Explaining the ‘Asian Miracle’

REVIEWS, 30 Mar 2020

Richard Falk | Global Justice in the 21st Century – TRANSCEND Media Service

The Economic Resurgence of Asia: Reaping the Benefits of Decolonization, by Deepak Nayyar, Oxford University Press, 2002

20 Mar 2020 – This is a modified version of an interpretative review of an outstanding book that initially appeared in Challenge, an online publication, a few weeks ago. A timely aspect of Nayyar’s book is the emphasis he places on the importance of effective state/society relations in explaining the remarkable growth experience of Asia. Such an insight seems relevant to the degree to which various governments are effectively managing responses to the challenge of the Coronavirus pandemic. It would seem at this stage that well-managed autocracies do better than most democracies, and much better than poorly managed democracies that embody capitalist structures, priorities, and values.

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The distinguished Indian economist, Deepak Nayyar, has written a fascinating and illuminating account of the economic rise to ascendancy of Asia over the course of the past 50 years, entitled Resurgent Asia: Diversity in Development, (Oxford University Press, 2019). Its rigor, lucidity, statistical evidence, and reasoned analysis enable this book to stake a claim of being the definitive account of the extraordinary Asian rise that has reconfigured the world economy since the collapse of European colonialism in the two decades after World War II. Nayyar tells us near the beginning that “The object of this book is to analyze the phenomenal transformation of Asia, which would have been difficult to imagine, let alone predict, fifty years ago.”[4] It would indeed seemed so absurd to have been upbeat about the Asian economic future as late as 1960, a case of “imagination running wild” according to Nayyar.[2] To drive home this striking point he looks back at The Asian Drama (1968), the classic three-volume work of the celebrated Swedish economist, Gunnar Myrdal, who despite a magisterial effort to marshal all available information at the time, turned out to be totally wrong in his central pessimistic prognoses of the economic future of Asia. His book was treated as an authoritative confirmation of the conventional wisdom of the time that relegated Asia to a permanent condition of impoverished underdevelopment.

Nayyar helps us understand why Myrdal was so wrong, and if I get correctly the force of his well-honed argument, the foreboding prognosis resulted from the gross underestimation of Asian human capital (skilled and high performing labor, education), governmental capabilities, and legacies from formidable pre-colonial economic stature and achievements. Furthermore, Asian states emerged from colonial governance and imperialist exploitation much less shattered than did their African or Latin American counterparts, and were endowed with governing processes that were better able to steer their economies in ways that produced sustained developmental success. A major theme of Nayyar’s groundbreaking study of what he labels ‘Asian resurgence’ is the critical importance of rational guidance and management of development by a strong and autonomous state that can operate in a constructive and intelligent manner when it comes to formulating its pro-active managerial approaches to economic and social development. As a result, Asian governments did not need to defer to the status quo orientations and stultifying special interests of traditional elites while implementing polices designed to promote rapid industrialization, education, health, social and economic rights, and technological innovation, and maybe most important of all, the governing elites of most Asian countries exhibited flexibility with respect to policy, being not hamstrung by ideological dogma of either capitalist or communist hue.

A distinctive feature of Nayyar’s ambitious approach is to broaden inquiry beyond the rise of China, or at most China and India, by examining the economic experience of no less than 14 Asian economies over the half century, beginning in 1970. This comparative methodology enables a search for clues as to why some countries in Asia did far better than others when it comes to GNP growth per annum and per capita without losing the other part of the story, which tells of the startling progress achieved by Asia as a region. In effect, some Asian countries did perform better than others, and some did better in certain intervals than at other times, accounting for two dimensions of diversity. Yet this deconstructive insight should not divert attention from the central assertion: that Asia as a region did spectacularly better than was expected, especially after 1970, and from economistic perspectives far better than could have been responsibly predicted. It is obvious that Africa and Latin America did not fare nearly as well as Asia, which is a part of the puzzle that Nayyar takes note of, but does not try to solve beyond a casual observation that their state formation lagged, their human capital was of poorer quality, and these countries did have nearly as robust pre-colonial economies as did several Asian countries with their impressive manufacturing and governance capabilities.

