The News (Pakistan)

Asian tigers and paper tigers
Friday, November 01, 2013
The writer is special adviser to the Jang Group/Geo and a former envoy to the US and the UK.
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An important new book explains why some countries have become economic tigers in East Asia while others are relative failures or paper tigers. ‘How Asia Works’ by Joe Studwell is a bold and insightful work that is essential reading for anyone interested in understanding the ingredients for economic success in this continent.

It challenges much conventional wisdom in the development debate. Most significantly the book questions key tenets of the so-called Washington consensus, which prescribes free market ‘solutions’ for all economies regardless of their level of development. Studwell establishes that a nation’s development destiny is shaped most decisively by government action and policies. History, writes the author, shows that markets are created, shaped and re-shaped by political power.

Studwell presents his case unambiguously, backing it with solid empirical evidence. “No significant economy has developed successfully through policies of free trade and deregulation from the get-go.” “Proactive interventions” have been essential in all cases of economic transformation – in agriculture and manufacturing – as they fostered early accumulation of capital and technological learning.

The book does two important things. First, by a historical recall of the East Asian and Chinese experience it shows that for all the talk of an ‘Asian miracle’, countries in the region have followed different trajectories and policies, which have produced sharply different outcomes. While north-east Asian states achieved extraordinary progress and prosperity, south-east Asian nations have lagged behind, in part because they took poor advice from multilateral financial institutions and failed to heed the lessons of history. China, Japan, South Korea and Taiwan are all remarkable economic success stories. But the Philippines, Thailand and Indonesia, despite initial spurts in economic growth, slipped back and have remained relatively poor. This divergence has created what the author calls “a tale of two East Asias”.

Second, the book draws a distinction between what it calls the ‘economics of development’ and the ‘economics of efficiency’. The first is like an education process where poor nations, lacking technological capacity and adequate human capital, acquire the skills necessary to compete globally. This requires investible funds, which in turn needs state intervention, “nurturing and protection as well as competition”. However at a later stage of development, countries have to transition to the ‘economics of efficiency’ to achieve profitability. This requires less state intervention, more deregulation and freer markets.

From this emerges the author’s central argument that economic development is a “stages game” with different policy solutions suited for different phases of development. This challenges the one-size-fits all paradigm of neoclassical economics. Studwell delves into China and East Asia’s varying experiences to substantiate this thesis. This leads to a provocative conclusion: “Poor states can only become rich by lying” – publicly supporting ‘free market economics’, advocated by the developed world, while pursuing “interventionist policies that are essential to become rich in the first place”.

At the very outset, Studwell identifies three critical interventions that successful east-Asian countries and China (after 1978) employed to achieve accelerated economic development. The first, “often ignored”, and now “off the political agenda” in developing countries, is land reform. This restructured agriculture into highly labour-intensive household farming. In the early phase of development, with the necessary institutional support, this helped to generate a surplus, create markets and unlock great social mobility.

The second intervention, as countries cannot sustain growth only on agriculture and must transition to the next phase, is to direct entrepreneurs and investment to industrial manufacturing. Manufacturing allows for trade and technology learning. And trade, says the author, is essential for rapid economic development. Studwell then demonstrates – while challenging the champions of free trade – how nurturing and protection, along with instituting “export discipline”, builds the capacity to compete globally. Manufacturing policy is a key determinant of success he says, as an infant industry strategy offers the quickest route to restructuring the economy towards more value-added activities.

Holding that development is quintessentially a political undertaking, the author sees the relationship between the state and private entrepreneurs as a critical variable. History, he writes, teaches that governments should not run everything themselves. But governments have to use their power and the right policy tools to make private entrepreneurs do what industrial development requires.

The third intervention necessary for accelerated development is in the financial sector, aimed at directing capital initially to intensive, small scale agriculture and to manufacturing rather than services. Studwell argues persuasively that it was the close alignment of finance with agriculture and industrial policy objectives that produced north-east Asia’s economic success.

Detailing the role of financial policy, he illustrates how premature bank deregulation exacted a high price in Thailand and Indonesia. China, on the other hand, and other north-east Asian countries resisted that, instead using financial management to serve development needs and an accelerated economic learning process.

The 1997 Asian economic crisis laid bare the sharp differences in policies followed by China/north-east Asian countries and those in the south-east. China, South Korea and Taiwan were either unaffected by the crisis or bounced back quickly to re-embark on the path to robust growth and technological progress. But the economies of Indonesia, Thailand and Malaysia were derailed. The first two remain mired in significant levels of poverty.

