Economy and social affairs

Hungry, efficient, willing to take risks ...

The Asians will not be considerate of us
An analysis of the "yellow danger" based on global economic developments over the past decades.

Published in GralsWelt 59/2010.

In April 1983 I traveled to (South) Korea for the first time for several weeks. My job was to familiarize a Korean bicycle tire factory with the development and construction of motorcycle tires, back then still bias tires. I had gained experience in tire technology as head of development in a tire factory and was up to date.

On the outbound flight I had a guilty conscience at first and asked myself whether I was in the process of delivering modern technology to an emerging country that would then compete with our German companies, so that jobs could be lost here.

Then I considered that a few months earlier VW boss Carl Hahn had been in China to sign a contract with the Chinese SAIC group for the production of the VW Santana in the People's Republic of China. At the thought of this enormous technology transfer from one of the largest German industrial companies, I felt very modest, with a briefcase full of personal notes and my specialist knowledge in my head ...

How dangerous is the "yellow danger"?

The "yellow danger" has been spoken of for a century. After it was forced to open up to the West in 1854, Japan, for example, caught up with western technology surprisingly quickly. In 1905 Japan was even able to win a war against a major European power (Russia). What would happen if China, with its gigantic population, took a similar path?

Then China fell out in civil wars and had to wage a long, tiring battle against the Japanese invasion. After the bloody Communist victory in 1949, the Maoist Cultural Revolution (1965–1976) cost the lives of many millions and destroyed a large part of the cultural assets that had survived decades of revolution, war and civil war. In view of this self-tearing, the “yellow danger” seemed to have been banned for the time being.

Japan (the so-called "big tiger"), which was badly hit in World War II, recovered - like Germany - faster than expected. The Japanese colonies of Korea and Taiwan, as well as the English colony of Singapore (the "little tigers") conquered by the Japanese, became independent after the Second World War and sought connection to the western industrial level.

The potential of hard-working, often well-educated people in East Asia was underestimated in the West, where after the Second World War the Africans were initially thought to have greater development opportunities than the East Asians.

The USA in particular felt superior to all others after it had won World War II and its epochal rise to the greatest world power. In the race for the first moon landing (1969) they were able to impressively underline their scientific and technical supremacy.

It was not until the beginning of the 1960s that Japan became an important export nation that thoughtful observers could guess what seemed possible in far-off Asia ...

Why the competition from the east was underestimated

When I first came to Korea in 1983, I saw an emerging country, a country that was in transition from a developing country to an industrialized country.
After the end of the Korean War (1953), the largely destroyed South Korea was one of the poorest countries in the world as an agricultural country. It has no significant deposits of oil, coal or ores and can only build on the hard work of its people. In the densely populated country, the forests cannot even meet the demand for wood.
A few decades later, in the 1980s, South Korea, poor in natural resources, had a population of over 40 million at the time[i] developed into the tenth largest industrial country; However, not with democratic structures, but initially under a tough dictatorship disguised as democracy. (For the history of Korea cf. "From the land of the morning calm", under "History").

As an engineer, the juxtaposition of scrap-ripe production facilities and modern machines was of particular interest to me. For example, there were still production lines that could have come from the time of the First World War. Right next to it, state-of-the-art transfer machines - for example for the production of bicycle valves - were being set up that I had not seen among competitors in Germany.

The Korean engineers were fully up to the demands of modern technology (the buzz word "high-tech" came later). My recommendations were also recognized and successfully implemented. It quickly became clear to my Korean partners that until then they had not been sufficiently familiar with the design of modern motorcycle tires.

During my first visit I became aware of the following findings, which at least back then received too little attention in the West:
• You could at the wage level at the time[ii] produce any standard technology in Korea more cheaply than with us. The standard technology includes, for example, automobiles or shipbuilding. After all, there were already two of the largest shipyards in the world in Korea at that time. Cars were also built and exported on a large scale. Today, Korean cars are part of the normal street scene in Germany as well.
• Countries with an old handicraft tradition have no difficulty in familiarizing themselves with modern technology. This is not only true for East Asia (China, Japan, Korea, Singapore, Taiwan etc.) and India[iii], but also applied, for example, to Bavaria, which actually only became an industrial country after the Second World War. Bavaria can look back on a long tradition of craftsmanship, for example the Augsburg silversmiths.
• Developing countries are not satisfied with a labor-intensive technology, although this would be sufficient with the local wage level. You have enough cheap labor and you don't have to drive rationalization to extremes. But the times are over when - for example from England - obsolete systems were exported to the colonies. Today, even in exotic countries, the most modern technology is required, with which the Asians - after astonishingly few initial difficulties - get along very well.
• Developing countries are not satisfied with the production of standard products. They also strive for high-tech products with high growth rates.
• In the Confucian tradition of East Asia, learning is very important. Great value is placed on good training. Schoolchildren are already required to do a workload that we consider unreasonable[iv]. Korean universities were striving to reach the level of US universities as early as the 1980s. The top executives in the industry have often obtained their PhDs from top universities abroad (mostly in the US).
• The Confucian philosophy (cf. "The Legacy of Confucius"Under" History of Religion ") was then still of great influence on the Korean and other East Asian societies. The loyalty to the higher-ups demanded by Confucius was an advantage for hierarchically organized industry. Meanwhile, trust in management (and in democratic politicians) among younger people, for example in Japan and Korea, has waned. Especially since large companies no longer kept the usual lifelong employment guarantee in crisis situations. In addition, the Confucian ethic, which aims to serve the education of noble humanity, is sometimes interpreted in a way that permits corruption.

