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Parting the Curtains

One of the best ways to sense the reality of “globality” is to be there when it begins to happen.Last …

One of the best ways to sense the reality of “globality” is to be there when it begins to happen.

Last September, I was a tourist in Czechoslovakia, Hungary and Yugoslavia when the East Germans began streaming into Austria and when freedom from Communist domination became a probability.

It was really an exciting place to be; the experience stimulated much more extensive follow-through reading and thinking on my part than if I had simply scanned the headlines in the New York Times and the Wall Street Journal.

Last February, I was a tourist again, this time in the Republic of South Africa. I was in Johannesburg when President F.W. de Klerk made his pronouncement, and in Cape Town the exact day Nelson Mandela was released.

Again, it was an exhilarating place to be; again, my reading came alive and my global comprehension was immeasurably enhanced.

In both cases, hitherto reclusive countries were confronting their political establishments, their restraints and regulations, and their personal rights and freedoms.

But more important, they were doing so with a high profile and in the glare of the international press.

Both cases involved bold and courageous leaders-Gorbachev and de Klerk-who offered imaginative proposals at a risk to their political and personal lives. In both cases, it was obvious that in the countries I visited, life would never be the same again.

I was fascinated, of course, by the great issues of human rights and political restructuring. As a businessman, however, I was even more intrigued with contemplation of the changes that now come into view for business in each country.

Interestingly, there are some surprising similarities and some striking differences.

In the European case, which my economist friends dub “the New Capitalist States,” I came away dismayed with the monumental nature of the jobs to be done.

The plants I saw were outmoded and without environmental controls; there had been little or no capital investment for 50 years.

The cities I saw were physically drab with little new building or modernization under way. The companies were bureaucratic with poor record systems, bad work rules and no marketing programs. How long will it take, I thought, to privatize, refinance, computerize and regenerate these failing businesses?

In South Africa, the housing and educational facilities were even worse than in New York City.

But the infrastructure of the country is up-to-date: the highways, office buildings, communications and services of all types are first rate.

The plants I saw are visually comparable to our American ones, as many of them were American at one time. Only 200 U.S. companies actually pulled out, and to my surprise, many U.S. corporations are still going strong. Of those that left, most were quickly replaced by Japanese and other foreigners or went through a management buy-out and kept operating much as they did before sanctions.

The South African executives I met were effective in every sense. I came away with the impression that if we leave them alone for a few years, they have an excellent shot at working out a tenable solution to their massive human rights problems.

Perhaps the greatest business assets of a New Europe are the large numbers of skilled workers available at a much lower rate than those of Old Europe. In a new South Africa, if there is going to be one, the weakest link in a business revival is the need to educate and train the overwhelmingly large numbers of unskilled workers available.

In both cases, the element of political instability, plus the ever-present danger of inflation, creates an added risk factor for business investment. Offsetting this, if new government approaches succeed, there should be a significant rise in standards of living everywhere, and, in all cases, a huge increase in tourism and its ancillary lodging and entertainment income.

It will be fascinating to watch these “turnaround” countries as they emerge from behind the curtains that have shut them off from most of the capitalist world and as they strive to become effective global players.

I make absolutely no pretense of being a knowledgeable economist or student of the history now being made in Eastern Europe and South Africa.

Yet I cannot help observing that the U.S. has a remarkable opportunity to lend assistance in the form of tolerance, patience, money and business partnering to both areas as they continue to struggle to right themselves. If we do, and they succeed, democracy will truly be the global winner.

Formerly the CEO of F.&M. Schaefer (1972-1977), Robert W. Lear teaches at Columbia Business School where he is Executive-in-Residence. He is an independent general partner of Equitable Capital Partners and holds directorships with Cambrex Corporation Inc.; Crane Company; Scudder Capital Growth, Equity Income, Development, International and International Bond Funds; Korea Fund; Medusa Corporation; WICAT Systems Inc; and Welsh, Carson, Anderson, Stow Venture Capital Co. He authored the recently published book, How to Turn Your MBA Into a CEO.

About robert w. lear