I'm really looking forward to your take on how applicable this is to African countries, in either direction.
When I read and reviewed Studwell's book, I did some research and ultimately concluded that the Studwell "Success Sequence" you elucidate was probably contingent on the time period and specific countries rather than a universal formula.
The three countries that have become "developed" since then (Ireland, Israel, Chile) didn't follow that path.
Ireland - being part of the EU and aggressively targeting multinational corporate FDI and headquarters location via favorable tax minimization laws. The “double Irish” and such.
Israel - a highly educated base population supplemented by highly skilled immigration, targeting high tech, military hardware, and software, with substantial FDI.
Chile - Pinochet basically pulled a mini Lee Kuan Yew after becoming dictator, outsourcing his economic decisions to The Chicago Boys, who put the economy on privatized and liberalized economic footing while pivoting to an export focus. Notably however, they didn’t focus on manufacturing or industrialization - the biggest exports are copper, wine, fruit, and fish.
None of them followed the Success Sequence. And sure, his book is "How Asia Works" not how the rest of the world works. But let's look at Malaysia and Vietnam:
Malaysia ($12k per capita GDP as of 2023) is right on the edge of being considered developed (a country is considered “developed” if it has a per-capita-GDP of between $12-$15k and has decent qualitative measures on health, education, and infrastructure), and it's actually SE Asian and didn't follow the success sequence - it never did extensive land reform, it has pushed on manufacturing, but 20% of exports and government revenue is oil and gas, and 23% of employment is tourism based. Malaysia was one of his “failure” cases in the book in terms of not doing land reform at all, and in terms of doing manufacturing wrong, but here they are.
Or how about Vietnam? It’s been explicitly and assiduously following the Studwell success sequence since 1986. Exports are nearly 90% of the economy, and manufacturing has steadily grown in that time to be more than 25% of GDP. But in that nearly 40 years, it’s gone from roughly $700 GDP per capita to roughly $4,500 GDP per capita, a factor of roughly 6 improvement, whereas in their comparable periods of growth, Taiwan’s and Korea’s improved about 60x, and China and Ireland at least 12x (Vietnam’s growth is in line with historic Japanese and Israeli growth rates, which both started at a *much* higher baseline GDP per capita). If they can maintain this pace (and that's not a given, growth usually slows down the larger your baseline GDP gets), they might make “developed” status by around 2040, roughly 60 years after starting - but everyone else hit it after 20-40 years.
For another thing, "land reform" isn't going to do much now, when agriculture is a tiny part (5-15%) of even the "failure" economies in his book like Malaysia, Indonesia, Thailand, and Philippines:
1) Joe Studwell probably wouldn't call Chile or Ireland real success stories (even though they are high income countries), but he would call Vietnam a country becoming a success story.
When Studwell talks about success stories he means a country that makes national champions, its not just about having high income. That's why he didn't label Malaysia as a success story even though its clearly above Thailand and the others.
2)Chile mainly sells copper, it's what Congo wishes it could be. Chile mainly sells commodities, with no big national high tech champions.
5) When I'll discuss African countries, most of them don't need land reform (or if they do it's for political reasons). Land is pretty abundant. Much of the issue is terrible property rights and they need to get yields up.
> When Studwell talks about success stories he means a country that makes national champions, its not just about having high income.
Ah, interesting, I don't think I've heard this take before - by national champion, I assume he means something like "companies relevant on the world stage?"
What countries do you think are on that track in Vietnam? I can't think of any, and I've been living in Asia the past year. Vingroup is just your usual conglomerate with hands in every pie milking locals, but which can't compete internationally, much like SM / SMDC in the Philippines.
Israel has a ton - Teva, NSO group, Mobileye, Cellebrite, Check Point, Wix.
And doesn't Ireland have Stripe? I guess that fits in with the finance thing. They have a few airlines (which I don't really count) and Kerrygold and Guiness, which I think are pretty big and globally revelant?
1) national champions means relevant manufacturing companies on the world stage. Boeing, Intel, Airbus, ASML, BMW, that stuff. Stripe & fintech would not count. I am taking about jobs that integrate supply chains and build service jobs that support the manufacturing.
2) Vietnam is "sort of" doing China's strategy of pursuing FDI. As a result, Vietnam's exports are driven by foreign firms just like it was for China. Vietnam has Vingroup, but its not really building national champions like South Korea/Taiwan/Japan.
