|The latest notable change is the financial and economic crisis that erupted in East
Asia in 1997 and which brought evident relief to many observers in the West. As a result
and mis-led by day-to-day press media reports and short term business and government
analysis and policy, even 'informed' public opinion in the West changed again. Now the
"East Asian Miracle" is said to have been no more than a mirage, a dream for
some and a nightmare for others. The previously supposed 'explanations' and sure-fire
strategies of success are being abandoned again as quickly as they had come into fashion.
We hear no more appeals to "Asian values,' no more guarantees from ' the magic of the
market,' and no more security from state capitalism . So much the better I would say,
since these supposed 'explanations' and 'correct policies' were never more than
ideological shams anyway.
The historical evidence presented in this book shows that no
one particular institutional form or political economic policy offers or accounts for
success [nor failure!] in the competitive and ever changing world market. The contemporary
evidence shows the same. In that respect, Deng Xiaoping's famous aphorism is correct. The
question is not whether cats are institutionally, let alone ideologically, black or white;
the real world issue is whether or not they catch economic mice in competition with others
in the world market. And that depends much less on the institutional color of the cat than
it does on its opportune position in the world economy at each particular place and time.
And since the obstacles and opportunities in the competitive world market change over time
and in place, to succeed the economic cat, no matter what its color, must adapt to these
changes or fail to catch any mice at all.
The significance of position and flexible response in the world economy is particularly
important during periods of economic crisis - that is in Chinese of [negative] danger and
[positive] opportunity. In the present economic crisis so far, the focus has been far too
predominantly on its undoubtedly serious negative consequences. But the opportunities it
poses have received insufficient attention, except perhaps in the United States and China,
both of which are seeking to reap competitive advantages from the political economic
problems and alleged 'meltdown' of Japan, Korea, and Southeast Asia.
But the dismissal of East Asian and particularly Chinese economic strengths and
prospects may be premature and certainly is based on a shortsighted neglect of the
historical evidence as presented in this book and a serious misreading of the contemporary
evidence. I believe that this latest quick dismissal of Asia is mistaken for the following
reasons among others:
- Since Asia and especially China was economically powerful in the world until relatively
recently, it is quite possible that it soon be so again.
- Chinese and other Asian economic success in the past was not based on Western ways; and
much recent Asian economic success was not based on the Western model. Therefore, there is
also no good reason why Japanese or other Asians need or should copy any Western or other
'model.' You can manage your own ways and have no good reason to now replace them by
Western ones as the alleged only way to get out of the present economic crisis. On the
contrary, Japanese and other Asian reliance on other ways is strength and not a weakness.
- The fact that the present crisis spread from the financial sector to the productive one
does not mean that the latter is fundamentally weak. On the contrary, the present crisis
of overproduction and excess capacity is evidence of the underlying strength of the
productive sector, which can recover.
- Not that economic recessions will or can be prevented in the future - they never have in
the past even under state 'planning' in China or the Soviet Union. More significant is
that this is the first time in over a century that a world recession did not started in
the West and then moved eastward but that instead it started in the East and is now moving
West. This recession can therefore be read as evidence not so much of the temporary
weakness as of the growing basic economic strength of East Asia to which the center of
gravity of the world economy is now shifting back to where it had been before the Rise of
- That underlying political economic strength also puts East Asia, and especially China
and Japan in a much more favorable position than the rest of the 'Third World' and even
Russia and Eastern Europe to resist Western blackmail as it is now exercised by the U.S.
Treasury Department through the International Monetary Fund, the World Bank, the World
Trade Organization, Wall Street and other instruments.
- The very act and cost of East Asian concessions to this Western pressure during the
present recession makes it politically more likely, since it is economically possible,
that East Asia will take measures, including especially a new financial bloc and banking
institutions, that can prevent a recurrence of the present situation in the future by
escaping from the strangle-hold of Western controlled capital markets.
- Indeed, one of the present battles, first by the Japanese and now also by the Chinese,
is to remodel the world financial and trade institutions that were designed by the United
States to work in its favor. Thus, Japan wanted to establish an Asian monetary fund to
prevent the East Asian recession from deepening as it has thanks to the International
Monetary Fund based in and subservient to Washington. And China wishes to join the World
Trade Organization but also seeks to have this Western dominated institution reformed to
- A related political economic struggle is the competition between the United States and
China to displace Japan, Korea and Southeast Asia in the market by taking advantage of
their bankruptcies. American capital is buying up some East Asian productive facilities at
bargain basement prices, while China is waiting for them either to be squeezed out of the
competitive market altogether, and if not to engage in joint operations. Only time will
tell which strategy will be more successful, but the Chinese and perhaps also some
Southeast Asians seem like the better bet over the long term. Moreover, no matter how deep
the recession in Japan; it is not for that eliminated as an economic power, especially in
- Equally significant is that India and to recently to a lesser extent China have remained
substantially immune from the present recession, thanks in part to the inconvertibility of
their remin ribao and rupee currencies and the valve in their capital markets that permits
the inflow but controls the outflow of capital. The currency devaluations of China's
competitors elsewhere in East Asia and the reduced inflow into China of Overseas Chinese
and Japanese capital that is negatively affected by the recession in East Asia may oblige
China to devalue as well to remain competitive. Nonetheless and despite their serious
economic problems, the Chinese and Japanese economies appear already to have and to
continue to be able to become sufficiently productively and competitively strong to resist
and overcome these problems.
- It is noteworthy that the economically most dynamic regions of East Asia today also
still or again exactly the same ones as before 1800:
- Around the North China Sea, the quadrangular trade relations with among Northeast China,
Siberia/Russian Far East, Korea, and Japan
- In the South, Lingnan centered on the Hong Kong - Guangzhou corridor, and Fujian, still
centered on Amoy/Xiamen and focusing on the Taiwan straits and all of Southeast Asia in
the South China Sea.
- Between them, the Yangtze Valley, centered on Shanghai and trade with Japan that is
already taking the lead away again from the southern and northern regions.
All of these in turn were and still or again increasingly are important segments of
world trade and of the global economy. In that sense also and although its story ends in
1800, the examination of the world economy and of the predominant place in it of the
Chinese, Japanese and Southeast Asian economies points to the most fundamental bases of
contemporary economic developments in the region and also presages important world
economic ones for the foreseeable future.
Andre Gunder Frank
Miami March 1, 2000