How Asia Works Summary

HOW ASIA WORKS SUMMARY
Joe Studwell believes that North East Asian countries (China, Japan, South Korea, and Taiwan) used this 3 step roadmap to go from
developing countries to economic powerhouses with global influence
1. Reform land to break the concentration of ownership. Redistribute land to small-scale agriculture workers, and they will – with
support from the government in terms of infrastructure and marketing – increase yields, get richer, and open new opportunities
with their surplus. It’s a rather easy step to do as countries are still fully in control of their land policy. All north-east Asian countries
did follow the same path, providing small farmers the opportunity to grow and change their lives. South-East Asian countries
(Philippines, Indonesia, Thailand, and Malaysia) did not (yet?) succeed to break this monopoly of rent-seeking and non-innovative
landowners.
2. Organise the manufacturing industry in a way it is incentivised and constrained to export. Read again: EXPORT. By culling non-
exporting companies and offering free money, infrastructure and bureaucratic support to the best-in-class, North-East Asian
countries proved able – in decades, not years – to grow a class of big manufacturing & industrial champions, from Sony in Japan to
Samsung or Hyundai in South Korea, ACER in Taiwan and the big state-owned companies in China. The key is really to help
companies to export. Without this “export discipline”, the author of How Asia Works shows, you only feed rent-seekers. Money and
the necessary quality and innovation features from products sold abroad help to buy new technologies and talent.
3. Keep finance on a short leash. Don’t deregulate too soon. “Infant industries” are like kids, says Joe Studwell. They
need protection and help until they can walk by themselves. Central Bank policies (rediscounted loans) and government tricks to
avoid entrepreneurs (always on shorter terms than the state) control the banks (tycoons in post-war Japan could not control more
than 1% of a given bank) can help the finance industry to be aligned on the nation’s longer-term, industrial goals. Japan’s MITI,
South-Korea’s General Park Chung Hee, and Deng Xiaoping’s China all managed to control the financial flows to their strategic goals.
South-East Asian countries did not, and ended up with real-estate bubbles (at best) or just pure theft/corruption (at worst) and
systemic crisis.
Indonesia, Malaysia, the Philippines, and Thailand (S.E. 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. Entrepreneurs were not required to assist in “developmental” causes when privileges
were extended to them, nor were the privileges dependent on revealed success, e.g. in exporting. Accordingly they have no chance
of becoming developed.
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 1997, 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.
Journey 1: Tokyo to Niigata
Taiwanese farmers helped to fund their country’s early industrialisation. Taiwan set a high-water mark for agricultural input into
development. Moreover, early industrial development echoed that in Meiji Japan.
Agricultural progress became bound up with industrial progress not only financially – because the former was the early generator of
new wealth and markets – but also geographically, because rural areas were home to many new manufacturing enterprises and
produced many industrial entrepreneurs.
South-east Asia. There, post-colonial governments toyed with land reform, but never followed through to fundamentally restructure
their rural economies. This lack of domestic and international political conviction over the importance of household farming in
development was the first step towards the relative economic underperformance of the south-east Asian region.
Journey 2: Negros Occidental
Land policy tells us how much the leaders know and care about the population.
SEA’s real defense: the influence of European and American colonialism made it harder for politicians there to see what kind of
policies they needed
Heart of the problem: was that elites in Southeast Asia were sufficiently co-opted by colonial rulers (Before and after independence)
that they lost their ability – or perhaps their desire – to think clearly about national economic development.

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HOW ASIA WORKS SUMMARY

Journey 1: Tokyo to Niigata

Journey 2: Negros Occidental

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