How Asia Works is a book by Joe Studwell which contrasts the successful development of capitalist Northeast Asia(Japan, South Korea, and Taiwan) with the “paper tigers” of capitalist Southeast Asia(Thailand, Malaysia, Indonesia, and the Philippines). He doesn’t analyze India, the middle East, or the authoritarian disasters such as North Korea and Burma. Studwell mentions three key policies that Northeast Asia got right and Southeast Asia got wrong: land reform, industrial policy, and finance.
The main weakness of the book is that it does not consider HBD as an explanation for the differences between Northeast and Southeast Asia.
Studwell’s argument is that land reform is essential to increase crop yields, providing the surplus that funds industrialization. Agriculture by farmers who own small plots they work intensively(“smallholders”), is more efficient than tenant agriculture. Why?
According to Studwell, it’s because farmers have an incentive to farm intensively and maximize yields. If they have to pay rent to a landowner, and especially if they have to pay a percentage of their crops to a landowner, they do not have as much of an incentive to produce. It’s the same process that dissuades someone from working if they have to pay a 50% tax rate.(In East Asia, paying fifty percent of one’s crops as rent was not rare.) High rents starve them of capital, preventing them from being able to make investments to improve their yields. With access to capital only at usurious rates of interest, farmers know that the return on any investment they make will go to paying the interest. Wage labor on plantations is also inefficient as the workers have no incentive to work hard.
In Northeast Asia, the data seems to support this, land reform in Taiwan, Japan, and Korea is associated with greatly increased yields. In Japan, yields increased under land reform in the early Meiji period, ceased increasing as land reform was slowly reversed, and then increased during the post war period when it was definitively accomplished. In communist China, yields increased during the early communist period when land was redistributed, then declined once collectivization was imposed.
But would this same process work in Southeast Asia? Studwell claims that the crops in question do not matter, pointing out that sugarcane, a tropical crop, is grown more efficiently in Taiwan than in Southeast Asia despite less favorable climactic conditions. But maybe the people differ, and would respond differently? Maybe, if freed from the burden of paying a high rate of rent to landlords, farmers would produce less? This is where HBD, or, less likely, ‘culture,’ come in.
In the Philippines, a small percentage of land has been redistributed to the tenants, and according to Studwell, the farmers who received redistributed land are no more productive than the farmers who farm rented land. Studwell attributes this to a lack of the kind of governmental support for smallholders which existed in Northeast Asia. Denied capital, they can only turn to their former landlords, who will charge usurious rates of interest. About one place in the Philippines Studwell writes:
“It is hardly surprising that an emblematic image one sees in Negros is the ‘reform’ family that immediately leased its land back to the landowners and now sits around a karaoke TV set bought with the proceeds of the advance. In the absence of any real chance of household farming success, people put their capital into a KTV machine and sing in a shack.”
Although Studwell points to the gradual reversal of land reform in pre-world war II Japan, showing it is not exclusive to Southeast Asia, it is hard not to imagine that there may be an IQ/time orientation explanation for the reform family’s behavior.
There’s also HBD’s effect on whether land reform will happen in the first place. In the Philippines, land reform was supposed to occur, but bribery of officials and violence against farmers often prevented it, while in other cases former landowners negotiated agreements with their former tenants which left the situation de-facto as it was before. While being a high-IQ country is no guarantee that land reform will happen, it will assure that once the government declares it as a goal, it will probably happen.
Studwell points to the higher yields of a certain group of Philippine land reform families which were supported by an NGO, but also says they are “more politicized, better educated, and more articulate than the 250 other families which do not have NGO support.” The direction of causality here is unclear. He points out that across Southeast Asia farmers keep small gardens where they grow food for personal consumption, he claims these are the most productive spaces in the region, but small gardens may not scale up to big farms. The strongest evidence he has is the fact that, in British colonial times, smallholder rubber farming was more efficient than big business rubber plantations. However, many of the rubber workers were ethnic Chinese, who by 1947 were 38% of the Malaysian population, Studwell does not mention the ethnicity of the smallholders.