Globalization and Explanations of the Asian Miracle and Debacle

A Research Paper

By

JERIC LAWRENCE M. MINA

2005-40533

Submitted To

Professor Rolando Talampas

In Partial Fulfillment of the Requirements in Area Studies 131

(Issues in the Asia-Pacific Region)

30 March 2009
Second Semester, AY 2008-2009
University of the Philippines Manila
 GLOBALIZATION

We begin by defining globalization. Globalization is a protean word, it is difficult to define.

Globalization means anything and everything for different people. Various powers (political
leaders, economists, social scientists, businessmen, etc.) have stakes in imposing their own
notions of globalization. As I would later argue, globalization is not a concept rooted in
empirical reality – it is ideological. As such it varies from place to place, time to time, culture to
culture.

Many people are bogged down by globalization’s vastness by trying to accommodate different
definitions and trying to find their common denominator. By doing so the word loses its
operational value and becomes vague; a friend of everyone is a friend of no one. Like
postmodernism, another problematic concept, the more you try to pin it down, the more it resists,
the more it defies essentialist efforts. We can all pretend to see the broad sketches of
globalization, but there is difficulty in elaborating the details or find something analytically
useful. There is something happening, but we can’t really describe it – it’s just something(s).
Globalization is not a homogenous or monolithic entity. It is a series of tendencies produced
through conscious human action. It is not a simple structural condition (Watson, 2006).

Still, Watson’s seeming proscription has not stopped people from offering their own
essentializing takes on globalization. Sometimes they were successful, getting quoted in many
books, but there are those who get quoted to be criticized. For Roland Robertson, globalization is
“the compression of the world and intensification of consciousness of the world as a whole”
(1992, p. 8). Lord Anthony Giddens, who gets the most quotes in my study, explains that
globalization is the “intensification of worldwide social relations which link distinct localities in
a way that local happenings are shaped by events occurring many miles away” (1990, p. 64).
David Harvey tells us that globalization is the “compression of our spatial and temporal worlds”
(1989, p. 240). Manuel Castells emphasizes the words interdependence, scale, scope and
simultaneity; a global economy is “an economy that works as a unit in real time on a planetary
basis” (Castells, 1994, in Coclanis & Doshi, 2000). Paul Krugman defines globalization as a
positive relationship between the rate of growth of global trade and global production (Krugman,

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1998, in Coclanis & Doshi, 2000). For the Organization for Economic Cooperation and
Development (OECD), globalization is “the geographic dispersion of industrial and service
activities (like research and development, financing, production and marketing) and the cross-
border networking of companies (like joint ventures and asset-sharing)” (Bannock, Baxter &
Davis, 1998, in Coclanis & Doshi, 2000). Thomas Friedman, one of globalization’s most famous
cheerleaders, believes that globalization comes into existence when everyone feels the pressures,
constraints, and opportunities attending the relative increase in importance of world trade, and
the “democratizations” of technology, finance and information (2000).

As what the preceding definitions (and millions more, if you care to plow into tomes of books
written on the subject in recent years) imply, globalization is about interconnectedness,
compression, intensification, breaking of barriers, homogeneity and resistance and change. Space
and time (a concept they probably took from Einstein) is crunched. With the crunch is the
intensification and widening of scope of economic, political, social and cultural processes. State
boundaries lose their power over elements crossing them at will. Though the elements are often
economic (goods, capital, labor), globalization has effects that are clearly more than economic.
Globalization is not a product but a process, a process that have different effects on different
people. For some, globalization means more opportunities for prosperity, for others,
globalization means more inequality, poverty and hopelessness. In globalization’s wake are
destroyed ideas, value, identities, practices and movements, and newer ones that are reborn in
their ashes (Eitzen & Baca Zinn, 2005).

The image we get from the definitions supplied is an image of our world today. Production is by
the global assembly line. Production follows a law that is similar to the second law of
thermodynamics: whereas heat will seek a colder place, production will seek a place that offers
less cost for the same product. Unless barriers are erected, both heat and production will flow in
and out. But heat and production differ in one important aspect: heat flows to level off the
temperature but production rarely moves to other countries to close income disparities. Nations
are locked in a “race to the bottom”. However, labor exploitation, whether of black slaves or
Bangladeshi women, is not new: it has always been the feature of civilization as far back as

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Sumer. In Marxist terms, civilization is made possible by surplus value that accretes to
civilization’s elites.

Corporations aim to be global, and global companies aim to decentralize. Companies outsource
production (corporate outsourcing) or services (business process outsourcing). Almost everyday,
companies are breaking apart or merging or developing strategic alliances. These speed up
product development and reduce cost. But if production is decentralized, wealth and power are
not. The result is that the workers are parted more from the money they produce.

Goods and services are now offered to the global market. Since time immemorial, civilizations
have traded with each other (other civilizations that comprise their “Known World”) but what
sets our time apart is that there are technologies that allow greater volumes of traffic at a faster
rate, wider coverage and decreasing cost. One is still to find McDonald’s in Darfur, but one can
be sure of a Coke in Laos as much as one could find it in London.

Globalization and a panoply of posts- (postmodernism, postindustrialization, postcolonialism…)

reflect the important changes in our society that can only be comprehended by comparing it with
the past. An important post-, post-Fordism (flexible capitalism) tells of the shift in contemporary
economics: changes in the processes of production (e.g. just-in-time, subcontracting,
outsourcing), exchange (e.g. rise of electronically-mediated global financial markets and capital
flows) and consumption (e.g. emphases on lifestyles, niche markets, consumption of experiences)
(Nonini, 2008). Post-Fordist may very well mean the end of Ford and the model of employment
security it established in the Developed World. Employers are reversing the World War II gains
in the United States; employees even in the West are powerless against downsizing,
rationalization, outsourcing or contractualization. What is good for General Motors is no longer
good for America. Labor unions and sympathetic governments have lost power against
corporations (Klein, 1999; Lee & Kuruvilla, 2001).

Though imperialist powers have nominally given their former colonies independence, many of
these states are still economically-dependent upon the US, Western Europe and Japan. Only a
few were able to break the iron bonds of colonization (at a heavy price) to become the economic

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stars that they are today. Though globalization has enriched Third World elites, their masses
continue to suffer from poverty that is undignified by their subservience to global corporations,
organizations and economic superpowers. One way by which poorer countries try to survive is
by sending their people abroad, migrating to where opportunities are the best. Globalization has
increasingly made this possible and acceptable. But as economic tensions rise even in the
Developed Countries, physical barriers against human traffic, which have always been there,
globalization or not, are reinforced, rendering the masses of Underdeveloping Countries unable
to take advantage of opportunities and vacuums which they fill in the Developed Countries.

