Thoughts on Joe Studwell’s ‘How Asia Works’

I just completed Joe Studwell’s new book “How Asia Works: Success and Failure in the World’s Most Dynamic Region.” Here are some thoughts I tweeted about after reading it.

1) Size of farms matters! Studwell argues that having a small (3ish acre) family-owned farms boosts agriculture productivity (read: land reforms!). There are various loopholes countries (like Philippines/Indonesia did) can fall in while doing this.

2) This will create a surplus which can be used to set up an export-oriented manufacturing base. (exporting makes companies productive). This is pretty much in line with broader evidence: the state protects certain industries, but also punishes losers if they are not productive.

3) Meanwhile, these countries set up a financial sector which promoted these export-oriented industries. But, here is the important part: these Asian countries made sure that the financial sector’s incentives were to assist long-term dev. goals, not speculative short-term ones.

4) Throughout this journey promoting exports is important. Because this is the best way to push your industries to become more productive. In other words: competition=developing comparative advantage. Let your industries fight with each other, and more productive ones globally.

5) Now think about Pakistan. We didn’t go through the kind of land reforms these countries did, so we don’t have the egalitarian, productive base. We protect inefficient manufactures despite them to not being globally competitive. We even had an over-valued exchange rate.

6) Having an equalitarian land ownership structure is good for development trajectory – I didn’t know that it is good for productivity too! Despite economic intuition arguing otherwise: small farms are good. So, it might be wise to talk more about agrarian reforms in Pakistan.

7) Another thing for us to think about is that the state vs market paradigm is flawed – there is no such binary relationship in the real world! Gov.’s need to work to promote market efficiency not protect patronage industries (I’m looking at you the Pakistan’s car industry)

8) Lastly, this is a great book and you should read it (no technical stuff) But, at the end of the day some of this stuff will work for Pakistan, others will not. Every country has its own path – but there is some stuff I’m willing to bet will work, agrarian reforms is one of them.

By Shahrukh Wani

Economist at International Growth Centre, University of Oxford.

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