For Studwell, the Asian crisis underscored that these three interventions were what made the crucial difference between sustained economic success and failure. In China, Japan, Taiwan and South Korea, he writes “governments radically restructured agriculture after the Second World War, focused their modernisation efforts on manufacturing and made their financial systems slave to these two objectives”.

But in south-east Asian states, this didn’t happen. There was neither any real land reform nor creation of globally competitive manufacturing firms. This caused what were called “technology-less” developing countries to regress when their investment funds dried up.

It is in the context of the author’s lament about how, despite land reform being a vehicle for change, it does not figure in the development advice given today by rich countries or international institutions, that Pakistan gets mentioned in the book. Pakistan is cited as a prime example of where land inequality and agricultural dysfunction is at the heart of its economic and security challenges. Elsewhere the book says rural poverty nourishes terrorist groups that echo those suppressed in south-east Asian countries.

India doesn’t feature in the book. But it gets a mention when the author challenges the myth that poor countries can become prosperous by leap-frogging the stage of industrialisation. Studwell believes it is a mistake to think that India with its “much-vaunted IT service sector”, which employs a fraction of its labour force, “represents an alternative to manufacture-led development”. “There is no way that the specialist IT firms of Bangalore, or the financial services elite of Mumbai, will propel India to the kind of development success seen in China, Japan and Korea.”

Much of the book concerns itself with the three interventions. But the author is also emphatic in stating that they only take countries to a certain development stage. Over time, these policies create problems and have to change as countries transition to the next phase, when the ‘economics of efficiency’ has to kick in. As Studwell puts it: “The one, two, three approach only gets an economy – not to mention a society – so far. If policies do not change the economic sclerosis of contemporary Japan or Italy beckons”.

In making a powerful case for poor countries to make the right development choices and learn from other nations’ experiences, the book warns against the kind of free-market economic dogma routinely pushed down the throats of developing nations by wealthy countries and international institutions. As China has shown by example, countries must determine their own development path, stick to it and then stay the course – not lurch erratically between contradictory policies under donor or populist pressure as several developing nations including Pakistan seem to do.

Joe Studwell, How Asia Works: Success and Failure in the World’s Most Dynamic Region, (London: Profile Books, 2013).

Twitter: @LodhiMaleeha

Asian Review of Books

An Interview with Joe Studwell, author of How Asia Works

by Caitlin Dwyer

How Asia Works; Success and Failure in the World’s Most Dynamic Region

Joe Studwell

Profile Books Ltd, March 2013

 

3 July 2013 — Joe Studwell has written about Asia and economics for a variety of publications. Founding editor of China Economic Quarterly, he is also the author of three books: The China Dream, Asian Godfathers, and his most recent, How Asia Works.

How Asia Works seeks to debunk the classical rationale for why some Asian countries have flourished economically and others not. Three factors—agriculture, manufacturing, and finance—need supportive government policy to encourage development, Studwell posits. Using examples from Malaysia, Korea, Japan, China, and the Philippines, Studwell shows that the economics of developing nations are necessarily different from developed, free-market countries. Studwell calls his model “the economics of learning”, noting that until nations have achieved a certain technological self-sufficiency, they cannot possibly succeed with a neo-classical economic model. An extract from the book is available here.

Asian Review of Books spoke with Studwell about the economics of learning and how Asia offers a new model for development.

 

ARB: How much research was involved in writing this? You’ve got very extensive footnotes—can you talk about where these ideas came from and how you developed them?

JS: I lived for ten years in China, and in that time I spent some time working in Southeast Asia as well. I arrived in China not speaking any Chinese. Most of the people who spend a long time in China become China people, but gradually I evolved into a person who was more interested in the comparative development of the major economies in East Asia. I focused on the major economies because it allows you to take the basket-case countries out of the equation and focus down.

In 2007-8, I did a Masters in Economics [Development Economics] and I started reading more into the economic literature, which is pretty strong on Japan, Korea, and Taiwan in particular. In the era of the Cold War, the U.S. put a lot of resources behind stabilizing and supporting those economies. They were written about in the way that China’s being written about now. There’s actually a much stronger literature on Japan, Korea, and Taiwan in terms of what happened than there is on any other country in the region, including China. There hasn’t really been a developmental classic about China yet. But if you take your knowledge of Southeast Asia and your access there, put that together with what has already been done about China, and bring the whole thing together, maybe that’s a useful project.

