I have managed to catch up on a lot of reading over the Lunar New Year festival.
Joe Studwell’s How Asia Works is fascinating reading. It talks about how Korea, Japan and China have grown while their counterparts haven’t. Studwell highlights a number of factors that contribute to economic growth:
- 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.
China’s Crony Capitalism by Minxin Pei explained the mechanism of how corrupt officials, state enterprise employees and businesspeople managed to bilk the Chinese government and people of vast amounts of money. Much of the challenge is structural. China has a federalised government with power lying at provincial, city and county level. Pei is hawkish on the country’s prospects.
For an outside observer Pei’s research into the mechanisms, one can appreciate the challenge that the central government faces in combatting corruption and bad behaviour. President Xi’s ‘tigers and flies’ campaign to root out the worst corruption in the party and business is part of the solution; but according to Pei there is also careful structural reform required. This will only be possible through a massive aggregation of power towards the centre.