The Difference Principle

Can ethnic identity and individual freedom coexist?

Joel Kotkin from the February 1993 issue

(Page 3 of 5)

More recently, the primary Asian global tribes have employed deeply entrenched traditions of communal self-help to pace their rapid penetration of the world economy. Like the British, the Japanese have transformed themselves into a global tribe of enormous importance through the cultivation of a capitalist system uniquely dependent upon intra-ethnic cooperation.

Across a broad spectrum of commercial and crafts institutions, the Japanese as early as the 17th century created the basis of today’s system of cooperative business networks. Japanese manufacturers, from traditional village garment makers to multinational auto companies, rely heavily on specialized subcontractors. And the international trading companies, or sogo shosha, have developed worldwide networks to distribute raw materials, manufactured goods, and, most important, information about new products and markets. As a result, a small flatware maker in a Japanese village can, through an alliance with a trading company like Mitsui, sell its products from Java to Johannesburg. Such private innovations–not the ballyhooed role of the Japanese state–explain most of Japanese economic progress.

In fact, Japan’s economy is highly dependent on its tightly connected smaller producers, who account for some 70 percent of industrial value added, compared to the 40 percent that small companies contribute to the U.S. economy. As Japan scholar David Friedman suggests in his landmark The Misunderstood Miracle, Japan’s economy is hardly a "command" economy directed by a few genius planners or large companies; instead, its economic system resembles a web without a spider, characterized by strong horizontal and vertical linkages but lacking a central controlling element.

The success of such networks depends on a cultural ethic that stresses duty and obligation–to one’s employer, one’s customers, and one’s employees–rather than formal, legal structures. Although based on such clearly Asian sources as Buddhism, Confucian familialism, and Shinto traditionalism, this Japanese ethic has produced in the business world an effective equivalent to Calvinist faith and commercial energies.

Looking back at these roots, historian William Hauser, who has studied the intricacies of the 17^th-century Tokugawa economy, observes: "To describe the modern experience of Japan as ‘miraculous’ . . .is to overlook the realities of the Japanese case."

Communal self-help has proved equally important to the more recently emerging Asian global tribes. Hampered by government policies at home, the Indians and Chinese have developed their networks on a global scale, creating links between communities of more or less permanent immigrants. Like the Jews, Indians and Chinese found themselves usually discriminated against as outsiders by natives and dismissed as inferiors by colonial administrators, forcing them to rely heavily on each other for employment, sources of capital, and business intelligence.

Among the Chinese, these patterns can be seen most clearly in Southeast Asia and the West Coast of North America. Immigrants developed an elaborate system of huts, or informal credit associations, and local Chinese Chambers of Commerce to help newcomers adjust to the new conditions. As early as 1851 Chinese immigrants in San Francisco set up the Chinese Company, an organization whose purpose was to greet, protect, and find employment for newly arrived immigrants. Such associations still play an intermediary role in helping newcomers–familiarizing them with local business conditions, recommending immigration lawyers, finding housing, and so on. Within the estimated 20

million strong Indian diaspora, other means of resource pooling, largely within extended "joint family" corporations and informal kinship ties, provide the critical capital resources.

This emphasis on self-generated prosperity can best be seen in the Asians’ emphasis on self discipline and thrift. Both Indians and Chinese around the world boast savings rates that range upwards to 30 percent or 40 percent of gross income, better than twice that of the thrifty Japanese. When asked the reasons for their success, reports researcher Bernard Wong, old time New York Chinese constantly repeated the saying "Kan Kim Hay Ka," or "frugality is the key to success," certainly an apt parallel to the dicta of such Anglo-American writers as Samuel Smiles or Benjamin Franklin.

In the past, even such successful models of ethnic identity have been widely seen as fundamentally inimical to the creation of modern, cosmopolitan societies. Yet rather than serving as a retarding force, dispersed ethnic groups–from the Jews of antiquity to the Asian tribes of today–have flourished in and helped to develop tolerant, advanced commercial civilizations.

Throughout their history, the Jews have been widely regarded as narrow-minded and inner-directed, yet their historical circumstances drove them to create one of the world’s most cosmopolitan civilizations. The real "secret" of Jewish success lay not in their insularity but in an openness to new knowledge and opportunity. Historian Leon Poliakov notes that Jews, faced with frequent threats to their trades by the majority populations, "took refuge in the dynamic security of acquiescence in change."

As a scattered people dependent on their skills at transactions, Jews became indispensable not only as traders but as transmitters and translators of knowledge in such ancient centers as Babylon, Alexandria, and Antioch. During the Middle Ages, they served as intermediaries between at least three major cultures–Christian, Arabic, and Indian. Indeed, according to at least one medieval account, it was a Jewish scholar sent by an Arabic ruler to India who brought back the Indian symbols thereafter widely known as "Arabic" numerals.

With the opening of the new world and the coming of the Enlightenment, this cosmopolitan and inquisitive spirit grew, influencing the development of such European trading communities as Venice, Amsterdam, Paris, and London. As the Jews moved, notes the great French historian Fernand Braudel, so they strengthened already nascent prosperous economies; their arrival, he notes, was a sure sign business was on the rise and their departure equally an indication of diminished prospects. Indeed, the extent to which the Jewish economy has operated on a transnational basis has long been cause for oppression by nationalists and statists, whether from the right or the left.

Even today Jewish success is most pronounced in those fields–apparel, entertainment, investment banking, diamonds–where an international mindset remains critical. Like their ancient predecessors, many of today’s most successful Jewish business people still travel the world. "There are no borders anymore," explains Charles Dayan, the Syrian born Jew who owns Bonjour, a New York City based garment company. "China, El Paso, or Nashville–the only difference is that sometimes you have to carry a passport."

Similarly, much British success grew from adapting to changing conditions and cultivating cosmopolitan attitudes. In their global expansion, the British borrowed shamelessly the best techniques from France, Germany, or Asia for everything from building ships to constructing waterworks to clearing land. As Daniel Defoe remarked, perhaps a bit unfairly, the British improved everything and invented nothing.