Moving to New Rule Sets, we shift gears from number crunching to a norm-oriented brainstorming exercise where we explore the notion of what makes a region an "attractive" FDI partner, in terms of either providing or receiving investment flows.

We dub this workshop session "The Dating Game," after the 1960s American television game show of the same name.

The original version of "The Dating Game" debuted in December 1966 and immediately became a major game show hit on American television.
During its seven-and-a-half year daytime run on the ABC network, earning a distinction as the 31st longest running television game show in history, the program set up some 3,000 dates for contestants. Appearances on the show helped launch the fledgling careers of numerous actors who later became major television and movie celebrities, including Sally Field, Tom Selleck, Burt Reynolds, Arnold Schwarzenegger, and Steve Martin—to name a few.

The show was designed to feature two date selections during each half-hour program. The format was simple: three young men or women (the "contestants") sit on stage and vie for a date with a young woman or man (the "guest") who is hidden from their view. Only the host, the studio audience and the television audience could see both the guest and the contestants at the same time. Asking questions especially prepared to reveal the romantic nature of each contestant, the guest judges their responses to determine which one is best suited to his or her particular taste. At the end of each segment, the selected contestant joins the guest to share a prize date, which always includes a fun-filled weekend during which they travel to some desirable and romantic destination.

In effect, the Dating Game was an early form of what we now call reality-based television: the show replicates a real-life dynamic (choosing someone for a date) in an artificial environment for the entertainment value of simple voyeurism.

In our version of the game, we cast Developing Asia as the guest, with three contestants vying to win the FDI "date" that leads to a long term economic relationship:

And yes, as with any committed relationship, this one also involves a subtle mix of personal attraction (e.g., cultural ties), fear and loathing (security issues), interpersonal conflict (political controversies) and a desire for long-term financial security (it always comes down to money, doesn’t it?).

In this first round of questioning, the guest (Developing Asia) asks the three suitors to offer up what they think is their single best feature.

Having opened the game as such, we turned our participants loose with their laptops to brainstorm how each of the contestants might answer.

This slide presents a selection of the best ideas we received from our participants. They are grouped in trios along the following lines:

• The first row ("Most dynamic…," "Alternative to US…," "Most money…") focuses on a combination of sheer market capacity and the security muscle that comes with it. The U.S. is presented as the obvious leader in both categories, but Europe is seen as offering the same economic package without the additional national security "baggage." Japan is presented as the most liquid ("most money and fewest scruples") or easiest to deal with, since it does not represent a security challenge.
• The second row ("Management talent…," "Experience in…," "Strong existing networks…") focuses on management capacity. The U.S. is presented as the most forward leaning, while Europe is presented as the most experienced. Japan, once again, is presented as the easiest fit.
• The third row ("Most New Economy…," "Don’t judge…," "We’re here…") focuses on Developing Asia’s hopes and fears regarding globalization’s ultimate impact. The U.S. is presented as the leading edge of the New Economy, while Europe is contrasted for its ability to export Western efficiency without imposing "alien" values. Japan is contrasted even more as the "local boy made good," who is more like its neighbors than these upstart, New Economy-types from the West.
• The last row ("...movies!" "...movies," "...movies") focuses on cultural differences. The U.S. is seen as an egomaniacal exporter of culture, while Europe is contrasted for its sophisticated acceptance of other cultures. Japan, yet again, is presented as the insider who can really understand the local environment.

In this second round of questioning, the contestants are asked to reveal their least attractive feature as it relates to serving as a source for FDI. Here our participants brainstormed critical descriptions of all three economic players, as they might be viewed from the perspective of Developing Asia.

