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8 of 8 people found the following review helpful:
5.0 out of 5 stars
Insightful and thoughtful analysis of Asia's rise, July 31, 2009
This review is from: The Miracle: The Epic Story of Asia's Quest for Wealth (Hardcover)
Right after WWII many Asian countries such as Korea were some of the poorest countries in the world. Devastated by war and years of bad government, these countries were not expected to rise. Unlike many African countries they also were relatively poor in natural resources such as oil and diamonds. Sixty years later many of these Asian countries accomplished incredible growth and in the process elevated many of their citizens from poverty. Schuman examines the many factors that contributed to their rise. What has been the role of culture? Or government? Could unfettered free markets without government intervention have produced similar results? The answer to these questions and many more turns out to be more complicated. Schuman has chapters on China, India, Japan, South Korea, Hong Kong, Taiwan, Singapore, Indonesia, and Malaysia. Each of these countries employed different strategies to grow and succeed. Schuman does an outstanding job analyzing each of the countries. His open-mindedness and lack of ideology give readers a well balanced picture of the region.
Schuman's writing is easy and enjoyable to read. You will learn about the countries' politics, history, economic systems and in general the benefits and pitfalls of globalization. In the process you will also learn about key figures that were instrumental to the rise. This is an outstanding book and a delightful read. I highly recommend it and as you can see from my other reviews I am not a generous Amazon reviewer - I do not give many 5 star reviews!
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9 of 10 people found the following review helpful:
5.0 out of 5 stars
Must-Read Economics and Development Material!, July 1, 2009
This review is from: The Miracle: The Epic Story of Asia's Quest for Wealth (Hardcover)
Asia has emerged from centuries of stagnation to produce the most sustained economic boom in modern history - all in little more than a generation. Shuman's expertise and openness combine to produce one of the most important books on economic development - "The Miracle." South Korea leads the group, with a 15,046% growth in GNP/capita from 1965 - 2007; Japan's was "merely" 4,133%, China's 2,260%, and India's 764%. East Asia's 1981 poverty rate (surviving on $1.25/day, or less) led the world at nearly 80%; this fell to 18% by 2005. (During the same period sub-Saharan Africa remained at 50%.) Goldman-Sachs predicted in 2003 that by 2050 the Indian and Chinese economies together would double that of the U.S.
Shuman's focus is on both reporting how each economy blossomed, and then synthesizing underlying potentially explanatory factors. Five theories are most prominent:
1)"There is something special about Asians" - eg. Confucianism's stress on societal order and devotion to a strong work ethic (early Hyundai shipbuilders working 17-hour-days; Chinese factory workers working 12-hour-days for 28 or so days/month), savings (up to 50%) and education. (Akin to earlier studies crediting Protestantism's "The Lord helps him who helps himself" for the success of capitalism in the West.") Shuman also could have referenced politically-incorrect yet credible studies concluding that Asians benefit from about a ten IQ-point lead over average Caucasians. Regardless, Shuman challenges this theory, asking "Why not earlier?"
2)A second theory is that Asian leaders did a superior job of planning - despite contradicting seemingly superior U.S.-backed laissez-faire ideology. Examples include selecting particular industries to promote (eg. steel, shipbuilding, chemicals, electronics, metals, machinery - Japan, South Korea), assisting them with government funds, protection from foreign competition on their home turf, discounts on energy, lowered local taxes on their products, and wresting foreign assistance with new technology and patents. Other aspects include sometimes picking leaders of the new industries, forcing them to succeed vs. international competition in other lands, and forcing out corporate leaders who failed to succeed. Another important strategic dimension involves horizontal vs. vertical integration - a 7/13/09 WSJ column by Andy Grove points out that the Chinese government is supporting auto battery development (horizontal integration), vs. the U.S. supporting G.M./Chrysler (vertical), and that the Chinese may be making the better choice. Finally, it was also particularly interesting to note that some aspects correlated with strategic thinking by U.S. leaders. South Korea, for example, seemingly deliberately planned that every new plant had to be one of the largest in the world, and most efficient - very similar to Jack Welch's dictate that G.E. must be #1 or #2 in every area it competed in - guaranteeing it would not suffer scale dis-economies.