In one sense, the most startling finding, given this comparative approach, is that ideological orientation meant far less than the effectiveness of state intervention in the economy by its pursuit of industrial policies designed to promote growth, especially via export promotion and an opening of the national economy to trade and investment potentials arising from profits, savings, and transnational capital flows. In other words, competent and pro-active government, superior human capital facilitated by education and health, and reinforced by a cultural work ethic, as well as the effective assertion of national sovereignty seemed to be the key explanations of the most spectacular success stories among the Asian 14, with China leading the way. What Nayyar concludes is that “The state and the market are complements rather than substitutes and the two institutions must adapt to each other in cooperative manner over time.”[226] He does suggest that China and Vietnam are special due to their “strong, one-party communist governments, with clear objectives, that could co-ordinate and implement policies” in a manner that cannot be “ that could not be replicated elsewhere in Asia.[226]

This enlightened outlook that was initially implemented with excellent economistic results by the Asian Tigers (South Korea, Taiwan, Hong Kong, and Singapore), then emulated on a grander scale by China, and lately more unevenly pursued by India. These success stories contradicted economic dogma in the West, which favored either a supervisory relationship between state and market as in the social democracies of Europe or a more deferential approach by the state to the market as in the United States where the tyranny of Wall Street and the ceaseless budgetary demands of the Pentagon has often impaired effective governmental activism with respect to markets except through various subsidies, tax breaks, and crisis-induced bailouts. Although not explicitly articulated, Nayyar seems to be suggesting that the genius of Asia was to escape from the Cold War poles of economic ideology, and figure out practical ways of making make the state a useful guide and facilitator of economic policy rather than a passive spectator or an omnipotent overseer. The Asian success was to find various pragmatic national formulas for coordinating state and market on the basis of synergies that were dedicated to overall success in achieving sustainable development at high rates of growth, and that displayed talents for adapting to the challenges of changing global and regional economic conditions.

One dimension of this hyperbolic economic growth in Asia involved the effective management of complex transitions from an economic concentration on the export of primary goods and resources to a much-increased reliance on manufacturing, and from there moving the center of economic gravity to a more and more sophisticated stress on the provision of services. Nayyar takes due note that during this process of growth and expansion, it is of utmost importance to take maximum advantage of technological innovations to ensure that increases in productivity offset rising wages, which enables a continual rise in living standards without sacrificing the savings and profits needed for continuous investment, which alone can sustain aggregated momentum on the level of macro-economic policy.

Perhaps, as significant as the prodigious demonstration of the diversity of the 14 Asian national trajectories amid the unity achieved in the form of sustained economic growth, is Nayyar’s methodological mastery of the complex statistical material presented in the form of data, charts, and graphs. Writing in a manner that exhibits great economistic sophistication, Nayyar yet somehow has produced a book that is understandable by non-economists with a storyline that provides real insight into the dramatic restructuring of world order in the aftermath of colonialism and economic imperialism (significantly, not all of the non-West was colonized, but it was all, including of course China exploited by the West). Indeed, Nayyar shows that while India was a British colony and China never lost its formal independence as a sovereign state, their economic decline in the colonial period was roughly equivalent, with both emerging after World War II as highly problematic broken economies with respect to their future prospects, making this regional climb to ascendancy that much more remarkable.

Yet that does not mean that Nayyar overlooks the damage done to Asian countries by the colonial system as it operated between 1820 to 1962. On the contrary. He faults Myrdal for failing to take account of the pre-colonial past when Asia was so much more prominent in the world economy, which Nayyar believes partially explains why this great Swedish economist did not adequately foresee the Asian potential to achieve post-colonial affluence. The economic fall of Asia during colonial period was very sharp—“Between 1820 and 1962, the share of ‘the West’ in world income almost doubled from 37 per cent to 73 per cent, and the share of ‘the rest’ more than halved from 63 per cent to 27 per cent, of which the share of Asia plummeted from 57 per cent to 15 per cent.”[9] The dynamic that caused this to happen was rapid European industrialization that enabled the West to reshape  by coercion the international division of labor in its favor. In Nayyar’s words this new international economic order was “shaped by colonialism and imperialism through the development of mines and plantations.’[16] This dramatic shift resulted in the drastic ‘deindustrialization’ of Asia, which meant reversing the growth expectations of development, epitomized by a retreat from manufacturing to primary goods in the context of production and international trade.

Nayyar grounds his book by a look back in two distinct illuminating ways. First, he considers the standing of China and India, along with the rest of Asia, in the world economy through a period of two centuries, putting forth a dazzling array of statistics that probably will produce some major surprises for most readers, as they did for me, and especially for those who have not studied Asian economic history. In Nayyar’s words, “Until 1750, Asia accounted for almost three-fifths of the world population and world income, while China and India together accounted for about one-half of world population and world income. These two Asian giants also contributed 57 per cent of manufacturing production, and an even larger proportion of manufactured exports in the world.” [2] The most intriguing aspect of this critical assessment of Asian economic experience is that the result of the amazing economic surge is in one rather secondary sense unremarkable. For Asia in this past 50 years did nothing more than recover by 2016 or so its earlier relative global position with respect to population, shares of the world economy, and per capita living standard of its peoples. It is with this central reality in mind that explains Nayyar’s use of the word ‘resurgence’ rather than, say, ‘rise’ or ‘rise to ascendancy.’ At the same time, the differences between economic conditions in 1820, or for that matter, 1960, and the present are so dramatic for Asia in terms of experiencing the actual conditions of modernity, its technological advances and the great heightening of living standards, as to make it no exaggeration to consider the transformation of life in Asia from what it was to what it is as ‘the Asian miracle.’ Although much is left to be done throughout Asian-14, including dealing with large pockets of extreme poverty, especially in India, never have so many millions been lifted from the harsh clutches of extreme poverty in a few generations.