This slide presents a selection of the best ideas we received from our participants. They are grouped in trios along the following lines:

• The first row ("Impatient business…," "Labor rigidity to US…," "Not reciprocal…") lists the classic gripe about each economy’s business practices. The cliché on the U.S. is our lack of patience and our incomprehensible political system (to wit, the 2000 presidential election). The European cliché is the pampered, privileged German worker who’ll defend his eight weeks of vacation to his dying breath. Japan’s cliché focuses on its lack of reciprocity.
• The second row ("Impose values…," "Lotsa bureaucrats…," "Very arrogant…") explores the concept of business culture. The U.S. is blamed for Seattle Man and our tendency to moralize about other people’s "unfair practices." Europe is criticized for going overboard on rules, especially as the EU cracks down on union-wide standards for everything from beer to ball bearings. Japan is tagged for its well-worn mask of cultural superiority, which as of late has definitely shown signs of cracking.
• The third row ("We’ll pollute…," "Not very good…," "Terrible corporate…") zeros in on each system’s Achilles heel. America is the land of the lowest common denominator—a Hobbesian economic wasteland where everyone races to the bottom. Europe is an old fogey in a young man’s game, and clearly doesn’t have the stomach for hyper-competition. Japan’s corporations, once the envy of the world, are now despised by many as dinosaurs from another age.
• The last row ("…experience at building nations," "…experience as landlord...," "…experience as labor overseer...") gets at the worst historical baggage each side brings to the table in Asia. The U.S. is seen as the militaristic bully, Europe as the former colonial master, Japan as the unrepentant war criminal.

In the last round of questioning, the tables are turned on the Guest, and we ask our participants to brainstorm both compliments and criticisms of Developing Asia as a target for FDI.

This slide groups the most interesting ideas in best-worst pairings:

• The first row ("…growth potential," "…growth dangers") gets right to the heart of the matter. When the international business community looks at Asia, the first thing they see are markets, markets, markets. It’s the bromide, "If I could just get every person in China to buy one . . .." But with that potentially massive market comes a demographic downside: Asians have already abused their environment mightily in their rapid industrialization. How much worse could it get when you combine all that population growth with mass consumerism?
• The second row ("Great labor…," "Our markets…") tackles two great clichés: Asians as hard- working (true, but what Emerging Market features lazy workers?) and Asian as one vast marketplace (when in reality Asia is a jigsaw puzzle of countless markets, each a little different from the rest). India is a good example on both counts. Non-resident Indians certainly do well abroad, suggesting that if the Indian government just got out of the way more often, India would have a lot more to offer the world. On the other hand, there is no more fractured market in the world, with its hundreds of languages and dialects.
• The third row ("We love technology…," "Don’t like to share info…") highlights the great irony of the region: the juxtaposition of great skill in information technology design and manufacturing and an almost culturally ingrained distaste for transparency. Outside of India, where is the press truly free in Asia?
• The fourth row ("Governments are friendly…," "Governments are rigid") targets governments which seem to specialize in maximizing control versus encouraging individual and corporate risk-taking. If China spent half as much time encouraging e-commerce as it does trying to keep its population under "mouse arrest," how much further ahead would that economy be in ten years?
• Finally, the last row ("I don’t have a weight problem…," "I have a very unstable personality...) cites arguments about the region’s historical maturity. Despite featuring some of the oldest continuous civilizations in the world, Asia features a lot of insecurity—both real and imagined—that detracts from its obvious positive attributes as a up-and-coming center of the global economy.

We now turn to the Scenario Dynamics Grid, which is our "black box" model of sorts. Here we seek to arrange, in a systematic fashion, those broad scenario elements that we think—in aggregate—offer us the majority of the explanatory power we need to analyze how this huge process of change unfolds over the coming years.

The scenario elements we cite here are obviously not the only ones in play, and we don’t pretend that this 3X6 matrix encompasses the universe of change that will be FDI in Developing Asia from now to 2010. Rather, we choose to focus on these 18 scenario elements because we think it’s important to tackle the subject with both vertical depth (i.e., drilling down through Waltz’s three levels) and horizontal breadth (i.e., our six global "lenses" of economics, politics, technology, culture, environment, and security*).