Contemporary globalization is fueled by the ideology or neoliberalism or Washington Consensus.

This ideology dates back to the classical economists who argued that market forces would bring
prosperity, liberty and democracy if left alone by the government (laissez faire economics). In
terms of policy, neoliberals advocate privatization, deregulation, trade liberalization and the
dismantling of the welfare state. Neoliberalism informs the policy of organizations like the North
American Free Trade Act (NAFTA), the World Trade Organization and the International
Monetary Fund. This stance is assiduously advocated by the United States, claiming that its own
economy (which is flagging at the moment) succeeded because of its adoption of neoliberalism.
The sovereignty of the nation-state is diminished by globalization. Suprastate organizations
regulate transnational trade and international law. As an implication of adoption of neoliberalism,
states have become powerless against corporate decisions regarding outsourcing and capital
flows, even though these may be harmful to their citizens at the moment or in the long run.

Porous borders are not only to economic concerns like contraband goods, illegal migrants, sex
workers and sweatshops, but also to terrorism, environmental problems and diseases. Culture is
also another concept that rarely followed map contours, despite claims of national or local
culture. With globalization is the vanishing of national or local culture and its replacement by a
global culture. Unlike national culture, which gives a group their national consciousness and
identity, global culture is de-ethnicized and de-territorialized, existing outside the usual reference
of geography. Global culture is sustained by the media, advertisements and the entertainment
industry. Global culture is often equated with American-styled consumerism, mass media,

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products and language. National cultures are now on the defensive, with some wanting to turn
back time and live in a more pristine past, or adapting to new times.

Globalization has such complexity that it may be useful to plot its history. In many works,
globalization seems to be a linear process that leads to a “single”, borderless world. However,
history seems to be against this interpretation of globalization. In some cases, high globalization
was followed by a period of isolationism and global wars. There was no “single”, borderless
world that ended, though the quest resumed. Globalization, and many other concepts like
modernization and industrialization, was associated with the West. But in the definitions
supplied before, there was little, if any, reference to the West. Is globalization purely Western, or
does it have non-Western trajectories?

At the turn of the first millennium of the Common Era, the Islamic empire took the leading role
in integrating the economies of the Eastern empires of the Chinese, Southeast Asians and Indians,
the African kingdoms south of the Sahara, the Central Asian nomads, and the various European
polities. The process of globalization began, and has quickened ever since. From the sixteenth
century, as the Islamic empire and its successors waned, the role was taken over by the
Europeans, whose crusading (or colonizing) efforts later included America, the Pacific islands,
greater Black Africa and East Asia. This was the era of proto-globalization and mercantilism.
This later gave way to modern globalization, the period of industrial capitalism; the European
imperialists established the foundations of globalization that would endure from the 19th century
to today. The Great War in Europe, and the global economic depression that followed,
temporarily halted globalization. After the Second World War, which culminated decades of
isolationism and marked the retreat of European colonialism, the United States and its key allies
(which included a non-Western country – Japan), took the efforts to sustain and extend a new
global economy. The effort was heightened by the Cold War, as the First World countries of the
Free World struggled to maintain not just their position in their global economic system, but the
survival of the global economic system itself. More countries, all states in the Westphalian sense,
joined global economic and political institutions. Technological innovations, many of them made
possible by the war itself, laid down the foundations for the advances in transport and
communications. Transnational political and financial institutions were also established,

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reinforcing the interdependent consciousness and reality (Friedman, 2000; Hobson, 2007;
Hopkins, 2000 in Mallavarapu, 2007).

Generally, it is the outward-looking societies that attained power and commanded global
influence. The Islamic Empire was at its greatest when it was outward-looking and imperialistic;
in contrast, Europe was provincial, fragmented and inward-looking (a result of the collapse of the
Roman Empire at the hands of the “barbarians”). Parts of Europe nearly succumbed at Islamic
intrusions, which took Iberia and the Balkans from Christendom. Imperial complacency, hubris
and overreach afflicted all the great civilizations, including the Islamic one, so that when the
Europeans made great discoveries in the field of navigation, the Muslims were unable to keep up.
Like the Muslims, the Europeans were full of missionary zeal and greed: the Spanish crusaded
with the cross and went back with galleons full of gold; the British went in search of gold too
and brought governance to where they go. Inward-looking civilizations (the Mughals, the Qings,
and the Tokugawas) all over the world fell under European weapons and rhetoric. Those that
were able to survive and prosper were the countries that adapted to changing times and became
outward-looking themselves: Meiji Japan, and to a lesser extent, Thailand under Kings Mongkut
and Chulalongkorn. Globalization, as a great change, comes when sublime changes compel the
old, isolationist or limited system to become open. Globalization is often capped, and begun (or
restarted) by violent wars, social upheavals or catastrophes. Globalization is not as peaceful or
laidback as many think it is.

Given the short (and unjust rendering) history of globalization, it is apparent that it is not new
and not a wholly Western project. By being more than a Western project, globalization allows
for non-Western flows of capital, goods and culture. Globalization is not synonymous with
Westernization. By being an integral feature of civilization (trading not only goods but also
ideas), the dichotomous either/or question is deconstructed – there is no sense hating a part of
your existence (unless one wants to redefine existence or cease to be existing). People who
campaign “against globalization”, protesting in WTO ministerials or Davos Summits are actually
against certain aspects of contemporary globalization (neoliberalism) (Sen, 2004; Mallavarapu,
2007). Moreover, globalization does not have a fixed teleology – there’s no guessing as to where
globalization will head (Mallavarapu, 2007).

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 ECONOMIC GLOBALIZATION & NEOLIBERALISM

It is almost impossible to “decouple” globalization from another controversial word to which it

has become synonymous – capitalism. Karl Marx and Friedrich Engels (1848) viewed the
capitalism of their day with striking similarity to what we call globalization of today. There was
the destruction of national industries by industries that raw materials from even the remotest
regions of the world and market their products worldwide; new wants are satisfied by products
which may come from distant places. Local and national seclusion and self-sufficiency are
superseded by universal connections and the interdependence of nations. That Marx and Engels
formulated these things a full 160 years ago means that either they were the best clairvoyants in
the world, or were merely stating the obvious of all time.

It is not surprising that our notions of globalization become tied with capitalism. Capitalism is,
generally, an outward-looking process, and it would never be content to be in just one place. It
will continually search for other, less capitalismed areas. If true capitalism began in the Industrial
Age, it would all the more tie modern globalization with itself (I argue that modern globalization
began along with the imperialism of the industrializing countries).

