lớp công nhân là gần như không thể trong xã hội chính trị Đông Nam Á hiện tại.
3. Tiết kiệm: Các bố già sống rất tiết kiệm so với khối lượng tài sản của mình, thể hiện bản năng của doanh nhân là bảo toàn vốn. Tuy nhiên, họ hoàn toàn không biết gì về cuộc sống khốn khó của những người ở tầng lớp dưới.
4. Gia trưởng: Các bố già luôn là ông chủ của gia đình. Họ duy trì quyền thống trị, gia trưởng, quản lý tài chính chặt chẽ với cả các con để tránh sự tranh giành và bị phản bội.
Họ phóng túng, có rất nhiều vợ và tình nhân, dùng tình dục như 1 quãng nghỉ sau khoảng thời gian “làm việc” mệt mỏi. Sự “làm việc” ở đây tức là đi đánh golf, họp mặt giao lưu trò chuyện cùng các bố già khác và các chính trị gia quyền lực cả ngày dài.
5. Kín đáo, bí mật: Không phô trương, ngại công khai, không cảm thấy có nghĩa vụ phải giải thích về bản thân với các nhà đầu tư nhỏ hoặc với toàn thể công dân.
Điều làm nên sự khác biệt trong mô hình kinh tế Đông Bắc Á (NB, HQ) và Đông Nam Á, tất cả đều liên quan đến đời sống chính trị:
1. Đông Bắc Á (Nhật Bản, Hàn Quốc, Đài Loan) đã thực hiện cải cách ruộng đất.
2. Chính phủ hậu thuẫn cho các nhà sản xuất và doanh nghiệp có khả năng phát minh ra công nghệ mới hưởng lợi về kinh tế.
3. Hệ thống chính trị luôn hoạt động nghiêm túc hơn, là động lực phát triển, noi theo các mô hình chính trị từ các nước phát triển phương Tây.
Tuy nhiên, do họ kinh doanh dựa trên nền chính trị mục nát qua các cartel, độc quyền, việc buôn lậu, lũng đoạn thi trường tài chính qua các ngân hàng, mua lại các công ty niêm yết đã bị làm suy yếu với giá rẻ không qua đấu thầu, chiếm dụng nguồn vốn và đất công, giấu lượng lớn tiền mặt ở nước ngoài (HK và SG)… nên không đóng góp gì cho sự phát triển của quốc gia và khu vực. Trong khi đó, những nhà đầu tư thiểu số, những công ty nhỏ và vừa sản xuất thương mại các hàng hóa có sức cạnh tranh trên trường quốc tế, những công nhân làm việc trong các nhà máy và xưởng sản xuất, là những người đóng góp chính vào sự phát triển kinh tế lại là những người đầu tiên bị lợi dụng và bị ảnh hưởng khi cuộc khủng hoảng tài chính diễn ra.
Văn hóa các bố già:
1. Nhập vai, mắc kẹt văn hóa, không tìm được nhân dạng thật sự: Sự lo sợ về việc người Hoa sẽ xâm lấn văn hóa qua sự bành trướng của các bố già là không cần thiết, bởi lẽ các bố già không hề thông thuộc tiếng TQ và văn hóa TQ. Các đại gia càng giàu và càng có ảnh hưởng lớn thì càng “mất gốc TQ”, họ chỉ giữ mức độ TQ vừa đủ để duy trì hình ảnh một nhà lãnh đạo cộng đồng người gốc Hoa.
Do bị mắc kẹt giữa các nền văn hóa và không hoàn toàn thuộc về nơi nào, họ thường bị bất ổn và ám ảnh tâm lý.
Các bố già cũng rất hám danh, họ yêu thích việc thu thập và trưng bày các huy chương, danh hiệu, bằng cấp, các bài báo ca ngợi họ, … một cách hào hứng.
2. Xuất thân không tầm thường: Câu chuyện các đại gia giàu có đi lên từ tầng lớp công nhân là gần như không thể trong xã hội chính trị Đông Nam Á hiện tại.
3. Tiết kiệm: Các bố già sống rất tiết kiệm so với khối lượng tài sản của mình, thể hiện bản năng của doanh nhân là bảo toàn vốn. Tuy nhiên, họ hoàn toàn không biết gì về cuộc sống khốn khó của những người ở tầng lớp dưới.
4. Gia trưởng: Các bố già luôn là ông chủ của gia đình. Họ duy trì quyền thống trị, gia trưởng, quản lý tài chính chặt chẽ với cả các con để tránh sự tranh giành và bị phản bội.
Họ phóng túng, có rất nhiều vợ và tình nhân, dùng tình dục như 1 quãng nghỉ sau khoảng thời gian “làm việc” mệt mỏi. Sự “làm việc” ở đây tức là đi đánh golf, họp mặt giao lưu trò chuyện cùng các bố già khác và các chính trị gia quyền lực cả ngày dài.