These 18 scenario elements are, so to speak, signposts directing us to where the change connected with the growing role of FDI in Asia’s economic development is most likely to be concentrated—in terms of causality. Naturally, the more we research the subject, the better our signposts become in terms of clarity, but for now, these are the best 18 scenario elements we can identify.

The scenario dynamics grid as a whole should be viewed as a sort of smorgasbord: we think all of these elements are potentially in play for all of the countries in question, but obviously each country’s path will be a selection of sorts from the larger menu of possibilities. As such, the grid is purposely defined in a rather generic fashion, so as not to concentrate too much explanatory power on just one country to the detriment of others.

Beginning with the economic lens and focusing first on its nexus with the international system, we cite the fundamental tension between two possible future pathways: an Asian economic grouping that is Japan-centered or one that is anchored more by a rising China. The difference may be crucial not only for Western business interests, but U.S. national security interests as well. A Japan-centered grouping is more likely to favor a trans-Pacific orientation, while a China-centered one would likely remain captive to Beijing’s concept of "globalization on our terms."

In many ways, Japan is ahead on the learning curve, having already experienced the collapse of its state-dominant development model, whereas China’s may linger for years to come—or collapse soon enough from the rigors of international competition once it finally joins the WTO.* But eventually one country will emerge from that crucible, and whoever gets there first may well determine which country dominates the region over the long haul. For now, both are too weak to serve as the organizing principle of a truly integrated Asian market.

At the level of the nation-state, we note the all-important question of whether or not Asian economies move away from the Japanese banking model and toward that of the U.S. In a nutshell, Japanese banks, in collusion with the government, value firms more for their strategic relationships than their profit potential, leading to lots of bad loans to businesses that would otherwise falter in a more open marketplace. As a result, Japan’s banking crisis has dragged on for years now, while the U.S.’s Savings & Loan crisis of the late 1980s was dispatched with our usual harsh speed.**

Finally, on the individual level, we cite the potentially large role Asian personal savings accounts could play in the region’s investment future. Simply put, too much of Asia’s financial assets sit in do-nothing bank accounts when they could be employed in more efficient capital markets.

Turning to politics and focusing first on its nexus with the international system, we note the important role played throughout the region by Strategic Financial Alliances (SFAs). SFAs are prevalent in Asia because too many governments there simply do not get along well with one another. A classic example is Taiwanese airlines investing in their Chinese counterparts despite a ban on direct flights between the two countries. Often, SFAs work through a neutral intermediary, which is how a lot of investment flows into China via Hong Kong and Singapore—two linchpins in Asia’s SFA network. For example, two firms that otherwise would not join together are willing to do so if the right Singaporean firm steps in as a cornerstone in the alliance. In sum, SFAs represent international networking at its best: getting around the political roadblocks that too many governments put in the way of value-enhancing business partnerships.*

Dropping down to the nation-state level, we cite the obvious issue of rule of law. Few things scare away foreign investors more than judicial caprice, especially when it smacks of political motivation. Governments can facilitate a return on investment, but only a sound judiciary guarantees a return of investment when conflicts arise.**

Finally, and much in the same vein, we focus on cronyism and corruption at the level of the individual. It is the judgment of many experts that Asia simply has not "cleaned up its act" sufficiently as a result of the Asian Flu of 1997-98.*** While a few heavyweights disappeared in the financial earthquake (Indonesia’s Suharto the most prominent example), the culture of cozy business-government relationships persists throughout the region.