Globalization resumed after the Second World War, with the United States as its champion. The
United States found that the lack of globalization, namely isolationism, was the reason why
countries like Japan and Germany would resort to war when they can’t what they want through
trade. Indeed, the war-or-trade thesis is supported by the United States intervention and invasion
of countries that refused to trade (or give in, since they have little to benefit from “free trade”
with the United States). The list is long and includes the Cold War’s proxy wars, the overthrow
of Chile’s Allende, and the CIA’s support for the Shah of Iran, and the US invasion of Iraq. All
of these were done to uphold the American way of life, which has come under threat from
alternative ones.

For a long time, the American way was primarily Keynesian. Keynesian economics was the
brainchild of John Maynard Keynes. Keynes’ claim to fame came during the Great Depression
when he offered an alternative to laissez faire or classical economics, which have been

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discredited. Free markets, he argued, do not necessarily maximize human well-being. It was up
to the state to do its work and correct the market (here he parted with the communists who did
not believe in markets). He believed that monetary policies could affect business confidence,
employment and the economy. Conservative Keynesians argued for the manipulation of interest
rates while radical ones added government spending to stimulate the economy. When capital is
scarce, saving is good; when unemployment rises, thrift is bad. The idea is for the government to
craft policies that would maintain full employment.

Keynesian economics gained currency in other countries as well. It was a good alternative, the
only one, for laissez faire or communism. Keynesianism became the mainstream, classical
economics went downstream. But classical economics did not really vanish, and was fought for
by a core group that had right-wing, but not conservative, ideas about individual freedom,
political democracy, self-regulating markets and entrepreneurship. Neoliberalism, the new
concept classical economics evolved to, developed in many centers of learning: the Austrian
School of Economics in Vienna, the London School of Economics, the Institute of Economic
Affairs, Centre for Policy Studies and Adam Smith Institute (all in London), Freiburg (Germany),
and the Hoover Institution at Stanford University and the Chicago School of Political Economy
(United States). Among its advocates are Friedrich von Hayek, Milton Friedman, George Stigler
and Robert Lucas.

The concept of neoliberalism is another difficult word. It is hard to theorize with the concept
because it has so many meanings both formally and in context. It has been referred to as an
ideology, hegemony, hegemonic project, doctrine, rhetoric, discourse, discursive formation, logic
of governance or governmentality (Nonini, 2008). It should be noted that neoliberalism is not
just economic. There is also political neoliberalism that is distinct and separate from the
economic one (which is the topic of this part of the paper). Economic neoliberals praise
Singapore for its commitment to open trade and economic transparency, but political neoliberals
attack the regime’s authoritarianism. In contrast to classical liberalism, economic neoliberalism
is not supportive of democracy because it potentially opens the door to rent-seeking groups and
allows for the tyranny of a majority of populist coalitions. Many neoliberals come down on the
side of liberalism without representative democracy enforced by what is, in effect, a techno-

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dictatorship of experts able to insulate the markets from politics (Robison & Hewison, 2005).
One should also not confuse neoliberalism with economics – neoliberalism and capitalism are
not the same. Neoliberalism is about governance in relation to capitalist markets, the individual
and the state. On the other hand, capitalism has to do with an assemblage of economic, technical,
legal and political arrangements centered on the wage-labor relation in the process of production
and appropriation of surplus value by owners of the means of production. A country can be
capitalist without becoming neoliberal (like the European social democratic states), but must be
capitalist to be said be neoliberal (Nonini, 2008).

In his book The Road to Serfdom (1956), the Austrian economist Friedrich von Hayek argued
that the growth of civilization comes from the freedom of its individual members to pursue their
own ends in the context of private property rights. Social institutions, like the market, function
best when derived from the voluntary contribution of free men. Market competition creates an
order that is the product of human action, but not human design. Government should be
democratic, with fixed limits on its command. Planned economic orders can only go so far
because they cannot handle complexity. Collectivist economic planning, even of the social
democratic kind, is never an option as it leads to totalitarianism, lost of initiative, misery and
disaster. However, it was not until 1974, when von Hayek was awarded the Nobel Prize, and
during the crisis of post-war Keynesianism, was neoliberalism recognized as a respectable
convention.

By the 1980s, neoliberalism had trumped what was previously a worldwide social democratic
and Keynesian development discourse. Global financial institutions, the informal arm of the
United States’ economic foreign policy, switched to neoliberalism (Peet, 2003). Keynesianism
and the welfare state were brought to their knees by the industrial development of the
Developing World and the lack of competitiveness of the industries in the Developed World.
When the turmoil in the Middle East resulted to OPEC-engineered price shocks in 1974, the
Developed World was thrown off balance, its manufactures’ prices soaring too. Fixed-currency
and financial regulations, hallmarks of a Keynesian state, repelled capital, and capital flew away
from countries where the cost of production has gone up. The moment has come for the

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Developing World, with their industries built up by years of Keynesianism and import-
substitution policies, to let go of their economically-damaging socialism and become neoliberals.

Economic neoliberalism has the following ideas: (1) markets are self-equilibrating in the long
run and that state intervention is deleterious if not perverse; (2) rational optimizing agents
discount interventionist strategies pursued by governments; (3) supply-side economic theory is
the best, supply creates its own demand (as opposed to demand-side Keynesianism); and (4)
public choice theory, politicians are analogs of market actors maximizing votes by providing
goods to constituents making democratic governments prone to inflation (Blyth, 2002, in Peet,
2003).

Neoliberalism has good assumptions. Development in the poor countries, brought about by the
adoption of neoliberal policies, is good. Much better is the revitalization of the North since
affluence would result to growing demand for products from the South. Both will be achieved by
greater capital mobility. States should all industrialize because it was “natural”; there is a need to
improve the agricultural base so that excess capital can be reinvested in industry and education
(to become better workers and entrepreneurs). Now, not all countries are as big as China and
India, which have the options to industrialize in a bewildering variety of sectors. Those that
cannot should not try but instead channel their efforts into the production of one or two
commodities that they have the “comparative advantage” (Miller, 1998).

Neoliberalism is/was being pursued by the “unholy trinity” of international organizations: the
International Monetary Fund, the International Bank for Reconstruction/the World Bank, and the
World Trade Organization (Peet, 2003). All of them are headquartered in the United States and
cooperate closely with Capitol Hill and Wall Street. Their single most important theme is, aside
from globalization, free trade. The three organizations use their powers support neoliberalism in
the form of stabilization (IMF), structural adjustment (World Bank) and trade liberalization
(WTO). They are all similar in that they are averse towards states controlling the markets. The
policies (are all similar, no matter where they are applied) are imposed as conditions for loans in
times of crisis, as qualifications for debt relief or as part of developmental assistance for
countries that are in need (though not always) of their help. International economic policy is

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made by the heads of the organizations on behalf of their member countries, the interests of the
multinational corporations as well as the international financial community (like the investment
banks), the government of the United States, and academics from rich and well-established
educational institutions. That way the partisan appeals of the US government and the financial
community are balanced by the scientific theory and expertise.

