Category Archives: economics

Millionaires Against the Billionaires in Russia?

On 27 January, Washington Post columnist Jim Hoagland shared an interesting take on Ukraine and its possible lessons for Russia.

A revolt of “the millionaires against the billionaires” helped fracture Ukraine’s corrupt power structure and lift Viktor Yushchenko to the presidency there. A similar upheaval may be bubbling next door against Russian President Vladimir Putin.

That is the well-buttressed argument put forth by Anders Aslund, a Swedish economist and former diplomat whose past readings of failure in the Kremlin and its political consequences have earned my attention and respect.

I first ran across Aslund in Moscow in the 1980s at the height of Gorbymania, as the West cheered Mikhail Gorbachev for pushing perestroika as a means of reforming and saving the Soviet Union. Aslund’s predictions that Gorbachev would be unable to manage the forces he unleashed and would be destroyed by them were seen at first as provocative, then profound — and ultimately prophetic.

Being right once is no sign of being right always, or even often. There is a human tendency to analogize from the past and to miss what has changed. The rough-and-tumble years of Russia’s robber-baron politics and capitalism under Boris Yeltsin’s government, which Aslund initially advised, must have changed something.

But in conversation the other day and in several recent articles he has written, Aslund persuasively illuminated domestic conflicts that he sees leading toward “an unraveling of the Putin regime.” Parallels exist both with Gorbachev’s failure and with the political success of the reformer Yushchenko, with whom Aslund worked at Ukraine’s Central Bank.

Corruption and mismanagement have begun to sap the strong public support that Putin commanded in his first term, Aslund reports. And the campaign to line the pockets of Putin’s former KGB associates by jailing, intimidating and/or dispossessing the “oligarchs” who assembled fortunes under Yeltsin has turned much of the business community against the Russian president — as corruption did for Ukraine’s former rulers.

Ukraine’s “millionaires” — the big, but not the biggest, businesspeople — helped create and finance a political opposition that they hope will implement the rule of law and let them keep most of what they have already made, suggests Aslund, who directs the Carnegie Endowment’s Russian and Central Asian projects from Washington.

Siberian Light also notes an article in Mosnews about the importance of big-city mayors during revolutions.

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Some Backgrounders on Ukraine

Ukraine-based Le Sabot Post-Moderne explains how the system works there:

You have to understand the situation in Ukraine. The country is run by a series of oligarchic clans that actually found their beginnings in the Soviet Union, and then grew fabulously rich during the early days of “privatization”.

Compare the situation to Russia, where an authoritarian Putin faced off against corrupt oligarchs. In Ukraine, authoritarianism and oligarchy are fused. Yanukovych isn’t just another unscrupulous candidate, he’s the main man of Akhmetov — the duke of Donetsk and the richest man in Ukraine. The current president, Kuchma, is the head of a different clan, Dnepropetrovsk. The presidential administrator is Medvedchuk, who happens to run the Kiev-based Medvedchuk-Surkis clan. He also owns the two biggest Ukrainian TV stations, which is awfully convenient.

While there is jockeying for control among these clans, the overall effect is for them to sustain one another in power. They all depend on the same system for survival, and actively collaborate to keep it in place.

A good example of the clan system in action was the recent privatization of the Kryvorizhstal factory. Western firms offered 2.1 billion dollars. It was sold to the presidents son-in-law for 800 million. His son-in-law is Pinchuk, the head of the Pinchuk-Derkach clan.

Do you start to see how life works here? This isn’t about a few stolen votes. It’s about an entire system of fine control over the political, social and economic life of the people. Economics and politics are incestuously fused here in a way that is difficult to imagine for those in the West.

Ukraine-based TulipGirl quotes an essay by Ukrainian novelist Oksana Zabuzhko in Monday’s print edition of the Wall Street Journal.

Never before — even 13 years ago, on the eve of the collapse of the Soviet Union — has Ukraine witnessed such a massive upsurge of national solidarity. People who’ve always remained politically indifferent and had missed voting in all previous elections, were disseminating self-printed leaflets from the Internet (samizdat is back — any piece of information was voraciously devoured on the spot!) in public places, and volunteering to monitor the elections on behalf of opposition candidate Viktor Yushchenko. At a peasant food market a merchant first asked who you’re voting for — the right answer (with which you could count on a generous discount) was “Yushchenko,” while incumbent Prime Minister’s Viktor Yanukovych’s supporters were more than likely simply refused service. In the playgrounds children were playing a game called “Yushchenko beats Yanukovych.” To quote my seven-year-old neighbor, “in our class Irka alone stands for Yanukovych, and no one wants to play with her.” The slogan chanted by protesting students at demonstrations reads in English as “We’re together! We’re many! We won’t fall!” And just how may of “us” there are, one can easily see in the streets. These days Kiev, as well as other major Ukrainian cities, is defiantly demonstrating its political sympathies by wearing orange, the campaign color of opposition candidate Yushchenko.

