An American capitalist seeks profits, and a future for his children, in Asia
So Jim Rogers is trying to convince me that I should relocate to Korea, marry a nice local girl, become a farmer, and teach our kids Chinese while waiting for the imminent Korean reunification, which will make me rich, rich, rich. He’s not kidding. (I’m thinking about it.) Rogers, the gazillionaire investor and adventurer, has followed his own advice: He decamped for Singapore a few years ago and crackles with paternal pride when bragging about his daughters’ Mandarin: “They’re six and two, so they’re not reciting Shakespeare in Chinese, but both of my daughters are perfectly fluent — they have two native languages now. And the best advice I can give you is to teach your children and grandchildren Mandarin.” The United States, Rogers reasons, is overleveraged, undercapitalized, and beset on all sides by competitors with sharp elbows and growly stomachs — a business with an ugly balance sheet, and he’s getting out. It’s the ultimate short position, but with a long-term view: Jim Rogers isn’t just talking profits, but progeny. He’s shorting the West.
“If you were smart in 1807, you moved to London,” he told CNBC, explaining his move. “If you were smart in 1907, you moved to New York City. And if you are smart in 2007, you move to Asia.”
The inevitability of China’s rise, the unshakable certainty that it must surpass the United States as the world’s alpha dog, is an article of faith — frequently an unexamined one — that permeates the conventional wisdom like the brown smog covering a Chinese industrial town. But it’s still a great time to be rich and connected in the United States, and our best and brightest aren’t exactly stampeding to Beijing, Bombay, or Seoul, much less putting down permanent roots there. Rogers has already made his splendiferous fortune — he was living in a six-story Manhattan townhouse and circling the globe with his wife in a bespoke Benz before he up and moved — so he hasn’t gone east only in search of profits. He still talks the talk of an old-school Wall Street pony picker, but he isn’t just trying to get ahead of the market: He’s trying to get ahead of history.
“If you look at the huge creditor nations in the world, they’re all in Asia: China, Hong Kong, Singapore, India. Saudi Arabia, if you want to go that far west. This is where the money is — and you know where the debts are.” Voluble on the symptoms of American decay, Rogers is shy about diagnosing the underlying malady. “The debt didn’t make us debtors, something else made us debtors. Debt’s a symptom. What was the cause? Pick your own reason. Look, Karl Marx knew it, Adam Smith knew it: The way you create a successful economy is — you build capital. And that’s what the Asians did. Maybe they had to. Maybe it was dumb luck. You decide.”
Maybe it was dumb luck: Between 1969 and 1980, the S&P composite index returned a total of 47 percent, and the Quantum Fund, which Rogers launched with financier George Soros, returned 3,365 percent. Famously, they made a massive bet against the British pound and turned $1 billion on that single transaction, back when $1 billion meant something. Rogers has been wrong about some things — at least, he’s been wrong about the timing — but he’s been right about a lot, too. Say he’s right only one time out of three, and then consider these three predictions: 1) Massive food shortages are coming, and will drive up the prices of agricultural commodities worldwide; 2) the United States will default on its sovereign debt — and not decades from now, but soon; 3) the United States is headed for economic isolationism and domestic political repression. Rogers believes that, like it or not, the model of Asia’s future is more like authoritarian China than democratic India — and it is telling that he chooses to live in Singapore, which is basically an air-conditioned fascist shopping mall with sovereignty — and he’s more worried about the politics in Washington than those in Beijing.
“I’m an American, I don’t enjoy saying this. It’s not fun, but one has to face facts, or one will suffer. We’re all God-fearing citizens of our nation, whatever the nation may be. And we always tell ourselves that our problems are caused by three classes of people: The first is foreigners, and it’s easy to attack foreigners, because they speak a different language, have different religions, their food smells bad, they smell bad. Then they attack the bankers and the financial types. Nobody likes bankers, especially successful bankers. The third group is the journalists, and politicians say, ‘If those sons of bitches didn’t write all this bad stuff, we wouldn’t have all these problems.’ What happens is, you end up with a closed-off society, much to the chagrin of your children and grandchildren.” You might recall that, in his State of the Union address, President Obama raised the alarm that “foreign entities” were threatening to undermine American democracy, and that he has devoted a fair amount of time to vilifying bankers. The president’s sustained attacks on unfriendly media outlets and commentators are too familiar to need rehashing.