3)A third theory is that Asians simply took advantage of American-supported free-trade and military support for stability, while also boosting the education of their peoples and infrastructure (eg. transportation, power networks). Again, however, Shuman challenges such thinking with "Why not eg. Africa as well?"
4)Shuman sees nationalism as a fourth explanatory theory. The transformational Asian leaders sought strong growth to lift their people's standard of living, as well as a defense against the Communist or U.S. threat (eg. South Korea, Taiwan; China). Ironically, part of Deng's motivation in China was also to favorably impress citizens in Taiwan and Hong Kong in hopes of later peacefully re-uniting with them. These leaders also often set demanding goals for themselves - Ikeda, Japan's PM beginning in 1960, set a goal of doubling national income by 1970 - not only did Japan succeed, but confidence in his goal led many Japanese to boost the economy by spending on basic appliances (B&W TVs, refrigerators, washers), and later upgrading to color TVs and buying cars. Similarly, China's Deng supported a 1982 goal of boosting output in 2000 to levels 4X those then current.
Deng, like Obama's assistant, Rahm Emmanuel, was of the "let no crisis go to waste" school. He and his supporters took advantage of failing harvests to encourage and support radical thinking - eg. "privatizing" the collective farms. (Six months after Deng's approval, this spread to 75% of its farms.) Shuman also points out that China's approach differed from its Asian neighbors, with considerable government withdrawal from business areas formerly dominated - eg. government-owned enterprises. However, readers mush not make too much of that distinction - China still kept core actions of selecting and assisting new industries.
The author also notes that, with one exception, (Singh, in India) the leaders were not economists, but were quick to borrow from nations demonstrating early success (Japan was first). (Similarly, many leading American business leaders had no economic/management training - eg. Gates, Welch, Jobs, etc.)
Shuman also is quite impressed by the creativity of innovative and driving early Asian business leaders - eg. Morito (Sony), those involved in developing the Toyota Production System (TPS) that turned "Fordism" on its head, China's head of Leveno, Hyundai's founder, etc. China's recent battery and solar power entrepreneurs, not mentioned, are nonetheless also supportive of Shuman's thinking. Finally, "The Miracle" also quotes Asian leaders with crediting the U.S. for providing security and stability to the region.
5)A fifth potential explanatory theory is that strongman or single-party rule throughout much of Asia, did away with divisive arguments and interminable decision-making delays (think U.S. politics). Interestingly, South Korea's strongman Park, most credited with its economic transformation, was also posthumously selected in 1996 as the "dictator they' most like to clone." (Economic benefit trumps political freedom.) Clearly China's Deng, Suharto, and Japan functioned similarly - especially at the onset of their transformation.
Which theory is correct? My opinion is that each has truth; reality is probably a combination of them all.
My only criticism of "The Miracle" is that Shuman's thinking about long-term consequences for the U.S. are superficial. He believes, correctly, that continuation improves relations between the U.S. and Asia - but this is likely only up to a point. China's increasing concerns over holding U.S. financial assets is evidence that things may get tougher.
More importantly, however, Shuman fails to realize that what's good for Asia (more free trade) may not be good for the U.S. Further, he misses the significance of Sony's Morito refusing a major manufacturing contract to build transistor radios with Bulova's name on them - Morita's point was to give Sony greater control of its destiny, and gain access to the bulk of profits accruing to non-manufacturing activities (eg. China receives only 25-35% of the consumer price for items it manufactures). Similarly, Lenovo has acquired IBM's PC business, and various other new Chinese firms in China (eg. autos, solar and battery power) are following the same logic.
