Lee Kuan Yew on East Asia's Economic Prospects

Lee Kuan Yew, Senior Minister of the Republic of Singapore

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Lee Kuan Yew (Photo: US Department of Defense)

There are many things that I'm thankful for the education in the United States, I got an MBA, which has been a very effective passport for me to open many doors. America has continued to maintain a very strong liberal education system. When I was brought in to the world of Xerox, back in 1963, I immediately met the man who was the head of Xerox then. His name was Joseph C. Wilson, who introduced me to the Aspen Institute in Aspen, Colorado. This was when I challenged Mr Wilson, for the typical American shortsightedness, quarterly profit orientation, and disregarding long-term investment. “Mr Wilson, America would lose competition to Japan for sure, maybe even to China and Korea.” But Mr Wilson, in his warm, fatherly manner, said, "You are right in that aspect, we are very short-term profit oriented, but that's part of the reality. This is what the market wants us to be but that is not everything about America, that's not everything about American business, and that is not everything about American business people. Go on and visit Aspen, and let's have another discussion after your visit.” To make a long story short, I went to Aspen for the executive seminar. It was two weeks at that time - it's been shortened to ten days now. I felt so ashamed. Unfortunately Mr Wilson had died a few years before. Aspen had been created in 1950, with the urge from the leaders in the United States, and some from Europe. Robert Hutchinson, the president of the University of Chicago, told the people that - this is back in 1950 - we, the Americans, and many of the other developed nations, suffer from our world being run by narrow-minded specialists. They don't know how to talk to each other. So, they went on to create the Aspen Institute, connecting classics with the modern happenings. I told myself, who is shortsighted? It is not Americans or Europeans. No, we Japanese are the ones who should be blamed for shortsightedness, we have become totally how-to oriented, forgetting about the fundamental objectives of why people live. Fundamental objectives of why corporations exist, the roles of corporations in society. We had a chance to think about it. We started the Japan Aspen Institute six years ago, and it is doing well. It is ironical that it was created in the middle of the time when the general air in the Japanese business climate of the last 10 years was that the global business model is the Anglo-Saxon American business model, a sort of misunderstood Anglo-American business model, which was to put the market cap maximisation at any cost, at the top of the list of priorities. This is the name of the game - in other words, this is a shareholder's game. Pardon my extreme language. Stakeholders - nonsense! That is too complicated. You have to run a simple game, you have to please shareholders, in the short-term and long-term: unless you do it, you are lost.

But we have had, around the world, repercussions, rebounds, from this extreme focusing on one stakeholder, and particularly, even including the short-term professional orientation, the pendulum is being swung - hopefully to the centre, we could go to the other extreme as well. Now in Japan, before this took place, I must admit, Japan had been at the other extreme. We were talking about the whole - help the community to be run for the benefits of employees. Maybe customers and employees at the top, and investors were told - please wait. In the long run, you'll be paid. But except for those bubble years, when of course there were capital gains, and particularly after the bubble burst, many investors and shareholders found out that not only had they lost a great deal of their investment, but they also had no idea how to be paid for the investment from the corporations they had invested in. So in a way it was natural for them to really go to the other extreme and say “pay us, maximise our investment returns, and otherwise you're fired”.

So we are now right in the middle of finding our own business models. Number one: accepting some of those extremes of so-called American ways, but the Japanese economy has been helped by that direction, manufacturers have been more productivity/profitability-oriented, they have forced their excesses to come down, and they are in that sense more competitive. At the same time, this whole question and debate about corporate social responsibility, that sort of started in Europe and is going around the world. Particularly in Japan, it's like a fad. If you're a business leader, unless you say something about CSR, you are not invited to speak, or you're not invited even to important meetings. Now corporate social responsibility, or corporate societal responsibility, which I prefer it to be called: we all know that all good business either here or in Japan, America, Europe - many of those corporations that have weathered generations of challenges and who prosper today, have grounded their businesses, placing their stakeholders in their views. Not just one stakeholder, not just shareholders, not just employees: stakeholders in balance. But I guess when this CSR drive developed in Europe and caught the imagination of people around the world, partly because it really came in the midst of corporate scandals. In some ways compliance plays the biggest role in the whole of CSR. But in Japan, at least, we think this is probably a golden time. Firstly, to let a more competitive business model say to our people: yes, we are now a more mature economy, we will not go back to the unemployment rate of 2% or lower, but we will develop the system where we will have a more flexible labour market and therefore just a high unemployment rate does not signify poor economic conditions; after all, we are experiencing a very low birth rate and will become, among the developed nations, one of the more aged in the next couple of decades. So we do need to develop a system to make much better use of a slowing flattening population, particularly the working population that we have. Labour mobility is going to be a very important part of it. But also, if labour mobility is important, it is also important to again emphasise productivity in the larger sense, not just physical, of every single working person: men, women, old, young. And this is where that factor I mentioned earlier is relevant: how creative, how imaginative a man can be, not just accepting the challenges and questions and just trying to find the answers. We do need people who will develop a new set of questions, a new set of challenges, in order to develop the world that corporations can develop their new business and new challenges. As I said, education is not just teaching them to count things better, to memorize things better, but to let people develop their ability to think better about whats and whys, and this is going to be the most important challenge if we are going to go up against the challenges of creating more imaginative and more creative people.