From the Archives: ‘How the World Works’

If Lin-Manuel Miranda is looking for his next biographical subject, to dramatize the neglected origin-stories of the country, I have a nominee. Meet Georg Friedrich List.

A college rugby match in Tokyo in the early 1930s, between teams from two prestigious Japanese universities, Hitotsubashi and Keio. I’m using it because Hitotsubashi is the setting for the story told below. And also because the photo captures a moment in the 150-year-long process of Asian societies being influenced by, and influencing, those in the Anglosphere, which is the larger theme of the story, (Getty Images.)

Last week on ‘The Indicator’ program from Planet Money I heard a very good report by Darian Woods and Adrian Ma about a “founding father of the semiconductor industry,” a 90-year old Taiwanese man named Morris Chang.

I’m using it now as a link to an old article that I think has immediate relevance.

As I mentioned in a recent dispatch, the main advantage of having been around for a long time, is having been around for a long time. We’ve been through versions and foreshadowings of America’s current dramas before.

The recurring historic theme I have in mind today is: The difference between how people talk in public about economics and industrial growth, and how those processes actually work. What we hear about most often in news reports—a new spike in gasoline prices, daily movements of the market—has vanishingly little connection to the way economic power rises and falls, at either the corporate, the regional, or the national level. The same applies to most of the economic-policy disputes that generate and consume partisan heat.

Let me illustrate.

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The new angle: Taiwan now

These days everyone knows that Taiwan is a center of semiconductor production. Many people know that a firm called Taiwan Semiconductor Manufacturing Company (TMSC), which Morris Chang founded, is a dominant worldwide force. The priorities, output, and capacity of this one company affect everything from production backlogs in the international smart phone and automotive industries, to strategic calculations among Taiwan, the United States, and the People’s Republic of China. As the summary for The Indicator’s segment put it:

For decades, the top semiconductor manufacturers were based in America because that's where semiconductor chips were invented. But… [Chang and TSMC] flipped the entire industry on its head.

Today on the show, how Morris Chang revolutionized the chip industry and led TSMC to become the most important semiconductor company in the world.

What fewer people know, and the report highlights, is that as a young, immigrant student Chang had been a product of education at Harvard, MIT, and Stanford—and had gone on to work for several decades at Texas Instruments. But when he decided to start the company that would eventually change the chip industry, he did so not in Silicon Valley—the place named for those chips—or any other U.S. site but in Taiwan.

Why? It’s worth hearing the report yourself. But as I listened, I heard chords of historic resonance.

The main parallel was between Chang’s account of how Taiwan built its tech industry and what I had heard in reporting trips to Silicon Valley in the early 1980s about the rise of Intel and other leading chip companies. (I wrote about those trips in The Atlantic and in two books.)

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Individual success, within a supportive system

In retrospect I can hardly believe that I got to hear Silicon Valley origin stories first-hand in interviews with, among others, three of the fabled founders of Intel—Andy Grove, Gordon Moore, and Robert Noyce. Technical brilliance, managerial excellence, strategic vision, and other founder-specific virtues were obviously huge and necessary parts of their success.

But all three of the men stressed the importance of the larger system within which their firm and the others that created “Silicon Valley” had emerged. Large businesses, small startups, public and private universities, foundations and research institutes, banks and investment firms, military and civilian branches of the U.S. government—all of these and others were part of what built a global technology powerhouse.

It’s a familiar saga, which I mention because it’s clear that Morris Chang and his colleagues in Taiwan themselves understood it well. What they did in Taiwan differs in many ways from Silicon Valley’s history, especially in the role of central-government direction. But in its purposefulness—its awareness that tax rates and “regulatory burden” go only so far in explaining industrial dominance—it rang a bell.

What bell, in specific? The one that led me to write a book nearly thirty years ago, which included one chapter I think worth highlighting now.

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The older angle: the United States then

At just about the time Morris Chang was moving from the U.S. to Taiwan, I was returning from four years’ residence and reporting in Japan and throughout Asia.

I wrote dozens of Atlantic articles and eventually two books about the experience. The second of the books, which came out in 1994 (and was edited at Pantheon by my friend Linda Healey), was called Looking at the Sun. The Atlantic ran a lengthy excerpt from it as a cover story in December, 1993, with the title, “How the World Works.”

That article and book excerpt are too long to reproduce in full here. The Atlantic’s excerpt is available online; the book still exists; and I’ve just now uploaded the chapter that ran in the magazine, for reference as a standalone Substack post.

But I quote below the introduction to that chapter, which involves the same Hitotsubashi University in Tokyo whose rugby team is shown in the photo above. My hope is that the sense of discovery that drew me to two dusty volumes in a second-hand book store might draw some readers to consider a view of the world under-represented in circa-2021 public discourse.

