x Abu Dhabi, UAESaturday 22 July 2017

New book casts light on complex diversity of Asian economies

The success or otherwise of Asian economies is all too often lumped together. A new book aims to explain why that approach is naive at best and downright misleading at worst.

A busy night in Tokyo's Shibuya district. Japan and China have been traditionally tagged as Asia's economic powerhouses. Noriko Hayashi / Bloomberg News
A busy night in Tokyo's Shibuya district. Japan and China have been traditionally tagged as Asia's economic powerhouses. Noriko Hayashi / Bloomberg News

When discussing Asia’s amazing economic rise in the past few decades, the tendency is to lump these wildly diverse countries together as a group, when the expansion in the various economies, and the prevailing policymaking overlords, have differed wildly.

For every thrusting Japan, South Korea and Taiwan in the north-east you have much less impressive performances in places like Thailand and Indonesia in South East Asia.

Reasons why this happens can be pretty diverse – some blame the climate, saying it is too warm near the Equator for these economies to thrive (which obviously does not apply in Hong Kong and Guangdong).

Then there are controversial cultural arguments. Some say the Chinese or the Japanese are fundamentally hard-working, which is as unhelpful a cliché and misunderstanding as any of the opposing views about the Philippines or Koreans.

These are the questions asked in How Asia Works, where Joe Studwell tries to explain why things have happened at a different pace in different parts of the continent.

He believes it is largely due to a lack of political leadership and a tendency by ruling elites to behave badly.

For countries to do well, they have to be prepared to introduce land reform.

“No one had put this together before, a book covering the nine major economies, explaining the differences between the ones that succeeded and the ones that failed, and how in the end it came down to policies devised and implemented by human beings rather than anything else,” says Studwell.

He describes as “folly” the ways of some of the leaders in the region in the past few decades, such as Mao in China, Sukarno in Indonesia and Mahathir in Malaysia, constantly railing against western hegemony and sticking “your rhetorical finger in the eye of its leader, the United States”.

“Far better to take a page out of [the South Korean leader in the 1960s and 1970s] Park Chung-hee or contemporary China’s book: make public pronouncements about the importance of free markets, and then go quietly about your dirigiste business,” Studwell says.

The region is full of dichotomies.

Despite its resources, its educated, often English-speaking workforce and its central geographical position, the Philippines has until recently done much worse than countries such Korea, which was devastated by war and has little in the way of natural resources to lift it but has gone on to become one of the world’s richest economies.

“In east Asia the countries with the best endowments have pretty much done the worst. That’s why it’s such a fantastic laboratory for understanding economic development. People who had it all have thrown it all away, and the people who had less have got themselves organised have done well,” says Studwell, whose previous works include a look at the early days of the China boom in The China Dream and tycoons in the region in Asian Godfathers.

“The main thing that prevents you from seeing that clearly in east Asia is the racial overlay. The rubbish you hear – largely generated by indigenous people in the region – about Chinese culture or Japanese culture, or Korean hard work,” he says.

“It’s been my observation at an entrepreneurial level as well. I’d never rate entrepreneurs that I met in China over the years higher than say entrepreneurs in places like Malaysia. They are not producing better businessmen.”

Chinese business communities thrive in many areas of South East Asia, but this is down to political structures in the region.

Many of the South East Asian economies are former British colonies and Studwell talks of how the British empire was successful at marshalling economic structures in the region and argues that the long-term impact has been disastrous on many countries.

“The British empire in particular because it was so efficiently and subtly run, working with small numbers of people and working through local elites, it was extremely good at reinforcing and shoring up these kind of economic operating systems.

“This is why the colonial influence was so utterly perfidious. The British don’t come in and put a knife in your back, they finish you off with a warm embrace. They were fantastic at running systems on that basis, which in developmental terms have proven to be enormously damaging,” Studwell says.

“Malaysia doesn’t get independence until 1957 when the Cambridge University-educated leader of the country agrees to allow the British plantation and mining interests to remain in place and it was only the race riots in the 1960s which changed that.

“The same thing in the Philippines – independence in 1946 but the Americans locked them into various trade agreements which kept the ruling elites in a comfortable position,” he adds.

“No country has ever acted generously having become rich, with the exception of the United States for a brief period after the Second World War in very particular circumstances.”

He cites the remark by 19th Century German economist Friedrich List about kicking away the ladder once you get to the top.

“That’s very much what Britain did. China fits much more into the British model. I don’t see them having a positive developmental impact in places like Africa, or in North Korea. The Chinese go in and trade for their own benefits. All that ‘pragmatic’ really means is that countries that climb the ladder of development have a very long history of being revoltingly selfish,” Studwell writes.

So much is a question of approach. It is not about prudence or stability, at least not necessarily.

“Macroeconomic stability was not a clear determinant of developmental success in north-east Asia, and nor was it in South East Asia, where there was also notable variation – for instance, between less ‘prudent’ Indonesia and more prudent Thailand, both of which ended up on the industrialisation rubbish heap,” he says.

“Equally, there is the example of Ferdinand Marcos [the former Philippines leader], who borrowed and printed lots of money, like Park Chung-hee and Chun Doo-hwan in Korea, but blew his cash like a drunk in a casino,” he writes.

“I think China will be the last fast-growth story that we will see. You can’t have that kind of very fast development without land reform and I don’t think that kind of land reform is going to occur in South East Asia because the politicians can’t get it together.”

For those looking for the next Asian growth story, Studwell recommends a possibly surprising candidate.

“The place most likely to have a 10-per cent growth story is North Korea.

“The reason would be is that Korean agriculture is collectivised but they have been moving tentatively towards household farming essentially and it wouldn’t require much of a push for North Korea to significantly increase its output and push to industrialisation and go for the East Asian miracle,” Studwell writes.

“It has the political infrastructure. It will of course require a political shift.”

How Asia Works: Success and Failure in the World’s Most Dynamic Region, by Joe Studwell, published by Profile Books

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