Joe Studwell has produced a formidable work in development economics by masterfully presenting the economic policies that transformed Japan, South Korea, Taiwan, and China into global economic giants in just a few generations. He also shows how nations like Malaysia, the Philippines, and Indonesia have failed to develop at a similar level to the aforementioned countries because they did not adopt the full raft of policy prescriptions which transform an economy from a developing to a developed one.

Studwell argues that unlike the position of theoretical economists that all economic theories are true at all times and in all circumstances, countries require different policies at different stages of development. For a poor nation to develop, it first needs to maximise agricultural production through smallholder farms; develop an export-focused manufacturing sector through state-planned allocation of capital to manufacturing businesses; and introduce capital controls to prevent investments in speculative sectors that do not contribute to the goal of technological learning. He is critical of IMF and World Bank policy prescriptions that favour liberalizing markets and free trade prematurely to developing countries, although he favours them when countries have reached an appreciable level of development.

How Asia Works strives to avoid all kinds of political and ideological dogmatism – seeking to prescribe a development framework that is agnostic to socialism, capitalism, democracy or autocracy. Irrespective of the economic or political system in play, the book argues that a clear policy towards the goal of turning infant industries to global players through technological learning is much more important than who owns the industries. For example, he explains how both the Korean chaebol (large family-owned businesses) and the Chinese state-owned giants have achieved similar objectives in terms of becoming exporting giants.

Interestingly, the author is not in favour of the pursuit of self-sufficiency and import substitution policies that have primarily being pursued by developing countries seeking to develop. He believes these policies are inadequate at best and harmful at worst, because they do not submit local businesses to the kinds of export discipline that forces domestic forms to learn, borrow or steal technology to become innovative. Creating protected, domestic monopolies in the name of import substitution can result in rent-seeking businesses that suck up huge capital without contributing to development objectives.

Perhaps, what makes this book the most convincing is the acknowledgement of the shortfalls of its policy prescriptions. They could lead to domestic consumers suffering lower real wages, low interest on savings, higher domestic prices of goods, frustrating controls on how one can move their money globally, the neglect of the service sector, and generally a quality of life that for some time is lower than that enjoyed by citizens of other countries. The book therefore praises the efforts of the IMF in Korea post the Asian Financial Crisis, which introduced reforms to liberalize the economy.

While the arguments in this book are truly compelling, it would be difficult to ignore the geopolitical context in which some of these nations developed. With the support of Western powers that provided capital and ignored trade tariffs and other unfair trade practices by these developing Asian nations, the stage was perfectly set for rapid industrialization and development. Contrast that with developing countries in other parts of the world which have had to accept trade and financial liberalization in return for aid, debt forgiveness, and loans despite never having the chance to build any industrial development capacity. Industrialization for some of these countries has largely been in the form of joint-venture assembly plants which Studwell heavily criticizes for contributing nothing to technological learning.

I thoroughly recommend this book and I have held out on discussing more of its detailed analysis (that surprisingly fits into only 320 pages) because I want to encourage people to read it. I understand the author is writing a book on African development, and if How Asia Works is anything to go by, that book would be a must-read.