Since the “unholy trinity” is closely headquartered in Washington D.C., their policies have been
called the Washington Consensus (Peet, 2003; Robison & Hewison, 2005). The word
“Washington Consensus” was coined by John Williamson, a senior fellow at the Washington
D.C. institute for International Economics. He originally referred to the policy reforms imposed
on debtor countries in Latin America in the 1990s. The Washington Consensus has been called
“Neoliberal Manifesto” and “Washington Conspiracy” among others (Peet, 2003).

The Washington Consensus calls for fiscal discipline; large and sustained fiscal deficits are a
main source of macroeconomic dislocation in the forms of inflation, balance of payments decline
and capital flight. Public expenditures should be matched to the resources available. An
operational budget deficit in excess of 2% of the GNP is considered a policy failure. Reduction
of public expenditures is an imperative. Among the areas which are first to get their budgets
should be the defense/military, public administration and subsidies to state enterprises. What the
government saves must be reallocated to education, primary health care and public infrastructure.
Tax bases must be broadened and tax collection improved. Financial deregulation should be
pursued to make interest rates market-determined, discouraging capital flight and encouraging
saving. Exchange rates should be competitive or market-determined to make exports
competitively-priced, but not too much as to be inflationary (but there is only a thin thread
separating the two). Trade should be liberalized; no restrictions on imports and reductions in
tariffs. All enterprises should be subject to competition and any state enterprise should be
privatized. Foreign investment is encouraged since investment brings needed capital, skills and
know-how. One way to make an indebted country attractive to foreign investors is to swap its
debt for equity in privatized state enterprises. Property rights should be secured. And most of all,
the welfare state must be dismantled (Gough, 2001).

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When people rally around WTO ministerials, what they really against is not globalization as a
whole but what the WTO stands for: neoliberal aspects of contemporary globalization. For
champions of neoliberal globalization, trade is the outcome of the natural propensity to exchange.
Mobile factors of production are empowered to take advantage of profit opportunities in other
areas. Policy makers who restrict factor mobility in the interests of social policy and welfare
rights are disadvantaged. Not only businesses must be competitive – so do states (make business-
friendly economies to stay in “control”) and individuals (be competitively skilled and “priced” to
get into and stay in job). This competitiveness concept has wrought a lot of disastrous change on
societies that have long been centered on the community and mutual cooperation. Constraints in
the way of purely self-interested actions are eroded in the name of utility maximization; moral
sanctions against individual acquisitiveness are weakened. Neoliberal globalization, despite of
the claims of its more optimistic cheerleaders, is not really democratic – it involves the
delegation of policy-making responsibilities (hence power) by elected officials to non-elected
technocrats and “experts”. Marketing and advertising make consumption unreflexive or routine
(Watson, 2005). Who among us care if our clothes were made by underpaid ten-year olds
trapped in an ill-ventilated factory in Vietnam? What is privileged in our neoliberal world is the
happiness found in consumption (everyone on advertisements find a way to smile and make the
viewer smile too); what are lost are the efforts that were put into the creation of the product. In
fact, the more the effort is made seen, the more it becomes conscious of the welfare of the people
behind it, the more the product costs!

It is quite easy for people to attack neoliberalism because of its privileging of the business,
especially big business, sector. Neoliberalism, touted as a way to get out of the gutters of the
global economy, actually deepens it. The export of primary products (from poor countries) in
return for processed and manufactured goods (from the industrialized ones) that they are
proscribed to produce is self-perpetuating; states that export primary products can never export
enough to pay for what they import, exporting ever more and more for less and less. Dependence
renders the economy vulnerable to the vagaries of the world market. Synthetics and other
substitutes for primary products wealthier countries import from the South lessen the demand for
the latter’s exports. As wages in the North rise, along with the increase in price, the imported
goods become costlier for the poor countries. To adapt to the reduction of their purchasing power,

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the poor countries fall into the inflationary path, raising their exports to redress the imbalance.
But with several other countries offering the same product or service, and more willing to (or
have a government that is better at forcing people to) suffer poverty in return for more exports, it
is just impossible. Dependency does not only stop at industrial products – as the people of the
Developing World are drawn into cities and urban occupations (serving the foreigners), the less
are those who remain living on agriculture. The countries make up for this by importing food,
which is subsidized and mechanized in the Developed World. Inviting foreign companies to
one’s shores rarely leads to getting their technology. Furthermore, what little knowledge,
creativity or technology poor countries have in the form of human capital are sucked into the
wealthier ones, resulting to a brain drain (Miller, 1998).

Not only are laypeople throwing stones on the “unholy trinity” but its former supporters too. The
Washington Consensus has turned into a Washington Confusion. However, the most vocal ones
do not directly attack the IMF-WB-WTO triumvirate and call for its dissolution – they just want
it to change. They interpreted the crises as the failure of the states to adopt the Washington
Consensus or sequence them correctly, wrong prescriptions that led states to open their
economies prematurely (this one is supported by Joseph Stiglitz, former chief economist of the
World Bank), and that the IMF and its political masters were inconsistent in giving bail-outs in
the past and then adopting a no-bail stance (Peet, 2003).

The neoliberal order is still full of questions (like the resurgence of left-wing governments in
Latin America). Symptomatic of the capitalist order, which is the more universal one, is the
presence of inequality and crises that are getting increasingly global in scope: the
‘marginalization’ of Africa, the ‘turmoil’ in the Middle East, the ‘lost decade’ of development in
Latin America, ‘transition’ in Russia and Eastern Europe, the ‘crisis’ in Asia and ‘meltdown’ in
America. The last one may be a watershed event in neoliberalism’s poor record: either it finds
itself thrown back to the dustbin of history, or prove to everyone that “there is no other
alternative” – TINA.

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 THE ASIAN MIRACLES

It is a cliché to say that Asia is one of the most important regions of the global economy today.
Asia, a region dismissed by the West after the Second World War, rose to prominence in so short
a time (considering that the West took centuries to become what they are now, but countries like
Japan, South Korea, Taiwan and Singapore took around just a lifetime), while the promise for the
West, Latin America, continued to lag. What has happened in Asia, despite being reversed 10
years earlier, and in a shaky position today because of a global crisis, is one of the most
important periods in global history and economics.

Asian economic development began in Japan immediately after the Second World War. At the
outset, the Asian “tigers” pursued rapid economic development by integrating their economies in
the global economy. For the most part, the West aided the tigers, but had little power to restrain
them if they chose developmental paths that were clearly against Western liberal economic
models (Robison & Hewison, 2005).

