How Asia Works
Studwell, J. (2013). How Asia works. New York, NY: Grove Press/Atlantic Monthly Press.
How Asia Works by Joe Studwell is a comprehensive and insightful exploration of the economic development of Asia, particularly focusing on the rise of countries such as Japan, South Korea, Taiwan and China. The book provides a unique perspective on the reasons behind the economic success of these countries and what sets them apart from other developing nations. The author draws on extensive research, economic analysis, and historical background to explain how these countries have transformed themselves from low-income agrarian societies to modern industrial powerhouses.
The purpose of this review is to provide a critical evaluation of “How Asia Works,” including its strengths, weaknesses, and overall contribution to the field of economic development. This review will cover the main arguments presented in the book, data in its research methodology, and its relevance to contemporary debates on the economic development of Asian countries (especially after Russia’s invasion of Ukraine). The scope of the review will be to examine the book's contributions to the existing literature on economic development and to assess its implications for policymakers, economists, and business leaders.
Background:
Joe Studwell (PhD) is a British journalist, researcher, and author known for his work on Asian economic development (see The China Dream 2002, Asian Godfathers 2007). Studwell has extensive experience covering Asian economies and has written for several prestigious publications, including the Financial Times and the Economist.
In "How Asia Works," he sets out to explain why some Asian economies have succeeded while others have failed. He argues that the key to success is a focus on agriculture and manufacturing, rather than relying solely on natural resources or service-based industries, but on how economies are incorporated into the international trade system during the different phases of their economic development (protectionism during the infant industry stage and liberalisation once businesses are internationally competitive). Studwell also claims that the successful Asian economies have implemented policies that have helped small and medium-sized enterprises grow, while limiting the influence of large corporations from market monopolies (with some state exceptions).
The book is divided into two parts: the first looks at the success of economies such as Japan, South Korea, and Taiwan, while the second examines the failures of Southeast Asian economies such as Indonesia and the Philippines. Throughout the book, Studwell provides detailed case studies of each economy, as well as historical and cultural context to help readers understand the factors behind their success or failure. He delves into the unique historical backgrounds of each country and how their policy makers navigated the bipolar economic order during the Cold War.
Key Argument:
Studwell argues that the Washington Consensus, a set of policies advocated by international organisations such as the World Bank, has not produced positive outcomes in most countries and has hindered their development, providing examples from Latin America. He identifies a set of policies, referred to as "Asian development model", that have contributed to the success of countries like Japan, South Korea, Taiwan, and China. These policies include selective intervention by the state in the economy, prioritisation of agriculture and manufacturing, and support for small and medium-sized enterprises (based on their export performance). The author highlights the importance of state-led infrastructure development, such as providing access to credit, investing in education, and promoting technological advancement. Yet, he highlights that this model is not concerned with internal inequality but with “growing the pie."
In contrast, the author criticises the Washington Consensus for its focus on free-market policies and its neglect of the role of the state in development. Studwell argues that the World Bank's policies, which advocate for liberalisation, privatisation, and deregulation, have not led to economic growth and have instead resulted in increased inequality and economic instability. Overall, the author's theories challenge the conventional wisdom of development policies and provide insights into the factors that have contributed to the economic success of some Asian countries. Studwell's arguments have significant implications for development economics and highlight the need for a nuanced approach to development policies that takes into account the unique geopolitical context of each country.
Analysis and Evaluation:
The author's main argument is that the key to the success of some Asian countries lies in their implementation of state-led development policies that prioritise agriculture and manufacturing. He argues that these policies were necessary to overcome the constraints of low wages, low investment, and limited access to capital that characterised these countries before their economic transformations. Studwell argues that the state-led development policies helped these countries to achieve rapid and sustained growth, increase productivity, and raise living standards, although he admits that industrial policy alone without state redistribution policy leads to rising inequality within the state, but takes a utilitarian view on reducing inequality between states as the goal of such policies.
The author provides several concrete examples of successful state-led development policies, including Japan's land reforms, South Korea's emphasis on the steel industry, Taiwan's investment in electronics, and China's focus on state-owned enterprises. He also provides a critical assessment of the Washington Consensus and World Bank's development policies, arguing that these policies focused too heavily on liberalising trade and finance (which might work for economies such as Hong Kong and Singapore), and did not sufficiently address the critical role of the state in economic development at the early stage of “infant industries.”
Strengths of the book include its use of extensive research and micro/macro data, as well as its clear and concise journalistic writing style. Studwell presents a well-structured argument, providing evidence and examples to support his theories on the role of government intervention in economic development. The author's analysis of the economic success of several Asian countries is insightful and provides valuable insights into the development process. He offers a fresh and balanced perspective on the role of government intervention in the development process and provides a clear critique of the Washington Consensus and World Bank's development policies. His views on industrial policy have become mainstream following the economic disruption of Covid-19 and Russia’s invasion of Ukraine in 2022, even by neoliberal proponents such as the United States and the European Union.
However, the book also has some limitations. While Studwell's argument is well-supported, some of his conclusions may be open to debate due to the difficulty of setting a limit to the argument of economic nationalism in a fragmented world. For example, the author's emphasis on the role of government intervention in the development process may be viewed as controversial and may not be applicable to all countries depending on their historic and geopolitical alliances. Furthermore, the author's focus on a limited number of Asian countries and excluded of others (that he claimed to be failed states) which may limit the generalisability of his conclusions as more states fall into this definition in 2022 than in 2013.
The primary counterargument to Studwell's theories is that his focus on a limited number of factors and his limited geographical scope may lead to a narrow perspective that fails to capture the complexity and diversity of the Asian economy (see Bill Gates’ review of the book). Some critics argue that there are a number of other factors at play in the development of Asian economies, including demographic changes, government policies, and cultural differences, which may have a significant impact on their success. Furthermore, other economists argue that the concept of Asian values and the importance of Confucianism as a driving factor in the success of Asian economies is overly simplistic and not supported by empirical evidence. For example, some argue that economic success in Asia is due to a combination of factors, including government policies, investment in education, and favourable demographics, rather than a single cultural and economic value system.
In conclusion, "How Asia Works" by Joe Studwell is a valuable contribution to the field of economic development, as it provides a unique perspective on the reasons behind the success of some Asian countries. The author's arguments challenge the conventional wisdom of the Washington Consensus and the World Bank's development policies, and offer an alternative view based on a close examination of the Asian experience in comparison with the Latin American one. In times of great power competition, his book provides a useful guide for the behaviour of small states that are not economically aligned with the US/EU or China/Russia.
Favourite quote:
“What created the Canons, the Samsungs, the Acers and so on in Japan, Korea and Taiwan was the marriage of infant industry protection and market forces, involving (initially) subsidised exports and competition between manufacturers that vied for state support” (p. 118).