Tuesday, 22 March 2011

Prospering from misfortune

John Mangun
OUTSIDE THE BOX
Business Mirror
http://www.businessmirror.com.ph/home/opinion/8887-prospering-from-misfortune

The human toll of the disaster that struck Japan is still unknown. Estimates of the dead and injured are certainly not complete. Yet, perhaps, more important in the long term is the economic effects not only on Japan but on Asia.

We tend to view events like this disaster outside of the context of the current world that surrounds the occurrence. Say, for example, you drop and shatter one of your drinking glasses. Your immediate concern is to make sure you and everyone else are not cut by the broken glass. Then you need to clean up the mess. If the glass contained the last of your bottle of brandy, then you think about replenishing your stock of liquor. But after all of that is done, the problem has been solved.

Then a week later when you entertain guests, you suddenly realize that you are one glass short. And now you have to buy a whole set of glasses, otherwise a single oddball glass looks kind of silly.

Events have multiple effects; some may not be apparent until much later.

I spoke last week how the age demographics of Japan is going to affect their rebuilding effort. A conscious decision by the Japanese people in the 1970s and 1980s to limit marriage and family size may now be a great impediment to rebuilding their nation. Two e-mail I received accused me of merely repeating the “propaganda” of the Catholic Church about “reproductive health.” How foolish. The discussion was about consequences of a nation’s action. Simply, too few children can be just as disastrous as too many.

Many foreign “experts” tell us that had the Philippines limited population growth 20 years ago, we might now have streets paved with gold and every one would be riding in new Mercedes. Perhaps. But Japan tells an interesting postwar story.

Japan had reached an unheard-of annual growth rate of 10 percent by the 1960s, then 5 percent in the 1970s, and 4 percent in the 1980s. At the end of the 1980s, Japan seemed poised to economically surpass America. In 1960, when Japan was trying to beat West Germany as the world’s second-largest economy, 49 percent of the people were under 25. Then suddenly, Japan changed and now only 23 percent of Japan’s population is under 25.

Eight of the 10 largest companies in the world were Japanese in 1988. This year Japan does not have a single company in the top 20, and only six in the top 100. In 1969 the population growth rate was 2 percent, falling to 0.74 percent in 1976. Perhaps, the children who were not born in the 1970s left a shortage 20 years later of qualified people to continue to manage and prosper Japanese corporations. Who knows? But it is something to think about.

Asian cultures are supposed to be much more forward thinking that the West. I wonder.

China, too, has a demographics problem, thanks to their one-child policy. However, the greater issue with China is its “at-all-cost” move to industrialization.

China is America’s banker. Soon, America may well be China’s farmer.

China is facing a double problem of environmental degradation and rapid industrialization, both affecting its ability to feed its people.

This from the Washington Post: “Since 1950, some 24,000 villages in the northwestern part of the country have been totally or partially abandoned as sand dunes encroach on cropland. And with millions of Chinese farmers drilling wells to expand their harvests, water tables are falling under much of the North China Plain, which produces half of the nation’s wheat and a third of its corn,”

Further, “Chinese agriculture is also losing irrigation water to cities and factories. Cropland is being sacrificed for residential and industrial construction, including highways and parking lots that accommodate China’s voracious demand for automobiles. In 2009 automobile sales in China totaled just below 14 million, surpassing those in the United States for the first time. For every 1 million cars added to this fleet, at least 50,000 acres are paved over.”

Here is where it gets interesting. “In 1995 China produced and consumed 14 million tons of soybeans. By 2010 China was still producing 14 million tons of soy annually, but consuming 69 million tons.” China needs 80 million tons of grain each year to meet just 20 percent of its needs and the largest grain exporter in the world, the US, sells 90 million tons of grain each year. China may be sending back the US debt it holds in return for food.

Back to my silly broken-glass story. Clean up the mess and treat yourself to a new set of fine crystal. While the Philippine government frets about losing a portion of its exports market because of Japan’s problems and fears a mass exodus of workers from Japan, put in a larger context, there may be a beneficial upside.

As I wrote last week, “It is estimated by the UN Population Division that Japan will need to ‘import’ 1 million workers per year over the next two decades to supplement its labor force.” That has got to be good for the Philippines, regardless of our growth rate. We should be working to take advantage of this in light of the tremendous Japanese rebuilding effort right now.

While Chinese industrialization is a major problem for their country, it can be a boom for the Philippines. Chinese industrialization is not going to stop and their need for metals is unstoppable, metals that the Philippines has in rich abundance. This government needs to get its act together right now to provide sustainable, wealth creating mineral- extraction development.

I know it is all urban myth and nonsense about the Chinese word for crisis—weiji—actually meaning “danger” plus “opportunity.” But it makes a great story. And the truth is that out of every crisis comes opportunity for someone.



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