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How Asia Works: Success and Failure In the World's Most Dynamic Region Kindle Edition
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|Length: 402 pages||Word Wise: Enabled||Enhanced Typesetting: Enabled|
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About the Author
- File Size : 3345 KB
- Publication Date : July 2, 2013
- Publisher : Grove Press (July 2, 2013)
- Word Wise : Enabled
- Print Length : 402 pages
- Language: : English
- Enhanced Typesetting : Enabled
- ASIN : B00B3M47VC
- Text-to-Speech : Enabled
- X-Ray : Enabled
- Lending : Enabled
- Best Sellers Rank: #156,654 in Kindle Store (See Top 100 in Kindle Store)
- Customer Reviews:
Top reviews from the United States
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This book absolutely nailed it when it came to telling me what I wanted to know. This book answered my questions directly and explained how the economics and politics worked in northeastern Asia and what didn't work elsewhere.
Although his historical exploration of the Asian experiences is appealing and informative, I am not sure if the suggested policy implications are right. For instance, it is not clear when or why a country must switch from its developmentalist strategy to a more market-friendly regime. In addition, it appears to me the author has understated political stage (South Korean development was based on a dictatorship).
All in all, any person interested on Asia or in topics of economic development must read this book.
The most important premise in the book is the need for land reform to fund industrialisation.
By 'land reform' he means distributing land equally among farming families, by taking it off the big landowners.
Land reform does not come easily:
In Japan the first (and initially successful) reform was after the Meiji Restoration, and the second immediately after the Second World War.
In Taiwan it followed the defeat of the Kuomintang (KMT) by the Communists in China. Initially Communist land reform in China was popular with the people, and the KMT were forced to copy it in Taiwan to achieve some popularity with the locals.
In South Korea Syngman Rhee's government resisted land reform until it was nearly swept into the sea by Kim Il Sung's invasion. When the South Koreans retook Korea, they found Communist land reform was very popular with the farmers, and were forced to accept it.
The ensuing agricultural boom gave these governments the cash to fund industrialisation. Studwell shows how they largely got it right, by copying the 19th Century Prussian model.
(In China and North Korea the agricultural boom ended when the Communists collectivised the farms.)
In South East Asia land reform never took place, probably because events were not dramatic enough to force it to happen. Consequently large landowners live very well, while ordinary farmers are very poor, and agricultural productivity is low.
In describing industrialisation, Studwell compares the successful Japan/South Korea/Taiwan model of competition between state supported companies (with the creative destruction of the failure of some) and the discipline of serving export markets versus the failure to introduce competition and export discipline in South East Asia. The outcome is exemplified by Toyota/Honda/Hyundai versus Proton.
The failings in South East Asia described in this book are pretty much as described in Studwell's earlier "Asian Godfathers".
'How Asia Works' attracted a fair amount of criticism here in Hong Kong for appearing to advocate financial repression (paying derisory interest rates on household savings, enforced by exchange controls) and state planning - we have a very good vantage point of this process in China, and worry about the effects - for example an uncontrolled shadow banking system and misallocation of easy credit by State Owned Enterprises.
Studwell does not advocate this as a universal panacea - he points out the problems that South Korea had, and that they were lucky to get away with it - and that the system gets a country to a certain level of development, after which it is necessary to modernise - which may not always work - as in Japan.
His conclusion is that South East Asia will probably never fulfil its potential, and that China might.
This book offers a helpful political-economic model for those attempting to understand Asia generally, and, most importantly, China.
Top reviews from other countries
The author is a staunch defender of state guided industrial policy - a view not particularly popular with neo-liberal economists, which nevertheless does a much better job of explaining the success of economic catching up to the developed world than any alternative explanation offered in the classical economics literature.
The main thrust is a three phase explanation model, namely agricultural land redistribution towards small scale yield intensive agriculture, an export driven manufacturing development, and finally a financial system geared towards supporting these two goals.
Covered examples, where these steps have been effectively followed followed and are presented in detail, are Japan (from the Meiji restoration onwards), South Korea, Taiwan and China. On the other hand, there are cases of South East Asian economies, which decided to liberalize their economies sooner - in the author's opinion prematurely - and were thereby not capable of following the three policies effectively. These include the outright dire example of the Philippines, the moderately better one of Thailand and the best of the lot - Malaysia - which still lags significantly behind the successes of the North-East model countries.
Before the author is labelled a big government supporter, or a 'statist' in the widest sense, he makes a clear distinction between the needs of the catching up / development phase (where even currently free market supporters such as the UK and the US used the same mechanisms in their early development phases) and the later phase, when the first world level has been achieved. In the latter case, many of the tools needed for success in the catch-up phase become hindrances to further development and further reforms become necessary, something that some countries managed better (South Korea) than others (Japan or Taiwan).
The analysis is brilliant, the case studies very compelling, and crucially, the framework does an excellent job of describing and predicting the developmental success. The comparison between different policy choices in both the successful and less successful groups give the reader further insight and provide a more differentiated picture of what is important for development and what not.
Furthermore, the framework also wonderfully explains why industrial policy worked in North-East Asia, and less well in other regions where it has been applied (such as SE Asia, the Soviet Union, or Latin America), showing which levers have a real positive impact, which are highly detrimental to development, and which are of no real consequence. This is not about creating protected state champions but much more about relentless pruning of the low performers, first through export discipline and subsequently also at home.
If you look at it from the perspective of a manager / owner of an individual company, you may well wish for governments not following the advice, since they may well force you to earn your money in a more difficult fashion than is strictly necessary. Especially export led growth, leading both to a knowledge build-up and a quality requirement through free competition on world markets (while being protected at home) will in the short run be much more laborious than investing in gambling, tourism or real estate but is a proven method of improving the well-being of the country as a whole, rather than the wealth of an individual or profitability of a single company. As long as the government leaves little leeway for circumventing its aims, while at the same time allowing the entrepreneurs to generate adequate profits while serving the developmental needs, a win-win can be produced.
Even if not all managers would like the lessons applied by the government of the country where they operate, there are excellent learnings for them, as there are for politicians. Many of the lessons can be applied in a business set-up, too - if you are looking at expansion into new markets or product areas, or trying to catch up with more dominant competitors.
The book is perhaps not something for the very casual reader, as it takes some effort, and is written from an expert's point of view (even if the writing is far from ponderous). If you are looking for an easier but less profound read, Kaplan's Asia's Cauldron: The South China Sea and the End of a Stable Pacific is probably the better start. If the topic is of serious interest, not reading this book would be an unfortunate omission, though.
With an agrian economy, a market garden approach to agriculture rather than farming at scale delivers the best results. But only if rent seeking interests are removed through effective agricultural reform
Industry requires total mastery of technology – which is the reason why low grade heavy industry is the starting point
Exports planned into industrial development from the beginning and a continued relentless focus on exports is required
Governments are best at keeping businesses focused on total technology mastery, raising cheap finance and weeding out failures that might be a resource suck
Studwell critiques how different countries throughout Asia have managed to process in this manner including both the strengths and the weaknesses of their respective approaches.
It was fascinating to read how Taiwan managed to succeed in spite of nationalised industries and the challenges in China’s agricultural model. How General Park ‘motivated’ Korean chaebols and the tragedy of development in Thailand, Malaysia and the Philippines.