Address to The American Chamber of Commerce in Japan: "Reflections of an American Abroad"

Ambassador J. Thomas Schieffer
December 10, 2008
Okura Hotel
Tokyo, Japan

AMBASSADOR SCHIEFFER: The French Prime Minister Georges Clemenceau once awarded the Legion of Honor to a business tycoon whose only apparent qualification was the large contribution he had made to the Prime Minister's campaign. Pinning on the decoration, the Prime Minister said, "Sir, you wanted the Legion of Honor. Here it is. Now all you have to do is earn it."

While I made no contribution to the American Chamber of Commerce in Japan, I do feel that I must earn the honor of being designated as the Person of the Year for 2008. It is very humbling to be recognized in that way and I deeply appreciate it. But I also know you might be feeling just a little worried right now about me taking this opportunity to deliver a long-winded, pontificating speech. Rest easy. I found out a long time ago that no one complains when the sermon is too short. It is heady stuff to be the ACCJ's, Person of the Year but I will try to keep in mind that many of my predecessors were also Persons of the Year in the last year of their ambassadorships. Some might say its a nice way to get us out of town.

In any event, it is with a good bit of humility and a keen awareness that short is better than long that I share some thoughts with you today on my time as an Ambassador of the United States of America for the last eight years.

When I left the private sector for public service I had several notions about the proper role of government in modern society. Some still hold and some have changed. I believe more than ever that governments do not get better when they get bigger. They just get bigger. And as they grow they get more and more difficult to manage for the good of the governed. By the same token I have come to the conclusion that governing is much more difficult than operating a business in the private sector.

When you run a business, you have some very straight forward and objective ways of measuring success- the balance sheet and the income statement. After all, the main purpose of a business is to make money. If it does it stays in business. If it does not, it goes out of business.

Government, on the other hand, is always with us regardless of whether it does a good or poor job. The means of measuring its success are much more subjective than objective. Too often the measure of success in government is growth. If a bureaucrat gets more money and more people for their bureaucracy, he or she is judged a success, regardless of whether that money or those people are used wisely. Elected officials are often held to the same standard. If they bring home the bacon they are cheered. If they miss out they are jeered. Ultimately this leads to a culture of greater and greater waste and inefficiency. Somehow we have to do a better job of creating incentives for bureaucrats and politicians to get more out of less. Until we do, waste and inefficiency will haunt the most fair-minded and altruistic of public servants.

Governments can and do make a difference in the success of business opportunities. A good business climate will attract companies that create more jobs, more wealth and even more revenue for their host governments. A poor business climate drives away jobs, prosperity and government revenue.

Having lived abroad for almost eight years, I realize now more than ever that America's future prosperity will depend on expanding our trade with others. Today, in America, one in five jobs depends on trade with a foreign country.

The revolution in communications is only going to increase that percentage in the years to come. Globalization, a word often used in pejorative terms, is here to stay. The Internet, the cell phone, the personal computer and the information explosion around the world will continue to allow businesses and entrepreneurs everywhere to connect in a borderless world where the best price, the best supplier and the best product are never more than a few clicks away. Even if we wanted to, we cannot opt out of the globalized world we have created. It is too big, too complex and too much a part of our lives to do that. And its presence has hit us like a tsunami.

In 1990, the number of households connected to the Internet in the United States was exactly zero. Now there are almost three hundred million connections to the Internet in the United States and over three hundred million connections in China.

Twenty years ago, I could not imagine the world that technology has created. Now, I cannot imagine a world without all the modern ways we have to communicate.

But whether you live in my native Texas or here in Japan, there is fear and anxiety about where all this change and technology is taking us. People are not sure that the jobs they need or the cultures they take pride in will survive in the modern world we have created. I think they will, but we must be thoughtful in what we do to prepare for tomorrow.

In 1833 the U.S. merchant ship Tuscany sailed up the Hooghly River in India. It was carrying a precious cargo exported from America- ice. That's right, ice. Long before there was refrigeration, long before there was electricity, long before there were steamships, there was a booming ice business in America. It worked like this: during the coldest winter months when northern rivers froze, Americans would take out giant saws and cut big blocks of ice from the frozen rivers. They would pack it in sawdust and put it on sailing ships to be sent around the world. The saw dust insulation was so good that the ice could be sailed around South America or Africa, cross the equator more than once and wind up in India to cool the drinks of Indians and British alike.

Today, no one makes their living sawing ice out of frozen rivers but there are millions of jobs in the refrigeration industry. Technology may have changed the way we get our ice, it may have changed the way we refrigerate our foods, but technology didn't wind up eliminating jobs associated with refrigerating products. It increased them. That same sort of technological change can create more jobs and more prosperity for the nations that understand that our world economy is no longer dependent on the natural resources we bring to the table. It is much more dependent upon the knowledge our citizens have and the means they have to use it.

Neither the United States nor Japan need fear a globalized world. We have a better chance of surviving in a knowledge-based economy because we have the fundamental building blocks of such an economy- literate populations and a strong educational system combined with businesses that spend heavily on research and development. Almost 72% of all the patents issued in the world today are issued to Americans and Japanese. The ability to produce that kind of intellectual capital in the future will ensure that we will continue to be major players in the world to come, provided that we retain our educational and technological advantages. Never before has knowledge and the ability to develop and sustain it been more important.

In 1960 the world economy in percentage of value could roughly be divided into thirds- a third agriculture, a third manufacturing and a third services. Today, agriculture is only about 4% of the value of the whole world economy, manufacturing is still about a third but services have skyrocketed to almost two thirds of world value. And services are heavily dependent upon educational infrastructure and expenditures on research and development. Over the long haul that combination will produce prosperity and jobs for our people provided that we did not become frightened about the rest of the world.

