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How Asia Works: Success and Failure in the World's Most Dynamic Region by Joe Studwell - amygosumizul.tk
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Close Figure Viewer. Browse All Figures Return to Figure. Previous Figure Next Figure. But governments have to use their power and the right policy tools to make private entrepreneurs do what industrial development requires. The third intervention necessary for accelerated development is in the financial sector, aimed at directing capital initially to intensive, small scale agriculture and to manufacturing rather than services. Detailing the role of financial policy, he illustrates how premature bank deregulation exacted a high price in Thailand and Indonesia.
China, on the other hand, and other north-east Asian countries resisted that, instead using financial management to serve development needs and an accelerated economic learning process.
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China, South Korea and Taiwan were either unaffected by the crisis or bounced back quickly to re-embark on the path to robust growth and technological progress. But the economies of Indonesia, Thailand and Malaysia were derailed. The first two remain mired in significant levels of poverty. For Studwell, the Asian crisis underscored that these three interventions were what made the crucial difference between sustained economic success and failure. There was neither any real land reform nor creation of globally competitive manufacturing firms.
Pakistan is cited as a prime example of where land inequality and agricultural dysfunction is at the heart of its economic and security challenges. Elsewhere the book says rural poverty nourishes terrorist groups that echo those suppressed in south-east Asian countries. But it gets a mention when the author challenges the myth that poor countries can become prosperous by leap-frogging the stage of industrialisation. Much of the book concerns itself with the three interventions.
But the author is also emphatic in stating that they only take countries to a certain development stage. As China has shown by example, countries must determine their own development path, stick to it and then stay the course — not lurch erratically between contradictory policies under donor or populist pressure as several developing nations including Pakistan seem to do. These are essentially three. The first is land reform: letting the peasants own their own land and supporting this by the necessary ancillary services will result in maximizing output per hectare and the labor input , with consequences that include a burst of output, increased savings, the creation of rural markets for urban-produced goods, without jeopardizing a ready-made supply of labor for the new urban industries.
The second is the development of an industrial sector under heavy infant-industry protection, disciplined by the requirement of export success, and its progressive expansion into ever more advanced fields. The third is the use of a repressed financial system under government control in order to promote the first two conditions. He argues that this was the formula first pioneered by Meiji Japan and subsequently copied elsewhere in N.
Asia postwar Japan followed by Korea and Taiwan, and he hopes now China. Asia , and dismisses claims that they have enjoyed comparable success. They failed to implement a serous land reform, nor did any of them institute an industrial policy aimed at growing industry and pushing it into ever more advanced fields.
Accordingly they have no chance of becoming developed. Of course, countries are required to lie through their teeth in order to implement his strategy. His hero is Park Cheung-hee, who was prepared to assure the Americans that he was aiming to enhance free markets at the same time that he actually did the opposite. But Studwell admits that there is a problem with his prescriptions, which are aimed at development. For an advanced economy, it is quite appropriate to pursue efficiency. The problem is in knowing when to switch from caring for development to pursuing efficiency.
Korea accidentally made the switch right, at the time of the Korean crisis in , when its policies were fortuitously controlled by the IMF. Japan failed to make the switch, as a result of which it has suffered 2 lost decades.
Interview: Author of 'How Asia Works'
One suspects that there may be other problems with his prescriptions besides the self-diagnosed one. Before elaborating on these, let me say what a pleasure it was to read a literate defense of land reform again, emphasizing the importance of accompanying land reform by the provision of extension services, credit, marketing, etc. This is a reform that we have almost forgotten about in recent years, yet it is surely of vital importance. My guess is that under current conditions it would be worth compensating fully, even though this would add to government debt.
A compromise is available to countries that have previously imposed a land tax: pay compensation at the declared value of land, which is usually a gross under-estimate of its actual value. It is also a pleasure to have the logic of the industrial policies pursued in NE Asia laid out so clearly, though I am not filled with the same zeal for them as for the agricultural policies.
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Buying them essentially requires a similar act of faith to that involved in signing on to the neoclassical economics he so fervently despises, and accepting that there is no other way to develop except by the dirigiste strategy that he so well outlines. But is that really true? It is difficult to know what Studwell would make of Southern Europe at least outside Italy, which he considers to have developed properly and Israel. This would make sense if the cities normally sacrificed for the benefit of their hinterland, but surely they have, on the contrary, generally exploited their hinterlands, so that it is more and not less difficult for a city-state to develop.
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- How Asia Works: Success and Failure in the World's Most Dynamic Regio….
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Of course, addition of Hong Kong and Singapore to the comparators is devastating to his thesis. Hong Kong developed under the purest laissez-faire that I know of; its addition to the list of comparators suggests that we look to what the countries of NE Asia have in common—competitive exchange rates, reputable educational systems, demographic transitions, and high savings—rather than to what is different between them—industrial policy—in explaining their success. And the inclusion of Singapore in the reference set would force him to admit that part of SE Asia has already made it.
His attitude to SE Asia is in fact something of a mystery. He says on p.