A special term has come into use — “The Orange Revolution.” It looks like people have dragged all shades of orange, from yellow to vermilion, out of their wardrobes and adorned themselves with them simultaneously — vests and sweaters, scarves and purses, coats and umbrellas. Orange ribbons flutter everywhere — on trees, fences, lanterns, and cabs. Drivers joyfully beep to each other, and pedestrians (traffic police included!) salute them with smiles and raised fists. It feels like the capital of three million has been transformed into a sea of brotherly love! The windows of shops are lavishly decorated with things orange. Among my favorites is the stunt of my neighborhood coffee shop — its windows glow with pyramids of oranges! …

Here I have to clarify one important point. A widespread cliche used by many Western journalists to describe the major collision of our dramatic elections is that the establishment candidate, Viktor Yanukovych, is “pro-Russian,” and that opposition candidate, Viktor Yushchenko, is “pro-Western.” This version has as little to do with the feelings of an average Ukrainian voter as with those of the belligerents of the Trojan war. Mr. Yanukovych is perceived not so much as being “pro-Russian,” but as, first and foremost, being “pro-criminal” — a Ukrainian Al Capone, who has under his belt two prison sentences for robbery and assault, and publicly uses criminal argot compared to which even the boorish tongue of retiring President Leonid Kuchma sounds as innocuous as a school textbook. A former governor of Donetsk, Mr. Yanukovych in power represents the so-called “Donetsk fellas” — a business clan with a notorious criminal background. That the latter have close ties with similar mafia clans in Russia seems to be the most immediate explanation for the pre-election outburst of a passionate love between Russian and Ukrainian leaders, an affair of which Yanukovych-as-president had been designed as a mutually satisfying offspring.

Chicago-based international relations professor Dan Drezner is more pessimistic:

A few years ago there were sizeable protests in Kiev because of “Kuchmagate,” in which tapes came to light suggesting that President Leonid Kuchma played a role in the disappearance of Ukrainian journalist Georgy Gongadze in September 2000. There was tangible evidence that Kuchma personally ordered Gongadze — who was investigating corruption in Kuchma’s administration — to disappear. Despite months of protests, however, Kuchma stayed in office (click here for an exhaustive World Bank study [PDF] on this case).

Not to put a damper on what’s going on right now in Ukraine, but that example should be kept in mind when speculating whether the protests at the rigged election results in Ukraine will actually cause a change in government a la the Rose Revolution in Georgia [Quickly: opposition leader/reformer/nationalist Viktor Yushchenko led by double digits in Western-run exit polls over Kuchma stalwart/Russophile Viktor Yanukovich. However, the preliminary election results had Yanukovich winning by three percentage points. Outside observers are pretty much unanimous in their belief that there was massive vote fraud].

The two most salient facts in assessing what will happen are that:

a) Leonid Kuchma wants Yanukovich to win;

b) Vladimir Putin really wants Yanukovich to win.

I would love to be wrong about this, but it doesn’t look good for Yushchenko.

Canada-based Randy McDonald weighs in on Ukraine’s Underestimated Strength.

I’m skeptical, in short, that Ukraine is at real risk of splitting apart along ethnolinguistic-cum-political lines. And yet, I can’t help but remember Andrew Wilson’s The Ukrainians: Unexpected Nation, which suggested that the most likely and the most stable course for Ukraine would be a broadly centrist position, relying on slow Ukrainianization and a Ukrainian balancing act between the European Union and Russia. Going to one extreme (a strongly Ukrainianizing regime intent on immediate European integration) or another (a strongly Russophile regime intent on Eurasian integration) could, Wilson suggested, disturb the equilibrium. Mass secessions wouldn’t be the result so much as growing alienation, the formation of more coherent ethnic groups with stricter frontiers. This would be a problem for Ukraine, needless to say.

