title: How Asia Works author: Joe Studwell
How Asia Works
mix of new notes from my reread in April 2023
Part One
The importance of Agriculture
- It makes sense I suppose that food would be fundamental to the growth of any economy. First, we must secure the food source.
- Studwell talks about ‘Urban bias’ this idea that farmers are just labourers who aren’t absolutely crucial to any economy.
- Studwell details the difference in land reforms between Asian nations. Why are all these nations in a sudden position
of land reform?
- Japan got bombed.
- China had paused a civil war.
- China was in quite the pickle at the start of the 20th century. 85% of the Chinese lived in the countryside and life expectancy for these rural dwellers was 20-25 years of age. It seems there was also large scale selling of women and children.
- ”Yield gains over tenancy profits”. What is it indicative of if credit becomes more profitable than selling products?
- Why is there a tendency for agricultural yields to stagnate in a ‘free market’ why is it more profitable to mop up land in this scenario.
- There’s an interesting case study of Malaysian rubber output being suppressed so that plantation output could be maintained at it’s market price, smallholder rubber output had a much higher yield and was something like 25% of output of rubber. It’s estimated that the british essentially ‘robbed’ two years worth of rubber output revenue from smallholders due to these restrictions. Basically punished for being more efficient.
- This notion of small holders being more efficient is apparently due to their greater flexibility in what they grow and personal incentive to put in more effort.
Manufacturing
- Export driven manufacturing creates innovation, increases productivity and provides new jobs.
- Along with this farming scales. It’s productivity doesn’t necessarily increase as much though. Farmers can earn more per hour of labour. This is important so as to keep people in farming?
- The history vs economist appears hear too. An interesting thought that could do with a few examples (from the book obviously). Korea following the Japanese model after they had followed the Prussian (or German) model
- Why is it important to increase Exports? According to the book, to become competitive and develop for a wider market
which will force increases in productivity. To compete globally. If not, local firms can pretend to be achieving world
class standards.
- So competition drives productivity
- Uses the case study of HMU to show how industrial policy created this massive company that became a huge global car manufacturer. Here, I’m taking this industrial policy to be, once again, export discipline and competition. Constantly forcing competition with government credit support (to a point).
- 23/11/21 21:29:26 I only got through 12 pages reading today. I have this niggling misunderstanding of the whole thing. First, fundamentally I don’t understand the importance of income or how the economic engine is started (who payed for the first product). Secondly, how did investment in low value added companies help Malaysia, whats the dynamic there?
- Studwell writing is very dense and muddled. It would be nice if he kind of offered some space in the text, some maps too. It can be more of a thought dump at times with lots of implications that might not be obvious
- Interesting point about learning in manufacturing. That learning can be done on the job and its important that locals are learning new tech
- Not so much picking winners as weeding out losers who aren’t competitive. In japan they had a government agency to do this as early as the 1930’s.
- This along with the international sales feedback mechanism.
- ”Businesses that worked were always allowed survive”.
- Friedrich list contented the free market evangelism from Britain:
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Any nation which by means of protective duties and restrictions on navigation has raised her manufacturing power and her navigation to such a degree of development that no other nation can sustain free competition with her can do nothing wiser than to throw away these ladders of her greatness, to preach to other nations the benefits of free trade, and to declare in penitent tones that she has hitherto wandered in the paths of error, and has now for the first time succeeded in discovering the truth.
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- Japanese ministers of the Meji era learned a lot from Prussia under Otto Von Bismarck. Hirata Tosuke, Minister of Agriculture and then [1890] interior minister was the first Japanese to obtained a German doctorate, he also undertook translation of List to Japanese.
Case study of POSCO steel:
Every day workers at Pohang were line up in front of the main, corrugated-iron site office and told that Japanese reparations money was being used for the project and that it was preferable to die rather than suffer the humiliation of wasting the money.
Drivers of success
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Nippon Steel was the man provider of technology. Trusting no one and despite using Japanese reperation payments for the steel development they had second checking on everything that Nippon steel gave them.
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A refusal to use off the shelf system lest they did not fully understand the equipment they wer buying.
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Directing entrepreneurial talent towards policy goals.
- ”the state’s most effective role is not to take over all aspects of entrepreneurial activity, but rather to channel the private entrepreneur towards its developmental ends. In particular, the entrepreneur must be compelled to compete internationally in a business that is cut-throat and highly cyclical”.
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Japan for instance allowed a deprecation of income if companies could show export receipts.
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”Bureaucracies are only as good as the policies it implements”.
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Studwell describes how after Korea got indpenedence from Japan in 1945, the go between class between the Koreans and the colonial power were allowed to buy state assets cheaply and the acquire many monopoly concessions from Rhee’s government. Aft Hee’s 1961 coup, the new regime began to apply export discipline and cull underperforming firms. After Malaysisa gained its independence in 1957, its economy had similarities to that of Korea under Rhee. The Malay sultans were never put under any sort of discipline to export like that of Korea until the 1980’s when they tried and failed.