- The Washington Times - Tuesday, December 1, 2009

THE MIRACLE: THE EPIC STORY OF ASIA’S QUEST FOR WEALTH

By Michael Schuman

HarperBusiness, $29.99, 422 pages

The world is changing. The 20th century was the American Century. The 21st century is not likely to be the same. Although U.S. influence won’t disappear anytime soon, the balance of economic power is shifting from the West to the East. Economic wealth likely will bring commensurate political influence.

What caused the Asian economic “miracle”? In his new book, journalist Michael Schuman attempts to explain.



A miracle it certainly looks to be. Between 1965 and 2007, the per capita gross domestic product, in current U.S. dollars, rose 15,046 percent for South Korea, 7,291 percent for Taiwan, 5,913 percent for Singapore, 4,352 percent for Hong Kong and 4,133 percent for Japan.

Even the artificial and unstable state of Indonesia enjoyed a 2,257 percent increase over the same period. India has just started on the growth curve at 764 percent. China is at 2,260 percent and climbing.

The most obvious impact of such rapid economic growth is to improve people’s well-being. Mr. Schuman writes: “In 1981, East Asia had the highest poverty rate of any region in the world, with nearly 80 percent of its people living on an income of less than $1.25 a day. By 2005, the rate had fallen to only 18 percent.”

Money also brings power. Asia possesses the next two likely great powers and even superpowers: China and India. Combine the two most populous nations with two of the world’s largest economies, and political clout is sure to follow.

Already, Mr. Schuman argues, “the Miracle has given this continent more influence in world events than it has held for hundreds of years, perhaps all the way back to the fourteenth century, when the Mongol Khans reigned from Moscow to Baghdad to Guangzhou.” And this is just the beginning.

There is much that still could go wrong. Even China, seemingly destined for international greatness, remains a poor nation suffering serious economic, social and political tensions.

Still, the most realistic question would seem to be not whether, but when Asia comes to set the global agenda.

The bulk of “The Miracle” is devoted to people who helped turn Asia into an economic Weltmacht. Policies matter, but they are developed and implemented by people. Mr. Schuman reminds us that individuals play a key role in determining history.

Mr. Schuman highlights some businessmen, such as Akio Morita of Sony, but most of the subjects of what amount to chapter-long biographies are politicians: South Korea’s Park Chung-Hee, Singapore’s Lee Kuan Yew, China’s Deng Xiaoping, Indonesia’s Suharto.

It’s an interesting mix. One obvious conclusion is that democracy is not necessary for economic growth. Most of the politicians covered by Mr. Schuman were thugs to varying degrees. Suharto came to power stained with the blood of hundreds of thousands. Deng rose out of the bloody morass of Maoism. Park took power in a coup.

Equally obvious, however, is the role of capitalism in promoting democracy. Mr. Schuman notes: “Dictatorships may have launched the Miracle in most Asian nations, but almost everywhere, economic progress undermined their legitimacy and vibrant democracies have taken their place.”

Even in China, he adds, “the demands of a market-oriented economy have given the Chinese people far more freedom - over how they live, work and communicate - than they had during the harsh days under Mao.”

Another lesson is that Asia’s rise was a triumph of markets, though not necessarily laissez-faire economics. Officials rarely keep their hands out of the economy. Yet even interventionist governments generally allowed markets to work. Private property was respected, prices rose and fell. Moreover, export-oriented industries had to defeat foreign competition.

Moreover, though Mr. Schuman makes no final judgment on “the Asian Model,” he notes cases in which success required ignoring government authority, as when Mr. Morita challenged the economic plans of Japan’s MITI. When states routinely interfered economically in order to enrich favored interests, the results were particularly ugly, as in Indonesia. Indeed, bad policies helped set the stage for the 1997 Asian economic crisis that ravaged Indonesia and South Korea.

Mr. Schuman also reminds readers of a time when the United States looked to Asia for economic guidance: “The answer to America’s problems, some Asia experts determined, was to adopt the economic, political, and cultural norms of Japan. Many of those enamored with Japan thought the Asian nation had formed a more advanced society that was better adept at handling the challenges of the modern world than the United States and was well worth copying.” Then came the lengthy economic swoon from which Japan has yet to fully recover.

Some analysts now see the U.S.-China relationship as working only to Beijing’s advantage. Mr. Schuman, however, points to Haier Co. Ltd., a Chinese appliance manufacturer that has opened a factory in Kershaw County, S.C. “While jobs are being lost in one industry to Asia, jobs are being re-created in the same place by growing Asian companies in entirely different industries. Even companies controlled by the government of Communist China.”

The Asian miracle is likely to continue. Countries like Vietnam may become new economic “tigers.” China is still expanding, even though significant challenges remain. Nations elsewhere in the world have an opportunity to emulate the Asian model and create their own economic “miracles.”

The final lesson of Mr. Schuman’s book, however, is that good U.S. policies remain critical for the success of poor countries.

“As the story of Asia makes clear, the support for trade and foreign investment in Washington and American corporate boardrooms was an indispensable factor in making the Miracle happen. The United States has an important part to play in ensuring that the policies necessary to keep the Miracle alive remain firmly in place,” Mr. Schuman contends.

The onset of the global financial crisis makes it even more important to preserve an open international market. To retreat through autarchy and protectionism would be to surrender economically. In fact, the Haier investment suggests that America eventually may find the Chinese economic engine to be as important for the United States as the American economic engine has been for China.

• Doug Bandow is a senior fellow at the Cato Institute and a former special assistant to President Reagan. His books include “Foreign Follies: America’s New Global Empire” (Xulon Press).

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