I finished a couple of books where Asia played a prominent role.
The first is How Asia Works by Joe Studwell (2013) – the subtitle is Success and Failure in the World’s Most Dynamic Region. The main point is to understand how the drivers that allow an emerging economy to grow are not governed by the same principles of a free market and efficiency that guide the developed world. And in making that argument, the author compares the countries of Northeast Asia (which have thrived) with those of Southeast Asia (which have struggled), beating the drum on the idea that government intervention is an important catalyst in the earliest stages.
The first part of the development story revolves around government intervention into agriculture, which is the base industry in many of these countries filled with farmers in the countryside. Rather than allowing large landlords to take hold, the countries of the northeast often implemented very focused and aggressive land redistribution policies that put everyone to work and minimized the risk of food shortages. In the southeast, while the governments came up with many such plans, execution was far different, where often the landlord and tenant would negotiate directly often resulting in unfair terms, to the extent that land reform was followed through on at all. The result is to maximize yield at the expense of any per capita metrics. But, it also allowed for wealth to build across the nation.
The second phase is manufacturing. It comes after returns from agriculture have begun to taper and the citizenry has built up some capacity to become consumers. At the same time, the government has to direct entrepreneurs towards large manufacturing that can be globally competitive – through subsidies and protectionism. The focus is to develop export discipline. It means many firms getting the support initially and engendering competition, making mistakes along the way and losing some money as part of the learning curve, but then having government weed out the losers (versus picking the winners). In that way, Studwell argues, government is channeling talent towards a certain end without taking over completely.
The final piece relates to finance and keeping it regulated long enough so that it serves the goals of the first two phases. Basically, capital controls and subsidies. If deregulated too soon, the money all too often goes towards real estate development and stock speculation, which means hot money that can leave the country very quickly and does nothing to enhance the agricultural and manufacturing elements. And where the finance system is not put towards these ends, companies end up having to rely on retained earnings, thereby never really having the capacity to risk and experiment on technology and advancement. Or so the story goes. The counterpoint is put forth by the so-called “Washington Consensus”, which tries to push a free market, rational market approach – Southeast Asia providing evidence of how it does not work for an economy in its formative stages.
Studwell’s thesis is interesting, even if filled with Keynesian undertones along the way. Still, he recognizes that a managed economy can only go so far before it has to relent to a free market, deregulated environment. The trick is in identifying when to make that adjustment.
The second book is a novel entitled How to Get Filthy Rich in Rising Asia by Mohsin Hamid (2013). It tracks the life of an anonymous protagonist in an unnamed country, starting with his youth as a peasant in the countryside, to his education at university in the city, through his first jobs in sales, to becoming incredibly wealthy in the bottled water business, only to have it all stolen, and then detailing the mundane final years of his life. It is equal parts interesting and depressing, and probably accurately describes much about life in emerging Asia.