Countless American "experts" have told us we benefit from off-shoring manufacturing and its sweaty, brainless jobs - Shuman certainly isn't concerned. Reality, however, is that manufacturing experience, even involving simple plastic toys, also provides an irreplaceable foundation for related product and tool design, and process management. (The "Toyota Production System," obviously developed to support auto manufacturing, has proven generalizeable to countless industries, and is now also being applied in hospitals and white-collar work.) Meanwhile, CRT-tube outsourcing has been followed by ceding industry-related R&D jobs and even participation in the industry's increasingly technological direction - CRT and plasma screens, and most likely OELDs as well.
Finally, I can't help wondering what Russia's economic fate would have been if it had followed the Asian model.
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1 of 1 people found the following review helpful:
4.0 out of 5 stars
Different perspective to detect Asia development since 1950s, October 22, 2010
Among the books which deal with the rapid economic growth in Asia from a political, cultural and economic perspective, Michael Schuman distinguishes himself by examining Asian history through the biographies of several influential Asian individuals. These people can be regarded as "crucial revisionists" and "market friendly adherents" . Crucial revisionists, in this sense, are those who view market failures as pervasive and governments as justified to lead the market in critical ways, while market friendly adherents believe that governments need to do less in production sectors and more in those areas where markets cannot be relied upon.
Schuman has interviewed these influential individuals through his career as a journalist and created short and interesting biographies of them. Because most of these people are policy-makers, Schuman attempts to use these biographies to reveal the details of Asian development: how policy-makers make decisions, what pressures they face, what considerations they focus on, and how the general conditions of Asia affect their decisions. However, the author doesn't intend to reach strong conclusions- his book is more descriptive than analytical. Therefore, this book should not be viewed as thorough economic research on rapid Asian development, and it is crucial for the reader to have prior knowledge on this topic before attempting to understand the book. However, it is an interesting supplement that provides a different perspective on the "miracle" of Asian development.
In each chapter of the book, the author focuses on the crucial revisionists or market friendly adherents in eleven countries: Japan, South Korea, Singapore, Hong Kong, Taiwan, China Mainland, Malaysia, Indonesia, and India. While the book doesn't come to explicit conclusions about the development in Asia, this is not necessarily a fatal flaw. In fact, it provides the opportunity for the reader to come to her own conclusions and understanding of the potential problems in Asia, without being influenced by predominant theories. However, the author has not provided the reader with any theory or analysis, making the book harder to follow and the conclusions harder to reach for those with less prior knowledge on the topic.
Even without critical analysis, the book does present many interesting observations. First, Schuman's biographies point out two major characteristics of the Asian model of development. One of these is the fact that Asian countries tend to emphasize investment in export intensive industries, as well as participate heavily in international trade. The second aspect is the emphasis on investment as the main pathway to economic growth. Unfortunately, having both of these characteristics can be problematic, since an overdependence on exports not equally balanced with domestic consumption can lead to a bubble economy.
The author describes these issues through two biographies: Shigeru Sahashi, a crucial revisionist from Japan, and Li Ka-shing, a market friendly adherent from Hong Kong. Shigeru Sahashi, a government official, was selected by the author because he has personified the intrusiveness of Japan's state in guiding the economy. He implemented a sequence of policies to transform the comparative advantage of Japan from labor-intensive industries such as toys and textiles into heavy industries which require greater technical expertise and larger investments. By implementing easy access to low-interest financing, duty-free imports of necessary machinery, infusion of foreign technology, and trade barriers that protected favored industries from foreign competition, the Ministry of International Trade and Industry (MITI) and the Central Bank cooperated to speed up and expand investment. In this way, Japan first created the "MITI-driven Model". Growth led primarily by the government is actually quite representative of the typical model of Asian development. On the other hand, Li Ka-shing, a very influential and wealthy business man, was selected by the author because he characterized the other trait of the Asian development model: active participation in international trade. Li started his business by manufacturing plastic toys for a local trading firm and then accumulated great amounts of capital by accepting large orders from abroad. His business was significantly enlarged by international trade when there was a shift in global manufacturing in the 1960s from developed to developing countries. Now he is Chairman of the Hong Kong conglomerate Hutchison Whampoa, and one of Asia's richest men. Thus, Asian domestic industry is expanding rapidly while the government is emphasizing exports and international trade, which can lead to an overall diminished national consumption.