I also gave some thought to what the shortcomings are of the neo-classical view of economics that has dominated the world in an overwhelming way since the 1970s and 1980s.

ARB: It was clear in the book that you consider your theory is a deviation from the standard economic model. What can economists and development experts learn from this book? What is the standard economic view not seeing when it looks at Asia?

JS: The main message is about there being two kinds of economics. That really is a response to a question that was posed by Charles Kindleberger, who’s a very good economist, very historically literate. He posed the question: is it really possible that there is only one kind of economics?

The answer that I give in this book is that there are at least two. It has to do with objectives. Developmental objectives are about learning. It’s a learning process. Alexander Hamilton, the American treasury secretary back in the late 18th century, came up with the term “infant industry”. This theme of learning and likening it to the experience of going to school is one that people have often reached for as a way to explain what happens. Poor countries have the people, but they lack know-how and technology. When you start to think of learning as the objective, of course, that’s very different to when you’re thinking about short-term profit as the objective, or even efficiency.

What do we really mean by these terms? Well, efficiency could be short-term profitability. That isn’t necessarily the efficiency you’re looking for during a development period. The efficiency you’re looking for is how can we learn, or, in another respect, how can you go around the deficiencies of your human capital? Because people take such a long time to change. The economics of learning and development is largely about finding ways to go around human capital constraints.

You do that in agriculture if you use householdfarming, and turn it into gardening—because you’re just throwing the labor at the problem without a major restructuring. More than that, you’re employing all your human resources and getting something out of all your people. You do that in manufacturing by helping low-skilled people to build their knowledge base.

ARB: India is noticeably missing from this book, except for a mention that they have delved into IT and service-based industry rather than following the agriculture/manufacturing/finance model. Can you talk about why you didn’t include India here and how it differs?

JS: The media suggests sometimes that India has a different model and it’s based around services. I’m not sure that’s fair. I think it’s just that they don’t have a proper strategy. This is just the place they’ve ended up.

They have a very elitist education system left to them by the British. They have the Indian Institutes of Technology, and they graduate very sophisticated engineers, who work in IT and speak English. They work in software businesses, but in software, the capacity to absorb your human capital isn’t great. You can’t even write a single line of code until you’ve learned software code, whereas if you’re absorbing people into a manufacturing economy, you can put people in a factory and they can start to add a tiny bit of value from day one, because they’re working with and through machines.

This helps to explain why every developed country, with the exception of anomalous offshore financial centers (like Hong Kong and Singapore), everybody’s gone through this manufacturing experience. You can look at agricultural super-specialists like Australia and New Zealand, but even they have some manufacturing related to the agricultural sector.

ARB: Myanmar is kind of a blank slate at the moment. What’s going to happen there? Can they follow the model you’ve laid out?

JS: I don’t know what will happen in Myanmar, other than to say that the countries that develop are the ones that take control of their own destiny. If the government there says to the World Bank and the IMF, What’s on your shopping list?, they are going to end up with micro-finance and all kinds of at best superfluous and at worst damaging policy distractions. But if they do what successful states have done, which is to look at the world and see what other people have done, figure it out for themselves, and adjust it to their national condition, they’ll be fine.

The DPRK [Democratic People’s Republic of Korea] is easier to talk about. They have collectivized agriculture, so in the last decade or so they use a points system to differentiate people who work harder. They’ve brought the points-reward down to a very low level, a sub-group level, so they’re pretty close to rewarding the family as a unit. They could move very swiftly to household agriculture. If they were able to put the agronomic support in place around that, to make sure that farmers get the upside of growing more, then I could see, bizarrely, North Korea becoming the last fast-growing success story. It sounds extraordinary, but I can see that it’s possible they could turn on a dime.

ARB: In the book Japan emerges as a major success story developmentally, but one that failed to make an adjustment at some point and has stagnated as a result. Can you talk about that pivot point, where economies need to make a shift?

JS: This is most poorly understood part of the debate, including by me. Things are so misrepresented that one struggles just to communicate the idea of the economics of learning or development as distinct from the economics of efficiency that come later. Between these two things there is a relationship. The nature of that relationship is to do with the transition and the building of institutions, and it’s a very difficult thing to understand.

Take a legal system as an example. There’s a whole stream of literature that says property rights and a legal system are critical to economic development. Well, look at China. Does China have a functioning legal system? No. Has China developed? Yes, it has. But can China continue indefinitely to develop without a functioning legal system? I think not. Look at Italy!

