ECONOMICS: It's stupid to be afraid (Lee Kuan Yew to Der Spiegel)

In summary, Singapore's first-ever prime minister Lee Kuan Yew discusses the rise of Asia in the world economy and China's role in it. He shares his insights on the challenges and opportunities this presents for countries like Singapore, and emphasizes the importance of adapting and staying competitive in the changing global landscape. He also addresses concerns about China's advancements and urges not to be afraid of it, but to focus on areas where Western countries still have an advantage. He predicts that there may be challenges and changes ahead, but ultimately sees a strong and successful future for both Asia and the West.
  • #1
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In case anyone is interested in the 21st Cent role of China in world economy here is an interview with a smart realistic guy:


"It's Stupid to be Afraid"

Singapore's first-ever prime minister, long-time government head and current political mentor Lee Kuan Yew talks about Asia's rise to economic power, China's ambitions and the West's chances of staying competitive.

SPIEGEL: The political and economic center of gravity is moving from the West towards the East. Is Asia becoming the dominant political and economic force in this century?

Mr. Lee: I wouldn't say it's the dominant force. What is gradually happening is the restoration of the world balance to what it was in the early 19th century or late 18th century when China and India together were responsible for more than 40 percent of world GDP. With those two countries becoming part of the globalized trading world, they are going to go back to approximately the level of world GDP that they previously occupied. But that doesn't make them the superpowers of the world.

SPIEGEL: Their leading politicians have publicly discussed the so-called "Asian Century".

Mr. Lee: Yes, economically, there will be a shift to the Pacific from the Atlantic Ocean and you can already see that in the shipping volumes of Chinese ports. Every shipping line is trying to get into association with a Chinese container port. India is slower because their infrastructure is still to be completed. But I think they will join in the race, build roads, bridges, airports, container ports and they'll become a manufacturing hub. Raw materials go in, finished goods go out.

SPIEGEL: You've been the leader of a very successful state for a long time. Returning from your time in China, are you afraid for Singapore's future?

Mr. Lee: I saw it coming from the late 1980s. Deng Xiaoping started this in 1978. He visited Bangkok, Kuala Lumpur and Singapore in November 1978. I think that visit shocked him because he expected three backward cities. Instead he saw three modern cities and he knew that communism -- the politics of the iron rice bowl -- did not work. So, at the end of December, he announced his open door policy. He started free trade zones and from there, they extended it and extended it. Now they have joined the WTO and the whole country is a free trade zone.

SPIEGEL: But has China's success not become dangerous for Singapore?

Mr. Lee: We have watched this transformation and the speed at which it is happening. As many of my people tell me, it's scary. They learn so fast. Our people set up businesses in Shanghai or Suzhou and they employ Chinese at lower wages than Singapore Chinese. After three years, they say: "Look, I can do that work, I want the same pay." So it is a very serious challenge for us to move aside and not collide with them. We have to move to areas where they cannot move.

SPIEGEL: Such as?

Mr. Lee: Such as where the rule of law, intellectual property and security of production systems are required, because for them to establish that, it will take 20 to 30 years. We are concentrating on bio medicine, pharmaceuticals and all products requiring protection of intellectual property rights. No pharmaceutical company is going to go have its precious patents disclosed. So that is why they are here in Singapore and not in China.

SPIEGEL: But the Chinese are moving too. They bought parts of IBM and are trying to take over the American oil company Unocal.

Mr. Lee: They are learning. They have learned takeovers and mergers from the Americans. They know that if they try to sell their computers with a Chinese brand it will take them decades in America, but if they buy IBM, they can inject their technology and low cost into IBM's brand name, and they will gain access to the market much faster.

SPIEGEL: But how afraid should the West be?

Mr. Lee: It's stupid to be afraid. It's going to happen. I console myself this way. Suppose, China had never gone communist in 1949, suppose the Nationalist government had worked with the Americans -- China would be the great power in Asia -- not Japan, not Korea, not Hong Kong, not Singapore. Because China isolated itself, development took place on the periphery of Asia first.

SPIEGEL: Such a consolation won't be enough for the future.