Second, the author explores some anomalies in Asia that differ from this typical Asian model of development, as well as some changes that have been occurring to this model. One of these anomalies is India's focus on the service sector. While most of the other Asian countries have focused on manufacturing, taking advantage of the cheap labor force, India has focused on a more human capital intensive development mechanism. This is interesting because while the service industry demands a high level of skill and expertise, developing countries usually have a less developed educational system which cannot compete with developed countries in the quality of human resources. Therefore, most developing countries grow through manufacturing industries instead of service industries. Yet India, as a developing country, now plays an important role in international services and outsourcing industries by taking advantage of cheap human capital. While the marginal return to labor is decreasing as the labor force increases, it is the opposite for human capital: the marginal returns are increasing as the amount of human capital increases. This trait might show the potential development power for India as it becomes more and more predominant in worldwide service industries. Yet this style of Indian development is somewhat counter intuitive because of the country's low level of education. Secondary school enrollment rate is a good indicator of educational achievements, and since 1992, India has had the lowest ranking among major developing countries including Brazil, Russia, and China. Therefore, it is even more curious how India has managed to grow through the services industry, yet Schuman does not analyze the reasons for this.
Schuman also focuses on a major shift that has been occurring to the Asian model of economic development. Formerly, Asian governments placed greater emphasis on inward Foreign Direct Investment (FDI) flows. However, the purchase of IBM's PC unit by PC maker Lenovo in China signals that an increasing number of Asian countries might start to invest in developed countries in the 21st century. Consequently, there has been a shift towards outward FDI flow, which can take advantage of advanced technologies, infrastructure and human resources in developed countries, thus benefiting economic growth. Thus, the author demonstrates that while there are certain traits that are common throughout the Asian economies, it is also changing over time and has major differences between the countries.
Third, the book offers good examples of the relationship between intensity of regulation and economic growth. In South Korea, Park Chung-hee can be described as an ambitious, powerful and headstrong president who greatly influenced South Korea's development. Schuman uses a chapter title to depict this relationship between regulation and economic growth: "Why Koreans want to clone a dictator". Park created the Economic Planning Board, which controls the entire development process. His regime passed the Law for Dealing with Illicit Wealth Accumulation which allowed him to ensure that the business community serves the government's interests. Moreover, Park nationalized Korea's banks and took direct control over their lending practices. This made him more a commander of economy than a government official. While the Korean economy did rise under his regime, Schuman does not try to explain whether this rise occurred despite of the regulation or because of it.
In the book, the author not only points out the successes of the economic Asian model of development, but also indicates the potential problems it faces. Moreover, he cast doubts on the laissez-faire ideology prevalent in the United States and European countries' economic growth model, and emphasizes the positive effect of government in Asia's economic development. Although Asian governments are often criticized by economists as overreaching and intervening too much in the free market, the success of Asia's economic development cannot be neglected. The book's description of Asian economic growth raises the following question: under what conditions does a strong government-business relationship positively influence the economy? It would appear that both Asian culture and history, and the global environment in 20th century affect this outcome, although Schuman does not directly answer the question. However, even without the use of complex mathematical models, the introduction of abstract concepts, or critical analyses, Schuman vividly recalls the history of the rapid growth in Asian economies by depicting the stories of several significant individuals. This book thus provides the reader with an intuitive understanding of the Asian model of economic growth. With attractive personal stories and a clear writing style, the book is an interesting and useful supplement to existing literature on Asian economic development.
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