SUMMARY - How Asia Works - Joe Studwell



Here is a summary of the key points about land reform and agriculture in East Asia:

  • Equitable distribution of agricultural land is critical for economic development in poor agrarian countries. Land inequality leads to exploitation of tenants by landlords and stagnant yields.

  • Post-WW2, Japan, South Korea, Taiwan, and China undertook major land reforms to redistribute land equally to smallholder farmers. This incentivized them to maximize productivity through labor-intensive techniques.

  • Small 1-hectare farms achieved remarkably high yields through 'gardening' methods utilizing abundant labor. This disproved beliefs that large mechanized farms are inherently more efficient.

  • The smallholder model dramatically increased agricultural output across East Asia, providing food self-sufficiency, rural incomes, and demand to support industrialization.

  • Land reform and small farms also had political benefits, absorbing unemployed workers and avoiding the rise of an impoverished underclass seen in unequal agrarian societies.

  • Egalitarian distribution of land resources strongly predicts future economic growth. Unequal land ownership allows elites to dominate and resist development.

  • Land reform was critical but difficult due to elite resistance. Japan underwent partial reform in the 19th century Meiji period but inequality returned until post-WW2 reforms.

    Here is a summary of the key points:

  • In the Philippines, the government's implementation of land reform has been inadequate, leaving most beneficiaries without the necessary support to succeed as smallholder farmers.

  • Unlike successful land reforms in Northeast Asia, beneficiaries in the Philippines were generally landless laborers rather than tenant farmers with farming experience and autonomy.

  • The Philippine government fails to provide land reform beneficiaries with essential services like agricultural credit, marketing assistance, irrigation, and extension services.

  • Without state support, land reform in the Philippines does not lead to increased productivity or rural prosperity.

  • A few NGOs have helped small groups of beneficiaries by providing marketing, credit, and training, but their reach is limited.

  • The land ownership structure remains highly unequal and oligarchic, with a few elite families controlling most agricultural land.

  • Low productivity and rural poverty persist because the land reform fails to transform either the beneficiaries' capacity or the broader agricultural system and state support.

In summary, land reform in the Philippines has lacked the complementary components like beneficiary selection, government support services, and shifts in the agricultural system that made land reform successful in other Asian contexts.

Here is a summary of the key points:

  • Southern plantation owners in the antebellum U.S. opposed protectionist trade policies like high tariffs because they wanted to export cash crops freely and import cheaper manufactured goods.

  • But early U.S. leaders like Alexander Hamilton enacted protectionist policies anyway to nurture domestic manufacturing and promote industrialization.

  • Protectionist measures used by industrializing countries have included high tariffs, export subsidies, import quotas, preferential government procurement, technology transfer requirements, and more.

  • These policies shield infant industries from global competition initially so they can develop capabilities and economies of scale.

  • Once competitive, industries are exposed to world markets. But the protection allows time for learning and investment to raise productivity.

  • Historically, successful industrializers like the U.S., Germany, Japan, and South Korea all used extensive protectionist policies to promote development of manufacturing.

  • Free trade policies alone have rarely led to rapid industrialization and catching up. Strategic protectionism plays a key role in the developmental state model.

  • The key is to avoid permanent protectionism and rent-seeking. Protection should be limited and tied to meeting export competitiveness milestones to incentivize firms appropriately.

    Here are the key points summarizing the passage:

  • The German Historical School of Economics in the 19th century argued that developing states need protectionist policies to build up domestic industry, rejecting free trade theories as unsuitable. Friedrich List was a leading thinker who believed temporary protectionism was key before ultimately transitioning to free trade.

  • Japan closely studied and implemented the German model of state-led industrialization in the late 19th century, with government investment in pilot factories, technology transfer, and export subsidies. This allowed Japan's manufacturing and exports to expand rapidly.

  • Post-WWII, Japan aggressively applied infant industry techniques, achieving sustained double-digit economic growth and demonstrating the power of old protectionist ideas. South Korea and Taiwan also successfully drove industrialization through export discipline and state support for targeted industries.

  • In East Asia, practical engineers and industrialists drove policy, unlike Western-trained economists. Agricultural expansion provided the basis for industrialization by creating domestic markets.