Mr. Lee: Right. In 50 years I see China, Korea and Japan at the high-tech end of the value chain. Look at the numbers and quality of the engineers and scientists they produce and you know that this is where the R&D will be done. The Chinese have a space programme, they're going to put a man on the Moon and nobody sold them that technology. We have to face that. But you should not be afraid of that. You are leading in many fields which they cannot catch up with for many years, many decades. In pharmaceuticals, I don't see them catching up with the Germans for a long time.

SPIEGEL: That wouldn't feed anybody who works for Opel, would it?

Mr. Lee: A motor car is a commodity -- four wheels, a chassis, a motor. You can have modifications up and down, but it remains a commodity, and the Chinese can do commodities.

SPIEGEL: When you look to Western Europe, do you see a possible collapse of the society because of the overwhelming forces of globalization?

Mr. Lee: No. I see ten bitter years. In the end, the workers, whether they like it or not, will realize, that the cosy European world which they created after the war has come to an end.

SPIEGEL: How so?

Mr. Lee: The social contract that led to workers sitting on the boards of companies and everybody being happy rested on this condition: I work hard, I restore Germany's prosperity, and you, the state, you have to look after me. I'm entitled to go to Baden Baden for spa recuperation one month every year. This old system was gone in the blink of an eye when two to three billion people joined the race -- one billion in China, one billion in India and over half-a-billion in Eastern Europe and the former Soviet Union.

SPIEGEL: The question is: How do you answer that challenge?

Mr. Lee: Chancellor Kohl tried to do it. He did it halfway then he had to pause. Schroeder tried to do it, now he's in a jam and has called an election. Merkel will go in and push, then she will get hammered before she can finish the job, but each time, they will push the restructuring a bit forward.

SPIEGEL: You think it's too slow?

Mr. Lee: It is painful because it is so slow. If your workers were rational they would say, yes, this is going to happen anyway, let's do the necessary things in one go. Instead of one month at the spa, take one week at the spa, work harder and longer for the same pay, compete with the East Europeans, invent in new technology, put more money into your R&D, keep ahead of the Chinese and the Indians.

SPIEGEL: You have seen yourself how hard it is to implement such strategies.

Mr. Lee: I faced this problem myself. Every year, our unions and the Labour Department subsidize trips to China and India. We tell the participants: Don't just look at the Great Wall but go to the factories and ask, "What are you paid?" What hours do you work?" And they come back shell-shocked. The Chinese had perestroika first, then glasnost. That's where the Russians made their mistake.

SPIEGEL: The Chinese Government is promoting the peaceful rise of China. Do you believe them?

Mr. Lee: Yes, I do, with one reservation. I think they have calculated that they need 30 to 40 -- maybe 50 years of peace and quiet to catch up, to build up their system, change it from the communist system to the market system. They must avoid the mistakes made by Germany and Japan. Their competition for power, influence and resources led in the last century to two terrible wars.

SPIEGEL: What should the Chinese do differently?

Mr. Lee: They will trade, they will not demand, "This is my sphere of influence, you keep out". America goes to South America and they also go to South America. Brazil has now put aside an area as big as the state of Massachusetts to grow soya beans for China. They are going to Sudan and Venezuela for oil because the Venezuelan President doesn't like America. They are going to Iran for oil and gas. So, they are not asking for a military contest for power, but for an economic competition.

SPIEGEL: But would anybody take them really seriously without military power?

Mr. Lee: About eight years ago, I met Liu Huaqing, the man who built the Chinese Navy. Mao personally sent him to Leningrad to learn to build ships. I said to him, "The Russians made very rough, crude weapons". He replied, "You are wrong. They made first-class weapons, equal to the Americans." The Russian mistake was that they put so much into military expenditure and so little into civilian technology. So their economy collapsed. I believe the Chinese leadership have learnt: If you compete with America in armaments, you will lose. You will bankrupt yourself. So, avoid it, keep your head down, and smile, for 40 or 50 years.

SPIEGEL: What are your reservations?

Mr. Lee: I don't know whether the next generation will stay on this course. After 15 or 20 years they may feel their muscles are very powerful. We know the mind of the leaders but the mood of the people on the ground is another matter. Because there's no more communist ideology to hold the people together, the ground is now galvanised by Chinese patriotism and nationalism. Look at the anti-Japanese demonstrations.

SPIEGEL: How do you explain that China is spending billions on military modernisation right now?

