The following is an excerpt from Laurence J. Brahm’s book Fusion Economics: How Pragmatism is Changing the World.
The China bubble turns investors into lemmings
Beijing, 2002. The lobby of the Grand Hyatt in Beijing was buzzing. The World Economic Forum was in town for its 2002 spring session. Everyone who was someone in China was there. In the chandeliered lobby of the Grand Hyatt, the China bubble was inflating fast.
I had second thoughts.
From an insider’s view, China’s large-scale reforms were complete. State-owned enterprises were on their way to becoming global multinational corporations. China had entered the World Trade Organization (WTO), which had set an irreversible roadmap for China’s market economy. Economic integration with the rest of the world was inevitable. Exchange and interest rate issues would continue to grab media attention. Western politicians would focus on them. Would China appreciate or depreciate its currency value? These
were technical questions—valve tightening—not real reform.
The trillion-dollar question was, will China’s leadership establish social values that can make their economic achievements sustainable?
China had broken from the classic economic development formulas of the West. Its economic success proved those Western formulas were fossilized. But deep contradictions seized Chinese society. Excessive
aping of globalized brands and the quick money craze consumed the nation’s psyche. The thrift, patience and long-term planning that had made China’s reforms successful were largely lost in the process, ironically
threatening to unravel what had been achieved. In the wake of its successful reforms, China was embarking on policies of super-high growth. The environment was totally disregarded. Within a mere decade, these
policies would transform China into the world’s second-largest economy and single largest emitter of greenhouse gases.
Values of conspicuous consumption were encouraged. And they went too far. Amid the excitement of change, a rapid social deterioration occurred. Corruption, on a scale possibly unprecedented in human
history, rotted every aspect of Chinese society. All ethics had gone. Acquiring as much money as possible and showing off one’s wealth were the overriding ideals of the day.
The cause was clear.
Having come out of the Cultural Revolution, when everyone wore army rags and being poor was proletariat chic, it was natural for China to swing to a brand-conscious conspicuous consumption model. China
leaped from extreme Maoism and it fast-tracked market reforms, epitomizing capitalism, then taking it to a new extreme. Amid all the bubble and buzz, a cool-headed question had to be asked. Were China’s
economic achievements sustainable?
I began to think about what had brought me to China in the first place.
Chinese philosophy—an amalgam of Buddhist, Taoist and Confucian principles had once framed life as an integrated whole between man and nature. After the Great Leap Forward, the Cultural Revolution and 20 years of the dragon chasing the dollar, a rhythm of life once in balance with itself had been broken. In China’s overconstructed debauchery-oriented cities, this philosophy was nowhere to be found. It had become extinct.
Could China’s traditional values still be alive, somehow embedded among its ethnic minorities? That might sound like a strange thing to say, but much of what we think of today as Chinese Han culture actually comes from Mongolians, Manchurians, Tibetans, and other ethnic groups who ruled large portions of what constituted China over the past millennia. So with traditions all but wiped out, what occurred was that certain core values remained with those ethnic groups from which they probably derived in the first place. I would soon have an opportunity to go to western China and find out.
China’s spin doctor
It was 2002, and China was embarking on a fiscal spending program. Zhu wanted to create domestic consumption to counter the reliance on exports. That meant developing China’s interior and not only focusing on the coastal cities. Infrastructure investment would “open the West just as America opened its west too!” explained Zhao Qizheng, minister of the State Council News and Information Office. “Now, how can we use media to positively influence investment into China’s western regions?”
A debate had erupted between several counties in Yunnan Province, Sichuan Province and the Tibet Autonomous Region over which region could “legally” use the name “Shangri-la” to promote tourism. In the end, Diqing County in northern Yunnan Province was “awarded” the official “Shangri-la County” label, with the caveat that everywhere else in western China could use the name Shangri-la to promote tourism, as long as it made money for the local economy.
That is how China’s central government made deals with its regions.
