Asia has incredible disparities in wealth not just within nations, but between nations. China, Japan and South Korea are among the biggest economies on earth, with the latter pair also ranking high in terms of per capita wealth and output. Southeast Asian nations rank much further down those lists, despite many geographic and natural resource advantages. In How Asia Works, author Joe Studwell convincingly explains the dichotomy.
In his earlier book, Asian Godfathers, Studwell focuses on how tycoons in Hong Kong and Southeast Asia game the system to make themselves richer and keep their compatriots poor, holding back development in the process. Southeast Asia’s billionaires have yet to create a manufacturing company that can play in the global big leagues.
How Asia Works looks at the opposite side of the Asian gulf. It explains how Japan, Taiwan and South Korea, which had per capita GDP comparable to Malawi 60 years ago – created globally competitive companies and entered the top echelon of world economies. As a bonus, Studwell includes an insightful analysis of China’s progress as a global economic power.
As my Asia Times book review notes, Studwell’s observations, based on a century and half of history, contradict free market doctrine. The invisible hand of the market works in rich countries but needs the strong arm of government to help developing economies progress. The formula for transforming a poor country’s economy includes land reform to increase agricultural productivity, since small plots yields outstrip those of plantations; government-led industrial policy to create homegrown export industries, using local entrepreneurial talent and competition at the national and global level rather than bureaucrats, to pick the winners; and financial market regulations to ensure capital flows support industrialization. Studwell’s conclusions are at once radical ideas in an age of blind faith in free markets as the one true engine of economic growth and almost comically obvious to anyone reading economic history without ideological blinders.
A century and a half ago, German economist Friedrich List characterized Britain’s advocacy of free trade as a cynical and hypocritical attempt to reinforce its economic preeminence achieved through centuries of mercantilism. In that spirit, How Asia Works urges rich countries and their institutions such as the World Bank and International Monetary Fund to stop pushing developing nations toward free market policies that keep them poor. What’s good for the goose isn’t necessarily good for the gosling.
Totally globalized native New Yorker and former broadcast news producer Muhammad Cohen is author of Hong Kong On Air, a novel set in his adopted hometown during the 1997 handover about television news, love, betrayal, high finance, and cheap lingerie. See his bio, online archive and more at www.muhammadcohen.com; follow him on Facebook and Twitter @MuhammadCohen.