Vietnam has significantly more investor friendly fdi laws than China does. Vietnam used to have forced technology transfer, but multinationals didn't tolerate that from Vietnam like they did with China. So Vietnam changed its tech transfer laws to just do human capital training.
I do wonder what effect these wage suppression policies have had on wealth inequality in China vs the trio vs the TIMP countries. In comparison, was the flexibility of the American and select European governments towards unions and antitrust, post-1945 simply because they had a 60-year head start in industrialization, or because they factored in broader questions about internal political power (because their leftist/socdem parties were stronger)? I think with the Lib Dems’ underperformance, President Yoon’s political crisis, the KMT’s fall relative to the DPP, and Western pressure on the CCP, the four East Asian giants will have to start adopting consumption- and equality-first class politics into their economic strategies sooner rather than later.
1) The Wealth Inequality database is our best answer for this:
In Taiwan, the top 10% have 58% of the wealth.
In South Korea & Japan, the top 10% have 59% of the wealth.
In Indonesia, the top 10% have 61% of the wealth.
In Malaysia the top 10% have 62% of the wealth.
In the Philippines, the top 10% of 64% of the wealth.
In China, the top 10% have 69% of the wealth.
In Thailand, the top 10% have 76% of the wealth.
To put in perspective, in America the top 10% have 71%. In Netherlands the top 10% have 45%.
While wage suppression contributed to inequality, remember that Southeast Asian countries botched up land reform. Wage suppression has weak predictive power for which country is more unequal.
Heck of a report, Yaw. Are the government measures to promote exports like what Immanuel Wallerstein described as "Mercantilism"? Also, the limits on foreign investment look like these smart governments read Naomi Klein's book "Disaster Capitalism," a report about the actions of Friedman and the Chicago School: playing with a country's currency to make quick money and ruining its economy. Maybe they were just smart.
1) Yep, I would say its similar to what Immanuel described as mercantilism.
2) Yea, the Japanese government is smart but they were also well read on policies that worked. 1870-1930s Japan modeled itself after German's economic policies especially from Friedrich List. Friedrich List copied from Alexander Hamilton in America. Hamilton was learning from the Tudor Monarchs and Daniel Defoe in Britain.
It's old principles applied to new events!
I wrote about the cycle of copying here:
How Britain's Medieval Playbook for Industrialization affects Trade Today
It seems like a fairly egregious oversimplification to me to state that Japanese, Korea, and Taiwan were made up of feudal landlords owned vast agricultural estates prior to the end of World War II. Meiji Era Japan conducted ambitious land reforms of their own, and in the case of Korea and Taiwan, those land reforms were performed by Japanese invaders at gunpoint. Such land reforms were pivotal to the rise of the Japanese Empire in the first place.
Granted, by the time the war was over, the situation was arguably not that much better for the class tenant farmers writ large compared to when they started. But that's really more of a problem with capitalism in general naturally creating such exploitative situations given enough time. Similarly, while you can say the communists were overzealous in their prosecution of landlords, at the end of the day, no one anywhere was getting land reform without the new ruling authorities having to at least make a pretense of punishing the old leadership.
1. Yes, Japan did land reform during Meiji in the late 1800s, however, by the 1930s-1940s, land was already concentrating again back to landlords.
Prior to the Post-WW2 land reform, 46% of the total cultivated land was tenant-operated and 67% of Japanese farmers rented all or part of the land they cultivated. Their rents were exorbitant too, ranging from 50% to 70% of the harvest, and interest on debt was so high that it was 30% of their farming income. So while it's true that Meiji Japan had land reforms and it was pivotal to the Japanese empire's success, you are overlooking the reconcentration that happened during the Taisho period. I don't think the oversimplification was egregious.
2) " in the case of Korea and Taiwan, those land reforms were performed by Japanese invaders at gunpoint." This is simply incorrect. Landform was done by Chiang Kai Shek and the Kuomintang. It was the 1953 "land to the tiller program".
3) Any system can create exploitative situations given enough time. That's not unique of capitalism. I'm Ghanaian, before even the British came in, the Ashanti Empire was an exploitative, war like empire that had an internal form of slavery/debt bondage. I can give you so many examples of exploitation that occurred before property rights was a thing. There are so many forms of exploitation that occurred without a concept of individual property rights, which is the essence of capitalism.
4) ""Similarly, while you can say the communists were overzealous in their prosecution of landlords, at the end of the day, no one anywhere was getting land reform without the new ruling authorities having to at least make a pretense of punishing the old leadership.""
This isn't true at all. Post WW2, when Japan did land reform, when they bought the land, the landlord's were paid in government bonds as compensation. They didn't have to be killed.