Mr. Lee: Their modernisation is just a drop in the ocean. Their objective is to raise the level of damage they can deliver to the Americans if they intervene in Taiwan. Their objective is not to defeat the Americans, which they cannot do. They know they will be defeated. They want to weaken the American resolve to intervene. That is their objective, but they do not want to attack Taiwan.

SPIEGEL: Really? They have just passed the aggressive anti-secession law and a general has threatened to use the nuclear bomb.

Mr. Lee: I think they have put themselves into a position internationally that if Taiwan declares independence, they must react and if Beijing's leadership doesn't, they would be finished, they would be a paper tiger and they know that. So, they passed the anti-secession law to tell the Taiwanese and the Americans and the Japanese, "I do not want to fight, but if you allow Taiwan to go for independence, I will have to fight." I think the anti-secession law is a law to preserve the status quo.

SPIEGEL: Another critical point in Asia is the growing rivalry between China and Japan.

Mr. Lee: It's been dormant all this while, right? But I think several things happened that upped the ante. They possibly coincide with the policy of Japanese Prime Minister Junichiro Koizumi. There is this return to "we want to be a normal country." They are sending ships to Afghanistan to support the Americans, they sent a battalion to Iraq, they reclaimed the Senkaku islands, and most recently, they joined the Americans in declaring that Taiwan is a strategic interest of Japan and America. That raises all the historical memories of the Japanese taking away Taiwan in 1895. Then they're applying to be a permanent member of the Security Council. So, I think the Chinese decided that this is too much. So, they have openly said they will object to Japan becoming a member of the Security Council.

SPIEGEL: Well, the United States said the same to Germany.

Mr. Lee: Exactly. So, the whole process is trying to define the position for the next round, maybe in 10 to 15 years, by which time the world will be a different place.

SPIEGEL: Can the Chinese convince their North Korean ally Kim Jong-Il to get rid of his nuclear program?

Mr. Lee: North Korea is a riddle wrapped up in an enigma. The leaders in North Korea believe that their survival depends upon having a bomb -- at least one nuclear bomb. Otherwise, sooner or later, they will collapse and the leaders will be put on trial like Milosevic for all the crimes that they have committed. And they have no intention of letting that happen.

SPIEGEL: Who can stop them? The Americans?

Mr. Lee: Yes, but at a price, a heavy price.

SPIEGEL: Could the Chinese do it?

Mr. Lee: Possibly. By denying food, denying fuel, so they would implode. But will the Chinese benefit from an imploded North Korea? That brings the South into the North. That brings the Americans to the Yalu River. So, the North Koreans have also done their calculations and know that there are limits.

SPIEGEL: So Kim is in a strong position?

Mr. Lee: If I were Kim I would freeze the programme, tell the Americans you can inspect, but if you attack me, I will use it. That leaves the Americans with the problem of checking and verifying and intercepting ships, aircraft, endless problems.

SPIEGEL: Would that save Kim's regime?

Mr. Lee: In the long run I think they will implode sooner or later because their system cannot survive. They can see China, they can see Russia and Vietnam, all opening up. If they open up, their system of control of the people will break down. So they must go.

SPIEGEL: If the six party talks fail, do you foresee an arms race in Eastern Asia?

Mr. Lee: If the nuclear program is frozen, there won't be an arms race. Eventually, it is not in China's interests to have an erratic Korea nuclear-armed and a Japan nuclear-armed. That reduces China's position.

SPIEGEL: Many Americans fear that China and the US are bound to become strategic rivals. Will this become the great rivalry of the 21st century?

Mr. Lee: Rivals, yes, but not necessarily enemies. The Chinese have spent a lot of energy and time to make sure that their periphery is friendly to them. So, they settled with Russia, they have settled with India. They're going to have a free trade agreement with India -- they're learning from each other. Instead of quarrelling with the Philippines and the Vietnamese over oil in the South China Sea, they have agreed on joint exploration and sharing. They've agreed on a strategic agreement with Indonesia for bilateral trade and technology.

SPIEGEL: But the Americans are trying to encircle China. They have won new bases in Central Asia.

