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A Tale of Three Empires

A Tale of Three Empires

By Teutonic Knight

December, 2009


As the Old Trader put it, he always enjoys studying history, and believes it can be useful in plotting one's investment strategy.   Likewise, John Lounsbury once asserted it is important to understand the history of a country in order to gain insight into its politics and economics.

A recent Newsweek magazine cover page article “An Empire at Risk” (Sept. ’09) by Harvard Economics Professor Niall Ferguson reminds me of a related good read by the University of Newcastle upon Tyne Emeritus History Professor Bernard Porter's "Empire and Super-Empire" (Yale University Press, 2006).  So, are we an Empire?  If so are we at risk?  The Teutonic Knight  contends that those Anglo-Saxon views of the United States are distorted, and offers his alternate view.

Dear Professors: did you say "American Empire"?

The notion of an "American Empire" is a cold case and an Enigma - An Empire that never was! Unlike the illustrious Roman Empire epitomized by the Five Good Emperors (and Hadrian was a standout, kicking in the Hadrian Era), the Americans are either an ultimate hypocrisy, or a God-ordained benevolence to Mankind.  Case in point: Toward the end of the 19th Century, President McKinley was pursuing his expansionary policies, but Mark Twain adamantly advocated anti-colonialism.  We took over the Philippines after a brief and brutal war only to giving it up after some 50 years, and now we are saddled with a 20 plus-year backlog of would-be immigrants from that now independent country.

In short, we are forever caught in that giant space of indecision - To be, or not to be - An Empire!

The “American Empire” vs. British Empire

The “American Empire” if indeed it exists, would be in many respects diametrically opposite to that of the British.

The U.S. has been a giant magnet drawing huge influx of immigrants from all continents.  Whereas, the British Isles soil being thin  was the driving force for building up the British Empire (1600-2000) exporting its culture and its people.

Britain’s greatness lies in the rise of the British Empire where its industrial goods and services had enjoyed preferential advantages. For four hundred years from the Golden Elizabethan Era (circa 1590) to this date, that country’s crowning achievements in democracy, government institutions, science and literature reverberated as a model around the world.

Arguably, however, the visible “class-structure” of the British Society, while inducing authority, loyalty, discipline, hard work, may act as a barrier to upward mobility of its citizens.   At this point, my mind leads me to the 1951 black and white movie "The Man in the White Suit" where Sir Alec Guinness plays Sidney Stratton, a brilliant and obsessed young researcher working in a textile mill.  He invents an incredibly strong fiber which repels dirt and never wears out.

Stratton was unhappy.  One night working late in his laboratory, he ran into the lady janitor who sensing his unhappiness, jokingly said to him "...You haven't got that tie, eh?"  What she meant was that even Stratton graduated with First Class Honors from Oxbridge (supposedly then can walk on water), he did not attend one of those feeder schools of the power elites, and therefore, although he had the talents, he did not have the connections to move up fast in the corporate ladder.

America, on the other hand, is firmly based on an Ideal that “All Men Were Created Equal”.  As Billy Graham once said it in one of his best-selling books, the American experiment is one of the crown jewels of human history. Washington et al. founded this nation when monarchs and royalty were still in vogue.

We dreamed of such characters as Batman, Superman, Mickey Mouse, and Wonder Woman, among so many. People from around the world of all races and cultures could come to enjoy such great upward mobility.

Whatever your ancestors’ reason for coming, be it religious persecution, political turmoil, economic devastation, genocide, we call this place our home and strive to build it and preserve it as exemplary for the rest of the world.  People are willing to wait for 10, 20, or even 30 years in line for the quota to come up to take their turn.

An American Inflection Point

Yet, in the past two decades or so, never have I seen a country so blessed with its democratic traditions, so rich with natural resources, so envied for its law and order, so endowed with such innovative and entrepreneur talents, so technological advanced, and so militarily strong, and yet, so determined to blow it.

So how could this seemingly have happened?

One possibility is that historians attribute this potential inflection point to our immaturity as a new nation which is probably ingrained as part of the American culture.  Just as we, Americans, when we view the Chinese with bewilderment of their glorifying mathematicians as national heroes just to proving an obscure theorem, the same would hold true when they look upon us with such awe and scorn at our comedians, sport figures, Hollywood celebrities, talk show hosts and hostesses making hundreds of millions a year.

Another possibility is akin to the following fable.  There is a story that I was told when I was in kindergarten, and that was the race between the rabbit and the turtle. The rabbit runs fast, but the turtle is tenacious and perseveres. Normally, the rabbit would be ahead; but unfortunately he falls asleep.

Yet another possibility is too much politics.   From the outset back in circa 1800 this nation had thrived in politics - Ben Franklin couldn't get a decent pension from the then congress, and John Paul Jones had to seek a commission in the Russian Navy.

An Old Empire Rising from the East

Goldman Sachs’ prediction that China will ascend to world GDP preeminence in or around the 2027-2050 time frame bolds well with my own principally eclectic, macro, heuristic and subjective assessment as follows.

China has no tradition of democracy since the Xia Dynasty ~circa 1500 BC.   Western democracy originates from the Greeks, punctuated by the signing of the Magna Carter ~ circa 1215 AD, and the subsequent development of the British Parliament as its model.