I’m not going to try to summarize the article, because the whole point of writing it was to sum up a world view. (Again, you can read it here or here.) I will say that its “action” message was this: The United States knows how to help foster advanced, high-wage, high-employment, globally successful businesses. But it has forgotten how to talk about that process honestly, and instead sinks into familiar political and media slogans.

(For the record: in looking right now at a 10,000-word piece that I began writing before Bill Clinton had begun his first term, I see a few paragraphs that, with 30 years’ hindsight, I’d like to change. But most of the arguments stand up, I think.)

For more, see the piece itself. Which begins this way:

IN Japan in the springtime of 1992 a trip to Hitotsubashi University, famous for its economics and business faculties, brought me unexpected good luck. Like several other Japanese universities, Hitotsubashi is almost heartbreaking in its cuteness. The road from the station to the main campus is lined with cherry trees, and my feet stirred up little puffs of white petals. Students glided along on their bicycles, looking as if they were enjoying the one stress-free moment of their lives.

Hitotsubashi in the early spring (Getty Images)

They probably were. In surveys huge majorities of students say that they study "never" or "hardly at all" during their university careers. They had enough of that in high school.

I had gone to Hitotsubashi to interview a professor who was making waves. Since the end of the Second World War, Japanese diplomats and businessmen have acted as if the American economy should be the model for Japan's own industrial growth. Not only should Japanese industries try to catch up with America's lead in technology and production but also the nation should evolve toward a standard of economic maturity set by the United States. Where Japan's economy differed from the American model—for instance, in close alliances between corporations which U.S. antitrust laws would forbid—the difference should be considered temporary, until Japan caught up.

Through the 1980s a number of foreign observers challenged this assumption, saying that Japan's economy might not necessarily become more like America's with the passing years. Starting in 1990 a number of Japanese businessmen and scholars began publicly saying the same thing, suggesting that Japan's business system might be based on premises different from those that prevailed in the West. Professor Iwao Nakatani, the man I went to Hitotsubashi to meet, was one of the most respected members of this group, and I spent the afternoon listening to his argument while, through the window I watched petals drifting down.

On the way back to the station I saw a bookstore sign advertising Western-language books for sale. I walked to the back of the narrow store and for the thousandth time felt both intrigued and embarrassed by the consequences of the worldwide spread of the English language. In row upon row sat a jumble of books that had nothing in common except that they were published in English. Self-help manuals by Zig Ziglar. Bodice-rippers from the Harlequin series. A Betty Crocker cookbook. The complete works of Sigmund Freud. One book by, and another about, Friedrich List.

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Friedrich List!

Friedrich List! For at least five years I'd been scanning used-book stores in Japan and America looking for just these books, having had no luck in English-language libraries. I'd scoured stores in Taiwan that specialized in pirated reprints of English-language books for about a tenth their original cost. I'd called the legendary Strand bookstore, in Manhattan, from my home in Kuala Lumpur, begging them to send me a note about the success of their search (it failed) rather than make me wait on hold. In all that time these were the first books by or about List I'd actually laid eyes on.

One was a biography, by a professor in the north of England. The other was a translation, by the same professor, of a short book List had written in German. Both were slim volumes, which, judging by the dust on their covers, had been on the shelf for years. I gasped when I opened the first book's cover and saw how high the price was—9,500 yen, about $75. For the set? I asked hopefully. No, apiece, the young woman running the store told me.

Books are always expensive in Japan, but even so this seemed steep. No doubt the books had been priced in the era when one dollar was worth twice as many yen as it was by the time I walked into the store. I opened my wallet, pulled out a 10,000-yen note, took my change and the biography, and left the store. A few feet down the sidewalk I turned around, walked back to the store, and used the rest of my money to buy the other book. I would always have regretted passing it up.

WHY Friedrich List? The more I had heard about List in the preceding five years, from economists in Seoul and Osaka and Tokyo, the more I had wondered why I had virtually never heard of him while studying economics in England and the United States. By the time I saw his books in the shop beneath the cherry trees, I had come to think of him as the dog that didn't bark. He illustrated the strange self-selectivity of Anglo-American thinking about economics.

I emphasize "Anglo-American" because in this area the United Kingdom and the United States are like each other and different from most of the rest of the world. The two countries have dominated world politics for more than a century, and the dominance of the English language lets them ignore what is being said and thought overseas—and just how isolated they have become….

And the piece went on as you can read here.

In the more than three decades since I worked on that article, I’ve become all the more convinced that ideas surrounding the name Friedrich List deserve broader awareness from modern Americans. He and his contemporaries obviously did not develop, in the 1840s, specific answers to the problems of the 2020s. But his work back then raised questions that I think should be discussed again, and would point us to much better solutions and answers now.

To put it another way: Lin-Manuel Miranda could really go to town with Georg Friedrich List.

And I still have those two dusty books.