Mr. Lee: The Chinese are very conscious of being encircled by allies of America. But they are very good in countering those moves. South Korea today has the largest number of foreign students in China. They see their future in China. So, the only country that's openly on America's side is Japan. All the others are either neutral or friendly to China.

SPIEGEL: During your career, you have kept your distance from Western style democracy. Are you still convinced that an authoritarian system is the future for Asia?

Mr. Lee: Why should I be against democracy? The British came here, never gave me democracy, except when they were about to leave. But I cannot run my system based on their rules. I have to amend it to fit my people's position. In multiracial societies, you don't vote in accordance with your economic interests and social interests, you vote in accordance with race and religion. Supposing I'd run their system here, Malays would vote for Muslims, Indians would vote for Indians, Chinese would vote for Chinese. I would have a constant clash in my Parliament which cannot be resolved because the Chinese majority would always overrule them. So I found a formula that changes that...

SPIEGEL: ... and that turned Singapore de facto into a one party state. Critics say that Singapore resembles a Lee Family Enterprise. Your son is the Prime Minister, your daughter-in-law heads the powerful Development Agency...

Mr. Lee: ... and my other son is CEO of Singapore Telecoms, my daughter is head of the National Institute for Neurology. This is a very small community of 4 million people. We run a meritocracy. If the Lee Family set an example of nepotism, that system would collapse. If I were not the prime minister, my son could have become Prime Minister several years earlier. It is against my interest to allow any family member who's incompetent to hold an important job because that would be a disaster for Singapore and my legacy. That cannot be allowed.

The interview was conducted by editors Hans Hoyng and Andreas Lorenz.

Translated from the German by Christoper Sultan

thanks to Steve Hsu who runs the blog Information Processing
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  • #2
It is pretty much my opinion as well. I don t think China will be able to challenge the U.S military, but they will become more and more of a economic rival.
  • #3
kant said:
It is pretty much my opinion as well. I don t think China will be able to challenge the U.S military, but they will become more and more of a economic rival.

On the military issue, I disagree for several reasons.

military power is based on things like manufacturing base, population, engineering capability (for transport and weapons design), sense of moral righteousness (morale, motivation), having plenty of friends and allies.

I think China is turning out about 10 times the number of engineers and is developing a strong economy with an advanced high-tech sector (like manufacturing MRI medical scanning devices, space technology etc.)

Because of the Bush war popularity has shifted and China has become increasingly popular, globally somewhat overcoming its bad image and getting the friendly international image, while the US is the feared or despised bully. Lack of strong alliances makes carrying out foreign policy including military operations more expensive, risky, and difficult.

the war has also undermined the US military, growing reluctance to volunteer, declining morale, failing public support, declining sense of "we are the good guys", US army is now recruiting in the pacific islands, trying to get polynesian volunteers. severe shortage.

China does not seem to have such a big difficulty maintaining troop strength.

I would guess that in the 21st century China's military position will roughly parallel its economic position. It will be concerned with resources, like oil, forest products, certain metals, and it will project military power (as the US is doing) with an eye to ensuring resources essential to its economy.

I see no reason to assume, as you do, kant, that the US will retain military dominance. On what material, manpower, moral basis? Please explain.
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  • #4
marcus said:
I see no reason to assume, as you do, kant, that the US will retain military dominance. On what material, manpower, moral basis? Please explain.
America's military dominance is based primarily on technology, and there is no reason to believe that is going to change any time in the forseeable future.

China has, for the most part, stayed out of international military missions by choice, but at the moment (and for the forseeable future), they could contribute virtually nothing even if they wanted to. Consider in your mind what a Chinese-led Gulf War would have looked like in 1991, for example.

It does, however, matter which component of the military you are talking about. Ie, in raw infantry numbers, the Chinese military might be bigger, but what good is a large infantry? They have a lot of tanks, but for what purpose? They might be able to invade Russia with their tanks, but not the US and not Taiwan or Japan.

edit: The second basis for our military dominance is desire. While many Western nations posess similar technology, most have decided (for both political and economic reasons) to greatly reduce the size and strength of their militaries. NATO may read like a mutual protection pact, but the reality is that its a America-will-protect-us pact.