I don't disagree with any of these facts. I disagree with your initial framing which made it sound as if the Japanese Empire and the territories under its dominion had existed in an unbroken line of feudalism since premodern Japanese history. Perhaps this wasn't your intent, but feudalism is a fairly loaded word with medieval implications, and given the lack of context you provided about pre-War Japan, a correction felt appropriate to me.
Likewise, I don't disagree as to how or whether the land reform was accomplished, but why. As silly as it may sound now, given it benefited them, the landlords did not support the land reform and fought hard against it. Only the external political reality of competing communist states in the wake of the war, and the dubious behavior of those landlords in that war, was enough to overcome this resistance.
Albeit your post focus on how Africa can do, as a reader from a TIMP state in this case Indonesia, you have some words about how the four can actually do better? (Preferably in collaboration with writers with Asian focus) Thank you.
I'm really looking forward to your take on how applicable this is to African countries, in either direction.
When I read and reviewed Studwell's book, I did some research and ultimately concluded that the Studwell "Success Sequence" you elucidate was probably contingent on the time period and specific countries rather than a universal formula.
The three countries that have become "developed" since then (Ireland, Israel, Chile) didn't follow that path.
Ireland - being part of the EU and aggressively targeting multinational corporate FDI and headquarters location via favorable tax minimization laws. The “double Irish” and such.
Israel - a highly educated base population supplemented by highly skilled immigration, targeting high tech, military hardware, and software, with substantial FDI.
Chile - Pinochet basically pulled a mini Lee Kuan Yew after becoming dictator, outsourcing his economic decisions to The Chicago Boys, who put the economy on privatized and liberalized economic footing while pivoting to an export focus. Notably however, they didn’t focus on manufacturing or industrialization - the biggest exports are copper, wine, fruit, and fish.
None of them followed the Success Sequence. And sure, his book is "How Asia Works" not how the rest of the world works. But let's look at Malaysia and Vietnam:
Malaysia ($12k per capita GDP as of 2023) is right on the edge of being considered developed (a country is considered “developed” if it has a per-capita-GDP of between $12-$15k and has decent qualitative measures on health, education, and infrastructure), and it's actually SE Asian and didn't follow the success sequence - it never did extensive land reform, it has pushed on manufacturing, but 20% of exports and government revenue is oil and gas, and 23% of employment is tourism based. Malaysia was one of his “failure” cases in the book in terms of not doing land reform at all, and in terms of doing manufacturing wrong, but here they are.
Or how about Vietnam? It’s been explicitly and assiduously following the Studwell success sequence since 1986. Exports are nearly 90% of the economy, and manufacturing has steadily grown in that time to be more than 25% of GDP. But in that nearly 40 years, it’s gone from roughly $700 GDP per capita to roughly $4,500 GDP per capita, a factor of roughly 6 improvement, whereas in their comparable periods of growth, Taiwan’s and Korea’s improved about 60x, and China and Ireland at least 12x (Vietnam’s growth is in line with historic Japanese and Israeli growth rates, which both started at a *much* higher baseline GDP per capita). If they can maintain this pace (and that's not a given, growth usually slows down the larger your baseline GDP gets), they might make “developed” status by around 2040, roughly 60 years after starting - but everyone else hit it after 20-40 years.
For another thing, "land reform" isn't going to do much now, when agriculture is a tiny part (5-15%) of even the "failure" economies in his book like Malaysia, Indonesia, Thailand, and Philippines:
https://imgur.com/a/xnGvS0e
So overall I don't think it's a universally applicable formula. Definitely interested in your follow up take re African countries.
Hey! Great points!
1) Joe Studwell probably wouldn't call Chile or Ireland real success stories (even though they are high income countries), but he would call Vietnam a country becoming a success story.
When Studwell talks about success stories he means a country that makes national champions, its not just about having high income. That's why he didn't label Malaysia as a success story even though its clearly above Thailand and the others.
2)Chile mainly sells copper, it's what Congo wishes it could be. Chile mainly sells commodities, with no big national high tech champions.
https://oec.world/en/profile/country/chl
3)Ireland is more like a Hong Kong/Singapore. An offshore finance tax haven. It is successful, but not replicable.