  • A comparison of Korea and Malaysia shows that export discipline and state direction of private firms were key to Korea's superior industrialization outcomes. Developing countries must learn from historical examples rather than relying on outside advice.

    Here is a summary of the key points about Malaysia's Perwaja steel project and Proton national car project:

  • Malaysia invested heavily in two major industrial projects - the Perwaja steel mill and the Proton national car.

  • Perwaja was intended to spur industrialization and make Malaysia a major steel producer. However, it was mismanaged, produced low quality steel, and failed to meet targets, becoming a sunk cost.

  • Proton was launched as a joint venture with Mitsubishi to build a Malaysian national car brand. But Mitsubishi provided outdated technology and Proton could not export competitively.

  • Unlike successful Asian industrial policies in Korea and Japan, Malaysia did not have strict export discipline, focus on upgrading technology, and developing integrated supply chains.

  • The projects succeeded politically but not commercially. They did not enable Malaysia to move up the industrial ladder or develop internationally competitive export industries.

  • The money sunk into them could have been better utilized to support more viable private sector manufacturing that was forced to export and meet strict quality standards. This represented an opportunity cost.

    Here is a summary of the key points about the role of finance in the economic development of Japan and South Korea:

  • Post-WW2, Japan and South Korea both created state-controlled financial systems to channel credit and funding towards strategic industries and exporters aligned with national industrial policies.

  • Policy tools included rediscounting of loans, credit quotas, and influence over bank lending decisions. This allowed the state to nurture priority sectors despite lower short-term returns.

  • Over time in Japan, large firms found ways to access international finance, eroding state influence. Deregulation and asset price bubbles in the 1980s led to a financial crisis when the bubble burst in 1990.

  • Korea pursued aggressive financial policies under Park to fund export-driven industrialization. But this led to overheating and inflation. The 1997 Asian financial crisis forced reforms.

  • Both countries demonstrate the potential benefits but also risks of state-directed finance. Excessive control can distort incentives while premature deregulation can unleash instability. Getting the balance right at each stage of development is key.

    Here is a summary of the key points:

  • Suharto relied on American-trained technocrats known as the "Berkeley Mafia" for economic policy advice. They pushed market liberalization and deregulation, believing free markets would curb crony capitalism.

  • In the 1970s, Suharto went against their advice and increased public investment in heavy industries, though without export discipline or developing manufacturing capabilities.

  • When oil prices fell in the 1980s, Suharto turned back to the Berkeley Mafia who advocated further deregulation and privatization.

  • Financial deregulation led to a proliferation of poorly regulated private banks, while conglomerates set up their own banks which came to dominate lending. But credit remained directed to insiders rather than productive investments.

  • Deregulation also fueled a real estate boom exemplified by SCBD, a financial district developed by a tycoon on cleared squatter land.

  • The Berkeley Mafia continued pushing for liberalization to attract foreign capital flows even as risks mounted ahead of the 1997 Asian Financial Crisis. Their faith in free markets was misplaced.

  • Suharto lacked his own development ideology and flip-flopped between state-led development and liberalization advised by the Berkeley Mafia. But neither approach resolved cronyism or focused the financial system on technological upgrading.

    Here is a summary of the key points:

  • Indonesia's leaders in the 1990s believed the economy was strong because of deregulation, overlooking risks from short-term capital flows and a weak export sector.

  • Their faith in free markets failed to address issues like cronyism and misdirected lending that emerged after financial deregulation in the late 1980s.

  • Loans went increasingly to real estate speculation rather than productive investments. When the 1997 Asian financial crisis hit, Indonesia was vulnerable due to dependence on short-term foreign borrowing.

  • The IMF bailout program focused on austerity but this worsened the crisis. The root causes were private speculation fueled by financial deregulation, not budget issues.

  • After the crisis, the IMF restructured the banking system, privatizing and limiting state banks. The new system lends cautiously, focused on profits over development.

  • The key lesson is that financial markets respond to the environment shaped by government policy. Deregulation encouraged short-term profits over long-term development.

  • The developmental emphasis on deregulation by the IMF and others undermined countries' ability to steer finance toward their development goals.

    Thank you for the summary request. Here are the key points I gathered:

  • The Allied Council for Japan was established after WWII to oversee Japan's postwar reconstruction and democratization. It was made up of the U.S., Britain, Soviet Union, and China.