Asia’s spectacular economic growth took just a lifetime. Japan became a world leader just 20
years after it was reduced to destitution by its defeat in the Second World War. Trailing behind
Japan were South Korea, a nation wracked by a civil war 10 years earlier, and Taiwan, which
was a backwater region in China when the Guomindang retreated to it in 1949. Singapore was
another unlikely candidate, possessing no natural resources, having a diverse population ripe for
regional ethnic violence, and grieving for its expulsion from its brief union with Malaysia.
Southeast Asia as a whole was a simmering brew of ethnicities and tribes, of which China-aided
communist insurgents were to add to. It came as a shock to the West to see Malaysia, Thailand,
Indonesia and, yes, the Philippines, pulling off and surpassing many other Third World countries,
including China and India. To the haughty West, Asia’s economic growth was nothing less than
a miracle; they did not expect nor counted on it, believing that Asia would forever be consigned
to a subservient role serving the West’s economic interests. A greater shock was to come later
when China and India switched to full gear and pulled a significant percentage of their masses (a
considerable fourth of the world population) out of abject poverty, at a much shorter time span.

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The West tried to make sense of Asia’s growth, academics and scholars scrambling for theories
that will explain Asia’s economic miracle (which was also called the Asian Century, the Pacific
Century, the Golden Age of Asia and the Asian Ascent). However, as what Chalmers Johnson
observed, “Modern East Asia [he probably meant Southeast Asia too] is a junkyard for Western
theories of economic development and modernization” (1989).

Marxism floundered in Asia. Marx’s linear progression (primitive communism to slave society,
feudalism to capitalism, then socialism to communism) is irrelevant to Asia’s classical history.
The rate of capitalist profit has not dropped in Asia or elsewhere, invalidating the basic premise
of Marxism. Extraction of surplus value in labor-intensive industries resulted in growing equality
between classes in most of Asia, not alienation or polarization. The expansion of state capitalism
resulted in more wealth for the poor, not ‘immiseration’. Collaboration between the state and
capitalists reduced the periodic crises which Marx described as inevitable and increasingly
severe (though they did happen, and did so with great misery). Furthermore, Asia’s industrial
proletariat failed to provide leadership for a socialist revolution; most of the reforms in Asia
were carried out by leaders from the bourgeoisie or aristocracy (Lee Kuan Yew of Singapore,
Park Chung-hee of South Korea, Chiang Kai-shek of Taiwan, colonial officers in Hong Kong,
kings and sultans in Thailand and Malaysia, Chou En-lai and Deng Xiaoping in China) (McCord,
1991).

Weberian theories did not fare any better. In his book The Religion of China, Max Weber argued
that Confucianism blocked the development of capitalism in Asia. Confucian values failed to
provide the motivation for capitalistic endeavors. Confucian disdain for the merchant, dislike for
formal law, and its belief that the “cultured man is not a tool” hindered economic development.
However, only in Mainland China, where capitalism was actively suppressed, did the Chinese
failed to culture capitalism (furthermore, the Maoist revolution also suppressed Confucianist
elements in their culture). Other Confucian societies and Chinese segments of Indonesia,
Malaysia, Thailand and the Philippines pioneered economic development. Later authors
attributed the fortunes of these Chinese in Confucianism, turning around Weber’s theory
(McCord, 1991).

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Though it can be said that the common denominator of Asia’s leading countries, in terms of
economy, is Confucianism, Confucianism or folk cultures can only be given modest credit. Other
societies, like the Protestants, the Sikhs and the Jews, also prospered but without the influence of
Confucianism. Confucianism is not a monolithic religion; like Christianity it has its sects and it
varies from country to country, class to class.

Dependency and world systems theories also encountered difficulties in explaining Asian
developments. In different ways, these theories posited that “Third World” poverty was caused
by exploitation by the “First World” or core countries. Capitalist powers consigned the rest of the
world to the periphery, whose labor and resources were used to increase the wealth of the core.
The only escape for the peripheral nations was self-sufficient industrialization or a socialist
revolution that would cut off all ties to the capitalist world. These theories could not adequately
explain Japan’s move to the core: Japan did the obverse of these theorists’ recommendations by
adopting outward-looking policies and engaging in trade (McCord, 1991). In Asia, those that
tried self-sufficient industrialization or socialist revolution ended up destroying their countries,
the most grotesque of was Cambodia under the Khmer Rouge and North Korea under the Kim’s
Juche ideology.

Neoliberal theories praising free market capitalism and laissez faire policies also failed. State
interventionism was decisive in the economic development of Japan (the MITI), Taiwan (crucial
state-owned corporations), Singapore (the Central Provident Fund) and elsewhere. However,
where they intervened, the goal was capitalist and not socialist – they promoted the accumulation
of private capital, attracted foreign capital, built export industries, curbed trade unions, provided
basic infrastructure, and cultured their human capital through education and health care.

Asian governments also initiated a series of policies that encouraged entrepreneurial talent. In
Japan, the MITI encouraged and protected the big export industries. In Singapore, the PAP
government provided incentives for exporters. Taiwan and Korea tried to balance protection of
native industries, and competition. Malaysia, in a highly controversial move, increased the share
of ethnic Malays in the Malaysian economy (bumiputra policy). China, under Deng, gave
incentives to peasants who established highly successful rural industries. Entrepreneurship was

MINA 17
also sparked by population migration to urban regions, the disintegration of ruling classes
(caused by decolonization or the Japanese invasion) and atomization of the economic oligarchies
backed by the colonial power (McCord, 1991).

Asia’s economic miracle was later attributed to its strong, developmental states. A
developmental state is similar to a socialist country in that the government is active in shaping
economic progress, influencing decisions made even by the private sector. However, the
developmental state did not pull all the strings in the economy – much of it was done by the
private sector, though with their bidding. At varying costs, the private sector can disobey (but
they are more likely not to) but in doing so they lose the developmental state’s patronage.
Centralized industrial policies were instituted everywhere with the exception of Hong Kong. The
developmental state is also different because it was oriented towards trade; the developmental
state pursued policies that will make its exports competitive in the world market. Shutting its
doors may very well mean shutting down a developmental state’s economy.

All of the Asian miracle economies also exhibited high rates of savings and investment. There
was foreign capital, but for foreign-capital-resistant Japan and South Korea, what boosted their
domestic economies were domestic capital and credit creation. Japan’s banks, once the world’s
largest, were the fuel of its economic motor. Asians have the propensity to save and save,
trusting the financial sector their individual and family futures, to the benefit of the big
companies they worked for (Scott, 2003).

The government invested heavily in the education and health of its people. Education, at least in
Confucian societies, has been traditionally stressed as a means for social advancement and
protection (good iron is not turned to nails). In Japan and South Korea, the failure to get into a
prestigious university was a source of family shame and gave rise to the stereotype that Japanese
and Korean schoolchildren literally die for university slots. The same was true for China,
although the reason differed because in China, education was a means to escape the poverty of
the countryside and join the ranks of the country’s cadres. Improvement in the education of the
people made them better users of technology, adding to their product’s value and their wages.