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New Zealand’s Market Reforms

Tyler Cowen of Marginal Revolution asks Have New Zealand’s Market Reforms Failed?

New Zealand moved from being perhaps the most socialized OECD economy to the freest. The country now has free trade, 0-2 percent inflation, no agricultural subsidies, free labor markets, free capital markets, low marginal tax rates, a reasonable fiscal position, and it conducted substantial privatizations, mostly with success. The reforms started about twenty years ago, but the country is not sweeping the world …

What gives?

First, New Zealand without the reforms would have fallen apart and become insolvent; that is the relevant counterfactual. Second, the country is small. The population is just a bit over 4 million; for purposes of comparison the Philadelphia metropolitan area is over six million.

Michael Porter nailed it over ten years ago. New Zealanders have few if any industries [one being electric fencing] where they control market conditions or lead with innovations. For the most part they are at the mercy of world prices and broader conditions. The country’s earlier crisis was precipitated in the early 1970s, when the UK ended “imperial preference” for New Zealand agricultural exports. Another shock will come if Australia passes its free trade agreement with the U.S.; New Zealand exports will face a new and tough competitor.

Finally, the brain drain has not gone away …

UPDATE: Tyler Cowen posts a response from a Kiwi who maintains that NZ’s domestic economy is laden with a regulatory environment that heavily discourages private capital accumulation and investment, including foreign investment.

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The Third Reason for Surprise on September 11th

The Hart-Rudman report [commissioned by U.S. President Clinton in 1997 and completed in March 2001] established the nation’s vulnerability, but even it could not say when, how, or from where that vulnerability might be tested. Its conclusions, however striking, therefore fell within the realm of the hypothetical. Press coverage was minimal, and the response of the newly installed Bush administration–like that of the outgoing Clinton administration–to the commission’s preliminary findings was little more than polite thanks. That the foundations of national security were about to suffer a seismic jolt was still by no means clear.

There was yet a third reason for the surprise, though, which went beyond the concerns of Hart-Rudman: it had to do with a widespread sense in the academic and policy communities during the 1990s that the international system had become so benign that the United States no longer faced serious security threats of any kind. Paradoxically, the success of American grand strategy during the Cold War encouraged this view.

The record was indeed impressive. The United States had used military occupations to transform Germany and Japan into thriving capitalist democracies, and the Marshall Plan had secured similar results elsewhere in Europe. Over the next four decades democracy and capitalism spread much more widely, even tentatively into the Soviet Union itself. Meanwhile the world’s other great communist state, China, was pulling off a dialectical transformation that neither Marx nor Mao could ever have imagined, becoming a hotbed of capitalism, if not yet of democracy. By the time the Cold War ended, no other models for organizing human society seemed viable: Americans were remaking the world, or so it appeared, to resemble themselves. And the world, it also seemed, was not resisting.

Certain theorists concluded from this that the movement toward democracy and capitalism was irreversible, and that “history” therefore was coming to an end. It might have been an innocuous enough argument, given the care social scientists had taken in recent years to ensure that their theories bore little connection to reality; but this particular theory–associated most closely with the political scientist Francis Fukuyama–did wind up shaping the course of events. The Clinton administration drew from it the idea that if progress toward political self-determination and economic integration was assured, then the United States need only, as national security adviser Anthony Lake put it, “engage” with the rest of the world in order to “enlarge” those processes. The hegemony by consent the United States had won during the Cold War would simply become the post-Cold War international system. President Clinton himself saw little need for a grand strategy under these circumstances. Neither Roosevelt nor Truman had had one, he told a top adviser early in 1994: “they just made it up as they went along.”

There were several problems with this position, quite apart from the chief executive’s shaky knowledge of World War II and early Cold War strategy. It encouraged a tendency to view history in linear terms, and to ignore the feedback effects that can cause successes to breed failures by inducing complacency–just as failures can breed successes by shattering complacency. It sought coherence through alignment with vague processes rather than through the specification of clear objectives. It brought the Clinton team closer to the examples of Harding and Coolidge than to those of Roosevelt and Truman, for those presidents of the 1920s had also allowed an illusion of safety to produce a laissez-faire foreign and national security policy. Finally, Clinton and his advisers assumed the continued primacy of states within the international system. If you could make most of them democratic, if you could bind them together by removing restrictions on trade and investment as well as on the movement of people and ideas, then the causes of violence and the insecurity it breeds would drop away. The argument was well intentioned but shallow.