  • The Council had broad authority over Japan, including setting policy, approving laws, and overseeing demilitarization. But in practice, the U.S. dominated the Council and implemented much of the occupation unilaterally.

  • General Douglas MacArthur was the Supreme Commander of the Allied Powers. He and his staff had wide latitude to rule Japan as they saw fit, with minimal oversight from Washington.

  • Land reform was a major priority for the U.S. But MacArthur delayed implementing reforms, despite urging from expert Wolf Ladejinsky, out of concern for antagonizing Japanese conservatives and landlords.

  • The reform process was drawn out over several years. But it ultimately broke up the estates of absentee landlords and redistributed land to tenant farmers and owner-cultivators, improving rural equity and agricultural productivity.

  • The Allies focused on demilitarization, democratization, and rebuilding Japan as a peaceful, stable country. But the U.S. was the driving force in the occupation, not the full Allied Council.

    Here are the key points in summary form:

  • Historically, successful industrial catch-up has required some degree of state intervention, rather than relying purely on free markets.

  • In the 19th century, Germany and Japan both used activist industrial policies like tariffs, subsidies, state-owned enterprises, and coordinated business-government planning to promote industrialization.

  • Post-WW2, Japan's Ministry of International Trade and Industry (MITI) emulated Germany's state planning model to shape industrial development. The state collaborated closely with zaibatsu business conglomerates.

  • South Korea also followed a state-led model in the 1960s-80s. The government aggressively pushed chaebol conglomerates like Samsung and Hyundai towards manufacturing for export.

  • Malaysia under Mahathir in the 1980s-90s focused on high-profile projects like national car company Proton to force industrialization, inspired by Japan and Korea. But overconcentration of power and lack of checks and balances undermined effectiveness.

  • Overall, historical evidence shows that proactive developmental states played a crucial role in successful industrial catch-up. Unfettered free markets were not sufficient. But a balance is needed to avoid overplanning or corruption.

    Here is a summary of the key points:

  • Malaysia's heavy industry projects in the 1980s like national carmaker Proton and steelmaker Perwaja suffered from mismanagement, lack of expertise, and cronyism, resulting in huge losses. In contrast, South Korea built globally competitive auto and steel industries.

  • Malaysia provided extensive support and protection to Proton but it struggled with quality issues and uncompetitive models unlike Korea's successful Hyundai. Aerospace projects in Malaysia and Indonesia also failed to achieve lift-off.

  • Thailand focused on attracting foreign investment through incentives rather than developing local industries. Incentives-driven policies provide less lasting benefits.

  • Effective industrial policies require close state-business collaboration and flexibility on protection levels during development phases, as seen in East Asia's high performers.

  • Financial systems were harnessed in East Asia to provide directed credit and low-cost capital for industrialization. But this required strong governance and oversight.

  • Preferential, crony lending in countries like the Philippines failed to build competitive export industries in the way strategic credit allocation did in Korea and Taiwan.

  • China has rapidly built huge state-owned firms across industries to achieve industrial policy aims, though overcapacity and inefficiency are becoming issues.

    Here is a summary of the key points about ovo's global footprint and brand recognition:

  • ovo is an Indonesian consumer goods conglomerate founded in 2010 by the Salim Group.

  • It has grown rapidly to become one of the largest food and beverage companies in Indonesia.

  • ovo's key products and brands include instant noodles (Indomie), dairy products, snacks, cereals, and bottled tea.

  • Indomie is the largest instant noodle brand in Indonesia with over 15% market share. It's also popular across Southeast Asia, the Middle East, Africa, and other regions.

  • In just over a decade, ovo has expanded internationally to over 60 countries worldwide. It has manufacturing facilities in several countries including Turkey, Egypt, Saudi Arabia.

  • ovo actively targets overseas markets and positions itself as an Indonesian/Asian brand. This expands its global footprint.

  • However, ovo does not have the level of global brand recognition and dominance of larger Asian companies like Samsung, Toyota or Alibaba. It is more regionally focused.

  • Overall, ovo has achieved rapid international growth since 2010 but its global footprint remains more regionally concentrated compared to top Asian global brands.

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