The Political Economy of East Asia Striving for Wealth and Power

THE POLITICAL ECONOMY OF EAST ASIA STRIVING FOR WEALTH AND POWER Ming Wan George Mason University 1 CQPRESS A Division of Congressional Quarterly Inc. Washington, D.C. CONTENTS Tables, Figures, and Maps xiii Preface xv PART I: INTRODUCTION 1. Introduction 1 What Is East Asia? 3 The Political Economy Approach 4 Defining Political Economy 5 Institutions 5 '• Comparative Political Economy and International Political Economy 9 The State and the Market 10 Economic Growth Versus Political Regime 11 Power of Ideas 11 Design of the Book 12 Suggested Readings 15 Notes 16 2. The East Asian National Systems of Political Economy 21 The Political Economy Systems of East Asia: An Overview 21 The Japanese System of Political Economy - 26 The Embedded Mercantilism 27 Structural Reform 28 The Political Economy Systems of the Asian Tigers 30 South Korea 30 Taiwan 32 Singapore 33 The Political Economy Systems of Southeast Asia 34 Malaysia 35 Thailand 37 Indonesia 38 The Philippines 39 Burma/Myanmar 41 viii Contents The Transitional Political Economies 43 China 43 Vietnam 46 North Korea 46 Cambodia 47 Conclusion 48 Suggested Readings 49 Notes ' 51 PART II: THE RISE AND FALL OF EAST ASIA 3. The Chinese World Order 59 World Orders 60 International Order 60 The Chinese World Order 61 Political Economy of East Asian Trade 65 Comparative Political Economy 70 China 70 Korea 73 Japan 74 Southeast Asia , 76 Beyond European Models of World History 78 Eurocentric Models of World History 78 New Scholarship on World History 79 Why Did the West Rise? 83 Conclusion 86 Suggested Readings 87 Notes 89 4. Modern Imperialism 99 Western Imperialism • 100 Imperialism 100 History of Western Domination in East Asia 100 East Asian Responses to Western Domination 105 Legacies of Western Colonialism 110 Japanese Imperialism 114 Japanese Response to Western Imperialism 114 History of Japanese Imperialism 116 Legacies of Japanese Imperialism 120 Conclusion 122 Suggested Readings 123 Notes 124 Contents ix 5. The East Asian Miracle 131 Postwar Transformation of East Asian Political Economy 131 Rapid Economic Growth with Equity 132 Was There a Miracle? 137 Structural Change 139 March to Capitalism 139 Explaining the East Asian Miracle 141 Neoclassical Economics ' 141 The Developmental State Approach 145 The East Asian Challenge 148 What Exactly Explains the East Asian Miracle? ' 149 A Regional Perspective of East Asian Political Economy 151 Flying Geese Formation 151 Regional Integration and Learning , 153 The United States and East Asian Political Economy 154 The U.S. Hegemony 154 Managing Rivals 156 The United States and East Asian Regionalism 158 The Political Economy of Growth 158 Conclusion 160 Suggested Readings 160 Notes 162 6. The Asian Financial Crisis 171 Tracing the Crisis 171 Explaining the Crisis 177 Speculative Capital 177 Unsustainable Economic Policies 181 Crony Capitalism 184 Managing the Crisis 186 The Consequences of the Crisis , 188 The Political Economy of the Crisis 190 Conclusion 191 Suggested Readings 192 Notes 194 PART III: ISSUES OF EAST ASIAN POLITICAL ECONOMY 7. The Political Economy of East Asian Production 199 The "Factory" of the World 199 East Asian Industrialization 199 Foreign Direct Investment in East Asia 204 The Investors of the World 207 x Contents Regionalization of Production 210 The East Asian State and Production 213 Picking the Winners 214 Foreign Direct Investment Policies 218 East Asian Companies- 220 Domestic Political Economy of Production 224 Conclusion 227 Suggested Readings 227 Notes , 229 8. The Political Economy of East Asian Trade 237 Trade Patterns in East Asia 237 Rapid Expansion in Trade 237 Structural Change in Trade 243 Surplus with the World 245 Greater Regional Trade Interdependence 248 East Asian Trade Strategies 249 Import Substitution 249 Export Promotion 252 Trade Liberalization . 254 Facing the World 258 Managing Trade Disputes 258 Global Rules, Asian Plays 260 East Asian Trade Regionalism 263 Domestic Political Economy of Trade 265 Conclusion 268 Suggested Readings ' 269 Notes 271 9. The Political Economy of East Asian Finance 277 East Asian Finance . 278 East Asian Capital Accumulation 278 East Asian Banking 282 Shallow Financial Markets 286 East Asian Financial Policies 291 Mobilizing Domestic Capital 291 Financial Liberalization 295 East Asia in Global Finance - 301 Cross-Border Capital Flows 301 Global Saving Glut . 304 East Asian Financial Regionalism 307 East Asian Political Economy of Finance 309 Contents xi Conclusion 312 Suggested Readings 313 Notes 315 10. The Political Economy of East Asian Monetary Relations 323 East Asian Exchange Rate Policy 323 Exchange Rate Policies 324 East Asian Exchange Rate Policies Through the Early 1970s 326 From the Early 1970s to the 1997 Financial Crisis 332 Postcrisis East Asian Exchange Rate Regimes 335 East Asia in the Global Monetary System 337 International Monetary Regime 337 East Asia and the Bretton Woods System 339 The Dollar Standard 340 East Asian Regional Monetary System 343 Monetary Union 343 A Yen Bloc 345 The Yuan's Arrival 347 East Asian Political Economy of Money 348 Conclusion 349 Suggested Readings 350 Notes 352 11. The Political Economy of East Asian Regionalism 357 Defining Regionalization and Regionalism 358 East Asian Regionalization 358 East Asian Regionalism 360 Open Regionalism 360 The New East Asian Regionalism 362 "East Asia Plus" Versus "East Asia Minus" Regionalism 365 Theories of Regionalism 366 Economic Theories of Regionalism 366 Political Economy Theories of Regionalism 367 Political Economy of Regionalism 373 Conclusion 374 Suggested Readings 375 Notes 376 Index =• 381.

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