issue 263 - January 1995
ILLUSTRATION BY TOM HUNT
Simply... Alchemy of a miracle
Spectacular rates of economic growth are spreading from the Four Tigers of Asia (Singapore, Taiwan, South Korea and Hong Kong) to their Asian neighbours, particularly Thailand and Malaysia. The chemistry of this economic success is a hotly debated topic. Some, like the IMF and World Bank, put it down to the magic of the market. Others point to a heavy government hand behind the emphasis on growth through exports. NI looks at the East Asian economic sorcery and finds the reasons for success are not easily separated from the costs of high-speed industrialization.
RIGGING THE TRADE GAME
‘Export at all costs!’ is the first commandment of Asia’s new miracle economies. Exports like Hyundai cars and Taiwanese electronics are subsidized from the public purse and often sold at low profit margins in order to gain ‘market share’ and the allegiance of foreign consumers. Undervalued currencies are another way in which Taiwan and the other ‘tiger’ economies have made sure their exports were cheap and imports too expensive for local consumers. Domestic economies are heavily protected. In South Korea, for instance, almost no-one drives a car that is not made in Korea. And the code for foreign investors is one of the strictest in the world.
Despite eulogies to the market by its partisans the Asian economic ‘miracle’ is the product of a highly interventionist state. The use of subsidies to underwrite otherwise uneconomic exports, the control of finance and foreign exchange, centralized economic planning and a large public sector (particularly in Taiwan) are typical of the ‘tiger’ economies. In its heyday the powerful Economic Planning Board in Seoul could make or break the large ‘Chaebol’ enterprises that dominate the Korean economy. Rather than reflections of pure market logic ‘tiger’ economics has achieved success by ‘getting the prices wrong’ – through the manipulation of credit and the supply of foreign exchange to achieve export growth.
Both Taiwan and South Korea underwent far-reaching land reforms in the 1950s. In South Korea it was to counter the appeal of the Communists; in Taiwan to break the power of the indigenous landed élite so that the mainland nationalist Chinese could take over. Land reform in both places boosted support for the government among small farmers. And, given the precarious economics of small-plot agriculture, a growing pool of cheap labour left the countryside for the cities and export-processing zones. The landlord class that stood as a block to industrial development in Latin America was eliminated early in East Asia.
Both Singapore and Hong Kong have had several key advantages. As city-states they have been able to control the migration of poor rural dwellers that has overwhelmed almost all other Third World cities. They have taken in workers in boom times and expelled them when they were no longer needed. Their location has also made these two bustling ports into centres of financial and communication services for their surrounding regions.
Three of the Four Tiger societies have not bothered much with the niceties of human rights - being particularly harsh on political opposition and workers organizing independent unions for better wages and working conditions. Singapore’s jails are home to some of the world’s longest-serving political prisoners. The Korean military massacred hundreds of protesters in the ancient city of Kwangju as recently as 1980. Only in Hong Kong has there been relative political tolerance, although no right to democratic government.
COLD WAR AIR
In the early period of their industrial take-off both Taiwan and South Korea, the cornerstones of US anti-Communist strategy in Asia, were recipients of lavish economic and military aid. In the 1950s this aid was equivalent to 95 per cent of Taiwan’s trade surplus. Between 1945 and 1978 South Korea got almost six billion dollars in US economic aid, almost as much as all of Africa. This aid helped build up the infrastructure of modern export economies.
Workers in the East Asian miracle economies work some of the longest hours in the world. Many in South Korea still work 10 or 12 hours a day with one of the highest rates of industrial accidents in the world. In Hong Kong just one week’s annual leave for industrial workers is common. With the exception of Hong Kong, organizing independent unions is difficult. In Taiwan and South Korea company unions have been the norm until very recently. In Singapore the very tight police surveillance on a small island makes democratic unionism an impossibility.
The environmental costs of boom times have been born by the ecosystems and citizens of Taiwan and South Korea. The Nakdong and Han rivers in Korea are both badly polluted with industrial waste. Chemical agriculture has poisoned land and water, particularly in densely populated Taiwan where cancer rates have doubled over the last 30 years. It is already the leading cause of death. Both Korea and Taiwan are committed to massive expansion of an already heavy reliance on nuclear power. Urban air quality is so bad in Taipei that motorcyclists commonly wear surgical masks.