4) Israel didn't really get significant FDI (>1% of GDP) until the 2000s. But yes Israel is a success story.
https://data.worldbank.org/indicator/BX.KLT.DINV.WD.GD.ZS?end=2023&locations=IL&most_recent_value_desc=false&skipRedirection=true&start=1970&view=chart
5) When I'll discuss African countries, most of them don't need land reform (or if they do it's for political reasons). Land is pretty abundant. Much of the issue is terrible property rights and they need to get yields up.
https://ourworldindata.org/data-insights/cereal-yields-have-increased-in-all-regions-but-africa-lags-behind
> When Studwell talks about success stories he means a country that makes national champions, its not just about having high income.
Ah, interesting, I don't think I've heard this take before - by national champion, I assume he means something like "companies relevant on the world stage?"
What countries do you think are on that track in Vietnam? I can't think of any, and I've been living in Asia the past year. Vingroup is just your usual conglomerate with hands in every pie milking locals, but which can't compete internationally, much like SM / SMDC in the Philippines.
Israel has a ton - Teva, NSO group, Mobileye, Cellebrite, Check Point, Wix.
And doesn't Ireland have Stripe? I guess that fits in with the finance thing. They have a few airlines (which I don't really count) and Kerrygold and Guiness, which I think are pretty big and globally revelant?
1) national champions means relevant manufacturing companies on the world stage. Boeing, Intel, Airbus, ASML, BMW, that stuff. Stripe & fintech would not count. I am taking about jobs that integrate supply chains and build service jobs that support the manufacturing.
2) Vietnam is "sort of" doing China's strategy of pursuing FDI. As a result, Vietnam's exports are driven by foreign firms just like it was for China. Vietnam has Vingroup, but its not really building national champions like South Korea/Taiwan/Japan.
Vietnam has significantly more investor friendly fdi laws than China does. Vietnam used to have forced technology transfer, but multinationals didn't tolerate that from Vietnam like they did with China. So Vietnam changed its tech transfer laws to just do human capital training.
I do wonder what effect these wage suppression policies have had on wealth inequality in China vs the trio vs the TIMP countries. In comparison, was the flexibility of the American and select European governments towards unions and antitrust, post-1945 simply because they had a 60-year head start in industrialization, or because they factored in broader questions about internal political power (because their leftist/socdem parties were stronger)? I think with the Lib Dems’ underperformance, President Yoon’s political crisis, the KMT’s fall relative to the DPP, and Western pressure on the CCP, the four East Asian giants will have to start adopting consumption- and equality-first class politics into their economic strategies sooner rather than later.
Good question!
1) The Wealth Inequality database is our best answer for this:
In Taiwan, the top 10% have 58% of the wealth.
In South Korea & Japan, the top 10% have 59% of the wealth.
In Indonesia, the top 10% have 61% of the wealth.
In Malaysia the top 10% have 62% of the wealth.
In the Philippines, the top 10% of 64% of the wealth.
In China, the top 10% have 69% of the wealth.
In Thailand, the top 10% have 76% of the wealth.
To put in perspective, in America the top 10% have 71%. In Netherlands the top 10% have 45%.
While wage suppression contributed to inequality, remember that Southeast Asian countries botched up land reform. Wage suppression has weak predictive power for which country is more unequal.
Source: https://wid.world/world/#shweal_p90p100_z/US;FR;DE;CN;ZA;GB;WO/last/eu/k/p/yearly/s/false/38.8135/100/curve/false/country
2) As for policies, I think it's mixed on what the 4 East Asian giants will do.
I think China is finally talking about demand side stimulus even though Xi Jinping hates it.
Japan is trying to boost inflation.
I would need to dive deeper into what South Korea and Taiwan want to do.
Good answer, and thanks for the speed of the reply, hopefully I’ve provided some food for thought
Heck of a report, Yaw. Are the government measures to promote exports like what Immanuel Wallerstein described as "Mercantilism"? Also, the limits on foreign investment look like these smart governments read Naomi Klein's book "Disaster Capitalism," a report about the actions of Friedman and the Chicago School: playing with a country's currency to make quick money and ruining its economy. Maybe they were just smart.
Thanks Jill!
1) Yep, I would say its similar to what Immanuel described as mercantilism.
2) Yea, the Japanese government is smart but they were also well read on policies that worked. 1870-1930s Japan modeled itself after German's economic policies especially from Friedrich List. Friedrich List copied from Alexander Hamilton in America. Hamilton was learning from the Tudor Monarchs and Daniel Defoe in Britain.
It's old principles applied to new events!
I wrote about the cycle of copying here:
How Britain's Medieval Playbook for Industrialization affects Trade Today
https://yawboadu.substack.com/p/britains-process-of-industrialization
What do you think of the recent research that suggests that land reform did not in fact improve agricultural productivity in Taiwan/Korea/Japan ?