The only real threat that I see to our future is the danger that both Japan and the United States could revert to a protectionist past. The United States has always had a strong isolationist streak. From time to time we have argued that the world is too dangerous and we would be better off to concentrate only on America. In the nineteenth century we were able to grow prosperous because two great oceans largely protected us from foreign predators, but in the twentieth century our experience with isolationism between the two great wars was so disastrous to our economy and the safety of our citizens that Americans should know that they cannot withdraw from the world without risking serious damage to our way of life.

Japan, an island nation, also has a long association with isolationism. For two hundred and twenty three years, Japanese law prohibited citizens from going abroad on the penalty of death. Foreigners were quarantined to certain areas of the country for fear that they would ruin Japanese culture. It was not until the Black Ships of Commodore Perry arrived in Shimoda that Japan joined the rest of the modern world. And when they did, the Japanese people discovered that the feudal state they had largely known had been far surpassed in military power, wealth and technology by industrialized nations of the West bent on expansionism. The Meiji Restoration followed.

Most Japanese today would argue, I think, that Japan's future prosperity is dependent upon engaging the rest of the world. Yet there are still a significant number of Japanese who argue that Japan would be better off if it erected regulatory and technical barriers to make it more difficult for foreigners to do business in Japan than it is for Japanese to do business abroad. While such a philosophy might have worked in the past, it will not work in the future. The communication and productivity created by the Internet and globalization will not allow that kind of business model to be successful in the twenty-first century. If "Japan passing" occurs in the future it will not be in my judgment because this or that American was elected President. Japan will only be passed if Japan believes that it has no role to play in the international community and foreigners are not welcome in its economy.

Neither will the United States nor Japan succeed if they give up on free markets. Much has been written and discussed lately about the end of capitalism as we have known it. There is no question that the recent financial crisis is a severe one. The American economy in particular was over-leveraged and unwinding all that debt will be painful but we should not give up on a free market system that has produced more prosperity for more citizens of the world than ever before.

When I think of what has recently happened, I recall my experience in baseball. I am convinced that without umpires no Major League Baseball game could be played. Left to their own devices, some of the players just could not resist the temptation to cheat and take advantage of their opponents for their own selfish gains. Marketplaces- like baseball games- need good umpires and government should perform that function.

Business and the public need a body to ensure that the game is played with integrity so that hard work, creativity and ingenuity win. At the same time we must remember that as important as the umpires are to the success of the game, they can ruin it if they feel they are more important than the game itself. The government should ensure opportunity in the marketplace for customers and businesses alike. It should ensure the integrity of markets, to make sure the honest are not disadvantaged by the dishonest. Then it should get out of the way and let competition determine the winners.

And government should do something else. It should invest in long term infrastructure that has long term but low rates of immediate return. Once we thought infrastructure meant things like roads and bridges, now we know infrastructure means things like education and research and development. A child may not be a tax payer until they are in their 20s or 30s but if they are not taught to read or are not educated to their highest ability they will more likely be a tax consumer than a taxpayer through most of the years of their citizenship. We must also understand that the educational paradigm of the past no longer fits our future needs. Once we thought we had prepared our citizens for the world if we had educated them to the high school or college level. Now, we know that to be successful in an ever-changing, globalized world we must have the means to reeducate our citizens throughout their lives lest the skills they have at present grow stale and obsolete.

We have also come to understand that in a knowledge-based economy, colleges and universities are the reservoirs of our wealth. It is not by chance that the computer industry and the biotech industry have grown up around areas where higher education is concentrated. It is not by chance that India and China are emerging from the developing world at a time when they are producing record numbers of scientists, engineers and PhDs. Education creates wealth wherever it goes. And, no institution can have more effect on education than government. But governments can never be more than the ladders to success. They can never replace individual initiative. Societies succeed and prosperity follows when governments work to guarantee opportunity. They fail when government tries to guarantee success.

In the future both the United States and Japan will benefit from governments that spend more time educating their citizens for the future than governments that are bent on protecting them from the obsolescence of the past.

A society that embraces change in order to manage change has a much better chance for success than a society that hides from that change. The more we draw up into the comfortable world we know rather than venturing out into the world we do not know, the more we risk failing. And, failure will mean more than material loss. The arts and sciences flourish in a prosperous world, and they suffer in a poor one. If we truly want our cultures to survive we must adjust to change that is inevitable. Only Americans and Japanese can marginalize the United States and Japan. We must ensure that they never do.

This year the American Chamber of Commerce in Japan celebrated its sixtieth anniversary. The world we know today is so much different than the one that presented itself to the ACCJ's founders so many years ago. The bitterness and agony of those immediate post-war years has largely passed. We have learned that Americans and Japanese share a common desire to live in a world of peace where all our children have a chance to succeed on their merit. We both know now that democracy, tolerance, the freedom of speech, press and worship are the building blocks of free, open and prosperous societies. We both know now that tyranny and dictatorship can be faced down by free men and women who are determined to maintain their freedom. And we both know that our two peoples with very different cultures, very different languages and very different histories can live together in peace and harmony if they look to the future rather than dwelling on the mistakes of the past.

For sixty years the members of the ACCJ have done their best to create a relationship between the United States and Japan that would foster friendship and prosperity between our two great countries. You have succeeded beyond the dreams of the most optimistic of those founders. You should take great pride in that. And I will take great pride for the rest of my life in knowing that in 2008, I was your Person of the Year. Thank you very much for the honor.