This rise of Asia has been accentuated by coinciding with the relative and absolute decline of the West. This puts Asia in a position to become the leading regional force shaping world politics for the next 20-25 years, taking over for the United States, which had taken over from Europe. It would be illuminating to have a study roughly parallel to this great book that looked at the collective experience of the West in a framework that also tracked the experience of a group of Western states, not necessarily 14, but a sufficient number to illustrate diversity amid unity.

One consequence of Nayyar’s regional approach is to lessen attention given to the impacts of these economic trends on the structure of geopolitics, and the character of geopolitical rivalry at the start of the colonial era, in the course of the 20th century, at present, and in the near future. What becomes evident is that in the 1800s the main geopolitical rivals were also the main colonial powers of Western Europe, especially after the Industrial Revolution gave European countries the military instruments to extend their economic reach over most of the rest of the planet. The only notable exception to this pattern, as Nayyar observes, was Japan that benefitted its generally successful resistance to colonialism and later from the modernization thrust of the Meiji Restoration of 1868. These developments allowed Japan to catch up with the West much earlier than the rest of Asia, a dynamic tragically reversed by the Japanese turn toward regional imperialism coupled with a disastrous challenge to Western geopolitical dominance in its region. Nayyar takes note of the fact that Japan pursued its own version of the Western path of combining industrialization at home with an imperialist foreign policy in Asia. Nayyar does not, however, go on to contrast the soft power dynamics of the contemporary Asian global outreach, which places an emphasis on win/win approaches to non-Western countries in Africa and Latin America coupled with non-reliance on the Western addictive dependence on coercive diplomacy, intervention, and military superiority. In this sense, Asian geopolitics are post-colonial in character, although as of 2020 beginning to mount tensions and even some pushback as nationalist outlooks show resentment toward soft power penetrations of sovereign space.

Of course, the regional framework is somewhat misleading if the focus shifts from development to geopolitics. Although Nayyar’s conjecture of rising Asian geopolitical leadership is couched in regional language, the real geopolitical rivalry is between the United States and China. It is here that the most notable feature of U.S. pre-Trump decline is the American squandering of its resources and reputation on a hard power approach to geopolitical leadership that involved a series of costly military misadventures (Vietnam, Afghanistan, Iraq, Iran), which in effect, represented a dysfunctional continuation of a colonial mentality, somewhat disguised by shows of formal respect for political independence and national sovereignty of other countries, yet confirmed by U.S. reliance on threats, sanctions, and covert and overt military interventions. By contrast, how many such misadventures can one identify in Chinese foreign policy? This is not to suggest that China is pacifist in spirit or substance. Its fierce border wars with Vietnam and India, its investment in defensive and deterrent military capabilities, as well as its repression of dissent at home and in Hong Kong, suggest that Beijing places values on military and other coercive capabilities to meet some challenges to its goals. Yet when it comes to its pursuit of ambitious geopolitical goals, reliance on military capabilities has played almost no role. China’s immensely ambitious ‘Road and Belt Project’ is emblematic of its approach that is at once expansionist and pacific.

What was true in pre-Trump geopolitics has become more pronounced during the Trump presidency. Trump has deliberately disengaged from cooperative international arrangements, weakened alliance leadership, invested heavily in American military dominance, and worried leaders throughout the world by his unsteady, impulsive, and high-risk diplomatic style. At the same time, there is a certain Trumpist geopolitical realignment taking place due to the rise of right-wing leaders in many important countries throughout the world. As a result, while the world is more interconnected than ever before and can only solve problems associated with climate change, digital crime, migration, and management of nuclear weaponry by geopolitical coordination and cooperative solutions, it lacks the capacity to do so. In effect, the U.S. has substantially relinquished its global leadership role, while China, which alone would have the credibility to take over, has not attempted to do so, at least not yet. World order without geopolitical leadership, a weak UN, and beset by a series of fundamental challenges of global scope is in crisis. There is no obvious solution at present. Nayyar’s economistic master work does not attempt to address this dimension of Asian ascendancy, and what he does is itself a. most impressive achievement. At the same time, such a foreshortening of analysis may account for what struck me as an overly optimistic reading of the Asian future even before the Coronavirus shakedown of conventional wisdom. By his definitive portrayal of the Asian development story Nayyar plausibly projects a relative trouble-free future for Asia, reinforced by expectations of continued Western decline, but he excludes from consideration the negative impacts almost sure to be felt in Asia if climate change is not properly addressed or if a major war between China and the United States occurs without even alluding to the current woes arising from the COVID-19 outbreak, which were not on the horizon of anybody’s consciousness before the pandemic unfolded long after his authorial role ended more than a year ago. I wonder if Nayyar will stick with his confidently projected future in an updated edition as described in the book’s final paragraph: “There can be little doubt that, circa 2050, a century after the end of colonial rule, Asia will account for more than one-half of world income, and home to more than one-half the people on earth. It will thus have a political and economic significance that it would have been difficult to imagine fifty years ago..” [234] My simplistic commentary: maybe, maybe not. I disagree with the historical or Asian regional judgment that “[o]n the whole, there is more reason for optimism than pessimism.” [233] I wonder here whether Nayyar is making the reverse of the mistake he persuasively attributes to Myrdal in explaining why his dark vision of Asia’s future turned out to be so wrong.