This decision was academically based on statements in James Hilton’s book Lost Horizons and exploration notes by Joseph Rock, the first National Geographic bureau chief in Southwest China, who spent 18 years in Diqing County and the Lijiang area. I would learn years later that Shangri-la is a Western ill-informed misspelling of Shambhala, a core Tibetan concept of a future realm, where spirituality rises above materialism. Ironically, the Chinese government was flogging off the name as a gimmick to churn up tourism dollars.
I had known Zhao back when he was vice mayor of Shanghai serving under Zhu Rongji. When Zhu came to Beijing, he brought his trusted lieutenants. It was one team.
“Ok,” I said, testing the limits of China’s newly found media tolerance—basically Zhao’s tolerance. “If you give me authorization to make a documentary film and it is just a travelogue—no politics—then I will hitchhike across China’s remote western regions, followed by a documentary crew and create a new image for China’s west—young backpackers and environmentalists. Think like America’s West in the 1970s, Hotel California, and all that.” Thinking about the debate, I added, “Let’s call it ‘Searching for Shangri-la’. Will you agree, and grant me this permission?”
Zhao nodded, and arranged all the permissions.
I was stunned, never expecting this answer. It came without any expectation. That night, returning home, I took off my tie, hung up my suit, and began looking for mothballed hiking boots.
I was determined to find Shangri-la!
Nomads and monks shatter our economic assumptions
The reality was, I knew nothing about filmmaking. Now, I was about to become producer and director without any script or film crew.
So I caught up with Ai Jing, one of China’s top pop singers. We met at Beijing’s first Starbucks. Ironically, this Starbucks was located in the nostalgic Friendship Store, where I had once shocked my Chinese
hosts by spending one dollar on a Coke as an exchange student fresh off the plane in 1981. Now Starbucks was thronged with Chinese youth.
I told Ai Jing about the permission granted by Minister Zhao to film in Tibet and across minority regions of western China. She understood the difficulties of media in China. “It is quite unprecedented, a unique window of opportunity,” she exclaimed, offering to help.
Ai Jing got on top of the project. Within less than a week, she had assembled a first-class team. San Bao, China’s most popular music composer, himself an ethnic Mongolian, agreed to write the entire soundtrack. Dou Yan, one of China’s most experienced cameramen in Tibetan regions, led the cinematography team. Ai Jing was there to give artistic advice. The only thing I had to do was ask, “Where is Shangri-la?” With film crew in tow, I began hitchhiking and asking for directions to Shangri-la.
During the years 2002–2004, I made two films in Tibet. “Searching for Shangri-la” and “Shambhala Sutra.” Neither film would air on Chinese television or in mainstream theatres. But in the end, that did not matter at all.
To me, the journey had been more important than arriving at the destination.
The films became less relevant than the people I met along the way. Four in particular were deeply inspiring. An Sang, a Tibetan artist, helped establish a factory for disabled artisans. Ethnic Bai dancer Yang
Liping ran a performing arts program to protect hill tribe culture. Uttara Crees, an Indian environmentalist, was protecting biodiversity through ecotourism. Each was a pioneering social entrepreneur.
But the person who shattered all the economic assumptions was the monk Jigme Jensen, who established a yak cheese factory to help nomadic communities, while reinvesting profits into nomad schools.
The monk who outsmarted the hedge fund managers
Our jeep splashed across icy rivers trickling down from melting glaciers. We drove deeper until there was no road, and then continued across grassland. As we entered the next valley, I noticed a monk in saffron robes across the river, waving. We pulled up to where he sat on a rock, head shaven except for a small mustache and goatee. His smile widened over his goatee, stretching to pointed elf-like ears, “Are you by chance looking for Jigme Jensen’s cheese factory?” he giggled. “This is why you came here. You think you are searching for Shangri-la. Actually, you are looking for our cheese factory!” He broke into laughter.
With our overreliance on technology, the human ability to have intuitive knowledge of events and changes has been diminished. Instinct is on its way to becoming extinct. Living close to the earth, Jigme Jensen sensed our arrival and sent one of his monks to find us.