I'm detecting a little bit of a 1930s era nationalistic and cold war era brinkmanship tone to the interview questions and in the thread, but I agree with Mr. Lee that that isn't necessarily the way it is going to be between China and the US. IMO, those ideas are dead and are very unlikely to affect the politics here. Economics will drive the politics between the US and China.
I think China is turning out about 10 times the number of engineers and is developing a strong economy with an advanced high-tech sector (like manufacturing MRI medical scanning devices, space technology etc.)
But for the next 50 years, the tasks that those engineers tackle are going to be dominated by infrastructure and what we in the west consider basic needs. Ie, yeah, there may be a demand for computers in the cities, but people in the rural areas need electricity, running water, and phones before they can even think of buying a computer.
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  • #5
Hello Russ, glad to see you interested in these issues.
You might like to check out this article from FORTUNE MAGAZINE

Scroll about 9/10 of the way down the page, to the Fortune Magazine article. Or look at the righthand side menu called "Page Index" and click on

"Fortune on globalization and US competitiveness"

That will jump you down the page to where the article is quoted. There is a little Charles Atlas advertisement cartoon knockoff.

I am not primarily interested in arguing. And i expect you aren't either.
I'm happy if people simply have good up-to-date information to base
their subjective opinions on. Then they can think whatever it is they
decide to think.
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  • #6
I'm an engineer (one of the at-risk groups mentioned) and I'm not particularly worried about overseas outsourcing of engineering. From what I've seen, it just plain doesn't work (especially in my field).

I don't think that's quite what this is about though: its more about entire businesses going overseas. And while that's something that is already happening (car companies are a great example), I think countries like China and India have more to gain from it than the US has to lose from it.
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  • #7
russ_watters said:
its more about entire businesses going overseas. And while that's something that is already happening (car companies are a great example), I think countries like China and India have more to gain from it than the US has to lose from it.

I am in close agreement with you in basic attitude as regards cars.

the global sharing of industrial development does not have to hurt us collectively, although I am sorry for some of the effects on some sectors of our country's labor force---loss of livlihood, security, and a certain intangible:

there is a certain capability and hands-on knowhow that people in manufacturing industry get by osmosis at pretty much every level (maybe not the very worst assembly line jobs but at many levels) that they don't get in a lot of service occupations

the GI of WW2 was from a farmer/factoryworker society and he could often fix things that broke and jury-rig stuff outside the rule book and keep stuff running, or so the legend goes.

working in industry where there is a real physical product can be educational. so there is some collateral special value to those manufacturing jobs that are now migrating overseas.

but overall there are compensating good effects

my main reaction, Russ, is how does it sound if we substitute the word
INDUSTRIES for your word "businesses", in your sentence. I mean industries as in the aircraft industry, the high-tech weapons industry, the medical instrument industry, the computer hardware industry, drilling equipment, cranes, mining, earthmoving heavy equipment...

its more about entire industries going overseas...

I guess we will just have to see what goes and what stays.

Related to ECONOMICS: It's stupid to be afraid (Lee Kuan Yew to Der Spiegel)

1. What did Lee Kuan Yew mean by "It's stupid to be afraid" in regards to economics?

Lee Kuan Yew, the founding father of modern Singapore, believed that being afraid of economic competition and change was foolish. He believed that embracing and adapting to economic challenges was crucial for a country's success.

2. How does Lee Kuan Yew's statement relate to his economic policies?

Lee Kuan Yew's statement reflects his belief in free market principles and the importance of adapting to global economic trends. He implemented policies that encouraged foreign investment and trade, leading to Singapore's economic success.

3. Did Lee Kuan Yew face any criticism for his economic policies?

Yes, Lee Kuan Yew faced criticism for his strict policies and authoritarian approach to governance. Some argued that his policies favored the wealthy and suppressed individual freedoms. However, his economic strategies were ultimately credited for Singapore's economic growth and stability.

4. How does Lee Kuan Yew's statement apply to other countries?

Lee Kuan Yew's statement applies to all countries as it highlights the importance of embracing change and competition in the global economy. It serves as a reminder that being afraid and resistant to economic change can hinder a country's progress.

5. How is Lee Kuan Yew's legacy in economics still relevant today?

Lee Kuan Yew's economic policies and philosophy continue to be relevant today as many countries struggle with economic challenges and globalization. His emphasis on adaptability and embracing change serves as a valuable lesson for current leaders and policymakers.

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