In illuminating contrast, the Western international relations literature is not very much interested in Asian development per se as it is in sorting out the countries by whether they seem friends or enemies, and most of all whether the rise of China will produce a heightened rivalry with the United States, generating a second Cold War, and risking a hot war. Samuel Huntington in his controversial Clash of Civilizations and the Remaking of World Order (2011), shifted his inter-civilizational emphasis from Islam to China, in the course of predicting such a war fought to establish global supremacy. More recently Graham Allison has generated debate and concern about what he names as the ‘Thucydides Trap’ in his Destined For War: Can America and China Escape the Thucydides Trap (2017). Allison argues that war has occurred on 12 of 16 occasions since 1500 in situations where a geopolitical leader perceives being overtaken by a rival, which is what currently seems to be happening in the relations between China and the United States. In Allison’s strong words, “The defining question about global order in the coming decades will be: can China and the United States escape the ‘Thucydides trap’?”

Nayyar writes as an expert economist with a masterful control of his chosen subject-matter. In this sense, his statistical underpinning is that of an analytically skilled professional economic historian, interpreting trends on the basis of measurable indicators. He avoids the more qualitative assessments of the rise of China with respect to peace and security in Asia associated with what might be roughly called ‘political economy’ approaches to economic growth and its political consequences. In this regard, while celebrating what Deepak Nayyar has achieved in Resurgent Asia it is also important to retain an awareness of the limitations of this approach, and the need for more politically focused assessments to get the full picture of this extraordinary Asian story.

A haunting question is whether the disappointing record of the Asian-14 with respect to political and civil rights is in any way necessarily linked to the extraordinary achievements in economic and social rights. A complementary question could be posed in relation to the more market-oriented Western countries as to whether a better performance with regard to social and economic rights could be achieved without impinging upon political rights. In this regard, as in many others, the Scandinavian and north European countries stand out for their high degree of achievement across the entire spectrum of human rights. A further issue, somewhat outside the orbit of human rights, relates to stewardship of the environment, given the scientific consensus on the growing menace of climate change.

Since the publication of Asian Resurgence the world has become preoccupied with COVIS-19 pandemic in ways that cast a variety of shadows across the economic future of the world. It is too soon to assess the impact of this pandemic, although not too early to understand that the spread of deadly diseases strongly confirms the benefits of a cooperative world order, and the harms resulting from transactional approaches to international relations that conceive of gains and losses from pragmatic nationalist perspectives with no deference to global concerns, whether functional as in responding to climate change and the Coronavirus or normative as in dealing with refugee and migrant flows or prolonged strife and oppressive governance. Whether we learn that the politics of global solidarity is the politics of species survival remains unknown, but the failure to do so will sooner or later doom the project of modernity of which the Asian ascent was one of its most notable moments of triumph.

It is also not to early to conclude that the eruption of the pandemic caused far higher harm because of failures of preparation, crisis management, and governmental oversight, strongly

supporting approaching vulnerabilities to uncertainties by a much more robust adherence to the Precautionary Principle. Leading modern governments to devote major resources so as to be prepared for the onset of wars, but little else, creating dangerous societal and global vulnerabilities to systemic challenges to health, wellbeing, decency, and ecological balance.

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Richard Falk is a member of the TRANSCEND Network, an international relations scholar, professor emeritus of international law at Princeton University, Distinguished Research Fellow, Orfalea Center of Global Studies, UCSB, author, co-author or editor of 60 books, and a speaker and activist on world affairs. In 2008, the United Nations Human Rights Council (UNHRC) appointed Falk to two three-year terms as a United Nations Special Rapporteur on “the situation of human rights in the Palestinian territories occupied since 1967.” Since 2002 he has lived in Santa Barbara, California, and associated with the local campus of the University of California, and for several years chaired the Board of the Nuclear Age Peace Foundation. His most recent book is On Nuclear Weapons, Denuclearization, Demilitarization, and Disarmament (2019).

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