For precedent, Rogers cites history — endlessly, tirelessly, manically: Britain, once the world’s greatest power, humbly taking an IMF bailout just a few decades after its peak. Burma, within Rogers’s lifetime the richest country in Asia, ground down to a basket case. Ghana was, at the time of its independence, the richest country in Africa, producing 10 percent of the world’s gold and enjoying a per capita GDP equal to South Korea’s. Thirty years on, South Korea’s per capita GDP had quadrupled, while Ghana’s had fallen by a fifth as the nation was reduced to a shambles by Kwame Nkrumah — not a scheming colonel with a pistol and a goon squad, but an Ivy League graduate with the best of intentions.
In spite of the relentlessly rip-roaring style of his discourse, most of his predictions are not that radical. He’s interested in the small things, the texture of life. “When I was a student at Oxford in the Sixties, I couldn’t believe the state of the place: This is Oxford? Compared to where I’d gone to school in the U.S., it was run-down, decrepit, a mess. That will be the situation in the U.S. in the next 30 to 40 years. Start with the airport. You fly into JFK, and it’s a third-world airport. You fly into Singapore, it’s stunning. In the U.S., the highways, bridges — they’re all in a serious state of decline. In Asia, they’re in a serious state of improvement. And for future generations, there will be more opportunities in Asia than in the U.S. In Asia, whatever energies they have are going to be plowed back into building and developing the economy, the social system, and the political system. For the United States, it’s going to be plowed into paying off previous obligations.”
That view is shared by another expatriate in Asia, Marc Faber, who made his mark as Drexel Burnham Lambert’s boss in Hong Kong and is best known to investors as the publisher of the eccentric Gloom, Boom, and Doom Report. His tone and style are perhaps more measured than Rogers’s, but his assessment is substantially the same. He currently resides in Thailand, but he, too, is pulled by the gravity of the Sinosphere. “When I first went from the U.S. to Asia in 1973, the U.S. was . . . still the U.S. And São Paulo and Rio and Shanghai and Mumbai and Singapore and Hong Kong were poor cities. Today, you go to the U.S., you don’t see much difference between San Francisco or L.A. and São Paulo or Mexico City. And Shanghai is a very modern city.”
Both Faber and Rogers have complex attitudes toward China’s authoritarian regime. Unlike New York Times columnist Tom Friedman, who does journalistic handstands in celebration of the ability of the “enlightened” despots in Beijing to get things done, Faber does not seem to harbor very many illusions about the nature of China’s government. (For more on Friedman’s journalistic misdeeds, see Jonah Goldberg’s elegant backhanding on page 38.) But the Swiss-born financier has his reservations about the main competing models, too. “When I moved to Hong Kong in 1973, there was no democracy. We had a governor, and he was a benign dictator in the sense that he had British values. In South Korea from 1973 until the 1980s, they had military regimes and dictatorships. The same is true of Taiwan, Singapore, and so on. We shouldn’t misunderstand China, in the sense of believing that it’s run by a dictator. China has a one-party system, but capable people move upstairs within the Communist Party. It’s not ideal, but I’m not sure democracy a l’americana is an ideal system, either.”
And that, in many ways, gets to the heart of the question about the Chinese model, the Hong Kong model, and the Singapore model: How important is political liberalism in relation to economic liberalism? The Heritage Foundation ranks Hong Kong and Singapore the most economically free places in the world: The former is formally autonomous but ultimately under the thumb of one of the world’s nastiest regimes, and the latter is functionally a one-party state that bans unpopular religious groups as casually as it bans chewing gum, engages in extensive censorship, and occasionally locks up political critics without trial or charges. Compared with India, for example, both are illiberal, anti-democratic — and very, very rich. China is corrupt and authoritarian, Rogers concedes, but things get done. Translation: Mussolini makes the trains run on time.