The dragon wakes up and the elephant marches off

In the meantime, the internal turmoil in China seems to have been overcome, and what is currently the most populous country on earth is in the middle of a gigantic race to catch up, as is India with a slightly smaller but faster growing population[v].

The industrial revolution usually began with the textile industry. For example in the 18th century in England, in the 19th century in Germany and Japan, in the 20th century in China and India. Today the "great dragon" (China) and the "elephant" (India) are leaders in the textile industry. In Central Europe, the production of textiles, leather goods, shoes and toys has become a niche production for luxury brands.

But the young industrialized countries of Asia are emerging all Territory the world market leadership. There is no longer any need to talk about optics and photography; Here the once world's best German optical industry has been pushed back to special fields by Japanese companies for decades.

It has long been recognized in Asia that information technology (IT) is currently recording the greatest growth rates and is also striving for the very front here.

In the vehicle industry - the most important branch of German industry - VW has recently caught up with Toyota (Japan) as the largest automobile manufacturer. General Motors (USA) has fallen behind. High quality German automobiles still sell well in many countries, even in China. But there these “German” cars come mainly from local factories, which hardly create jobs in the traditional industrialized countries.

The Chinese themselves are still lagging behind Europe or the USA in terms of quality, although in 2009 they produced 13 million vehicles, including 10 million cars, more automobiles than Germany (2008: 11 million).

At the moment, the right cars for wealthy American or European customers are not yet coming from China: Jiangling's “Landwind” off-road vehicle and the BS 6, a mid-range vehicle from Brilliance, disappointed in the crash test, among other things. The improved, inexpensive mid-range BS 4 car also failed to convince in the crash test in 2009 and is (still) a decade behind in terms of technology. But these are smaller manufacturers. The invasion of the big - maybe even with technically simpler electric cars - is still to come.
The Chinese are by no means to be underestimated; even if they cannot currently compete with high-class cars from Europe. You will learn. After all, BMW, Mercedes and VW, for example, provide the necessary know-how for automobile production and train Chinese specialists!

In India the situation is a little different. Here, cheap cars are particularly needed, which can only be built in developing countries at the required prices. In January 2008 the TATA Nano was presented, which is to be offered at a basic price of almost 2,000 US dollars. At the moment the Nano is not yet a car for Europe; but the Indians are also developing and have big plans. A version of the Nano suitable for Europe is due to hit the market in 2012.

The dreams of the huge Asian markets have partly burst for the Americans and Europeans; because the Chinese and Indians, for example, want to serve their domestic market with their own products and also export!

As the largest export nation, China overtook the previous frontrunner Germany in 2010. For export to Asia, the classic industrialized countries are left with luxury brands and, above all, capital goods, which in turn help to improve the competitive situation for the Asians. As an industrial location, Germany has continuously fallen behind over the past decades. A first-order alarm signal is the relocation of the production of the C-Class (the group’s most important sales driver) to the USA planned by Mercedes!

Technology transfer, because the greatest return beckons!

In Asia, adopting third-party technologies is as little squeamish as it is with replicas that infringe patents[vi]. Contracts with foreign investors are also often drafted in such a way that their know-how can be used. This is how a transfer of technical knowledge takes place as it has never been before in history; not even after the two world wars of the 20th century, when every time the German patents were cashed in by the winners.

In the course of globalization, companies from Europe and the USA did not want to miss the huge Asian markets. On the other hand, they can often only gain a foothold in important countries if they produce there, and in some cases even develop there. In this way, western capital flows to where the greatest returns await, and valuable expertise is passed on.

We have already spoken of the automobile companies that are giving away their know-how to China, for example. But that's just the beginning, and there are many more examples.

The first commercial maglev train - for whose development the German taxpayer had to pay huge sums of money[vii] - was built in China. In the event of a (unlikely) follow-up order, the Chinese, who now have the necessary know-how, would likely submit the cheapest offer.

In order to sell aircraft, the Airbus A320 has to be assembled in China, and the Chinese want the EADS group to develop EADS in China too!

Well-known western companies and their know-how have long been bought up by Asian corporations.

Globalization has long since got out of hand

It is easier to initiate new developments than to control them afterwards - when they get up and running. This applies to politics as well as to the economy. Unwanted consequences - “collateral damage” - are seldom foreseen, and politicians and economists even less often listen to the warnings of wiser contemporaries.

The gifted mathematician John von Neumann (1903–1957), who himself played a key role in the development of computers and atomic bombs, wondered what could become more dangerous for mankind: the atomic bomb or the computer. The latter is, among other things, the prerequisite for IT technology. Modern information technology, the lightning-fast communication link from and with every place on earth, is a decisive prerequisite for world market integration, the global networking of stock exchanges, finance, development, production, logistics, service, transport and sales.