The counter-example is South Korea. They got caught up in the Asian financial crisis largely through bond market interaction. Then the IMF went in, changed company law, changed the financial system, a bunch of stuff. Today, Korea appears to have the upside of developmental economics. It has its Samsung and Hyundai, very successful companies. Household indebtedness is still quite high, but maybe Korea gives us a window onto the relationship between these two kinds of economics and how one transitions from one to the other.

ARB: Also in China, manufacturing is big business, but industry expansion is causing serious environmental issues with economic and also social costs. At some point are these costs going to outweigh the benefits? How does the environment play into your model?

JS: In Japan and South Korea, they created one hell of a lot of pollution and then they cleaned it up. Why did they clean it up? Public pressure. By the late 60s in Japan people were getting very upset, and in Korea by the 80s. So government moved to clean that up.

In China we can see the beginnings of that as well. Such a high proportion of incidents of civil unrest are attributable in one way or another to poisonous rivers and air. In any situation you have to find the positive. China’s in a position to do that, because the world has been working on cleaner energy technologies and the size of the Chinese market means that they can push forward the development of those technologies—essentially, using the scale of the domestic market. They are incentivised to do it because they don’t have a lot of mineral resources—they have a lot of coal, but they can see down the road… [Environmental protection] won’t happen as fast as many people would like, but I suspect we are at the apex of dirtiness at this point.

 

Caitin Dwyer is a freelance writer. Her work has appeared in print and online throughout Asia and North America. Caitlin spent three years working and studying in China and has her Master of Journalism degree from the University of Hong Kong. She now lives in Oregon.

Various from Asia

Just did three weeks in mainland China, Macau and Hong Kong. Here are some interviews:

FT’s Pilling on Indian IT after a chat.

Marginal Revolution likes the book. And is probably right that neither beach reader nor academic reader will be happy. There is a pretty informed discussion of the book by readers of the MR blog. Odd complaints are about insufficient elaboration on my part. Perhaps it should have been a 500 page book. But I decided not.

SCMP’s Tom Holland on the book.

Jake Van der Kamp responds to Tom Holland in the SCMP, except without reading the book. This is staggeringly lazy. File under Howard Davies. And I have often quite liked Van der Kamp’s stuff. But this thin, indolent drivel is a pretty good guide to why so many millions remain poor. How can anyone serious pass judgement on something they have not read? It is a book about stages, that takes in your view, Mr Van der Kamp, and the other one. Separately, and somewhat pedantically, ‘fulsome’ does not mean ‘full of’. It means ‘insincere’.

And now Holland responds. His main point is valid. I said at the beginning (and end) of How Asia Works that this is a book about economic development. Real development is also about social and political development. But I was not willing or capable to try to put the other parts of the equation in the same book. It would be too complex. And people would not absorb the basic message about economics. The next book will deal with the institutional stuff.

Hong Kong’s RTHK on the book. I had to download a plug-in to run this, but assume the average reader is more tech savvy than I. Trick is to do all this and then hit the play button to start the show. But first go to ‘Select segr’ and choose the 11.05 slot. With Phil Whelan. That is where the interview is. Very clunky stuff. But listenable if you get there.

Podcast interview by the Economist Intelligence Unit in Hong Kong.

Amcham in Beijing. The podcast should be here.

More to come when I remember what it was.

China Daily

Here’s the China Daily. One or two of the biographical details are wrong, and they made me a year younger than I am.

………………………………….

China the last big growth story

Updated: 2013-05-17 07:52

By Andrew Moody (China Daily)

Joe Studwell believes China might be the last emerging-nation economic success story the world sees for some time.

The leading Asian affairs author says it is wrong to assume that global development has somehow accelerated and that very soon everyone will soon enjoy Western standards of living.

“Everybody thinks the world is speeding up and after China it will be India and then it will be Africa. I don’t see this happening at all,” he says.

“China could be the last fast-growth story we see in the world.”

Studwell, former editor-in-chief of China Economic Quarterly, has set out his views in his latest book, How Asia Works: Success and Failure in the World’s Most Dynamic Region, which is already regarded as one of the major economic titles this year.

In it, he looks at why some Asian countries, such as South Korea and Japan as well as China, have had spectacular economic success and why others, such as the Philippines and Thailand, have not.

One of his central arguments is that it is not by applying free market principles that economies get rich. Instead, the basis for success has been agricultural development. China’s growth story, he argues, began when farmers became market gardeners in the late 1970s.