MINA 18
It was also accompanied by budget cuts in the military. Japan had its peace constitution which
effectively limited the size and scope of its Jieitai or Self-Defense Force. Under General Park
Chung-hee, South Korea began to reduce its military budgets. Essential to their reduction of
military expenditures is the United States’ explicit guarantee of military assistance should they
be invaded, especially if it is one of their hostile, communist neighbors. Though not a US ally,
China too is cutting on its military expenses, but on a proportional basis; although the People’s
Liberation Army’s share of the state budget is diminishing, the actual amount given to it is
increasing as China’s budget is increasing too (Overholt, 2005). US military assistance, however,
was purely defensive. This suggests that the countries have lost the will to fight offensive wars to
conquer lands (like what Japan did) or reunify their divided nations (like the Koreans on both
sides of the 38th Parallel and the Chinese in both sides of the Taiwan Strait).

Unlike many parts of Latin America, many Asian states did not have to contend with entrenched
and feudal elites. Determination and power made land reform possible and successful. Unlike
many parts of Latin America, Asian states did not have to contend with entrenched, feudal elite.
Determination and power made land reform possible and successful in most Asian states (the
Philippines being the most notable exception, but feudal landowners still exist in affluent
Malaysia and Thailand, which had land surpluses). Unlike Africa, there was no tradition of tribal
land ownership; communal tradition often hampers initiative and innovation (McCord, 1991).

There was a lack of industrial labor movements in Japan, Taiwan, South Korea, Hong Kong and
Singapore. With weak or co-opted trade unions, there was little fear of workers demanding for
unrealistic wages, especially since labor-intensive industries were the engines of economic
growth. The immediate human costs were great, but they paid off as the country’s economic
condition improved. However, labor exploitation has been the perennial characteristic of Asia,
and elsewhere (McCord, 1991). This is still a contested issue today – to what extent should
workers fight for their rights and keep their jobs? As mentioned before, neoliberalism renders
states inutile in delivering promises of employment for everyone – expanding the state’s payroll
is foolish, but forcing the private sector, especially the international ones, is tantamount to
twisting international conventions too much.

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However, one should be wary of generalizing the Asian economic miracle and trying to find a
single “East Asian Development Model” because there is none. Each state had its own way,
drawing inspiration from other before it, but adapting it to their local conditions. If everyone
followed the same paths, it would still have resulted differently because not all of them had the
same resources, same amount of land, same technical expertise, etc. If by some way they were all
similar, they must have responded to the same crises similarly. However, as what the Asian
Financial Crisis revealed, they all have great differences; South Korea was devastated but
Taiwan, its closest counterpart and cohort, emerged unscathed. Japan had its keiretsus revolving
around the conglomerate’s huge banks, Korea had its chaebols dependent on government
patronage and funds, and Taiwan had its small family businesses dependent on each other’s
capital. When the economic typhoon came, Japan and Korea’s big houses were blown down but
Taiwan’s slender bamboo-like companies bended and grew respectably.

Other explanations have appeared, claiming to be correct in their interpretations of the Asian
economic miracle. The greatest irony is neoliberalism. Neoliberals advocated that the economic
success of Japan, the NICs (South Korea, Taiwan, Hong Kong and Singapore) and the ASEAN-3
(Indonesia, Malaysia and Thailand) was because their governments allowed comparative
advantage in international trade to direct the allocation of productive resources. The governments
created stable, non-inflationary and open economic environments that encouraged domestic
firms to take advantage of low labor costs and engage in labor-intensive, export-oriented
industries. Exports were pursued because of low domestic demand and to immediately realize
profits. As productivity rose faster than real wages, East Asian countries were able to secure
rapid increases in output and employment without threatening their low labor costs and export
competitiveness. The government continued to abide by its commitment to loose restrictions on
export-oriented capital, privileging exportation and negatively discouraging production for the
local market. This attracted foreign direct investment further enhancing the country’s position in
exporting as market imperfections that hinder technology, finance and distribution are sorted out.
Threats to the Asian economic miracle is the protectionism of the countries where their exports
go to and the emergence of other economies that offer lower wages. To remain in position, the
Asian NICs and ASEAN-3 must upgrade their human capital without running budget deficits or
applying burdensome taxes; budget deficits cause inflation and taxes scare foreign capital away.

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Truly concerned with the economy only (divorcing economics from greater human goals like
freedom of choice and happiness, and making it a goal in itself), they reject a democracy as it
will lead to the empowerment of interest groups that would surely demand for anti-neoliberal
measures like employment security and social welfare (Burkett & Hart-Landsberg, 2000).

A more acceptable explanation was structuralism-institutionalism. State intervention, in the form

of investment and export subsidies, protection of infant or sunrise industries, government control
over credit, strategic planning of industries, and others, was given more credit. Though
technology is a key factor for achieving competitiveness for structural-institutionalists, similar to
the neoliberals, the former gives confidence to import-substitution as a complement to exports. A
strong, developmental state is required to carry out the plans, and organizations and institutions
(US government, the “unholy trinity”) getting in the way of the developmental state’s autonomy
are serious threats. A strong developmental state is also unlikely to embrace democracy as an
empowered opposition will frustrate the majority party. The developmental state is wary of
TNCs, unlike the neoliberal one; TNCs do not necessarily clear market imperfections and are not
averse in manipulating them to monopolize the local market (Burkett & Hart-Landsberg, 2000).

An assessment of the neoliberal and structural-institutional positions reveal that they are both
technocratic. Administration becomes more of a science than an art; societal problems and
political conflicts become management problems. Democracy becomes subservient to the
economic goals of the developmental state, and a means to enhance the legitimacy of the pilots
of the government. In Marxist terms, the developmental or neoliberal state was successful in
extracting surplus value from the workers and reinvested them for greater exploitation and
accumulation of wealth. A strong state subdues class struggles, creating the stable environment
that production needs. As more and more countries became successful with capitalism,
particularly this type of export-led capitalism, they tried killing each other by dumping the
market with their ever-competitive products (Burkett & Hart-Landsberg, 2000).