For what if the power of states themselves was diminishing? What if the very remedies the Clinton model prescribed–political self-determination and economic integration–were slowly undermining the authority of those for whom the prescription had been intended? What if the hidden history of the Cold War was one in which the great powers, under American tutelage, ultimately resolved most of their differences, only to find that their own power was no longer as great as it had once been? It doesn’t take a rocket scientist to see how this might have happened.

Self-determination certainly enhances legitimacy: that’s why democracies during the Cold War proved more durable than autocracies. But it can also expose an absence of legitimacy, which is what led to the breakup of the Soviet Union, Yugoslavia, and Czechoslovakia after the Cold War. There are now more independent states than ever before–almost 200, as compared to about 50 at the end of World War II–but that doesn’t mean that the international state system is stronger. It means just the opposite: that there are more “failed” or “derelict” states than ever before.

Integration certainly enhances prosperity: that’s why so many people benefited from the liberalization of trade and investment that took place during and after the Cold War. But the resulting global market has also constrained the ability of states to determine the conditions under which their citizens live. Marx was right in pointing out that although capitalism generates great wealth, it distributes that wealth unevenly. States used to have the capacity to cushion that process, thereby minimizing the resentment it generated: progressivism and the New Deal in the United States, social democracy in Europe, and their equivalents elsewhere provided the social safety nets that saved capitalism from the self-destruction Marx had forecast for it. Now though, in an unregulated global economy, those nets are sagging and becoming frayed.

It’s also the case that states–even democracies–used to have some control over movements of people and exchanges of ideas. We tend to celebrate the fact that it’s more difficult to impose such restrictions in a world of cheap air travel, liberal immigration policies, fax machines, satellite television transmitters, cell phones, and the internet. But there’s also a price, which is that it’s harder than it used to be for states to monitor the activities of those individuals, gangs, and networks who are their enemies.

The bottom line, then, is that states are more peaceful these days–that’s a major accomplishment of the Cold War–but they’re also weaker than they used to be. That situation too contributed to the events of September 11th, and it’s certainly shaping the era that has followed. The most important failure of strategic vision in Washington, therefore, lay in the inability of American leaders to look beyond their Cold War victory to the circumstances that might undermine its benefits. As after World War I, they allowed the absence of visible danger to convince them that nothing invisible could pose a threat. They assumed that it was enough simply to have won the game. It did not occur to them that the arena within which the game was being played–together with the rules by which the United States, its allies, and its defeated adversaries had played it–might now be at risk.

It was not just the Twin Towers that collapsed on the morning of September 11, 2001: So too did some of our most fundamental assumptions about international, national, and personal security.

SOURCE: Surprise, Security, and the American Experience, by John Lewis Gaddis (Harvard U. Press, 2004), pp. 74-80

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Nauru: Once Rich in Phosphates, Now Broke

The island nation of Nauru, which once had the highest per capita income in the “developing” world, is now broke. The New Zealand News reports:

Australia has declined to bail out the island nation of Nauru, which is facing almost certain bankruptcy this month.

As receivers moved in on Nauru’s key international property assets, President Rene Harris is understood to have approached Canberra for a short-term rescue package….

The tiny island republic is facing both a constitutional and financial crisis, following a deadlock in its Parliament when the Speaker resigned in protest at the Government’s failure to pass a budget.

A spokesman for the Harris Government said they were still trying to find a refinancer for a A$236 million loan with America’s General Electric Capital.

The loan used the last of Nauru’s once $1 billion-plus property portfolio as security.

Nationmaster.com profiles Nauru’s economy.

Revenues of this tiny island have come from exports of phosphates, but reserves are expected to be exhausted within a few years. Phosphate production has declined since 1989, as demand has fallen in traditional markets and as the marginal cost of extracting the remaining phosphate increases, making it less internationally competitive. While phosphates have given Nauruans one of the highest per capita incomes in the Third World, few other resources exist with most necessities being imported, including fresh water from Australia. The rehabilitation of mined land and the replacement of income from phosphates are serious long-term problems. In anticipation of the exhaustion of Nauru’s phosphate deposits, substantial amounts of phosphate income have been invested in trust funds to help cushion the transition and provide for Nauru’s economic future. The government has been borrowing heavily from the trusts to finance fiscal deficits. To cut costs the government has called for a freeze on wages, a reduction of over-staffed public service departments, privatization of numerous government agencies, and closure of some overseas consulates. In recent years Nauru has encouraged the registration of offshore banks and corporations. Tens of billions of dollars have been channeled through their accounts. Few comprehensive statistics on the Nauru economy exist, with estimates of Nauru’s GDP varying widely.