5. Kín đáo, bí mật: Không phô trương, ngại công khai, không cảm thấy có nghĩa vụ phải giải thích về bản thân với các nhà đầu tư nhỏ hoặc với toàn thể công dân.
Điều làm nên sự khác biệt trong mô hình kinh tế Đông Bắc Á (NB, HQ) và Đông Nam Á, tất cả đều liên quan đến đời sống chính trị:
1. Đông Bắc Á (Nhật Bản, Hàn Quốc, Đài Loan) đã thực hiện cải cách ruộng đất.
2. Chính phủ hậu thuẫn cho các nhà sản xuất và doanh nghiệp có khả năng phát minh ra công nghệ mới hưởng lợi về kinh tế.
3. Hệ thống chính trị luôn hoạt động nghiêm túc hơn, là động lực phát triển, noi theo các mô hình chính trị từ các nước phát triển phương Tây.
This entire review has been hidden because of spoilers.
July 17, 2022
Asian Godfathers is, roughly, the story of how Nick Young’s family in Crazy Rich Asians got to be crazy rich. The book is a survey of the economies of five southeast Asian countries (Hong Kong, Singapore, Thailand, Malaysia, Indonesia) told as the story of the tycoons (“godfathers”) who dominate them.
The basic story is similar in each of the five: the country’s political and economic power are divided, with political power held by a local ruling elite and economic power held by “overseas Chinese” (the Chinese immigrant community). The political class hands out control of lucrative monopolies, cartels, land, and natural resources to favored ethnic Chinese tycoons, and the tycoons in turn richly bribe their political benefactors.
The arrangement is mutually beneficial: local politicians can scapegoat the tycoon class to deflect public anger about bad governance (while enjoying handsome bribes and lavish vacations at the tycoons’ overseas villas), and the tycoons get very very rich. When a tycoon falls out of favor, he can run off to Singapore and live like a king on the money he squirreled away while times were good.
Studwell seems to have interviewed every important person in Southeast Asia and the result is page after page of material that is, very much in the spirit of Crazy Rich Asians, half gossip rag and half serious business/economic analysis. Example: in a discussion of expected bribes in Indonesia — generally 10% of the value of a contract — Studwell notes that Suharto’s wife, Madame Tien, was referred to by some as “Madame Tien Percent”. It’s all like that: insightful, very plugged in, and more than a little catty.
The basic story is similar in each of the five: the country’s political and economic power are divided, with political power held by a local ruling elite and economic power held by “overseas Chinese” (the Chinese immigrant community). The political class hands out control of lucrative monopolies, cartels, land, and natural resources to favored ethnic Chinese tycoons, and the tycoons in turn richly bribe their political benefactors.
The arrangement is mutually beneficial: local politicians can scapegoat the tycoon class to deflect public anger about bad governance (while enjoying handsome bribes and lavish vacations at the tycoons’ overseas villas), and the tycoons get very very rich. When a tycoon falls out of favor, he can run off to Singapore and live like a king on the money he squirreled away while times were good.
Studwell seems to have interviewed every important person in Southeast Asia and the result is page after page of material that is, very much in the spirit of Crazy Rich Asians, half gossip rag and half serious business/economic analysis. Example: in a discussion of expected bribes in Indonesia — generally 10% of the value of a contract — Studwell notes that Suharto’s wife, Madame Tien, was referred to by some as “Madame Tien Percent”. It’s all like that: insightful, very plugged in, and more than a little catty.
October 12, 2020
"The whole of Asia suffers from the perverse curse of high saving rates and bloated banks, which have depressed stock market returns throughout the region ... [the high savings rate] create minimal pressure on capital markets to offer decent returns."
The book is largely about "godfathers" but ties in heavily with politics and historical developments while trying to explain the [2006/07] state of South East & North Asia. Many parts of it reminds me of Piketty's argument that even growing economies will pay off those who hold capital more than those who labor - the rich get richer while inequalities and inequities continue to widen. Holders of capital + political patronage looks to be the path to becoming a godfather in most SE Asian cases.
Interesting enough that I found myself checking Google for updates to events that had occurred back in 2006/07 when this book was published. I would definitely look forward to a follow up.
The book is largely about "godfathers" but ties in heavily with politics and historical developments while trying to explain the [2006/07] state of South East & North Asia. Many parts of it reminds me of Piketty's argument that even growing economies will pay off those who hold capital more than those who labor - the rich get richer while inequalities and inequities continue to widen. Holders of capital + political patronage looks to be the path to becoming a godfather in most SE Asian cases.
Interesting enough that I found myself checking Google for updates to events that had occurred back in 2006/07 when this book was published. I would definitely look forward to a follow up.
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