Globalization, which has long since got out of control due to its own dynamics, is changing the world at an increasing pace in a direction that is not suitable for the West and, on top of that, dangerous for the whole earth from an ecological point of view. Even the fine words don't help that globalization is an expression of "Cross-border freedom" act. Politicians react helplessly to the rapid changes, which many people feel overwhelmed by.

The capitalist economy, sworn to short-term profit maximization, faces tough competition for so-called core competencies[viii]. Forward-looking thinking that has the entire globe in view can hardly be found here. Likewise, the social responsibility required for a prosperous future is not to be expected from the capital owners.

It is by no means the case that these economic upheavals come upon us completely unpredictably, like a natural event. As the cultural historian Wolfgang Schivelbusch explains in an article in Spiegel (23/2007, p. 187), the "Phantasmagoria of Infinite Expansion" the brains of the decision-makers are so clouded that they no longer really know what economic rationality and what public spectacle is. In such euphoria, the long-standing warnings about globalization are ignored:
“In his book 'Imperialism', the first modern theory of globalization, published in 1902, the English economic and social theorist John A. Hobson spoke of the consequences that the industrialization of the non-European world would have on the old continent. What he painted on the wall was the economic drowning of the old continent in the flood of unrivaled cheap global mass production. To compete at this level seemed hopeless to Hobson. Instead, he recommended the Swiss and Danish routes, which are unrivaled in their kind of high-quality production. The large corporations have naturally followed this path less consistently in their orientation towards mass production than Europe's medium-sized economy, which has so cultivated it in its entire range of machine tools, precision optics, designer lighting, luxury cars and grappa that it is almost unrivaled globally. "

So we can hope that at least the middle class, neglected by politics, thinks a little further, is less dazzled by share prices and acts more responsibly than the much-cited "locusts", the great globalization profiteers who are not a blessing for the world economy.

Tiger and dragon scare away, the elephant tramples down

In Germany, it is high time to put an end to the shameful games with which the federal government, states, parties, associations and unions are blocking each other and thus making the country almost incapable of reform. Postponing the necessary structural adjustments is no longer acceptable! Because our proud wage level[ix] will only hold up if our products are as much better as they are more expensive.

The prerequisites for this are above all research and innovations[x] and first-class training for as many people as possible, ideally all fellow citizens, but also the dismantling of an excessive bureaucracy. We have to recognize what is in store for us and act accordingly so that my unpleasant prediction does not materialize: The tigers and the dragon scare the whites away, and the elephant then tramples them down.

The Asians will not be considerate of us. You are hungry, efficient, willing to take risks and lend a hand; supported by governments that do not take social standards and environmental protection as seriously as economic growth.

[i] Today (2010) South Korea has 48 million inhabitants and a population density of 483 inhabitants per km² (the Federal Republic of Germany has 231, Austria 97 and Switzerland 178 inhabitants per km²).
[ii] In 1983, people worked 54 hours a week in South Korea, with two to three days of vacation per year. The costs for one worker totaled approx. DM 760 per month. This includes the cost of a severance payment that was paid after reaching retirement age. Pension insurance did not yet exist. Employees rarely changed; As a rule, you stayed loyal to your company (as in Japan) throughout your professional life. Since then, wages have risen dramatically and have more than doubled. For some products, such as bicycle tires, Korea has now become too expensive, and producers have switched to cheaper countries such as Malaysia or Thailand. The lifelong employment guarantee in Japan or Korea has also not been maintained and has led to a loss of confidence in companies.
[iii] There are now other emerging countries such as Brazil, Kazakhstan, Russia and South Africa that are emulating the “East Asian miracle”.
[iv] Students in a high school in Korea were given little more than five hours of sleep and had to study fully on Sundays and public holidays.
[v] For the year 2009, the figure for China is 1.331 billion (139 inhabitants per km²) and 1.171 billion (356 inhabitants per km²) for India.
[vi] In Europe and the USA, too, people were (and are) not always squeamish about industrial espionage. See “Stop the espionage!” In “Short, concise, curious” on page 310.
[vii] The German politicians apparently prefer to spend money on hopeless projects, which is then no longer available for important tasks. In addition to the maglev train, just think of the billions that were squandered for political reasons on the dying coal mining industry.
[viii] as Core competency one describes the ability or activity that a company can carry out better compared to the competition and thereby one Competitive advantage has attained.
[ix] The following hourly wages are given for 2007: Germany EUR 30.00; Poland 5, -; China 1, - to 2, -; Vietnam 0.50.
[x] innovation literally means "innovation" or "renovation". The word is from Latin terms novus "New" and innovatio "Something newly created" derived. In common parlance, the term becomes unspecific in the sense of new Ideas and Inventions and used for their economic implementation. In the narrower sense, innovations only result from ideas when they are implemented in new products, services or processes (Invention), which are actually used successfully and penetrate the market. (Source: "Wikipedia")