Book Summary : How Asia Works

Brilliant read, comparing development of more developed Asian countries like China, South Korea, Taiwan with countries like the Phillipines, Thailand, etc which have not. Most the of the book focusses on three main areas which the author believes makes the difference between phenomenal growth and abject stagnation or worse increase in poverty and income inequality. Also how at the end of the day, a lot of the progress of a nation still depended on the public policies of its government.

Agriculture

• Most countries are agricultural after the world wars, so easiest way to increase economic output
• Land reforms in China Japan Korea and Taiwan
• To increase yield to maximum capacity, divide up land equally among all farmers, introduce low interest credit to farmers, agro training etc
• Smaller farms actually yield more, but there has to be a during framework of sales, marketing around it
• The greatest rural poverty in East Asia is concentrated on areas of most natural abundance

Manufacturing

• Next phase of development since agriculture cannot be sustained
• Agriculture does provide the necessary wealth to pick up manufacturing and industrialization
• Successful north Asian countries pushed for local entrepreneurs to pick up manufacturing
• Policies centered around encouraging winners, weeding out losers and bankruptcies, supporting exports, growth etc
• Local protectionist laws finally showing up
• Unlike the popular belief in touch countries that competition leads to growth and all wealth is the product of competition but the shocking truth is every economically progressive society has had some protectionist laws in the formative stages
• The United States in fact had the mother country and bastion of modern protectionism.
• Protectionism has been the rich man’s ticket to industrialization.
• Failed nations instead had Import Substitution Industrialization (ISI)

Banking system

• This is the third polar which can propel an economy to the path of high growth or failure
• For a developing economy, not deregulating entirely is of more importance
• Financial loosening without the foundation of a sounds agricultural and manufacturing base will have the economy’s wheels spin off
• Regardless the financial development policy is only as good as the policy framework on which it acts.
• Interestingly Taiwan was very conservative (high interest rates, high savings rate) unlike Korea (more foreign finding, low savings rate, low interest rates)