Turning to technology and focusing first on its nexus with the international system, we emphasize India’s emergence as a global information technology superpower. The country’s high-tech enclaves already account for roughly half the software written in the world today, an achievement that is not so surprising when you realize India has the largest pool of IT workers in the world. Then again, it also possesses the largest pool of illiterates in the world. In some ways, India matters most as an example to the rest of the developing world. If globalization succeeds in India, where half the population is terribly impoverished, then it can succeed just about anywhere. But if it can’t succeed in democratic India, with its booming IT sector, then where can it succeed?*

Moving to the nation-state level, we note the loss of control many Asian states are experiencing as a result of the Information Revolution. One good example is last year’s South Korean parliamentary election, when the Internet proved itself a political force. When political activists wanted to publicize past corruption by certain candidates, the timid mainstream press took a pass, only to find itself outflanked by the Web. Out of 86 candidates named in a corruption "blacklist," 58 lost in a stunning turn of events.** A second prime example is seen is the mobilization of Falun Gong members in China by the group’s reclusive, New York City-based leader, working primarily through postings on his website.***

Finally, on the individual level, we cite the coming wireless revolution in Asia, which is likely to transform social interactions there to an unprecedented degree. One reason why this revolution will advance so quickly in Asia versus the U.S. is that Asians never became addicted to "fat" visual content on the Internet in the same way that Americans have. As such, Asians are far more willing to adapt themselves to using handheld devices for real-time alphanumeric communications, moving them ever closer to the concept of an "Evernet" of 24-7-365 connectivity.****

Shifting over to culture and focusing first on its nexus with the international system, we cite global fears regarding Asia’s cheap labor. Of course, this is a bit of a red herring, because if all it took to attract FDI was cheap labor, then Sub-Saharan Africa would attract the lion’s share, and this surely is not the case. Clearly, more than just cheap labor must go into the mix. But it is just as clear that Asia as a whole suffers from widespread underemployment, which is the real reason why labor remains so inexpensive. Simply put, many Asian workers are poorly utilitized in many sectors, where great gains in efficiency could be had, given the right blend of new rules and greater access to financial capital, which, in effect, work to free private firms from the influence of political powers more interested in preventing unemployment than maximizing growth potential.*

Dropping down to the level of the nation-state, we highlight the phenomenon of Asia’s clannish business structures, wherein a small number of families tend to control inordinate amounts of national economies in states such as Indonesia and the Philippines. In effect, these oligarghic market structures mean—as one of our participants put it—"a lot of FDI flowing into Asia is really ‘family direct investment’" that never escapes the grip of these powerful clans, thus limiting the potential multiplier effect in the economy as a whole.**

Finally, at the individual level we note the important variable represented by the overseas Chinese who work throughout the world, but are especially concentrated in the Asian region. They are important in a two-fold sense:

• Their remittances back to China are substantial, as are their estimated personal savings.
• Their presence in other Asian countries not only causes local concerns about a Chinese "fifth column," it also places these expatriates in the position of serving as convenient scapegoats during economic tumults.***

Switching to the environment and and focusing first on its nexus with the international system, we cite Asia’s growing out-of-area energy requirements. The region approaches self-sufficiency only in coal. In natural gas, where requirements are expected to roughly triple over the next two decades, Asia must increasingly turn to the former Soviet bloc and the Middle East, since advanced economies in the region already buy up the lion’s share of what’s produced locally. In oil, Asia’s requirements for out-or-region imports are predicted to double by 2020. Asia already buys up roughly two-thirds of all oil produced by the Persian Gulf region, and will buy approximately three-quarters as early as 2010. These dynamics create a co-dependent relationship between Asia and the energy-rich regions of the Persian Gulf and Central Asia: Asia is increasingly dependent on the political-military stability of these regions, and these regions are increasingly dependent on the economic stability of Asia.*

Moving down to the level of the nation-state, we focus in on the role of the state in the energy sector. One of Wall Street’s great concerns about the future of energy in Asia is the disproportionate mix of public decision making and private finance—namely, too much of the former controlling the latter. The historical record of state energy planning around the world is rather dismal, and yet, in the case of Asia, the states that will experience the most rapid increases also feature the heavy hand of state control.** In sum, while Wall Street likes to see monopolies build networks, it prefers them to be run by market forces once they are operational.

