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By Root 1756 0

crashed in 1998, the price of soybeans soared—a disaster for Indonesia’s tofu producers, whose monthly income is only around twenty-seven dollars and who are unable to pass higher costs along to their even poorer vendors and customers. Some eighty-four hundred tofu producers in East Java went out of business in 1998. Meanwhile, to control a ballooning budget deficit, the IMF and the World Bank are urging Indonesia to do away with government subsidies for fuel oil, which currently sells for only about a quarter of its world market price. Fuel prices have already increased significantly. For family-based tofu businesses, which typically buy one hundred liters of fuel a day to fire the ancient pressure cookers that turn their soybeans into slurry, free market policies have made Indonesians choose between starvation and removing their children from school—both to put them to work and to eliminate the cost of tuition.

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Also around 1920, two young immigrant brothers—who had left China virtually penniless just a few years earlier—scraped together enough capital to open their tiny Chia Tai seed shop in Bangkok. Over the next few decades the brothers, Chia Ek Chor and Chia Siew Whooy, struggled, importing seeds and vegetables from China, exporting pigs and eggs to Hong Kong, experimenting incessantly while living on next to nothing. In the 1950s the brothers began specializing in animal feed, especially for chickens, establishing the Charoen Pokphand Feedmill in 1953. Through the 1950s and 1960s the Chia family—now surnamed Chiaravanont—vertically integrated, combining their feedmilling operations with chicken breeding. By 1969 the Charoen Pokphand (CP) Group had an annual turnover of between $1 and $2 million.

As Thailand opened up its economy in the 1970s, embracing globally-oriented market policies, the CP Group took off, entering into various business arrangements with major Thai banks, the Thai government, and foreign companies. The core of the CP Group’s agribusiness was contract farming: The company supplied Thai farmers with chicks and feed and taught them how to raise chickens. In turn, the farmers sold the grown chickens back to the CP Group, which processed the chickens and then marketed them to high-volume buyers such as grocery stores, restaurants, and fast-food franchises. At the same time, the CP Group expanded internationally, exporting their contract farming formula first to neighboring Indonesia and Malaysia, then to the rest of Asia, and eventually all over the world, from Mexico to Turkey to Alabama.

In the 1980s, with Thailand now aggressively privatizing and in full free market mode, the CP Group moved into aquaculture, applying their contract farming formula to raising and marketing shrimp. In 1987 the group acquired the 7-Eleven and Kentucky Fried Chicken franchises for Thailand. It also moved into Shanghai, manufacturing motorcycles with a license from Honda and brewing beer with a license from Heineken. In 1989 the CP Group entered the petrochemical business through a joint venture with Solvay, one of Belgium’s largest firms. In 1992 the group signed a contract to rebuild Thailand’s telecommunications system, a $3 billion project. In 1994 it signed a joint venture agreement with Wal-Mart to establish super-retail stores throughout Asia. Today the CP Group claims $9 billion in assets and is among the most powerful business conglomerates anywhere in the world.

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Needless to say, these two stories do not amount to a scientific sample; they are intended only to be suggestive. And they do suggest a number of points. For one thing, the key to success doesn’t turn on what product you start with, whether bean curd or chicken feed. My own family in the Philippines started off manufacturing fish paste, another humble product best thought of as mashed anchovies. To save on costs, my family members decided to produce their own containers. They eventually dropped the fish paste to focus exclusively on plastics.

Nor does the existence of “social networks” explain economic success. Both the Javanese