But Air Nauru says it will keep flying.

UPDATE: Head Heeb has more.

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19th-Century IT Improvements and Noncorporate Whaling

Alaska-based econoblogger Ben Muse posted a couple of interesting historical observations recently, one on the 19th-century IT revolution and another on why whaling ventures didn’t adopt corporate structures.

The first post summarizes data from the book, The New Financial Order: Risk in the 21st Century, by Robert Shiller.

  • The cost of paper for record storage drops as a paper making machine is invented in 1800, and the use of wood pulp for making paper is introduced in 1865.
  • The cost of data transmission drops when standardized envelopes are introduced in 1849, and as “street addresses proliferated in the late nineteenth century …”
  • The cost of making copies drops with the invention of the letter press in 1780 (“Letters … were placed before the ink was fully dry between the tissue-paper pages of a blank book, and the book closed and placed in a letter press, which pressed the pages tightly together. The special ink used to write the letter left a mark on the blank page, thereby generating a copy, which, although backward on the tissue paper, could be read normally from the other side.”), of carbon paper in 1806, and photographic document copying in 1900.
  • “The invention of the typewriter in 1868 was significant not only for the increased speed of data entry but also for the increased reliability of typewritten records …”
  • Industry for producing forms emerges in the 19th Century; carbon forms available by the 1880s.
  • Document sizes become standardized.
  • In the 1880s and 1890s development of mechanical calculators “sped the operation of the addition of numbers by about six …”
  • Filing systems improved (Dewey Decimal system introduced in 1876).

And then, there is the vertical file: “The vertical file with the associated cardboard file folders appeared at the 1893 world’s fair, the Columbian Exposition in Chicago, where it won a gold medal …”

The second post summarizes data from a working paper by Eric Hilts, “Incentives in Corporations: Evidence from the American Whaling Industry,” NBER w10403, March 2004.

U.S. whaling began in the 17th Century as small groups of colonists set out from shore after targets of opportunity. Gradually the business shifted to whaling ships with crews of 30 taking world wide trips lasting years at a time. Despite the 19th Century IT revolution, management of an enterprise like this would pose big challenges.

In the typical whaling enterprise a small group owned shares in the vessel. These persons delegated most management decisions to agents, who themselves had significant shares in the operations. [The agents and owners also tended to know each other very well, both personally and professionally.] …

In the 1830s some whaling firms incorporated in an apparent effort to become more attractive to large numbers of small investors. But look at what happened to management’s incentives. To a great extent oversight responsibility shifted from the investors to a board of directors. These, in turn, delegated management responsibility to an agent….

The corporate structure never became very important in the whaling business. The whaling industry survived into the later 19th Century, but “Of the whaling corporations that were chartered in the 1830s and early 1840s, none survived past the 1840s.” [Hilts, p. 12] …

Hilts thinks the reason is the different incentives faced by agents under the alternative forms of organization. He sought confirmation in a data set on 874 whaling voyages from 1830 to 1849; the data set covered almost 20% of the voyages during that time. For each voyage he calculated a productivity index. Hilts thinks the reason is the different incentives faced by agents under the alternative forms of organization. He sought confirmation in a data set on 874 whaling voyages from 1830 to 1849; the data set covered almost 20% of the voyages during that time. For each voyage he calculated a productivity index. Statistical analysis of the relation between the index and voyage characteristics found that, both statistically, and practically, corporate voyages were less productive that non-corporate voyages. (As a practical matter, organization as a corporation had a greater adverse impact on productivity than the death of the captain on the voyage. [Hilts, p. 23])

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Cultural vs. Situational Factors in East Asian Industrialization

In 1991, Ezra Vogel published a slim volume that attempted to analyze for lay audiences some of the reasons why certain East Asian nations achieved notable success in industrializing. He compared Taiwan, South Korea, Hong Kong, and Singapore, which he labelled the “Four Little Dragons.” Here are some highlights, from a book review published in 1994.