This gave it a platform for the country to become the manufacturing workshop of the world with the careful guidance of state planning, another Studwell ingredient for success.

“It (agricultural reform) is almost always overlooked. What have you got when you start? You have no capital. You have no technology. What you have got is that – as in any poor country – three-quarters of the population are farmers, and that is what you have got to work with.

China the last big growth story“If you ignore that part of the economy – as most developing economies do because they are run by people who live in cities – you have already shot yourself in the foot.”

Studwell says leaders of developing countries often ignore basic fundamentals when they address development issues.

He dismisses those in Africa who currently espouse the view the continent can ignore land reform and manufacturing and develop through retail or financial services.

“It is just rubbish but unfortunately there are people out there saying this. It is being endorsed to some extent by the multilateral agencies and the World Bank support for micro finance,” he says.

“Everybody (in Africa) buys a stall and starts selling each other sweeties or washing powder. If these sweeties and washing powder have been made by Unilever, where is this getting you?”

He argues that people are wrong also to see India’s development in the same light as China’s since it has not been based on land reform but on an IT revolution that has tended to benefit a middle class elite and not the majority farmer population.

“It is the liberation of the posh Indian. It is a facetious thing to say but it is not far from the truth. If you have been to one of the Indian institutes of technology everything is fine and dandy. If you are a landless peasant in Bihar, you are still a landless peasant.”

Studwell, who speaks Chinese as well as Spanish and Italian, almost stumbled into a China connection.

After getting a first in modern history at Bristol University, he spent most of the 1980s as a freelance journalist for the Observer and the Evening Standard. His wife, who had studied Chinese at Cambridge, suddenly said she wanted to go and live in China.

The move led to him eventually becoming founder and editor of China Economic Quarterly, which is published by Dragonomics, the macroeconomics research firm of which he was also co-founder.

His big breakthrough came in 2007 with the publication of his second book, Asian Godfathers: Money and Power in Hong Kong and Southeast Asia, which was listed by both BusinessWeek and Wall Street Journal Asia as one of the top 10 business books of the year.

How Asia Works has had a similarly good reception, having been described by the Financial Times as an “important book” that should make people “rethink the glib equation of free-market policies with economic success”.

Studwell argues in the book that agricultural reform has been central to all the Asian economic success stories, starting with Japan in the 19th century.

“Japan led the way in the late 19th century with probably the most radical land reform that had been done anywhere in the world at that point,” he says.

He argues that the problem with countries like the Philippines is that they only pay lip service to the idea.

“The Philippines still has a comprehensive agriculture reform law in force. They just prolong the thing indefinitely. It has been running for 25 years. It is something you need to do in six months and get on with it,” he says.

Studwell insists another essential ingredient of economic success in Asia has been protecting nascent industries and not exposing them to international competition.

He insists both South Korea and China have been particularly successful at doing this.

“The analogy that works best is like the education process of a child and it should not be taken in a patronizing way,” he says.

“When you don’t understand technology, you don’t know about it, you have to learn. What Deng (Xiaoping) said when he came to power was that China had to accept it was a backward country. It took enormous political courage to say something like that.”

As for China, Studwell believes there is too much of a tendency to see the country’s progress over the past 30 years as the easy period of its development process with the next 30 years seen as more challenging.

“I wouldn’t say it was easy at all. It has been a huge achievement.”

Although he argues that China needs to make further serious reforms including the opening-up of its capital markets, he also says that the country is not at some urgent crossroads yet.

“My expectation is that growth of 7 to 8 percent can continue for another decade and with this sort of momentum, the middle class would be happy with rising incomes, although they will become increasingly frustrated by some of the institutional failures,” he says.

“China is not going to collapse if it doesn’t do much over the next 10 years, but if they don’t do much, the country’s potential will be greatly reduced.”

 

FT review

Reap what you sow

David PillingReview by David Pilling

How Asia Works: Success and Failure in the World’s Most Dynamic Region, by Joe Studwell, Profile, RRP£14.99, 288 pages
A woman plants rice seedlings in a flooded paddy field, Taiwan

 

Why are the northeast Asian states of Japan, South Korea and Taiwan rich, while the southeast Asian ones of Thailand, the Philippines and Indonesia are relatively poor? Is the failure of the latter because of their geography or climate, or is it because their leaders chose wrong-headed policies?

