A Review of How Asia Works
Here’s a name I’m willing to wager you haven’t heard of before you lucked out and started reading this post: Friedrich List.
Said gentleman, as you probably (and for the sake of your social life, hopefully) don’t know the first thing about him, was a German chap. More importantly, he was a German chap who was rather opposed to all that English nonsense about invisible hands and what not. Economics, he haughtily harrumphed, was about the development of a nation, not an individual. And to ram the point home, we went ahead and became a pretty important cog in a school of thought called the historical school of economics.
And while that school may not win any awards in the what-an-imaginative-name category, it turns out to have been a pretty important development for two nations in Asia – Japan and South Korea. And a third, although to a lesser extent: Taiwan.
These three nations win an approving nod from Joe Studwell, author of the book that is under review today, “How Asia Works: Success and Failure in the World’s Most Dynamic Region“. And if you ask me, these nations should heave a collective sigh of relief, for getting an approving nod from Mr. Studwell takes some doing.
Those nations that hang their heads sheepishly and receive a proper dressing-down include (but, as the saying goes, are not limited to) Thailand, Malaysia, Philippines and Indonesia. India doesn’t receive a dressing-down, but that’s because we simply aren’t worth the time and space in the book.
I’m getting ahead of myself – let’s go back to Friedrich. He said, as did everybody else in that school of thought, that a country’s development should take precedence over an individual’s affluence. In other words, if the state needs to butt in and meddle with what an economy needs to do in order to become awesome over time, well, then, the state should go ahead and do just that.
Not, I hasten to add, in a Nehruvian sense. Instead, in a Park Chung Hee-an sense. General Park was, for all intents and purposes, a South Korean dictator for quite a long time, and he was a very, very bad-posterior dictator. He butted in like nobody had butted in before, and made sure that private South Korean firms became awesome. He did this by providing firms absolutely everything they needed in terms of sops, grants, extensions and foreign expertise. If, after this, the firms proved to be less than excellent, he killed them off.
The ones that survived? Hyundai, LG and Samsung, among others – so perhaps there is something to be said for the General’s methods.
His methods also included, as did Japan’s and Taiwan’s, radical land reform and financing that was geared towards export growth – and that forms the crux of this book. The fact that if a nation in Asia hopes to be able to develop, it must do so by getting land reforms right (agriculture), by being ruthless and helpful to a fault towards industry (manufacturing) and by doing all one can to provide financial succour to those firms that show promising export growth (finance).
Do this right, it would seem, and you’re more or less guaranteed a path to development. Do not do this, and you are probably going to have Tom Yum Soup or Laksa for dinner. Or sambal, maybe.
The rest of the book is a truly intellectual tour de force through examples of what the three successful nations did right, and many more examples of what the other nations did wrong. He is scathing when it comes to what went wrong in terms of land reform in the Philippines, or in terms of industrialization in Malaysia, or in terms of financial reforms in Thailand and Indonesia. And his reviews are backed by many reams of citations, each of which are eye openers in their own right. In fact, you might consider yourself in profit with the citations alone. Whether you agree with the central theme of the book or not, there is much to learn here.
Count me among those who don’t agree with the thesis entirely, however. While there is no disputing the fact that the nations he speaks about have done very well indeed, their paths leave something to be desired. South Korea’s in particular. Rampant inflation, an over-dependence on chaebols for employment, political repression are heavy prices to pay for rapid industrialization – and if you ask me for my opinion, prices that are not worth the end result.
This does not for a minute mean that we’ve got things right here, of course – far from it. Nor does it mean that Studwell’s diagnosis is incorrect – again, far from it. He has done an excellent job of highlighting what went right, and what went wrong in South East Asia – and the consequences of the same over the last forty years or so for the region.
His prescription: this is the path that all developing nations must eventually choose for themselves, and there is no alternative – that is something your author feels a tad queasy about.
Mr. Studwell’s book deserves to be widely read because he leaves you with the distinct notion that feeling queasy about it is the best you can do.