Sunday, April 19, 2015

Paulson, Dealing with China

Hank Paulson thrives on spanning divides, perhaps because his own two overriding passions may seem, at least at first glance, to be at odds with one another. As CEO of Goldman Sachs and, later, Secretary of the Treasury, he pursued his passion for banking and deal-making. He was “the hammer.” But he has also been an avid nature lover his entire life, dedicated to conservancy.

When he left the Treasury Department in 2009 and returned to private life, he was “as unhappy as [he’d] ever been.” He began his memoir about the financial crisis, On the Brink. “Writing is said to be therapeutic for some authors. I’d like to meet one or two of them. It sure wasn’t for me. Writing On the Brink, I found myself reliving the most harrowing moments of the crisis—complete with sleepless nights. The strain wore on my family. As a matter of fact, when I later told Wendy that I was thinking about writing another book—this one—she said simply: “Fine. And I’m going to start dating again.” (p. 266)

As he searched for what to do after On the Brink was published and he and his wife left Washington for Barrington, Illinois, he knew that he wanted to stay involved with conservation and with China. In 2011 he founded the Paulson Institute, “an independent ‘think and do’ tank that conducts environmental and sustainable development projects and research on economics and the environment in the United States and China.”

His new book, Dealing with China: An Insider Unmasks the New Economic Superpower (Twelve/Hachette, 2015), which should help to publicize the work of the Paulson Institute, was presumably less stressful to write than his first--the Paulsons are still together. It’s part memoir, part prescription.

As memoir, it’s a fascinating glimpse into how Goldman did deals in an evolving China. To paraphrase the old Smith Barney commercial, they made their money in China the old-fashioned way, they earned it. They not only had to be creative in structuring deals, they also had to learn how to read China’s political and business leaders. Paulson recounts the China Telecom IPO, where “the most obvious challenge” the Goldman team faced was that, “in conventional terms, there was as yet no actual company to underwrite.” (p. 61) And in a nation largely “ruled by men, not laws,” “trust and face were uppermost.” (p. 85)

As prescription, Paulson focuses on what he considers to be China’s foremost task—“retooling its economy for the long run.” (p. 370) He is a strong advocate of competition, as long as it’s fair, and offers some principles to guide U.S. relations with China. Prescription, almost by definition, is never as interesting a read as memoir, but policy wonks can learn from Paulson’s extensive experience in China. Environmentalists can also take heart reading about some of the projects China has undertaken, although what still lies ahead is daunting.

Paulson writes well (he was an English major, after all) and has a good story to tell. I found Dealing with China a captivating book.

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