The myth of Asian capitalism

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The myth of Asian capitalism

If any national leader can claim to have worked an economic miracle, it’s Singapore’s Lee Kuan Yew. During his time as prime minister, from 1959 to 1990, the gross domestic product of this tiny country grew more than tenfold - from $8 billion (in 2010 inflation-adjusted dollars) to $98 billion. Today the number is pushing $400 billion. When Lee took office, Singapore was poor; in 2015, it’s one of the richest countries in the world.

Lee was indisputably the architect of this astonishing transformation. He was also, it so happens, learned and brilliant, and an articulate spokesman for what he saw as a distinctively non-Western path of economic development. Deng Xiaoping admired him and sought his advice. It isn’t outlandish to say that Lee deserves some credit for China’s equally startling economic expansion starting in the 1970s - a transformation that will reshape the world.

Westerners think that prosperity and liberty go hand in hand. Lee and Deng believed that order, more than liberty, is the handmaiden of growth. Their successors, and leaders elsewhere who’d like to emulate them, agree. Lee thought a competent meritocratic government should have the paramount role, not just in providing order but also in guiding economic development. The success of “Asian capitalism” seems to prove him correct.

Is this right? Well, bad government certainly isn’t good for growth, in Asia or anywhere else. The question is how you avoid it. One can be in awe of what Lee achieved in Singapore without believing that Asia’s answer to that question must be different from the West’s - or that there are two different capitalisms, each best suited to regionally distinctive values and culture.

Start with that second proposition, that there’s such as thing as Asian capitalism. In fact, East Asia’s miracle economies achieved rapid growth in different ways. For instance, in its years of fastest growth, Hong Kong’s approach was close to laissez-faire; South Korea relied heavily on state-directed investment; Taiwan and Singapore were somewhere in between. Across the region, the role of industrial policy, state-owned enterprises, business alliances and inward foreign investment all varied from country to country, and still do. The same goes for legal codes and political systems.

American capitalism is different from German capitalism, and China’s is different from Singapore’s. It’s easy to exaggerate the family resemblances.

The main thing East Asian economies had in common was reliance on export-led growth. Ways of promoting trade differed from case to case, but the goal was to succeed in global markets. Some countries relied more heavily on import barriers and state-directed investment, but success in export markets guided their interventions. This forced their producers to compete with more efficient producers, made their policies more transparent and helped guard against persisting with planning that didn’t work.

If Asian capitalism means anything, it’s “embrace globalization.” Lee’s Singapore embodied that principle to the maximum. In their zeal to succeed in global markets, East Asia’s most successful economies certainly differed from many other poor nations, which turned inward - but not from the rich West. The West was already global.

Put the debate about economic policy, and the respective roles of state and market, to one side. Lee’s critics would argue that he stood for the simpler proposition that authoritarianism works, and that this is why China’s leaders, especially, look at Singapore with admiration and interest. Singapore is a democracy, but not a liberal one. The government is paternalistic and stern. The ruling People’s Action Party, led by Lee’s son, Lee Hsien Loong, is clean, competent, and undeniably popular - but intolerant of critics and seemingly immovable.

The idea that “Asian values” incline people of the region to a preference for authority over liberty is implausible. There’s no need to invoke any such innate cultural preference. Experience of disorder, especially violent disorder, is what inclines people that way, regardless of where they’re from.

Culture, on the other hand, is malleable, as Lee himself often observed. He was, among other things, a shaper of culture. (One example: English is the main language of instruction in Singapore’s schools. Singaporeans are expected to master the language of global communication and technology, and the country’s other official tongues, Malay, Mandarin and Tamil, are taught as second languages.)

Liberal Western politics can be turbulent. It involves fruitless politicking, too-frequent changes of government, populist incompetence and excessive attention to the short term. But these are side effects of the checks and balances that keep politicians accountable. In an imperfect world, full of imperfect leaders, effective opposition isn’t unpatriotic; it’s indispensable.

Lee was right that Western democracy is flawed, and that an enlightened and meritocratic authoritarian can govern well: The first is self-evident and he proved the second. But a system of government cannot be good if it stakes everything on the emergence, somehow, of a uniquely gifted individual, or on the possibility that an excellent leader will continue to be excellent. Just as companies must be forced to test themselves against others and compete, so must political leaders and political parties. For every Lee, there’s a crowd of cynical, incompetent or exhausted candidates for high office. Constitutions must be designed for the world as it is.

It’s odd that Lee failed to see this. He often said he was a pragmatist, interested only in what works. The constitutional pragmatist, Asian or otherwise, chooses the turbulence of liberal democracy.

*The author is a Bloomberg View columnist and a member of the Bloomberg View editorial board.

by Clive Crook
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