Overview
Hong Kong and Southeast Asia are home to five hundred million people, yet their economies are dominated by only fifty families whose interests range from banking to real estate, shipping to sugar, gambling to lumber. At their peak, eight of the world’s two dozen richest men were Southeast Asian, but their names would not be familiar to most regular readers of The Wall Street Journal.
A complex mythology surrounds these billionaires, but in Asian Godfathers, Joe Studwell finds that the facts are even more remarkable than the myths. Studwell has spent fifteen years as a reporter in the region, and he marshals his unprecedented sources to paint intimate and revealing portraits of the men who control Southeast Asia. Studwell also provides us with a rich and deep understanding of the broader historic, economic, and political influences that have shaped Southeast Asia over the past 150 years.
Asian Godfathers is a riveting and illuminating book that lifts the curtain on a world of staggering secrecy and hypocrisy, and reveals—for the first time—who the leaders of one of the planet’s most important and tumultuous markets really are, why they got to the top, and how they keep themselves there.
“The romp around the region’s pleasure domes is a blast.” —The Wall Street Journal (Asia)
Product Details
| ISBN-13: | 9781555848927 |
|---|---|
| Publisher: | Grove/Atlantic, Inc. |
| Publication date: | 09/01/2018 |
| Sold by: | Barnes & Noble |
| Format: | eBook |
| Pages: | 368 |
| File size: | 3 MB |
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CHAPTER 1
The context
'People are trapped in history and history is trapped in them.'
James Baldwin, Notes of a Native Son (1955)
The contemporary economic landscape of Thailand, Malaysia, Indonesia, the Philippines, Singapore and Hong Kong was shaped by the interaction of two historical forces: migration and colonialism. Migration came first. Long before European colonists arrived in south-east Asia, Arabs, Indians and Chinese were settling in the region. The latter, hailing from what was the world's biggest economy until the nineteenth century, were the most numerous.
The early history of these immigrants is sketchy at best. What we know is that, landing in a patchwork of small, feudal states (where Thailand was the only unified state approximating to its current geographical footprint), the new arrivals engaged in much more than arm's-length trade. In Thailand, where historical records are more complete than elsewhere in the region, immigrants were employed in a range of court-sanctioned roles from at least the sixteenth century. Persians and Chinese (the latter hailing from Thailand's main international trade partner) operated trading monopolies and tax farms – paying an agreed, fixed sum to the royal household for the right to collect a given tax in a given locale. As of the eighteenth century, Chinese are recorded working for the Thai court as administrators and accountants. In many cases – perhaps most – however, Persians, Arabs and people from the Indian subcontinent were preferred as administrators; the Bunnag clan, which is still prominent in the Thai civil service and politics, were Persian Muslim immigrants who from the late eighteenth century ran the entire greater Bangkok region. Chinese dominance in court-sanctioned commercial monopolies in Thailand became overwhelming in the nineteenth century. On the island of Java, in today's Indonesia, there is evidence that Chinese entrepreneurs entered into administrative and monopoly management arrangements with Javanese aristocrats before the arrival of Europeans in the sixteenth century.
What developed, in the early stages of state formation in south-east Asia, was a pattern that has never disappeared: a racial division of labour in which locals were the political entrepreneurs – focused on the maintenance of political power against indigenous rivals and, later, in partnership with European and American colonists – and outsiders who became economic, and as a corollary bureaucratic, entrepreneurs. Political power, of course, trumps all other power, and so the arrangement made perfect sense to indigenous aristocracies.
That immigrants know their place is attested by the direction of acculturation – the process of cultural adjustment. South-east Asian aristocracies did not become clones of their immigrant employees; instead, the immigrants acculturated to them. This was as true of Chinese as Persians, despite the reputation of the former as having an unbiddable cultural identity. Pre-modern Thai history, for example, is a story of Chinese who were successful in the country turning rapidly into Thais. The Thai kings encouraged this, ennobling their ethnic Chinese revenue farmers and officials. All Chinese were required to choose between a Thai and a Chinese identity on reaching adulthood; if they opted for the former they cut off their Manchu queues. The vast majority of families did so within two or three generations. The Thai élite was the place to be; it took a fat slice off the top of commercial profits for no risk, while unassimilated Chinese traders received a secondary cut in return for all the risk. It was hardly surprising that, given the choice, Chinese immigrants preferred to be political rather than economic entrepreneurs. A similar trajectory occurred in Java, where successful Chinese sought to marry into the Javanese aristocracy.
Despite the attention lavished by historians on the impact of Chinese culture throughout Asia, migration to the south-east of the region – Chinese, Persian, Arab and Indian – really highlighted a different lesson: that migration into existing societies is less about the export of a culture, and more about the migrants' willing approximation to dominant local forms. Moreover, the most rapid acculturation occurs among the most ambitious, go-ahead individuals who recognise that economic progress is all but impossible without integration into local élites. This was a lesson that proto-godfathers learned early, and it was not difficult to follow because south-east Asia was a broadly ecumenical and tolerant place with sparse populations that meant limited competition for resources. Put simply, in an agricultural era, south-east Asia was blessed with natural abundance, particularly when compared with China and India.
