What if Kim Jong-un gets his hands on this?

By on April 29, 2013

A study of how Asian nations can achieve rapid economic growth was a thought-provoking read for reviewer Howard Davies.

It is a safe bet that the average management reader will digest few books this year that praise Kim Il-sung.

Yet, for Joe Studwell, the Great Leader features in a group of far-sighted Asian decision-makers who understood how to kick-start growth in the region, along with General Park Chung-hee, the president of South Korea in the 1960s and 1970s, and the great Chinese leader Chiang Kai-shek, who also ruled Taiwan till his death in 1975.

They are the heroes of How Asia Works. On the dark side of the account are the faceless bureaucrats of the IMF and their American and British paymasters, President Marcos of the Philippines and his kleptocratic successors, and the Singaporeans. They are all excoriated for advocating or pursuing a faulty growth model.

Things have not gone so well for the Kim dynasty recently in economic terms. But Kim Il-sung is praised for distributing land to peasants in 1946 at a time when the Americans, and their South Korean stooges, were opposed to the idea.

To win hearts and minds after the war, they were obliged to follow suit, paving the way for a great leap forward in agricultural production.

The point Studwell wants to make is that agrarian reform, and especially the distribution of small plots of land to the peasantry, is the essential first of three key steps on the road of dynamic growth in Asia.

Smallholdings, he argues, are far more productive than large farms, even if more labour-intensive. They are by far the best model for countries with abundant labour. The alternatives of protecting the interests of large landowners, as was done in the Philippines, or of collectivisation, as practised by Mao’s China, are far less efficient.

The second step is the promotion of manufacturing, and for Studwell it is crucial how it is done. Successful countries prioritised exporters by protecting infant industries with tariffs and other systems of local preference, such as public purchasing.

These policies are at variance with the standard IMF toolkit, which emphasises competition and open goods and capital markets. Competition, on Studwell’s analysis, is important, but it must be carefully managed.

Prioritising exports makes sense, as if companies can succeed in export markets they must be producing good products (albeit perhaps uncompetitively early on).

It also makes sense to promote competing domestic firms, as long as the weaker brethren are ruthlessly culled. That happened in South Korea.

The third, closely linked, dish on this menu is the organisation of the finance sector to support the first two priorities. So there is a need for banks that are focused on financing small-scale agricultural development, and also on mechanisms to channel capital to large-scale manufacturing investments.

The argument is persuasive, but, like many polemicists, Studwell overdoes his criticism of anyone with a different view.

It also leads him into heroic and contestable generalisations: ‘Outside the offshore port financial havens of Hong Kong and Singapore, there are no economies in the world that have developed to the first rank through policies of free trade.’

He cannot type the letters IMF without a sneer, and has a well-developed dislike of Singapore, whose policies in ASEAN have, he maintains, been ‘developmentally deeply unhelpful’. I think he may have fallen foul of some part of Singaporean bureaucracy: perhaps like many Americans he has a chewing gum habit.

But the bigger problem with How Asia Works is that this strongly argued thesis is larded with anecdotes and war stories in which it is easy to get lost.

Studwell has followed the corporate histories of Japanese zaibatsu, Korean chaebol (types of conglomerates) and assorted Indonesian, Philippine and Thai tycoons for years from his perches at the Economist and the China Economic Quarterly.

Pages of upmarket journalism on these topics are shovelled into the book. There are also several ‘journeys’ in the region, which are supposed to illuminate the arguments, but they add more heat than light.

Studwell certainly offers a particular perspective on Asian development, which is a useful corrective to the Washington Consensus. At the same time, Studwell paints a vivid picture of business life in the region.

If a copy of the Korean edition finds its way across the demilitarised zone to Pyongyang and Kim Jong-un discovers steps two and three to complete grandpa’s vision, we may find we have yet another Asian Tiger in our midst.

BOOK: How Asia Works: Success and failure in the world’s most dynamic region

AUTHOR: Joe Studwell

PUBLISHERS: Profile Books

 

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