Joe Studwell

A freelance journalist in Asia and founding editor of China Economic Quarterly presents a detailed analysis of why the economies of some Asian countries have flourished while others have declined. 20,000 first printing.

Success and Failure in the World's Most Dynamic Region

How Asia Works

Until the catastrophic economic crisis of the late 1990s, East Asia was perceived as a monolithic success story. But heady economic growth rates masked the most divided continent in the world - one half the most extraordinary developmental success story ever seen, the other half a paper tiger. Joe Studwell explores how policies ridiculed by economists created titans in Japan, Korea and Taiwan, and are now behind the rise of China, while the best advice the West could offer sold its allies in South-East Asia down the economic river. The first book to offer an Asia-wide deconstruction of success and failure in economic development, Studwell's latest work is provocative and iconoclastic - and sobering reading for most of the world's developing countries. How Asia Works is a must-read book that packs powerful insights about the world's most misunderstood continent.

Feyi Fawehinmi 

Bouke van der Bijl

Really interesting book! This might be the only book I’ve ever read on macroeconomics, but it’s very well written and reads easily. 

The book investigated and expounds the successful and not so successful economies of Eastern Asia, comparing why certain ones (Taiwan, S Korea, Japan) succeeded, while others (Philippines, Indonesia, Thailand) never reached the same level of success. The author explains that a lot of the policies that made these and other industrialized countries successful are contrary to those spouted by the world bank, IMF, and the US. 
According to the author it comes down to three policies by the developing countries’ governments:

1. Agricultural development. When a country is underdeveloped and labor is cheap, it should redistribute farmland to small household farms, and make sure that this is done in a sound way such that the land can’t just be accumulated under one landlord again. The reason is that ‘gardening’-style farming as done on such farms, while labor-intensive is much more productive per hectare than large-scale mechanized farming. This will lead to a surplus in yields, which will lead to profits for the families, which they can then re-invest in their farms or use to improve their own living conditions. This policy should also be supported with subsidized fertilizer, education, etc. whatever support the government can give to improve the yield of small farmers. The problem in the Philippines is that, while they tried to do land reform, in the end the big families just regained their land through backdoor policies, and to this day are farming them like plantations, which are profitable but don’t provide the biggest amount of welfare for the nation. 
2. Industrial policy. The country should nurture an infant manufacturing sector through protectionism and export discipline. The author points out that basically every industrialized country did so through protectionism, including Germany, USA, and the UK. The developing country should build up their own expertise, for example by doing technology transfers with foreign firms (while maintaining control) until they can innovate on their own. This should be stimulated by the government. An example from the book, is that during the Korean junta they rounded up all the business leaders and forced them to sign a statement that they agreed to listen to the junta, otherwise all of their possessions would be taken from them. They then coerced them into starting manufacturing businesses like cables etc. The other key factor is that the manufacturing businesses should be forced to compete on a global level through ‘export discipline’, which is policy that incentives businesses to export their products, for example by guaranteeing loans based on purchase orders from abroad (like Korea did). 
3. Keep a tight leash on the financial system. The hire part is that the government should rightly control the finance system and ensure it works to their interests, instead of being captured by profiteers. An example was that in the Philippines, where the banks were privatized, the big family businesses all had their own banks which would loan money to the family business, which they would just not pay back, leading to the government picking up the cheque. In Malaysia they liberalized the financial system and IPOd companies prematurely, leading to huge stock market bubbles on unproductive companies. Only after industrialization should the banking sector be liberalized bit by bit. 

The last chapter is on China, and talks about how all these things are also playing there, but on a much larger scale and with the twist that many of the large companies are state-owned. 

In conclusion, very good and clear book. I learned a lot.

Pierre

Adi Suresh 

“A good read for anyone who wants to understand what actually determines whether a developing economy will succeed” (Bill Gates, “Top 5 Books of the Year”). An Economist Best Book of the Year from a reporter who has spent two decades in the region, and who The Financial Times said “should be named chief myth-buster for Asian business.” In How Asia Works, Joe Studwell distills his extensive research into the economies of nine countries—Japan, South Korea, Taiwan, Indonesia, Malaysia, Thailand, the Philippines, Vietnam, and China—into an accessible, readable narrative that debunks Western misconceptions, shows what really happened in Asia and why, and for once makes clear why some countries have boomed while others have languished. Studwell’s in-depth analysis focuses on three main areas: land policy, manufacturing, and finance. Land reform has been essential to the success of Asian economies, giving a kick-start to development by utilizing a large workforce and providing capital for growth. With manufacturing, industrial development alone is not sufficient, Studwell argues. Instead, countries need “export discipline,” a government that forces companies to compete on the global scale. And in finance, effective regulation is essential for fostering, and sustaining growth. To explore all of these subjects, Studwell journeys far and wide, drawing on fascinating examples from a Philippine sugar baron’s stifling of reform to the explosive growth at a Korean steel mill. “Provocative . . . How Asia Works is a striking and enlightening book . . . A lively mix of scholarship, reporting and polemic.” —The Economist

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

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