Out for a Burden
The arrival of European colonists, present from the sixteenth century but not aggressively expansionist until the nineteenth, both reinforced and realigned the tendencies that were already apparent. Reinforcement occurred because colonialism in the countries with which we are concerned was not backed by heavy allocations of personnel. As a result, the colonials sought to rule through existing élites, both political and economic. Realignment occurred because colonial power created triangular relationships where before there had been simpler bilateral ones. The Europeans now represented ultimate power and local political and economic leaders needed to have relations with them as well as with each other. This had profound effects. For ambitious migrants, it meant they began to acculturate towards the Europeans because they represented dominant power. The local political élite also moved some way towards European cultural norms, while its relationship of cultural superiority to immigrants – most notably the Chinese – was shattered. The exception was Thailand, which was not formally colonised. There, the process of Chinese turning into Thais continued apace until the early twentieth century, when a rapid increase in the pace of immigration (driven by economic and political breakdown in China and the availability of new passenger ship services), the arrival of more Chinese women and a surge of Thai nationalism temporarily interrupted the assimilation process.
It was the Dutch in Java, and subsequently the rest of Indonesia, who most ruthlessly built on the division between political and economic activities. Control of the bulk of the population was exercised through the local priyayi aristocracy, who continued to govern their provinces and districts, with small numbers of Dutch colonial 'residents' in the background. Key economic roles went to the Chinese. They were revenue farmers for all kinds of taxes and monopolies, ranging from fees on the slaughtering of animals to the right to operate licensed markets. The biggest revenue farm was that for the manufacture and sale of opium. It became a mainstay of government income in each of the territories we are concerned with, but it was particularly important in Indonesia because indigenous people were also big consumers; elsewhere opium smoking was largely a Chinese pastime.
As well as cementing the Chinese economic role, the Dutch exalted a small number of powerful Chinese community leaders (immigration from China increased markedly in the seventeenth century) who were loyal to them. These men became some of the region's original tycoon godfathers. The Dutch picked up on a tradition begun by the Portuguese – the first European power in south-east Asia – to give the foremost person in the Chinese community the military title of captain. This was expanded into a complete officer system of Majoor, Kapitan, Luitenant – a hierarchy that persisted for two centuries. The Chinese officers kept a Chinese census, levied Chinese taxes and fines, issued permits, and their opinions were important in court cases. They were extremely powerful and, simultaneously, usually held the big revenue farms and worked as compradors – intermediaries – for the Dutch. Moreover, ordinary Chinese were compelled to live in designated Chinese quarters of approved towns and travel only with permission. These restrictions did not apply to the Chinese élite and their revenue farm employees. The cabang atas, or 'highest branch', as the Chinese élite came to be known, had the run of the country at the same time that their compatriots – and potential competitors – were theoretically confined to urban ghettos. The pass laws were often ignored, but the officers had more than enough power, including quasi-legal authority, to make life deeply unpleasant for anyone who crossed them.
Chinese society at large continued its process of acculturation in Indonesia, with successive generations of immigrants losing command of their different Chinese languages and becoming habituated to local customs. But as the Dutch expanded their power through the archipelago there was less incentive for ambitious migrants to seek employment in the households of Javanese kings or marriage into the priyayi aristocracy. On the other hand, white northern European society would not tolerate intermarriage and assimilation to the Dutch group. Unlike Thailand, where complete integration with the ruling élite was possible, what happened was that a 'halfway house' identity developed. By the nineteenth century the Chinese who spoke Malay (the indigenous language of trade), followed a culture comprised of both southern Chinese and Javanese elements, while looking to the Dutch colonials for favour and advancement, were a large and definable group called peranakan. It was the leading peranakan who were the leaders of Chinese society: they worked with the Dutch as officers to keep the Chinese population in line; they tendered for revenue farms; and they worked with the local priyayi to protect their farms – which were often challenged by smugglers, especially in the case of opium. The most successful entrepreneurs were almost inevitably the least purely 'Chinese' ones. They required a position of cultural equilibrium between Dutch residents, priyayi aristocrats and an evolving mix of almost exclusively male Chinese immigrants.
A similar state of affairs developed in the Philippines, where the Spanish arrived from across the Pacific via their Latin American colonies in the late sixteenth century. Unlike Dutch and British colonists, who were represented by monopolistic trading corporations – the Dutch Vereenigte Oost-Indische Compagnie (VOC) and the British East India Company – the Spanish colonial mission was an overtly political and religious one. It sought to convert Filipinos to Catholic Christianity. In this respect the Chinese, who were already trading in the Manila region when the Spanish arrived, were irksome. The Spanish needed the Chinese to provision their garrisons and trade Chinese luxury goods; but the Chinese were initially resistant to Christianity. There followed an uneasy stand-off punctuated by a series of bloody pogroms in the course of the seventeenth century. At the same time, the Spanish rewarded Chinese who did convert to Christianity, and who married local women, with lower taxes, freedom of movement and an ability to join the local political élite. A process of acculturation began and by 1800 there were an estimated 120,000 Chinese mestizos – equivalent to the Indonesian peranakan – versus 7,000 Chinese and 4,000 blancos, or whites, in the Philippines; they accounted for around 5 per cent of the population. Strict controls on the number of pure Chinese who were allowed residence further encouraged the development of mestizo society.
