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TOKYO -- Time Warner's one-two mega-merger punch, first with America
Onllne(AOL) then with British music giant EMI Group, followed last week
by shares of Yahoo Japan Corp. exceeding Yen 100 million, sent many
investors and observers searching for a psychological safety blanket.
Surely there must be an escape-hatch to this madness of inflated
dot-com stocks, and the ripples of excess they create with each new
transaction.
It was bad enough when the syndrome seemed rampant mainly in the United
States. Now it has extended to Asia with the expectation of many that
internet globalization may spread faster and even more profitably over
here than back there.
In times of such confusion and contradictions, a good place to turn
is the writing of Tokyo-based economics commentator Eamonn Fingleton,
whose analyses make maverick and enfant terible Paul Krugman sound like
those of a button-down conservative.
After reading Fingleton's new book "In Praise of Hard Industries: Why
Manufacturing, Not The Information Economy, Is The Key to Future
Prosperity," (Houghton Mifflin Company, New York, 1999, 235 pp., US$26) in
a single sitting, I could at least get a good night's sleep.
Fingleton's assessment in a nutshell is that manufacturing,
particularly at its sophisticated levels, beats postindustrialism, mainly
the amorphous information service industry, hands down.
The news from Time Warner, AOL, EMI and Yahoo Japan notwithstanding,
Fingleton says that over the long haul "postindustrialism should not
be embraced blindly just because it is fashionable, nor should nations
lightly allow their manufacturing prowess to drain away."
He pinpoints the Japanese electronics industry which has moved into
making the advanced materials and production machinery used throughout the
world's electronics industry. "Among other nations that have been
similarly successful in advancing to ever more sophisticated levels of
manufacturing are Germany, Switzerland, and Singapore. These nations,
like Japan, have generally outpaced the United States economically over
the long run."
Fingleton sticks to his intellectual guns despite popularly held
indicators to the contrary. You've got to admire someone who comes out
with a book like Fingleton's first: "Blindside: Why Japan is Still on
Track to Overtake the U.S. By the Year 2000."
Over lunch one day, Fingleton was asked if he would like to revise his
"Blindside" thesis due to the fact that it is already 2000 and there is
scant evidence that Japan is about to "overtake" the U.S.
"Not at all," he said, his jaw set with the determination befitting a
son of Ireland. "My basic premise, if anything, has been reinforced."
Fingleton is to be admired much in the same way that Harvard Professor
Ezra Vogel deserves respect for his 1979 book "Japan As No. 1." Not long
after Vogel's book was published, the Japanese economic bubble burst with
an intensity that nearly damaged various earthquake gauges.
Vogel's book title, like Fingleton's, is part contrarian hype. But
as Vogel will tell you, what he meant was that there is much in
theJapanese system and approach that is "No.l."
Fingleton can make the same claim, although there is plenty going on
across the street.
Japan's big three internet stocks recently rose at rates which Fortune
magazine's Jim Rohwer said "made most American internet plays look like
utilities." Cited, through year-end, were Yahoo Japan's 4,206 percent rise,
Softbank (now Japan's fifth-biggest company) surge by more than 1,250
percent and Hikari Tsushin jumped by more than 2,900 percent. The latter is
a four-year-old mobile phone and internet investment firm that is now
larger than Honda or Matsushita.
In January, the Yahoo Japan stock rise to over Yen 1000 made it the
first issue to break that mark in the history of Japan's stock market.
All of these seem drastically overvalued not just to bystanders but to
many veteran financial experts.
What should not be undervalued is the ability of commentators like
Fingleton and Vogel to think beyond the margins of conformity.
Edward Neilan (eneilan@crisscross.com) is a veteran journalist, based in Tokyo, who covers East Asia and writes weekly for World Tribune.com.