Customer Reviews

The Miracle: The Epic Story of Asia's Quest for Wealth

5 star:		(11)
4 star:		(5)
3 star:		(2)
2 star:		(1)
1 star:		(0)

 

 

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!

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.

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.

I have lived in Asia for the pat 30 years as an American ex-pat. It rings so very true!

The Miracle takes a different approach to most literature on asian growth. It looks at the individuals involved and tries to describe their backgrounds, motivations and perspectives and motivates the growth as a function of those uniquie perspectives. This is not an academic work in its intent but it serves a very important role of exploring the "original conditions" of the people who helped start asias miraculous growth and the book draws the reader into the characters perspectives on what was required and the solutions to the problems that were pondered.

The book explores most south east asian nations across the region. It starts with post world war japan and the start of Sony and the trajectory of the company from nothing to being a pioneer, it describes national MITI policy and the help and hinderance it could be. It goes into Korea and the story and vision of Park Chung Hee. The story of Singapore is discussed with the focus on Lee Kuan Yew. Hong Kong and its position is then discussed, discussing the rise or Li Ka-Shing and the eventual transfer of Hutchison. Taiwan is then discussed discussing Shih from Acer as well as some taiwanese historical background. China is explored and the journey of Deng Xiaoping is the center, the journey of liberalization within the party is focused on and the pragmatism of its leaders as well as the dogmatism of some of the older order. Indonesia is then moved onto with Suharto as the center, it is fairly flattering with focus on his use of the Berkeley team rather than the emergence of cronyism. The book then jumps back to Japan and Honda with his energy and vision and is used an example of how entrepreneurial Japan could be. India is then discussed, a little late to the party, Mannmohan Singh was the man who worked on fixing the situation along with Prime Minister Rao. Malaysia is described next with Mahathir's story being told. He is credited with avoiding the troughs of the asian crisis experience by pegging of the ringgit when presented with IMF bailout or his approach. We return to Korea over the asian crisis, with the most international precense at that time and the dismantlingh of Daewoo and the change in political sympathy and focus. We return to China through the eyes of the businessman and focus on Lenovo and its ascent. To conclude the author explores the story of one of india's largest IT sevices company, Wipro.

Usually when one reads a book on asia and its growth of recent decades, the focus is on trying to decompose the factors that were at work for success. Economists tend to look for the principal components of growth to make both better predictions and perscriptions for other similar situations. The author takes the view that economies are at heart built from individuals and it is their story in which insight can be gleaned and thus focuses on the narrative rather than aggregate statistics. The result is very entertaining and a very interesting read. Often some characters who could be portrayed in a very poor light are contextualised so as to describe the good rather than bad that they helped foster, but this is only natural given the goal of the book- to describe asia through the eyes of the people making the growth happen. I recommend reading this as it describes the uniqueness of each asian country and how they saw themselves relative to others both locally as well as globally. Too often do people consider asian growth a singular phenomenon born of the same factors, this book helps dispel this, doing it entertainingly as well as insightfully.

I am inspired by stories of great businesses being grown. And I am doubly inspired by the short period of time these companies have emerged. Companies like Acer, Honda, Toyota etc all really came into their own in the past 35 years. If these types of stories inspire you, you will love this book.

This book is by no means a breezy read. It is intense and over 400 pages unlike most of the business books I read. It starts with 3 pages of names (most of which are Asian so tougher for me to remember) and what their part is.

There is one chapter on each country. It goes through the history which differs dramatically. And it tracks major companies and their growth. Often the companies are assisted by the government.

In the global economy, understanding each country culture helps. This book would be a good primer for anyone doing business there.

Highly inspirational book. A must read.

The book is a delight because is takes a very, very complex subject and introuduces the reader to the ideas, personalities, and reasons behind the authoritarian approaches by Asian countries to bring themselves out of dire poverty. It's a great book and deserves a spot on any economics/history-minded reader's shelf.

The author does a great job of providing an introduction to the recent economic history of the Asian tigers. Each chapter focuses on a different one: Korea, Singapore, China, India, Indonesia, and Taiwan all get treated. I found the pieces on Korea and Indonesia particularly interesting. Also, I think the author debunks some of the myths about the rise of the East through his presentation of the facts -- what Singapore did was different from Japan which was also different from Taiwan. While Lee Kwan Yew might tout Asian values, others might tout state involvement like MITI, still others might say that it was the growth and expansion of markets in spite of state interference. For my part, I think that part of the equation was that a lot of people in these countries were highly motivated. They wanted to escape from poverty, reduce their vulnerability to outside forces, become as modern as possible as quickly as possible. I wouldn't underestimate pride and drive and a quest for national and economic security as key factors at all. The author does a good job of weaving the stories of some of the principal movers behind the Asian miracle with the story of the countries too.

If you are interested in what's happened in Asia over the past fifty years, I strongly recommend you check out this book.

I just finished reading 'The Miracle - The Epic Story of Asia's Quest for Wealth' by Michael Schuman.

The book traces the rapid economic development of Asia's economies since the 1950s. It is rich on anecdotal stories of key protagonists ranging from presidents, dictators, bureaucrats and entrepreneurs covering Japan, Taiwan, Hong Kong, Korea, Singapore, Malaysia, Indonesia, China and India. It is a good comparative study of history, but I missed a more in depth analysis of the economics that drove Asia's success.

All of Asia started their development process with similar degrees of poverty and a lack of substantial natural resources. Some used heavy government intervention such as in Korea and Indonesia, others let the free market rule such as Singapore and Hong Kong. While the approaches differed, what all had in common was the realization that to succeed, they had to develop industries that could survive and excel in the global market. Whether that meant nurturing domestic companies like in Japan and Korea or attracting foreign companies like in Singapore and Taiwan. The key was exposure to global competition and the pragmatic adoption of best practices. Governments who strayed from that formula suffered slower growth and often greater political instability as in the case of Indonesia and Malaysia.

In fact, even though many Asian economies started their development under autocratic regimes, they understood the connection between economic and political stability. This is exactly what's driving China's economic policies today.

In the end it's a book about the great success of globalization and free markets that has lifted hundreds of millions of people in Asia out of poverty within just one generation.

This is one of the most informative books on Asia from a business, political and economic perspective.

While Asia has been traditionally bundled as one homogenous continent, this book clearly illustrates, that no two countries are similar in terms of culture, political structures and economic policies.

The spectacular rise from stagnation to economic glory of Asian countries like Japan, Singapore, South Korea, Taiwan and the likes in a short period, rising from nowhere within the last five decades, is definitely a miracle, at least in recorded economic history. "In order to appreciate just how miraculous the Miracle has been, we need to look back at how pitiful Asia was in the early 1950's, when our story begins. Just about everywhere there was chaos."

How did the Miracle happen? Here are some theories:

1. Something special about Asians themselves, especially Confucianism, the ancient moral and ethical code of China.
2. Asia designed unique and superior economic policies and institutions - The State playing the dominant role in shaping economic policies.
3. Asia did nothing special, but simply adopted the basic forces of capitalism and free markets.

None of the above theories are uniquely true when tested across successful nations. Each of the success stories has traversed a very different trajectory to economic progress. Each of these countries definitely deserves a separate chapter to analyze the key players, policies and strategies that helped power their propulsion on the chosen trajectories.

There are several case studies, on companies, personalities, social and political policies well narrated in every chapter.

There are major contrasts among policies adapted across countries that baffle common assumptions.

This is a wonderful book on all counts. Highly recommended for anyone who needs a well informed view of Asia's economic Miracle.