Other approaches to the Asian economic miracle include the flying geese model, the Greater
China approach, and dependency approaches. The flying geese model was formulated in the
1930s by the Japanese economist Akamatsu Kaname. He drew three sub-patterns from the main

MINA 21
flying geese industrialization scheme: (1) from import to domestic production, then exports; (2)
from consumer to capital goods (simple to complex products); and (3) from advanced nations to
less advanced ones. Akamatsu, of course, identifies Japan as the lead goose, though he also
admitted that other geese can take the lead and disrupt the flight of the group. Japan was to break
wind resistance that symbolizes the barriers to technological progress. By being the lead goose,
Japan streamlines the wind flow, representing investment flows, to its flock members. The flying
goose model best illustrates Japanese investment flows and the scrap-and-build technique of
Japanese industries. The scrap-and-build technique involves the relocation of old industries to
other countries, depending on their rung on the technology hierarchy, at the expense of Japanese
labor. This had the unfortunate result that Japan’s domestic industries were hollowed out and
was replaced by high technology industries or non-productive speculation (Burkett & Hart-
Landsberg, 2000).

The Greater China approach sees the People’s Republic of China and significant expatriate
concentrations of Chinese businessmen in Taiwan, Hong Kong and Southeast Asia as the main
organizer and anchor of regional progress, especially after the 1978 reforms. Chinese-led
enterprises helped promote the industrialization of the ASEAN-3, and the PRC has become the
main export destination for these countries. Greater China analyses place more emphasis on the
development impulses and regional economic autonomy generated by the PRC’s state-directed
economy (Burkett & Hart-Landsberg, 2000).

Greater China proponents argue that Japan’s lead goose position as derived from US support as
much as its own strength. Greater China proponents argue that the leading economic powers in
Asia today should be the US, Japan and a reemergent China. Greater China treats interregional
inequalities, corruption, inflation, unemployment, social polarization and environmental
destruction as manageable side-effects of economic dynamism in China. What really worries
them is a potential clash with Japan who would not give up its position; the US is the moderator
between the conflicting parties (Burkett & Hart-Landsberg, 2000).

The Greater China approach underestimates the presence of Japanese capital compared to
Chinese trade and investment flows. It also exaggerates the industrial planning capabilities of the

MINA 22
Chinese state and structural stability of the PRC political economy. The reality is that the
dynamic sectors and regions of the Chinese economy are practically outside government
planning and state enterprise. The synergy of foreign capital and technology with low-cost
domestic labor and expanding domestic upper-class markets are furthering China’s conversion
from an autonomous developmental state into a dependent capitalist state operating as a junior
partner with foreign corporations in exploiting Chinese labor (Burkett & Hart-Landsberg, 2000).

Dependency analyses find that there are differences between the NICs and the ASEAN-3
countries; the NICs have import-substitution bases whereas the ASEAN-3s did not. The NICs
had successful national industrialization programs, but the ASEAN-3 countries depend upon
Japanese capital. Dependency analyses for Asia are dark: because countries are dependent upon
capital inflows, and policies to maintain them (low wages, taxes, government intervention in
monetary concerns) are harmful to the future of research & development education and other
projects to improve local production to higher value-added ones, they can not adapt to new
entrants like Vietnam and China. The looming crisis is compounded by the fact that exports are
not that diversified and that countries tend to specialize in the same type of export, leading to
overproduction that is harmful to all. To increase foreign exchange earnings, Asian governments
enforce policies that allow for the exploitation of women and children, repress the labor unions,
and plunder the environment (Burkett & Hart-Landsberg, 2000).

MINA 23
 THE ASIAN DEBACLES

The Asian Financial Crisis of 1997-98 was to become an important event in Asian economic
history, one that was to end an era of the developmental state. This was to begin in Southeast
Asia, a region that was to begin in the 1970s when multinational companies came to the region,
initiating changes in transportation, communication and production. Southeast Asia, long the
backward provider of raw materials, joined the ranks of countries like South Korea and Taiwan
on the road towards economic development through global economic integration. Southeast Asia
increasingly curried the favor of the United States, appealing to it by being the bulwark of
“democracy” and capitalism against the threats of communism. Indian and Latin American
developmental models were discarded in favor of one that is clearly geared towards exportation.
The rapid economic growth that began with Japan, and then the four tiger economies (South
Korea, Taiwan, Hong Kong and Singapore), has spread to the next-tier newly-industrializing
countries (Indonesia, Malaysia and Thailand), and finally Vietnam and the Philippines (World
Bank, 1993; Blomqvist, 1997; Tan, 1999).

The main catalyst of this growth were rarely the “indigenous” citizens of Southeast Asia but its
30 million-strong Chinese population who control companies and capital in ways that is
disproportionate to their numbers (Backman & Butler, 2004). The ethnic Chinese in Southeast
Asia are the intermediaries of commerce and finances (Yeung, 2000). Though ethnically
different, the Chinese of Southeast Asia have adopted Southeast Asian countries as their home
countries. The ethnic Chinese had a love-hate relationship with Southeast Asians; they are least
embedded in the societies of Indonesia and Malaysia. In Thailand and the Philippines, they were
accepted and had little trouble in dealing with the local people and officials.

Fast forward to the events leading to 1997. Because of Asia’s NICs and ASEAN+3’s remarkable
economic performance in the late 1980s and early 1990s, they attracted large flows of capital. An
investment boom financed by banks followed. However, like the Japanese bubble burst before it,
credit-fueled investments were concentrated in areas that had highly volatile returns and
substantial existing capacity, namely, stocks and real estate. The banks were inefficient at best,
and corrupt at worst. Huge amounts of assets were trapped in non-performing loans, and the

MINA 24
banks kept on lending, thinking that in an eventuality of failure, the developmental state would
come to its aid and bail it out (Jong).

While this was happening, another financial mess was being laid down in Southeast Asia. As the
Japanese yen began its rapid appreciation against other currencies, particularly the U.S. dollar
(following the 1985 Plaza Accord), the relative costs of production rose in Japan. The Japanese
goose took flight and shifted production to Korea and Taiwan. To counteract the effects of
outward FDI hemorrhage to the domestic economy, the Japanese government, essentially,
printed more money to expand the money supply. Giant asset bubbles formed in Japan as more
and more of it yen outflowed into Korea and Taiwan. By the late 1980s, these two countries
came under similar pressures as a result of the appreciation of the Korean won and the Taiwanese
dollar. To combat these pressures so as to maintain the exchange value of their currencies in
terms of the U.S. dollar, they copied the Japanese response. The destination of the capital
outflows now are the countries of Southeast Asia, primarily Thailand and Indonesia (Jong).

In the mid-1990s the US dollar began to appreciate against other currencies, and in a complicated
series of mathematics, led Southeast Asian countries to run increasing current account deficits. In
order to maintain the exchange value of their currencies and export competitiveness, Southeast
Asian countries depleted all their foreign exchange reserves (Jong). Southeast Asia did not have
the option of outflowing capital somewhere else and so had to sustain the damage. The last thing
Southeast Asia needed for the Asian Financial Crisis to happen was a stampede of investors. As
the investors panicked out of Asia, they pressured the banks to release money, and the banks
tried in vain to squeeze whatever they could from the borrowers. But the borrowers were unable
to pay, as their assets were trapped in illiquid form. Inflation spiraled, other industries buckled up
from the drain of investors and the increasing costs of input and decreasing competitiveness of
the output. The economies of Indonesia, Thailand and South Korea teetered towards collapse.

