MY TAKE
My Take
by

Asia's model of state-run capitalism is not Western

PUBLISHED : Wednesday, 29 July, 2015, 12:42am
UPDATED : Wednesday, 29 July, 2015, 12:42am

I often complain to my friend Paul Serfaty for writing erudite letters to newspapers such as the Post when he should be writing op-ed columns. One such letter appeared in this paper on Monday, arguing China took off economically by adopting what he calls "Western-style economic incentives" under Deng Xiaoping .

I believe that view, which I will describe as neo-liberal, is mistaken. Serfaty seems to think the choices are between Western free-market capitalism and collectivist centralisation. China under Mao Zedong failed miserably with the latter and is only now succeeding by adopting features of the former.

Instead, I would argue Deng's China actually followed a well-trodden path of the North Asian economic model - Japan, Taiwan, South Korea and outside of that geographic cohort, Singapore. Malaysia and Thailand may be less successful examples. Other latecomers include Vietnam, Laos, Myanmar and Rwanda. Theirs is a capitalism wherein a strong state controls much of the economy. This model is not what generations of post-war Eestern economists or institutions such as the IMF and the World Bank have taught, but its success is undeniable.

Serfaty also wrote: "Japan, Taiwan and South Korea all consigned their military strongmen to history, benefiting from a broadly Western model."

This is an oversimplification. Those strongmen laid the foundations for the eventual economic takeoff and transition to Western-style democracy: the Meiji reforms before world war one and Douglas MacArthur after world war two in Japan; Chiang Kai-shek's Kuomintang in Taiwan and Park Chung-hee in South Korea.

If we insist on calling this Asian model Western, it is one that is often forgotten or denied by Westerners today. Alexander Hamilton, the first US treasury secretary, practically invented all those "market-distorting" practices: prohibitive import tariffs in strategic sectors and national champions, infant industry protection (Hamilton might have coined the term), industry subsidies and yes, intellectual property theft. And before him, try reading Daniel Defoe's A Plan of the English Commerce. The Tudors used similar tricks to lay the seeds for England to become the great economic power of Europe.