Jim Rogers obviously does not fit the typical profile of an American expatriate — of whom there are remarkably few: about 5.25 million, scattered across 160 countries. The greatest part of them live in the Western hemisphere — lots of retired snowbirds in Mexico and Costa Rica — and a great many live in Western Europe — exchange students, financial types in London and Geneva. About 850,000 or so live in Asia. By way of contrast, hundreds of thousands of Chinese college graduates leave the country every year. Most of the foreign students receiving doctorates in science and engineering in the United States come from four countries — China, Taiwan, India, and Korea — and two-thirds of them stay. China’s much-ballyhooed program to lure expatriate scientists back to the motherland is said to be quite well funded, but that and the economic boom combined haven’t been enough to change the fact that high-performing Chinese are coming to America in large numbers, but high-performing Americans bound for China are only a trickle. There’s no way to know whether Rogers is part of history’s vanguard or just an eccentric millionaire.
There is as much psychology at play as economics. Like Japan in the Eighties, China in its role as nascent Asian economic superman functions as a scourge with which we Americans self-flagellate in atonement for our gaijin sins: our overconsumption, our insufficient savings, our laziness, our dumb kids who can’t do algebra or find their hometowns on a map. They aren’t watching NASCAR and drinking Miller High Life in Shanghai, the indictment goes. We’ve got it all, and the inscrutable little Orientals are going to take it all away.
“Have they ever heard of Japan?” asks Ethan Gutmann, author of Losing the New China. “I don’t want to get into heavy psychoanalysis, but you see this a lot in George Soros: When the stock market is crashing, Soros is putting out these mocking editorials saying that America is going down and China is taking over. You see it in Thomas Friedman’s work more and more. And there also is an attraction to authoritarian governments, this idea that, if you can just get the best and brightest together, get the elite together, then everything will work really well.” And by some measures, China is working out really well: There is no denying its extraordinary economic progress in the past decade. But there is another side to China, Gutmann argues, one that goes unseen by top-shelf expats and five-star journalists. There are lots of authoritarian governments in the world: Most of them do not engage in human-organ harvesting on a large scale. They don’t have tens of thousands of political riots to sweep under the national rug every year. They don’t have millions of political prisoners kept in a network of prison camps that would have made Stalin’s mustache twitch with envy. They don’t have the combustible mix of a boomtown economy and an old-fashioned police state. They don’t have The Matrix.
“There’s a haunted feeling in China,” Gutmann says. “China tries to engineer a fake society that looks responsive, but it’s like The Matrix — cheap as that is, it’s true. The Internet, Facebook, Twitter: It all looks normal, and feels normal, but it isn’t quite right.” The problem, in Gutmann’s view, isn’t that the West is recoiling in horror from the Chinese human-rights nightmare. The West has already proven willing to do business with China on almost any terms, so long as they keep buying our bonds and shipping us Snuggies. The problem is that China’s little shop of horrors is strangling Chinese society from the inside.
“They can’t free up the lines of communication. They can’t let a hundred flowers bloom,” Gutmann argues. “Too many people, in too many walks of life, are culpable. And that’s why they have The Matrix: There are newsgathering organizations that appear to have investigative shows, but it’s at a low level, never looking at Beijing, never looking at the Communist Party. It’s a bread-and-circuses Internet, and that’s why Google is getting out: It wasn’t the money. Google didn’t fit in, except as a way to legitimize The Matrix. Who the hell wants to use Baidu?”
Jim Rogers’s Mandarin-speaking daughters, presumably, can choose between Baidu and Google. And this isn’t the first time Rogers has seen himself getting ahead of the historical curve: “In the Fifties, Sixties, Seventies, Wall Street was a backwater. That’s where the idiot son went to get a job. Now, everybody at Yale has a hedge fund in his dorm room. But things are changing, and the power is transitioning back to the producer of goods.”
And that’s where Rogers’s start-a-farm pitch comes in. He pitches farming the same way he pitches Asia, like it ought to be obvious to you, but, because of some intellectual defect on your part, it isn’t: “It sounds radical, but it’s based on simple facts. Food inventories are the lowest they’ve been in decades — not months, not years, decades. And there’s a shortage of farmers. Japan has vast empty fields where all the farms have died, and the kids have all gone to Tokyo and Osaka. Japanese dislike foreigners, particularly Chinese foreigners, but they’ve started importing Chinese farmers to farm the fields in Japan that don’t have anybody to farm them. The farmers are going to have a future. Smart guys on Wall Street are going to learn to drive tractors, because the guys who can drive tractors are going to be driving Lamborghinis.” Foreseeing a unified Korea, he recommends buying now, just south of the DMZ: cheap land for hardy, self-reliant homesteaders looking to make their fortunes in a new world. Sound familiar?