Dragons in Distress: Asia's miracle economies in crisis
By Walden Bello and Stephanie Rosenfeld
Penguin, 1992. 346 pp.
Reviewed by Sean Healy
Few modern myths have been so pervasive, and yet so oppressive, as that of the "Asian tigers", the "newly industrialising countries" (NICs) of Hong Kong, South Korea, Taiwan and Singapore.
It's the standard justification of bodies such as the World Bank and the International Monetary Fund for "structural adjustment" programs — socially disastrous austerity plans — in countries from Argentina to Zimbabwe.
The line goes: Once upon a time there were four poor Asian countries who were sick of being poor. So, instead of fighting it, they turned and embraced the free market and it made them rich and they lived happily ever after.
Dragons in Distress debunks this myth by tackling it head on. The authors identify the real reasons for the Tigers' famous double digit growth figures.
First and foremost, they say, is cheap labour. For example, at the beginning of 1987 the hourly pay for male manufacturing workers in South Korea was 11% of that of their counterparts in the US, and 14% of Japanese workers in manufacturing industries. Women's wages in South Korea are half those of men. The average work week is 54 hours, and on average five workers are killed each day on the job.
The second reason is large-scale US aid, especially that given in the immediate postwar period. Taiwan received $1.5 billion from the US between 1951 and 1965, and South Korea $6 billion between 1945 and 1978. Korean and Taiwanese firms also benefited from large-scale contracts awarded them by the US as part of the Vietnam War; for South Korea this was worth $850 million. In return for acting as front-line fighters against communism the US agreed to turn a blind eye to their protectionism and allowed them favourable access to the US market.
Thirdly, large scale importing, initially at favourable rates, of Japanese components and technology proved decisive in the NICs' industrialisation, although it has also led to a massive dependence on, and huge trade deficits with, Japan.
A fourth reason was the particular system of economic management carried out by the technocratic elites, which the authors call "command capitalism", including use of all manner of subsidies, tariff barriers and preferential credit in pursuit of export-driven industrialisation.
The willingness of these states to sacrifice their own previously strong agricultural sectors is identified as the fifth reason. In Taiwan, for example, agriculture subsidised industry. Between 1951 and 1955 the net flow from agriculture accounted for 74% of capital formation, and from 1956 to 1960, 37.6%. In South Korea, in exchange for access to the US market for its industrial goods, US agricultural imports were allowed to destroy whole sectors of the food industry. From near self-sufficiency, South Korea has become the singe largest per capita foreign consumer of US foodstuffs.
The sixth reason is similar — a willingness to sacrifice the environment. An environmental catastrophe of monstrous proportions is developing in these countries. In Taiwan, for example, after 40 years of petrochemical pollution, the town of Hou Jin now has a river which is not only undrinkable but is flammable.
The final reason identified by Bello and Rosenfeld is that, at least until recently, the ruling class in these states has been able to coopt or repress opposition, whether from the urban working class, the peasantry or the environmental movement. Both South Korea and Taiwan experienced long periods of direct military rule, and Singapore is probably the most perfect one-party dictatorship in the world (between 1978 and 1989 there was only one strike).
The NICs have been used by the US and Japan as a ready source of super-profits: cheap, politically secure and out of sight. This leads to two questions: Is the NIC phenomenon replicable, and, if so, would you want to replicate it?
The first question seems to be answered by the increasingly aggressive and protectionist stance of the advanced capitalist countries, especially the US, Japan and Western Europe. The impact of this inter-imperialist rivalry can be seen in the Uruguay round of GATT, where even minor trade barriers erected by aspiring NICs to protect domestic industry are being battered down amidst furious threats of reprisals.
Of even more concern is the rapid fortification of the major northern economies, again the US, Japan and Europe. This closing of markets is having a major impact on the present NICs. Its impact on the other southern economies has been even more disastrous.
The second question is being answered presently by the majority of people in the Asian tigers themselves. South Korea since the resignation of dictator Chun Doo-Hwan in 1987 has experienced wave after wave of worker, student and peasant revolt against the imposed model of "development".
In Taiwan, even before the lifting of martial law in 1987, there was a massive environmental movement which, among other things, beat plans by the giant chemical company, Dupont, to build a titanium dioxide plant. In May 1989 the Taiwanese peasantry, formerly the major base for the regime, rioted for days outside the parliament in a show of anger which could be quelled only by an armed force of more than 20,000 riot police.
In Singapore, where political repression has as yet prevented such forces from emerging, 10,000-20,000 people vote with their feet each year by leaving the country permanently.
Not only is the NIC model non-transferable and undesirable; it is also transitory. All four tigers today face major structural crises which are already producing lowered growth rates and tighter profit margins.
The NICs are being squeezed. On one side, countries such as Indonesia and Thailand today play the role of cheap labour source in much the same way the NICs did 15 years ago, before industrialisation and militant working classes raised wage levels. On the other side, the imperialist nations show very little inclination to let the NICs join their exclusive club.
Capitalist economics seems to be conspiring against the NICs. Like the red queen in Alice in Wonderland, they are obliged to run harder and harder just to stay in the same place. To maintain their market share they need constantly to revolutionise their plant, and this requires huge amounts of capital, that is — debts to northern banks — and it requires technological transfer, which happens only, if it happens at all, on the north's terms.
The interpenetration of the NIC economies by the world market has only further enslaved them to the "international division of labour".
Instead of interdependence, the NICs have dependence. Samsung may export TVs and VCRs to all parts of the globe, but 85% of those TVs are imported from Japan. And the technology? That's all under patent to the Japanese Matsushita Corporation.
Dragons in Distress is a thorough and surprisingly readable settling of accounts with the NIC myth. It avoids the tendency of economic writings to ignore human beings and questions such as the impact of economic developments on the environment.
It is made engaging by Bello and Rosenfeld's obvious sympathy for the people who have suffered under "export-driven industrialisation" and their just as obvious anger at those who rigged the game in the first place.