Memorable quotes
The second intervention – in many respects, a second ‘stage’ – is to direct investment and entrepreneurs towards manufacturing. This is because manufacturing industry makes the most effective use of the limited productive skills of the workforce of a developing economy, as workers begin to migrate out of agriculture”
“Finally, interventions in the financial sector to focus capital on intensive, small-scale agriculture and on manufacturing development provide the third key to accelerated economic transformation”
“Brazil is the only major economy outside east Asia which has managed to grow by more than 7 per cent a year for more than a quarter of a century”,
“The Japanese economist Yoshihara Kunio had warned in the 1980s that south-east Asian states risked becoming ‘technology-less’ developing nations. Without successful large, branded companies of their own, south-east Asian economies remain technologically dependent on multinationals, eking out a living as contractors for the lower-margin parts of international production chains”
“The reasons for the failure of these states are varied, but one common characteristic leaps out: they are all politically and economically introverted. In varying degrees, these countries are re-learning the old lesson of pre-1978 China, pre-1989 Soviet Union and pre-1991 India: that if a country does not trade and interact with the world, it is all but impossible to get ahead in the development”
“The Meiji leadership squeezed farmers quite hard, obtaining a peak of four-fifths of its revenues from land tax in the late nineteenth century, but the tax squeeze was no harder – and probably a little less hard – than under the shogunate.14 Overall, these changes produced a spurt in yields and output that ran from the Meiji restoration until around the time of the First World War. Japan’s production of rice – its staple food – roughly doubled, a little ahead of a rapidly increasing population. As the industrial economy took off, there was no need to import food. And not only did agriculture feed more mouths, it also supplied the leading export (and hence foreign exchange earner) of Japan’s early development era – silk, produced by worms that were fed on mulberry”,
“The beauty of the property is breathtaking, but it does not reflect any softness of human relations. The Ito home, built around 1885 on the family’s revenues from its ever-expanding roster of tenants, is in fact a monument to the agricultural market failure that slowly asphyxiated liberal, reformist Japan and helped pave the way for the country’s military dictatorship. In the end, Japan’s halfway house land reform crumbled”,
“The CPC introduced a more progressive tax system whereby, instead of taking a fixed share of whatever was produced, the state exempted an initial quota of output from tax and subjected the rest to levies based on average local yields. Anyone who beat the average got to retain the upside”,
“The introduction of a more deep-rooted, enduring land reform – which kept the agricultural economy focused on yield gains rather than tenancy profits – set the stage for Japan’s post-war miracle”,
“Wolf Ladejinsky, writing about Korean agriculture before partition in 1945, quoted a 1928 US State Department research report which said that less than 4 per cent of households owned 55 per cent of agricultural land, while there were a quarter of a million landless squatter families”,
“The formal terms of the Korean reforms were much like those which had already been enforced in Japan and which were to come in Taiwan. There was a 3-hectare retention limit. Remuneration to landlords was particularly ungenerous, with some losing 90 per cent of the value of their assets”,
“This lack of domestic and international political conviction over the importance of household farming in development was the first step towards the relative economic underperformance of the south-east Asian region. No country bears this out more painfully than the Philippines”,
“SDO, like other loophole mechanisms in the CARL such as Voluntary Land Transfer and Voluntary Offer of Sale, broke one of the cardinal rules of successful land reform as implemented in north-east Asia: do not let landlords negotiate directly with tenants”,
“The symbols of HMC’s technology acquisition were not foreign joint ventures, but the Hyundai bungalows and the Hyundai hotel (where I stayed on my visit, known formerly as the Diamond hotel) in which temporary foreign consultants were housed while their knowledge was absorbed”,
“Unfortunately, there were to be fundamental policy differences in Malaysia when compared with Japan, Korea and Taiwan. Compounded by an already lacklustre performance in unreformed agriculture,144 these differences were more than enough to derail Mahathir’s industrial ambitions. The new leader failed to grasp the need for export discipline, and on trips to north-east Asia his Korean and Japanese hosts did not explain the dirty secrets of protectionism to him”,
“Instead of counting exports, Mahathir trusted his own judgement about the firms and managers he was backing. He tried to know more than the market”,
“By not licensing more entrants in businesses like car making, Mahathir threw away the power to cull losers. All he could do was change the management of state enterprises – firms he could not afford to let go bust because he had nowhere else to turn. Without realising it, Mahathir did just what critics of industrial policy have often falsely accused successful industrialising states of doing: he set out to pick winners when the effective approach was to create competition and then weed out the weak”
“Mahathir further compounded this problem by forcing putative national champions into equity joint ventures with multinational firms. The arrangements made it all too easy for Malaysian firms to develop long-term technological dependencies on their partners”
“The oligarchs simply showed the premier an efficient power station built by Siemens, or a mobile phone service based on Ericsson technology, or giant towers designed by an American architect and built with north-east Asian steel, and collected the rent for being able to use that imported technology efficiently”
“Hard-nosed infant industry protection of the kind recommended by List remains the only proven way of pushing a rising state up the technological ladder”
“In 1984 he awarded what was then the biggest construction deal in Malaysia’s history – for the Dayabumi complex in Kuala Lumpur – to two Japanese firms, despite the fact that local companies put in lower bids. The Malaysian taxpayer footed the bill, but Malaysians learned nothing”
“The tragedy of Malaysia is that this is largely true. Unlike the Chungs of Hyundai, or the Lees of Samsung, Malaysian businessmen were never compelled by the state to make any form of developmental contribution”
“When the regional recession struck in the early 1980s, the Philippine economy collapsed under the weight of unserviceable debt and shrank an astonishing 20 per cent. It only really stabilised in the mid 1990s, and there has been no sustained period of growth since. The Philippines has no indigenous, value-added manufacturing capacity. At the end of the Second World War only Japan and Malaysia had higher incomes per capita in Asia. Then Korea and Taiwan overtook the Philippines in the 1950s. The country slid down past Thailand in the 1980s, and Indonesia more recently”
“A tale of two east Asias In Korea, infant industry protection combined with export discipline, plus competition among multiple entrants, made manufacturing policy highly effective in securing technological upgrading. In Malaysia, industrial policy without export discipline and with insufficient attention to the need to foster competition came unstuck”
“In south-east Asia’s biggest state, Indonesia, Suharto was greatly influenced in the 1980s by Mahathir’s Look East industrialisation policy. Unfortunately, he pursued an industrialisation drive which had exactly the same weaknesses as Mahathir’s.225 There was no export discipline and there was very little competition”
“He was excited by the launch of the Proton project in Malaysia. ‘I said we should steal the technology,’ he recalls of his moment of industrial nationalism.226 This is exactly what government policy should have made his family’s firm, Astra, do – just as Hyundai begged, borrowed and stole its technology from Mitsubishi and other firms. Indonesia’s market, with 220 million people, was five times bigger than Korea’s”