How Asia Works: Success and Failure in the World’s Most Dynamic Region
I’m extremely fortunate to have stumbled upon this book. It reconstructed my views on developmental economics and doubles as a strong rejoinder to dogmatic laissez-faire.
It explains how Japan, Korea, Taiwan, and China have advanced so much economically–by following the 18th century English and 19th century American and German models of protected development, best described by Friedrich List–and how Southeast Asian nations have struggled despite taking far more of the neoliberal prescriptions of Adam Smith and the World Bank and IMF than their northern counterparts. There’s much to learn about here but we can summarize the three steps to prosperity as follows:
1. Peasant farmers must be given ownership of their land and receive infrastructure and technical support to increase productivity and build wealth. Fair land redistribution spreads wealth so much better than trickle-down economics.
2. During industrialization, infant industries must be protected from foreign multinationals, but there must also be enough domestic firms in each field to allow genuine competition, as monopolies degenerate into rent-seeking. Deals with foreign firms must require technology transfer in exchange for market access to allow the nation to build its knowledge base. Promising companies need sufficient capital to undertake long-term investment. To determine which firms deserve funding, use export performance as a benchmark because it is an objective indicator of competitiveness.
3. Finance must be directed toward productive development, not real estate and stock speculation.
Again, it’s not what race you are that determines how well your country does; it’s how effective its policy is. Learn about what’s been proven to work by reading this.