Finally, on the level of the individual, we note the general environmental issues connected with all this rapid growth. It is fair to say that Asia’s infrastructural requirements over the next two decades are unprecedented in human history. The combination of rapid rises in energy consumption, population, urbanization, and water usage will further damage an already battered regional ecosystem.***

Finishing with security and turning first to its nexus with the international system, we will argue that there exists in Asia a division of spheres of influence between China and the United States.* In effect, China is the dominant mainland power in the region, while the U.S. is the dominant maritime power. By and large this regional balance of power has been stable, with occasional lapses into mini-standoffs such as the 1996 controversy over Taiwan or this year’s surveillance plane imbroglio. But on a bilateral basis, it is fair to say that both sides have spent most of the 1990s coming to the conclusion that the other power constitutes the main threat to peace in the region.** How this military relationship unfolds over the coming years will go a long way in determining the region’s security environment.

Downshifting to the level of the nation-state, we cite the "UK effect," as in, United Korea. No single change to the region’s security landscape over the coming years will be more profound than the eventual reunification of the Korean peninsula. With the inevitable demise of the North Korean regime, the potential for a major land war in Asia will be immediately and significantly reduced. Two questions arise about this scenario: the speed of the collapse (fast versus slow) and the nature of South Korea’s response (can it just "buy out" Pyongyang or must it go in and literally take over the country?). Naturally, the best outcome in terms of the FDI climate is a slow collapse where Seoul "buys out" the North Korean regime in piecemeal.***

Finally, on the level of the individual, we cite the issue of Asian xenophobia about Western companies coming in and buying up big chunks of the economy, thus replicating, in some sense, a colonial-era atmosphere of "distant owners." This tendency to "blame the West" was also seen in the Asian Flu of 1997-98.****

Having presented our overview of the key scenario dynamics we believe will shape the future FDI market in Developing Asia, we now turn our attention to existing obstacles (Old Orders) that our participants identified as hampering the region’s ability to attract outside investment. These ideas are culled from various brainstorming sessions and discussions we conducted over the course of the workshop, and are organized across same six topic areas we employed in the previous section:

• Economics
• Politics
• Technology
• Culture
• Environment
• Security.

For each Old Order, we have identified a corresponding advancement or correction, which we dub a New Law. These ideas were likewise culled from various brainstorming sessions and discussions.

This section basically presents a wish list. In effect, we ask our participants to provide us two types of ideas here:

• Tell us something you don’t like about Developing Asia with regard to FDI.
• Give us an example of some event or deal that would signal an improvement in this issue-area.

In sum, the ideas all come from the participants, but we have provided the packaging and linkages.

To explain a bit further, we will say that "new laws" represent significant reforms, treaties, contracts or deals of some sort that our participants identified as signaling an improvement in Developing Asia’s long term FDI climate. "Old orders," in contrast, represent a significant deficiency in the current FDI climate that would be overcome or seriously diminished by the achievement of a relevant "new law."

We organize these pairings in a three-tiered manner:

• Letting go of the past refers to some long-standing order or way of doing things
• Getting a grip on the present refers to a more recent or near-term obstacle
• Reaching for the future refers to those situations whose solution set is probably the furthest from actual achievement.

Obviously, the "wish" element grows stronger the farther back you delve into the past or the farther ahead you look into the future.

Starting with economics, the Asian order with the longest pedigree is the cozy relationship that exists between major banks and their clients—or borrowers. In the U.S., banks foreclose bad loans based on their own objective economic standards, but in many Asian countries, an unusual degree of closeness exists between bankers and their corporate clients, so much so that a political consensus is often required for the painful decision to actually bankrupt a failing firm. Absent such political decision-making, the tendency of the banks is to let bad debts pile up, creating an untenable overhang for the banking system as a whole. It is exactly this sort of vulnerable situation that convinces foreign investors that currency depreciation is in the offing, which in turn can trigger a currency crisis and/or financial panic. As Japan is one of the worst offenders in this regard, a truly stringent reform of the banking laws there would be viewed as a significant step forward.*

Moving to the near term, we cite the Asian "values" so prominently celebrated during the heyday of the Asian Tigers. In essence, the crux of these "values" is the acceptance of the collusion of corporations, financial markets, and governments in a national economic policy that emphasizes macro-stability and broad-based development via an export strategy and deemphasizes the market’s role in picking winners and losers through competition.** The "new law" proposed here is the creation of an Asian Securities and Exchange Commission.