One of the many virtues of the pithy, well-written and intellectually vigorous How Asia Works is that Joe Studwell does not equivocate. South-east Asian nations have ended up on what he calls the “rubbish heap of industrialisation” because they failed to learn the lessons of history. Instead of taking what he presents as relatively simple steps to technological advancement, leaders were captured by their ruling elites or took bad advice from international institutions such as the World Bank. The latter pushed neo-liberal policies – including no protection for fledgling industries – that Studwell considers wholly inappropriate for countries trying to get on the first rung of the developmental ladder. His recommendation to poor nations is to emulate Park Chung-hee, the South Korean strongman who oversaw what became known as the miracle on the Han river: “make public pronouncements about the importance of free markets, and then go quietly about your dirigiste business.”

The measures taken by Japan, then South Korea, Taiwan and, after 30 years of Maoist missteps, communist China were, argues Studwell, threefold. They involved land redistribution, the development of an export-oriented manufacturing policy, and the formation of a closely controlled finance system. The three important development insights, he argues, are that “a country’s agricultural potential is most quickly released when its farming is transformed into large-scale gardening supported by agricultural extension services; that the technological upgrading of manufacturing is the natural vehicle for swift economic transformation … and that finance must be harnessed to both these ends”. Only the small city-states of Hong Kong and Singapore have successfully taken a different path.

The most original part of the book deals with farming. Studwell, whose Asian Godfathers (2007) dissected the failures of crony capitalism, argues convincingly that successful Asian nations were built on radical land reform. Japan began parcelling out land after the Meiji Restoration of 1868, a policy continued after the war when the US occupation oversaw a seemingly un-American exercise in land confiscation and redistribution. South Korea and Taiwan followed suit. Large farms are often considered more efficient because they can be highly mechanised to produce higher yields per farmer or per unit of investment. In other words, they are more profitable. But in poor, labour-abundant countries, Studwell contends, that is not the point. The goal should be to use available labour to maximise yield per hectare, something achieved on smaller, intensively farmed plots.

Maximising yields serves several broader development goals: farmers earn money to spend on local manufactures; higher food production means the state doesn’t have to waste precious foreign exchange on imports; and farmers’ savings can be recycled through the banking system into industry. Both the indulgent leaders of the Philippines, who left vast haciendas in the hands of absentee landlords, and Maoist ideologues, who collectivised land into unproductive large-scale co-operatives, ignored the basic insight on what he calls “the triumph of gardening”.

The sections on industrial policy and finance are more familiar, though the ideas remain controversial among free-market economists who argue that governments can’t “pick winners”. Such economists, says Studwell, misunderstand what Japan, and later South Korea, actually did. The key was to force manufacturers, whether of steel or cars, to export and thus compete on international markets. Those that couldn’t hack it were killed off. Korea, for example, had three putative car champions in 1973 at a time when local auto sales were only 30,000 cars a year. In the early years, the market leader was the now-forgotten Shinjin. Only later did Hyundai emerge as the last car company standing. “The economics of development requires nurture, protection and competition,” he writes. The alternative to such hard-headed, nationally driven policies, he says contemptuously of the Philippines, is “an authentic, technology-less Third World state with poverty rates to match”.

Studwell’s thesis is bold, his arguments persuasive, and his style pugnacious. It adds up to a highly readable and important book that should make people rethink the glib equation of free-market policies with economic success. He also writes with disdain for those who would peddle the “fairy tale” that poor countries can become rich by skipping industrialisation. Of India’s attempt to build wealth through IT services, which employ only a few million people, he says: “Punditry that likens India’s economic development to that of the more northerly countries is fatuous.”

The implication of Studwell’s analysis is that talk of globally converging living standards is overdone. Those countries that do not begin with comprehensive land reform or bully their entrepreneurs into nation-building – as opposed to rent-seeking – are bound to fail. Even the relatively successful ones won’t get further than Malaysia, he says, a country whose botched efforts at industrialisation he likens to attending school but not paying much attention.

That leaves China, which in many ways has emulated the successful northeastern model, through post-1978 land reform and the creation of state champions financed through policy banks. China’s biggest companies, he argues, are closing in on international standards in heavy industry. But consumer businesses are not. As demographics worsen and as vested interests worry more about personal gain than national development goals, he wonders whether China will get stuck.

Studwell’s book is a warning to those who believe that developing countries in Asia, Latin America and now Africa have cracked the secret of growth and will inevitably catch up with rich ones. Only those nations with good policies will make it, he argues. And good policies are out of fashion.

David Pilling is the FT’s Asia editor

中文: FT 中文网的书评