British and American advocates of minimal government interference in the marketplace will be countered not just by how different the role of Hong Kong’s government has been from the other little dragons, but by the historical perspective offered in the introductory chapter, where Vogel notes that only the earliest wave of industrialization, in England and later the United States, had the luxury of a rather leisurely pace of industrialization with relatively little government direction. The later waves in continental Europe and then East Asia had to rely much more heavily on government to secure the ever larger amounts of capital, complex technology, and skilled labor needed to leap the ever-widening gap between preindustrial and industrial society. Each new entrant in the race to industrialize had a clearer view of the finish line and ran down a better-trodden path to get there.

East Asian nationalists who, like European and American imperialists before them, tend to credit their success primarily to their own harder work and superior cultural heritage, will be forced to consider Vogel’s lists of the many situational factors that aided their efforts. And anti-American nationalists will object to the prominent position of U.S. aid on those lists. Vogel enumerates new global opportunities offered by the postwar world: (1) The United States, supremely self-confident and fervently anticommunist, was willing to open its markets and universities and share industrial technology with its allies to an unprecedented degree. (2) Thanks to the demise of colonialism and to bitter lessons learned during the prewar depression, international trade was far less restricted than before. (3) The growth of mass consumption enabled smaller countries to achieve manufacturing economies of scale that their domestic markets could not have supported. (4) Large Western corporations acquired a multinational outlook that placed loyalty to profits above loyalty to country of origin, making them willing, for profit, “to buy, sell, and lend anywhere in the world” (p. 11).

Vogel also lists more particular situational advantages East Asia enjoyed during the postwar period: (1) The U.S. poured in massive amounts of aid to build a bulwark against communism. Just as the Japanese economy benefited from U.S. procurement during the Korean War, the other regional economies benefited during the Vietnam War. (2) Confucian conservatives were discredited and large landowners were dispossessed. The postwar governments were not beholden to the traditional elite, so they were free to concentrate on production of new goods, not control of existing assets. (3) A keen awareness of external military threats and of inadequate land and natural resources lent an urgency that made leaders more willing to cooperate and citizens more willing to sacrifice for the common good. (4) Each country had large numbers of refugees and displaced people who comprised an “eager and plentiful labor force” (p. 88) dependent on their labor, not their land, for income. (5) Japan’s pioneering effort provided the little dragons with a goal, a way to get there, and the confidence that they could succeed in their drive to industrialize. As wages rose in Japan, corporations there were willing to transfer limited technology and manufacturing capacity to the other East Asian countries. However, some of those countries, most notably South Korea, succeeded in transferring more technology than Japan intended.

Did particular cultural traditions shared by East Asian societies confer any advantages? Vogel begins his chapter on explanations by downplaying the role of Confucianism in the spread of industrialization. He asks whether the ongoing industrial transformations of Islamic Malaysia and Turkey, Buddhist Thailand, and Roman Catholic Brazil and Mexico will not utterly invalidate cultural tradition as an explanatory factor. He further notes that Confucianism was blamed just as frequently during the 1940s and 1950s for retarding modernization, and asks why China, the heartland of Confucianism, has been slower to industrialize than the periphery, even before the socialist era. In answer, Vogel offers a tantalizing suggestion:

“If anything, just as Max Weber found that the greatest drive to industrialize in his time came in areas located far from Catholic orthodoxy, so in East Asia industrialization prospered in areas far from the centers of traditional Confucian orthodoxy, where trade and commerce were most highly developed. And successes occurred not under the old Confucian-style governments but in societies that had cast them aside for new governments, with very different political systems.” (p. 84) …

It is long past time to lay aside such vague, chauvinist notions as the Protestant ethic, the Confucian ethic, or the samurai spirit, and examine instead the more specific cultural traditions that aided industrialization. Vogel identifies four such traditions shared by Japan and the little dragons: (1) a “meritocratically selected bureaucracy” (p. 93) that not only implemented policy decisions, but formulated them; (2) an entrance examination system that afforded the means to overcome feudal favoritism and channel the most talented people into key leadership positions; (3) an emphasis on group loyalty and subordination of individual to group demands that well suited the level of centralized coordination needed to effect a modern industrial transformation; and (4) a tradition of lifelong self-cultivation.

Of course, the challenge today is not just to find a way for all nations to climb onto an industrial plateau, but to find ways to keep scaling new heights of innovation and growth in a postindustrial world. Orthodoxies of all kinds still seem to be among the primary obstacles.

SOURCE: Review of The Four Little Dragons: The Spread of Industrialization in East Asia, by Ezra F. Vogel (Harvard U. Press, 1991).

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