Looking more to the future, we cite growing Asian resentment over perceived Western meddling, most notably through international financial institutions such as the IMF and World Bank. Both institutions, and the IMF in particular, were harshly criticized for their handling of the Asian Flu.*** The "new law" proposed here is for an Asian Central Bank that would allow the region to—in effect—rescue its own during times of trouble.

Shifting to politics, we start with the cliché of China as an expansionistic power bent on reconstructing its near-mythical, Middle Kingdom past. We call this a cliché because too many observers tend to extrapolate from China’s efforts to reclaim "lost provinces" a more generalized ambition to gobble up large chunks of Asia. In reality, China’s appetite for expansion has always been narrowly focused.* Now that Macau and Hong Kong are back in the fold, the last significant piece of this puzzle remains China’s claim of sovereignty over Taiwan, which it views as a renegade "province" destined to rejoin the motherland at some point. Because Taiwan represents such a tremendous financial gateway into the Chinese mainland, we note that any accord that would solidify the two countries’ standing with one another—regardless of content— would greatly enhance investor confidence in both.

Looking more to the present, we cite investor concerns over the fate of China’s state-run enterprises, most of whom have long been propped up by subsidies from the state. With China’ imminent accession to the WTO (probably by the end of this year), many of these unprofitable enterprises will face foreign competition for the first time in their existence, leading to many failures within the coming years.** Therefore, how China handles this process will go a long way toward signaling to the outside world its commitment to free markets.

Scanning ahead to the future, we cite Western concerns over the course of one-party rule in China. Clearly, the Chinese Communist Party is weaker now than it has ever been, controlling less and less of the country’s social and economic life as free markets expand across the economy. The real question is, how quietly will the party exit stage left? One step that would quell investors’ fears about that downstream outcome would be for Beijing to make the Yuan, or Renminbi, convertible.*** This development would signal a significant loss party control over the economy, making its inevitable departure from power less uncertain.

Shifting to technology and looking first to the past, we cite Asia’s long-standing tendency toward copycat R&D, or basically breaking Western patents and copyrights. This issue has long been associated with Japan, and more recently with India’s pharmaceutical industry, where the issue has become caught up in the global debate on how best to handle the AIDS epidemic in Africa.* On another front, one of the U.S.’s main beefs with China over trade has been copyright infringement on recorded entertainment and software, a subject that periodically threatens to poison economic relations between the two. As such, the "new law" proposed would be some sort of treaty or series of national laws outlining Asia’s willingness to enforce the legal concept of intellectual property.

Turning more to the near term, we note the growing concern that Southeast Asia is falling behind in the so-called New Economy, as, relative to the rest of Asia, states here are not attracting the same level of information technology investment. For example, Chinese citizens are twice as likely to use the Internet than Southeast Asians. In short, Southeast Asia lacks much of the physical infrastructure for e-commerce to take root. Plus, the societies there do not adapt well to the transparency required for networks to flourish.** Along these lines, investors would welcome some explicit recognition of this danger by regional governments and coordinated economic incentives to accelerate Southeast Asia’s development of the necessary infrastructure.