Not only democracy is foreign to the Chinese, human rights for individuals start from zero and work their way up.  China will in my view continue its present course as a Dynastic entity – a Republic-in-Name-Only.

Let us go back in their history to discover hints for the future. The most recent Dynasty of the Han majority was the Ming.  Emperor Hongwu, a.k.a Ming Taizu was able to root out the Mongols of the Yuan Dynasty in 1368 after an onslaught of combined disastrous civil war, famine, and Black Plague that reduced the then population by some 60%. Subsequent reign of Hongwu from 1368-1398, an exceptional long reign, and the ablest rule of the Yongle Emperor a.k.a Ming Cheng Zu (famous for his envoy expedition to as far as Madagascar) lasted from 1402-1424 AD.

In retrospect, the Nationalist government under Generalissimo Chiang Kai-Shak was in actuality but a transitional period, from 1911-1949 in Chinese history.

Thus, it took about some 80 years from China to rise from the ruins to a world power, from 1368 to 1424 AD. Adding 80 to 1949 would roughly give us the Goldman Sachs 2027-2050 target.  This to me seems to be a tide of their history.

Viewing the Three Empires in Tandem

So, in summary, comparatively speaking, Britain’s strength lies in its merit-based well-organized institutions.   America’s strength lies in its inclination for innovation, entrepreneurship, and enterprising momentum.   China’s strength lies in its capacity for low-cost mass production.

Bell-Northern Research (BNR), the once fledging research arm of Nortel in the 1970's and 80's was touted as one of the world's most innovative hotbeds. BNR was noted for its free-roaming arms-length management style to fostering innovation. However, BNR had gone into sunset after reaching its zenith.  NT is now bankrupt.

While innovation is the necessary ingredient for success, it is hardly the sufficient. It takes know-how, yes, but acumen in management, and luck to aggressively productized to marketing and sustaining that lead.   Production has now become an emerging key factor, and for some situations, I dare say, is even more crucial than innovation per se.

Some say that the Japanese and the Chinese are not as innovative minded (perhaps culturally?). How would one observe in this regard about the Japanese auto sector these days?

Right from the beginning, as Toyota started in circa 1949 the Japanese had meticulously embarked on a journey to setting their far-sighted goals on a long-term basis - a 40-year plus horizon.

Bit by bit they overcame those numerous hurdles - use better steel to correct their horrible body rust problems, leveraging on American Deming's quality principles which we woefully discarded to raising reliability levels, emphasizing fuel efficiency, hiring American stylist to design exterior bodies, hiring American publicists to advertise, building network of dealers first in urban then rural areas by offering domestic dealerships joint brands on the same location, purchasing licensing rights from such firms as Borg-Warner to acquiring automatic transmission technologies, making more leg rooms in front seats to fit 6-foot plus Americans, and finally, use Southern labor to do the assembly - except one thing - the engineering is Japanese.

Chinese scientific achievements long exhibited in their ancient history, in astronomy, gun power, printing, paper currency, mathematics, to name a few.   True, their weakness lies in that it is all within the government's control and purview and the government had been the sole employer.

The Chinese have cultural issues inherited from the traditional hold of the family   perceived as lack of freedom. On the other hand, freedom could be abused; an extreme case in point would be our greedy CEO's who made off several hundred million dollars a year and left us with this mess. The Chinese politicians are authoritarian akin to be a new dynasty with an emperor in charge.   However, our two political parties have now shown signs of deterioration of late.

The point I am trying to get across is that it is the rate of change that counts. China in 1800 at the death of the Emperor Quinlong was the largest and most wealthy nation on earth. For those who visited the Williamsburg, VA Governor House, one would have noticed that the decor was distinctively Chinese to reflect the glory and prestige of the greatest empire at the time. Unfortunately, it was a waterfall juncture when that nation soon began its long descent ever since till modern time, mainly because of the onslaught of corruption. It took only a little less than a 100 years for them to spiral down to be carved out by powerful invaders.

In retrospect, historians using scientific economic estimations generally believe that America had peaked in its power, wealth, and prestige in 1974 coinciding with the Fall of Saigon (now Ho Chi Minh City). If indeed history and time will prove that this postulation is correct, then the rise of the American (Empire) will be short by history’s standard, very short indeed.

American Can become Anything

I used to take walks after lunch in the wooded trails along the Ottawa (Ontario, Canada) with some of my colleagues when I was working at a government laboratory several decades ago.   It was a cool but damp afternoon in October.   The sun was hazy and the river seemed to be covered by a sheet of white veil.    We were chatting and chatting, then Dr. Ted remarked to us: “…You know, when I first arrived in England and met my professor, he said to me one would have to careful with these American boys (although he was Canadian).  In England here you take a look at him and hear him speak for a few minutes you could size up his social strata.  With these American boys you wouldn't’t know if he is the son of a Billionaire or a garbage collector…”   I later found out that Ted was a Governor-General Gold Medalist, the valedictorian who scored the highest grades in his graduating class of the entire university.

This nation had seen even graver crises before but by the grace of serendipity every time we were able to ride it out even stronger. I have faith in counting on the tenacity and resiliency of the American people.   As that English professor said to Dr. Ted, PhD (Imperial), DIC, we can become anything.  

Disclosure: No positions