BOOK: HOW ASIA WORKS: SUCCESS AND FAILURE IN THE WORLD’S
MOST DYNAMIC REGION
AURTHOR: JOE STUDWELL
PP: 402
We hear a lot about the Asian tigers and the development
miracle that took place in that part of the world over the second half of the
last century. We hear stories how about
almost all Asian nations were at the same level as sub-saharan Africa 50 years
ago. The divergent paths of their economies with Asia becoming more and more
prosperous and sophisticated while sub-saharan Africa descended into chaos and
poverty serve as a useful study of what to do or not to do to drive
development.
In this book Studwell, a long time financial journalist in
Asia, distils the path to the region’s prosperity down to the jumping in
agricultural yields, export driven manufacturing and the directing of financial
resources to those two goals.
But first he debunked previous theories about the Asians
being congenitally frugal or disciplined people as the basis of their
superlative success. In doing so he makes the distinction between Japan, South
Korea and Taiwan on the one hand and Malaysia, Thailand and Indonesia on the
other. The former being the success stories – The Asian Tigers, while the
latter, while having experienced growth have fallen far short of the other
three as far as being development models is concerned.
"At the base of their – Asian Tigers, launches were land reforms, which were successful to varying degrees and served as a signal of the respective political classes’ commitment to long term, equitable development...
Once land reform was done the “gardenisation” of Asia begun
in earnest. This was the process of increasing the farm yields, which had
several advantages for the underdeveloped nations. One, it was labour intensive
creating employment. Two, the improved food yields saved the country valuable
foreign currency that would have been spent on food importation and relatedly
it created demand for the budding industries which served as the bedrock of
these countries next level of development.
The Tigers then pushed into manufacturing, but did not
succumb to the seduction of import substitution industries. They developed an
industrial policy that emphasised export discipline. Import substitution just
promotes inefficiency and entrenched local interest that are not competitive
abroad. In their drive to build their manufacturing base they not only
supported only companies that were producing for export but also supported
several companies in the same industry. This created competition as they
favoured these that succeeded in export markets and shut down or merged the
unsuccessful ones with the successful companies.
Contrary to popular belief they did not attempt to pick
winners but more the policy served to cull inefficient producers. Failure or
success was determined by the objective tastes of foreign markets.
And finally they directed financing strategically towards
boosting agriculture production and supporting firms to prosper abroad. In the
case of Japan and Taiwan through a determined effort to build their internal
savings but in South Korea’s case by borrowing abroad.
Studwell also points out that it does not matter much if the
banks are state owned banks as in the case of Taiwan and now China or are in
private hands as in the case of Japan and South Korea. What matters is whether
they are persuaded to support the government’s development agenda.
"This was an interesting finding that stretched to companies as well. That it did not matter whether they were state owned or privately owned but whether they could be compelled to support the development agenda...
One other interesting finding, a distinction between the
Asian Tigers and such basket cases as Philippines is that their development
agenda were driven by “historians” rather than economists. Technocrats who had
studied the process of development in Germany, England and even the US and
adopted to their local circumstances rather than kowtowing to liberal economic
theorists whose prescriptions had little precedent – and still don’t, to back
them up as successful developmental models.
Compelling, hard to refute case is made for differing economic models at
the different stages of development countries have to go through.
The books cuts to the heart of the many developmental
questions we are currently grappling with. How do we drive growth? How do we
make it more equitable? Which economic forces should the government be aligned
with? How can agriculture be supported? And why economic orthodoxy is bound to
fail all the time and is the wrong prescription for developing economies?
It is a book on a complicated subject that is written simply
enough for anybody to understand. A
priceless handbook, worth its weight in gold and which everybody who is
interested in the development questions of our time should, No! Must read.