Finally, looking more to the future, we note a similar concern. Many of our workshop participants were adamant about dispelling the myth of Asia as one giant undifferentiated market for Western goods and investment. Focusing on localism which they believe is exacerbated by the region’s minimal infrastructure development, one idea proposed was the emergence of an Asian NASDAQ, or PACDAC, that would focus investment toward IT and IT-related infrastructure development.***

Moving on to culture and focusing first on the past, we note Japan’s continued resistance toward accepting full responsibility for its actions in the Second World War. This historical amnesia perpetuates huge reservoirs of mistrust and even hatred of the Japanese in such countries as South Korea and China, to name the two most prominent cases ("comfort women" and the "rape of Nanking," respectively). To this end, we propose some sort of official reconciliation treaty between China and Japan over the latter’s rule in Manchuria during the 1930s and first half of the 1940s.*

Looking more at the near term, we focus on China’s growing sense of anxiety over its perceived non-acceptance into the ranks of global powers. In short, Beijing wants desperately to be recognized by the world, and the United States in particular, as a relative co-equal, and not merely as an upstart power that needs to be contained. The proposal here is for Beijing to be awarded the 2008 Olympics, signaling its emergence as a world-class city capable of putting on a global show.**

Finally, peering into the more distant future, we note the Chinese leadership’s continuing obsession with cracking down on Falun Gong, out of the fear that cults or religious-based movements have historically played substantial roles in fomenting political upheaval in the country.*** Understanding how these specific fears contribute to an overall hostile religious environment in China, we propose the achievement of a diplomatic recognition treaty between China and the Vatican as a positive step in the direction of demonstrating the government’s willingness to allow greater pluralism in general.

Shifting over to the environment and focusing more on the past, we cite the plethora of border and maritime disputes between major powers in the region, with a number of countries still technically at war with one another (dating back to WWII). Paraphrasing Robert Frost, we believe good pipelines make good neighbors, and given the region’s skyrocketing requirements for oil and natural gas, it only seems natural that these old border disputes should be put aside in favor of linking energy producers and consumers. A good example of a breakthrough in this arena would be Japan and Russia moving past the Kurile Islands dispute and finally going ahead with one of the natural gas pipelines currently proposed.*

Looking more at the near term, we highlight the general powerlessness of individuals to seek redress for personal and property damage brought about by environmental pollution. One way to achieve some corporate responsibility in this arena would be class-action lawsuits that would begin to define the private-sector’s responsibility for the environment.**

Looking ahead to the future, we note the failure of any advanced economy to ratify the Kyoto Protocol on climate control, in large part because of resentment over the fact that large, emerging economies such as China and India were excluded from the regulatory regime. To that end, we propose the notion of a successor Kyoto accord that would be far more inclusive and thus present a better chance for a global consensus to emerge.

Finishing up with security, we first zero in on the region’s most prominent Cold War hangover: the divided Korean peninsula. The consensus we heard at the workshop—especially from the Wall Street participants—was that South Korea should not wait until North Korea collapses to begin trying to "buy out" the regime in every sector possible. In other words, rather than wait out Pyongyang and face a very expensive reunification process, Seoul is better off seeking economic integration now, even at the risk of lengthening the socialist government’s life span. Exposure to South Korea’s vastly higher standard of living can only have a subversive effect on the North Korean regime’s legitimacy. Meanwhile, the deeper Seoul’s financial tentacles reach into the North Korean economy, the easier the process of later reunification.

Looking more at current events, we highlight the dangerous nuclear standoff between India and Pakistan, where the focus of conflict is the disputed Indian state of Jammu and Kashmir. Radm K. Raja Menon, Indian Navy (ret.) likes to say that India’s national security paradigm remains trapped within "the sacred soil syndrome."* On the one hand, you could argue that no nation has lost more land since WWII (e.g., Pakistan, Bangladesh). On the other hand, no economy today better demonstrates the "death of distance" associated with information technology. As Thomas Friedman might say, India is at once a leading "Lexus" economy (i.e., high-technology producer) and a classic "olive tree" society (i..e., still fighting over seemingly meaningless bits of land). To move India beyond this trap, we look to some strategic arms limitation treaty with Pakistan.**

Looking ahead to the future, we target the Pentagon’s never-ending search for a "near peer," which is clearly focused on China. Granted that Wall Street has a different appreciation for China, they would welcome some downstream multilateral security agreement that brought together the U.S., China, and Japan.