I think Oliver Kim spoke about that. I need to read it!
Go ahead, Yaw, good thing there's writing and smarts!
It seems like a fairly egregious oversimplification to me to state that Japanese, Korea, and Taiwan were made up of feudal landlords owned vast agricultural estates prior to the end of World War II. Meiji Era Japan conducted ambitious land reforms of their own, and in the case of Korea and Taiwan, those land reforms were performed by Japanese invaders at gunpoint. Such land reforms were pivotal to the rise of the Japanese Empire in the first place.
Granted, by the time the war was over, the situation was arguably not that much better for the class tenant farmers writ large compared to when they started. But that's really more of a problem with capitalism in general naturally creating such exploitative situations given enough time. Similarly, while you can say the communists were overzealous in their prosecution of landlords, at the end of the day, no one anywhere was getting land reform without the new ruling authorities having to at least make a pretense of punishing the old leadership.
1. Yes, Japan did land reform during Meiji in the late 1800s, however, by the 1930s-1940s, land was already concentrating again back to landlords.
Prior to the Post-WW2 land reform, 46% of the total cultivated land was tenant-operated and 67% of Japanese farmers rented all or part of the land they cultivated. Their rents were exorbitant too, ranging from 50% to 70% of the harvest, and interest on debt was so high that it was 30% of their farming income. So while it's true that Meiji Japan had land reforms and it was pivotal to the Japanese empire's success, you are overlooking the reconcentration that happened during the Taisho period. I don't think the oversimplification was egregious.
https://publish.iupress.indiana.edu/read/japan-s-postwar-economy/section/1283a341-ce03-40e7-8a4f-db9a0060ebe9
2) " in the case of Korea and Taiwan, those land reforms were performed by Japanese invaders at gunpoint." This is simply incorrect. Landform was done by Chiang Kai Shek and the Kuomintang. It was the 1953 "land to the tiller program".
Taiwan's Land to tiller post WW2:
https://oliverwkim.com/papers/KimWang_Taiwan.pdf
South Korea did land reform after WW2 during Syngman Rhee.
https://www.donga.com/en/article/all/20150330/410377/1
3) Any system can create exploitative situations given enough time. That's not unique of capitalism. I'm Ghanaian, before even the British came in, the Ashanti Empire was an exploitative, war like empire that had an internal form of slavery/debt bondage. I can give you so many examples of exploitation that occurred before property rights was a thing. There are so many forms of exploitation that occurred without a concept of individual property rights, which is the essence of capitalism.
4) ""Similarly, while you can say the communists were overzealous in their prosecution of landlords, at the end of the day, no one anywhere was getting land reform without the new ruling authorities having to at least make a pretense of punishing the old leadership.""
This isn't true at all. Post WW2, when Japan did land reform, when they bought the land, the landlord's were paid in government bonds as compensation. They didn't have to be killed.
https://pdf.usaid.gov/pdf_docs/PNAAD929.pdf
The Kuomintang in Taiwan also paid landlords in government bonds or even shares in public enterprises.
Source: https://taiwantoday.tw/Economics/Taiwan-Review/13771/Steps-in-the-Implementation-of-Land-Reform-in-Taiwan
Same in South Korea, land was compensated in government bonds:
https://library.fiveable.me/history-of-korea/unit-8/land-reform/study-guide/xb2CK9J5m1zlcEYl
I don't disagree with any of these facts. I disagree with your initial framing which made it sound as if the Japanese Empire and the territories under its dominion had existed in an unbroken line of feudalism since premodern Japanese history. Perhaps this wasn't your intent, but feudalism is a fairly loaded word with medieval implications, and given the lack of context you provided about pre-War Japan, a correction felt appropriate to me.
Likewise, I don't disagree as to how or whether the land reform was accomplished, but why. As silly as it may sound now, given it benefited them, the landlords did not support the land reform and fought hard against it. Only the external political reality of competing communist states in the wake of the war, and the dubious behavior of those landlords in that war, was enough to overcome this resistance.
Albeit your post focus on how Africa can do, as a reader from a TIMP state in this case Indonesia, you have some words about how the four can actually do better? (Preferably in collaboration with writers with Asian focus) Thank you.
Thanks for such an excellent article as always! I enjoyed this piece so much that it prompted me to write a response, part one of which I’ve just published now: https://backseatpolicycritic.substack.com/p/how-trade-surpluses-hurt-china