The mestizos dominated internal trade in the islands and moved increasingly into landholding. The Spanish always feared they would lead the native indios in rebellion, but in reality the Chinese mestizos were at least as attached to the Philippine version of Spanish culture as were the urbanised indios, and gave up most attachment to Chinese culture. As in Indonesia and Malaysia, they acquired their own dress forms and customs that reflected a hybrid culture.
The Era of Mass Migration
From the mid-nineteenth century, the pattern of low-volume migration and a heavily assimilated resident Chinese population began to change. There were two reasons for this. First, the number of immigrants increased exponentially. And second, the objectives of the ruling colonial powers both changed and broadened.
Technology facilitated a migration boom. The first steamships came into use in the 1840s and were widely deployed on passenger routes in Asia by the 1860s. The so-called Opium Wars of 1839–42 and 1856–60 forced open the principal ports of the Chinese coast, particularly the traditional migrant centres of the south, and these were quickly connected by steamer link to the major ports of south-east Asia. Much migration was determined by nothing more complex than the destination of the local steamship link. The opening of a service from Haikou in Hainan island to Bangkok, for instance, is a key reason that there are lots of people of Hainanese ancestry in Thailand.
Best estimates suggest that by 1850 there were half a million people of Chinese extraction, mixed race and not, in the territories we are following. The largest concentrations were in Thailand and Indonesia, with Hong Kong, Singapore and Malaysia (not yet formally incorporated into the British Empire) just taking off. By the time of the First World War, there were 3–4 million ethnic Chinese in the region, the vast majority of them first generation. There was an increasingly long list of reasons for people to get out of China. The country came under serious population pressure from the eighteenth century. Rebellions occurred with increasing frequency, building up to four major conflagrations in the mid-nineteenth century: Muslim-led rebellions in the south-west and north-west of China, and the Nian and Taiping rebellions in the central provinces. The latter, led by a man who believed himself to be the younger brother of Jesus Christ and a deputy who claimed to be the Holy Ghost, was the most disruptive; it cost the lives of several tens of millions of people in the 1850s and 1860s.
With regular steamships to transport them from what one historian dubbed their 'grimly Malthusian setting', the southern Chinese found south-east Asia's underpopulated and relatively peaceful destinations most attractive: labour rates were often a multiple of those at home. In the mid-nineteenth century there were just 5 million people in Thailand, 2.5 million in Malaysia and 23 million in Indonesia (Java was the one place in south-east Asia that was relatively densely settled) – around one-tenth of today's levels. The more fortunate migrants were assisted, both financially and with job-seeking, by relatives or kinsmen who had already travelled abroad.
The rising tide of migrant workers coincided with the dawn of so-called 'high imperialism' from the middle of the nineteenth century, and a sustained, labour-intensive commodities boom that continued into the twentieth century. From the 1830s the monolithic Dutch and British trade monopolies were dismantled and the European states took over colonial management in southeast Asia. An agreement between Holland and Britain in 1824 to delineate their respective areas of interest in the region presaged a Dutch campaign to control the complete Indonesian archipelago and, later, the rolling-out of the British presence in peninsular Malaysia. Direct colonial control was sometimes the prerequisite for the development of vast new plantations or mines and sometimes – as in peninsular Malaya, where small Chinese mines were well established – it occurred after the fact. There was to an extent a contradictory political impetus in Europe – on the one hand to extend the limits of colonial power, on the other to deregulate many aspects of international trade and investment. In an era informed by the writings of David Ricardo and Adam Smith, both Singapore (1819) and Hong Kong (1842) were established as free ports without restrictions or taxes on trade. (These colonial acquisitions also reflected the British imperial appetite to control strategic islands.) A Hong Kong governor persuaded the Thais to deregulate trade with the eponymous Bowring Treaty in 1855. Even the Spanish Philippines moved in this direction, ending the trading monopolies of provincial governors in 1844 and opening up to foreign business; since the industrial revolution had passed Spain by, trade came to be dominated by British and American firms with little more than the flag to remind merchants that they were on Spanish soil.
(Continues…)
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Table of Contents
Maps,
Introduction,
Author's note,
Part I Godfathers of yore,
1 The context,
Part II How to be a post-war godfather,
2 How to be a godfather, #1: Get in character,
3 How to be a godfather, #2: Core cash flow,
4 How to be a godfather, #3: Structuring an organisation – chief slaves and gweilo running dogs,
5 How to be a godfather, #4: Banks, piggy banks and the joy of capital markets,
Part III Godfathers today: Defending the precious,
6 The 1990s: Ecstasy and reckoning,
7 Finale: The politics, stupid,
Notes,
Cast of characters,
Selected bibliography,
Appendix,
Acknowledgements,