With a flourish of his hand, the monk led the way. A snow peak hovered over the crest of mountain above. Eagles flew so close, I felt I could touch them. A freezing cold river ran before us. We followed the river, then, crossed it, stepping upon stones, one at a time, as there was no bridge.
In contrast to everything around, a tiny factory building stood before us. Ironically, it had been built with seed funding from the Trace Foundation, which had been established by the daughter of famous hedge fund manger George Soros.
Tibetan workers stepped from the factory door to greet us. Dou Yan began filming immediately. Then another saffron-robed monk stepped forward. This was Jigme Jensen, the head of the yak cheese factory.
I was flabbergasted. A factory so utterly remote, so totally lacking in logistics, made no sense to my logical Western business mind. It had taken us days to find the place. So I asked in blunt frustration, “How
can you make cheese in a factory away from markets, transport, everything? You are not near anything!”
“We are near the yaks,” explained Jigme nonchalantly. “You see, we make yak milk cheese.”
Over the coming days, Jigme Jensen would change the way I think about cheese, yaks, mountains, people and education. More importantly, he would shatter all of my assumptions as to what constitutes a
good business model.
His factory was simple. There were only three large rooms.
Before we entered, Jigme asked me to put on rubber boots and a white lab coat and face mask as if I were entering an operating room. “We must keep international health standards here when making yak cheese for export,” Jigme explained with a flourish of his hand as if he were about to wipe Dutch Gouda off the market.
Sure enough, entering the little Tibetan factory was like stepping into a cheese factory in the suburbs of Amsterdam. The same techniques were applied. Yak milk was churned into heated vats and settled
into moulds. It solidified on wooden racks in cool rooms. I was convinced. Jigme Jensen was making real cheese.
Only one question remained. “Why here?”
“We need to be close to nomads who bring us fresh yak milk every morning and every evening. They bring it through this door,” said Jigme, pointing to a side door leading to the room with the hot churning vats.
The factory was nowhere near any point of distribution. There were no roads in the middle of nomad country, in mountains within the heart of a sea of wild grasslands.
“I don’t worry about distribution,” Jigme explained, “because I do not want to manufacture cheese in a place that might be inconvenient for nomads.”
It still didn’t make commercial sense. How do you get the cheese to market? Why build a factory here just to provide convenience to nomads making yak milk deliveries?
“But that is just the point,” Jigme insisted. “You see, they all live in mountains, in yak felt tents at high altitudes. They cannot leave valleys so easily. So by our having the factory here in the mountains, they can
deliver yak milk every day, even twice a day. In this way, the milk is assured to be fresh.”
I still did not understand this. “You can raise yak on farms near a factory, near a city, or a point of distribution, right?”
“Wrong. It would not be wild yak milk,” Jigme sighed, “that is, milk from yaks herded by nomads. My real purpose is to help nomads.”
Now I understood what was driving Jigme.
Jigme explained that the nomads, being herdsmen, traditionally had no income. Now, with economic change occurring everywhere, they needed cash to replace trade for goods. By purchasing yak milk
every day, Jigme was providing income, without affecting their traditional lifestyle. In fact, he was not changing their traditional means of livelihood, but supporting and strengthening it.
China’s official government policy insists that nomads be settled in apartments and assimilated to live like Han Chinese. The government pressures nomads to sell off their yak herds and tries to persuade them
to make a down payment on a township apartment, borrowing the rest from a bank. Lacking the skill set to compete in a highly structured Han Chinese society, nomads are often unable to find work. Crammed
into cement block living quarters, these proud people who herded flocks over vast ranges for generations, slip into alcohol, family abuse and depression.
The Chinese government argues that nomads should be resettled in townships so they can receive proper medical care and education. However most government-run clinics in the region are poor, operating
at something below sub-Saharan African conditions. What’s more, Chinese education is alien and irrelevant to nomad children.
Jigme’s response is to reinvest cheese profits into building schools. He pointed in the direction of another valley. “Tomorrow I will go to that valley to determine plot lines for the walls of a new school. It will be
built with the proceeds from yak milk cheese!” By bringing enterprise and education to the nomads, Jigme was offering nomadic communities a far more advanced and conceptualized approach to sustainable development, both meaningful and relevant to their livelihood.