The Asian Financial Crisis was to become a grim chapter in the economic history of Asia. In less
than a year, a month, or probably a day, Southeast Asia’s hard-won economic progress have
come to ashes. Riots sparked in many places in Southeast Asia as people demanded for
government help amidst the mass unemployment and inflation. When the government failed to

MINA 25
deliver, the people took their fates into their hands. Family suicides occurred in waves in South
Korea. Indonesians looted malls, and in one instance, a looted mall burned down, killing
hundreds (Klein, 2007).

Like in the Asian economic miracle, academics scrambled for Asia’s quick reversal from being a
showcase to a basket case. They all failed because they missed the point that Asia is not a
homogenous region. Neoliberals, who have just tried to claim the Asian economic miracle,
rejected it, calling the Crisis as the victory of neoliberal orthodoxy. Thailand, Indonesia and
South Korea swallowed the bitter pills of the IMF while Malaysia’s Prime Minister Datuk Seri
Mahatir Mohammad verbally attacked the West for its attempt to recolonize the East, this time
through currency trading and speculation. In Singapore, the PAP leadership has distanced itself
from other Asian economies and deconstructed the “Asian miracle” in an effort to save their
waning legitimacy. The PAP leadership naturalized the processes of economic globalization, and
its adverse effects on economies with weak and corrupt states, with the implicit conclusion that
Singapore still needs the PAP, incorruptible as it seems, to guide the economy (Yeung, 2000).

The Crisis was especially hard on the Chinese. The Asian Financial Crisis has exposed the
structural weakness of Asian economies. Especially in Southeast Asia, Chinese capitalists are
often accused of their rent-seeking behavior, creating politico-economic alliances with the ruling
elite. Yoshihara Kunio (1988) calls this ‘ersatz capitalism’. With the Chinese compradors and
their political allies diminished, popular calls for democracy and more competition (breaking of
monopolies and revoking special privileges to the Chinese and other groups) gained headway.

Economic reforms in post-Crisis Southeast Asia resulted in the loss of monopolistic positions for
the Chinese, the collapse of politico-economic alliances, and the liberalization of home markets.
Washington-based IMF conditionalities destroyed the wealth and corporations of many Chinese
entrepreneurs in Southeast Asia. The loss of patrons in the persons of Anwar Ibrahim (Malaysia)
and the Suharto family (in Indonesia) meant political demise. They were taken over by other
Chinese who had political patrons that survived the crisis. Yet, like in Malaysia, surviving
Chinese entrepreneurs were forced to bail out ailing companies that belonged to the ethnic
Malays (bumiputra). Although excessive liberalization of foreign short-term loans was among

MINA 26
the factors that caused the Asian Financial Crisis, many sectors of Asian economies were highly
regulated and remained protected from foreign competition. Liberalization has made life harder
for the Chinese business communities, who must get competitive to remain in business.

Because of the Asian Financial Crisis of 1997-98 currency values collapsed, generating higher
import prices and internal price changes, including falling asset values. Output, employment and
consumption also fell. Falling asset values affected the rich and poor alike with the effect of
wiping out the middle class. State revenues were reduced. With little social security and abject
poverty setting in, cries of erosion of the social fabric were heard (Gough, 2001).

The impact of the Asian Financial Crisis on Korea was severe. Labor demand and real wages fell,
with women hardest hit. As Korea was an advanced industrial economy, it had less rural
resources to fall back on. After the Asian Financial Crisis, the Korean welfare state expanded
(Gough, 2001). Korea’s chaebols also took a beating, some of them dying in the process (Hundt,
2005).

The impact on the Philippines was less, partly because the Philippines least benefited from the
preceding boom. Also, the Philippines depended much on its expatriate labor, which were not
working in crisis-affected areas, their remittances cushioning the effect of the crisis. Malaysia
was also less affected, but only because it offloaded the impact onto immigrant workers. Labor
migration reduced the impact of the crisis on these states and forestalled any significant policy
innovation (Gough, 2001).

Thailand and Indonesia, hardest hit by the crisis, had rural hinterlands that absorbed and
prospered in the crisis. Extensive shareholder agriculture helped displaced urban laborers with
peasant families, and actually prospered from escalating food prices. There was a massive shift
from formal to agricultural and informal labor. Community-based networks have strengthened,
though public efforts for social security remain weak (Gough, 2001).

MINA 27
Thus ended one of the greatest development successes of our time. Though they the legacies of
the Asian Tigers are now being surpassed by China and India, it can not be denied that, at least in
Asia and much of the Third World, it was the Asian developmental states that established the
fact that governments can bring prosperity to its people.

There is nothing different about the Asian Financial Crisis. It was similar to other crisis in the
past when a lending boom was followed by a catastrophic bust, banks closing down and
throwing the economy into trouble. And when that crisis comes, the blame goes not to
policymakers but the economic model, the same way the Soviet Union’s fall was blamed on
communism. It will not be surprising if one day the Chinese themselves would start denouncing
their “socialism with Chinese characteristics”, or rather, “capitalism written in Chinese
characters”.

Rather than the model, it is the people behind, it is the policy instruments and local conditions
that make or break. It would be instructive as to why Taiwan has escaped so many Asian crises
relatively unscathed. If it were the model, then it would be high time to nick neoliberalism out
(its greatest champion is currently trying to survive a recession) for some other model. But the
trouble is there are few alternatives to capitalism, particularly neoliberalism, left. An economic
system does not come by itself: it comes with its accompanying political, social and cultural
systems, which may not be easy to graft in another setting. Here is where the “unholy trinity”, in
its “noble” goal of spreading the fruits of neoliberalism, fails. And where their allies, eager to
change the country’s elites and establish a new power relations system, succeed, only to lick
wounds after.

I am no supporter of neoliberalism, but if anything, I am a supporter of good and socially-minded

management. Neoliberalism or developmental state, whichever, as long as it achieves it goals of
improving the lives of people, is good. Explanations for the Asian miracle and debacle, though
having hints of truth in them, fail if they wholly put the blame on societal systems and then force
people to drink their killer medicine (same dosage for all sizes), destroying what has already
been built and further regressing recovery.

MINA 28
Rather than try stopping or cheerleading the ubiquitous, albeit hard to define concepts of
neoliberalism and globalization, people should campaign for greater rights, participation in the
decision-making process, and hold people in power more accountable for what they do. The car
can only do so much to crash itself, ultimately, you have to consider human error.

MINA 29
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