Review of The Asian Financial Crisis and the Ordeal of Hong Kong: (Hardcover)

The publication of a book on the financial crisis in Hong Kong by Y.C. Jao from the University of Hong Kong is most timely. Jao is no stranger to anyone who has studied the banking and financial system in Hong Kong. There is no lack of analysis on the Asian financial crisis. However, this is the first book-length study that focuses on the case of Hong Kong. The analysis is particular timely as Hong Kong is currently in the midst of its severest economic recession since the early 1970s. The book not only clearly analyzes the financial crisis in Hong Kong by putting the events that happened in Hong Kong in the last few years in the larger context of the Asian financial crisis, but further delves into the post-crisis economic recession that Hong Kong is suffering.

The author begins by analyzing the origin, nature, and consequences of the Asian financial crisis. He proceeds on to discuss the financial crisis in Hong Kong by looking at the financial crisis itself focusing on how foreign exchange speculators tried to capitalize on the possible event of the collapse of the Hong Kong dollar and how the government reacted to the crisis by its unprecedented attempts to intervene in the stock market. The story was succinctly told with convincing information put together by the author. Jao then analyzes the impact of the crisis on the asset markets, financial sector, and the real economy. The analysis in the book is clear and solid.

The most interesting part of his book is, however, its attempt to answer two puzzles: (1) Why was Hong Kong's economic downturn so severe, and (2) Why was Hong Kong a laggard in economic recover, and the role China plays in the crisis. Jao points out that while the government was able to defeat the currency speculators in the financial crisis of 1997-98 and successfully defend the currency system, the people of Hong Kong, nevertheless, pay a high price as part of the reason for the continuation of the recession after the crisis is attributed to the currency board - the very system Hong Kong tries to defend. The need to defend the linked exchange rate has forced on the Hong Kong abrupt rises in interest rates severely impacting the assets markets and the real markets through the wealth effect, collateral effect, and the credit availability effects. The intricate relationships amongst these factors are clearly explained in the book.

I would recommend this book not only to economists who have an interest in the Asian financial crisis or the Hong Kong economy but also to anyone (as the book was written in non-technical language) who want to make sense of the recession in Hong Kong.



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Review of From Global to Metanational: How Companies Win in the Knowledge Economy (Hardcover)

What does a large company need to concentrate on for sustained success in a globalized world? Doz and his colleagues claim that it is to become metanational and to become good at innovating from a platform of bringing together knowledge from many different parts of the world. Metanationals differ from globalized companies in that they recognise that new ideas, products or directions may originate somewhere other than the corporate centre.

The focus of the authors is on innovation and they argue that this requires that the organization becomes good at :
* identifying where good ideas and special competencies are;
* mobilizing the often scattered capabilities and opportunities (they use the term 'becoming a magnet' for such capabilities); and
* optimising the size and configuration of operations for efficiency, flexibility and financial discipline.

This is a book that makes an important point about success in a globalized world, but presents one factor in success as if it was the whole. As with a number of books, I had an uncomfortable feeling that the content of a very good article was expanded into an only moderately good book.

The core message is important and useful. Organizations that operate on a global scale need to move beyond the extension of a unitary culture into new localities and recognise that new knowledge is found in unlikely places. They need to become excellent at recognising that knowledge, becoming an attractor for it, mobilizing it to provide a superior stream of innovations and operationalizing production, distribution and marketing into diverse markets.

The weakness is that the book is written at a fairly high conceptual level - for all the detailed example - that fails to get to grips with how to manage multiple cultures or the detail of innovation, or the issues of governance across countries. It also has surprisingly little on the major changes that are occurring in world consumer markets.

The book also falls into the 'one size fits all' trap. Issues of being effective globally are very different for a consumer fashion business, a high tech product or service industry and a major commodity business, but this is not recognised explicitly in the book.



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Review of How Countries Compete: Strategy, Structure, and Government in the Global Economy (Hardcover)

I expected great things from this book. After all, when your very title takes issue with Paul Krugman ("countries don't compete, firms do"), one counts on intriguing new insights. Alas, not here. It is a collection of very nice, albeit somewhat opinionated capsule economic histories in ten countries, from South Africa to the US. As you move along, you finally realize that countries are not competing with each other. They are "competing to grow," shaped by "four elements of successful economic development: (1) national strategy, (2) economic structure, (3) resource development, and (4) efficient use of resources." The compilation of interesting facts about each particular case can come in handy, but it is very difficult to see how these facts add up to lead to the ten success factors presented at the end of the book: (1) basic property rights, at best temporary fiscal deficits, higher savings and investment rates, strong central banks, sound microeconomic policies, labor market flexibility, avoiding the resource curse (for resource-rich countries), low levels of corruption, an acceptable income distribution, and adequate current balances.

Anyway, it would be a nice little book for reference, but it is marred by what appears to be a dearth of editorial talent over at the folks of Harvard Business School Press. There is Japan going down to "unconditional defeat." (p. 25) In Malaysia, the "majority (5.98 [sic] percent was Malaysian." (p. 41) In China, "the majority of the investment came from expatriot Chinese ..." (presumably still flashing their Super Bowl rings, p. 65) There is reference to a "John" Hopkins University, and the Southern African Development Community is rendered as "South African," and there are incomplete sentences("The World Bank estimated that SOE productivity was -1.2 percent annually."P. 65).

Finally, there is a certain element of what one might consider an often peculiar perspective. Putin does very well in the description of the Russian experience. Italy (and Europe in general) might as well throw in the towel, according to Vietor's views. There is an intriguing observation that "... [b]ound by their roots, most Italians are unwilling to relocate even when offered higher-paying jobs." (p. 207) That must have come as quite a surprise to the Italians who represented the first wave of Gastarbeiter in Germany in the 1950s, and their descendants. Right next to it is the gem that "[d]espite a high population density, Italy had the lowest birthrate in Europe." (also p. 207) Does that mean that countries with low population densities normally have low birthrates? And then there is President Bill Clinton "imposing a significant tax on energy (British thermal units, or BTUs, which release carbon dioxide when burned.)" Presumably American thermal units don't do that. And there is much more.

All in all, for those who expected to get a new perspective on the competitiveness debate--and I certainly agree that government actions can make, or often break, efforts by private enterprise to compete--will walk away disappointed.



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