That said, Jigme still had to overcome the logistical challenge of distributing cheese from his isolated factory. Every day, he would fill up a jeep with round cheese blocks, driving through rivers and mountain
mud to Maduo, a Tibetan town of teahouses and beer halls that looked like a scene from an American western like High Noon.
At Maduo, monks from Jigme’s monastery would load the yak cheese onto lorries and vans, to truck it over a winding road for the 15-hour journey to Xining, Qinghai’s main city. From there it would be transshipped to Beijing and other cities of China, and on to Europe and North America, where yak cheese was the ultimate for très chic cocktail parties and wine-tasting circles.
Meanwhile, Tibetan nomads earned cash and kept their traditional lifestyle.
Jigme explained that since he had established the cheese factory, nomad income in the surrounding valleys and mountains had increased, reinforcing rather than disrupting their traditional lifestyle. In Jigme’s
mind, preserving nomad life had far-reaching impacts beyond simply maintaining traditions. He saw nomad existence as integral to the survival of a delicate, endangered, biodiversity system.
Yak grazing patterns, tens of thousands of years old, are essential to the balance of nature in this area. The biodiversity, permafrost and glacial cycles of the Qinghai-Tibetan plateau account for the source of water from down glacial river flows, for China, South Asia and mainland Southeast Asia.
The investment impact of a social enterprise
The next morning, we rose early to the patter of horse hooves as nomads delivered fresh yak milk outside the factory’s side door. Then, with a flourish of his saffron robe, Jigme led me to his jeep. He sat up front, while another monk drove. I squeezed in-between two other monks in the back and realized I was the only one not wearing saffron. We bounced down the narrow trail. My film crew followed two jeeps behind.
Jigme pointed excitedly. “See that tent in the distance? There are two young children in that nomad family. Do you see that tent there?” He pointed in another direction. I could barely see a tent on the horizon
surrounded by tiny dots, yak. “There are several more girls living there. None of them has any opportunity to go to school because they are nomads. I will bring the school to them. They will be my students.”
We drove into another valley where several workers were painting wall lines on a rounded, flattened parcel of grassland. Jigme jumped out of the jeep and strode over to them. Pointing to where he thought the lines should be drawn, Jigme was more like a construction site boss than a monk. The workers adjusted the line to his satisfaction. The classrooms would be bigger.
The cliffs of a sharp-peaked mountain rose above the valley, attracting Jigme’s attention away from the work site. In the rock face I saw dots of dark colour. “Those are caves,” he whispered. “Monks used to meditate there. Good location for a school.”
But why not build the school closer to town? The children can go there and stay in a dorm. They can return to their parents on holidays. It would be so much easier.
“You see, their parents all live in the mountains, in yak-felt tents at high altitudes. They cannot leave the valleys so easily. So by having the school here in mountains, they can go to school every day. Their traditional lifestyle will not be affected. I do not want to build a school in a place which might be inconvenient for nomads.”
Within an hour or so, we arrived at the gated entrance to a compound. Within, stood a newly built Tibetan-style building with glass windows and doors. A monk unlocked the clean glass doors and nodded in deference.
On the first floor, Jigme led me into a physics lab full of modern equipment, past a chemistry lab and into a small library filled with Chinese and Tibetan books. There were copies of sutra text in a cabinet. There were also copies of American books, even Disney cartoons for kids. “Tibetan children like Mickey Mouse,” Jigme casually noted as he led me upstairs.
On the second floor we saw classrooms filled with computers and the latest Internet equipment. Qinghai was online! Jigme explained that his school was offering nomad children 24-hour global Internet access for free. “They can come here after class and go online. We encourage that. They can be connected to the world from our little school in Qinghai.”
Jigme went on to explain, “It is the first private school in this region, meaning we have had no government funding support. So we did it on our own. Our school welcomes any nomad children to attend regardless of ethnicity or religion. We have Tibetans, Muslims and Manchurians. At our school, education is free. It is all paid for with cheese.”