Publication in Economics, Politics and Public Policy in East Asia and the Pacific

Is Thai democracy really so bad?

Author: Andrew Walker, New Mandala

Note: Andrew Walker is Editor of the New Mandala blog, a wonderful resource for anyone interested in South East Asia.

With the brother-in-law of Thaksin Shinawatra now serving as Prime-Minister, Thailand’s democracy is set for another round of turmoil. However, sometimes it can be useful to step back a little from the day-to-day battles of political life. The battles that have convulsed Thailand’s political elites over recent months and years may lead many to conclude that Thailand’s democracy is in crisis. It would be easy to dismiss Thailand as a country where democratic institutions have shallow roots.

But perhaps there are deeper democratic currents that deserve more attention.

Read more…

Tables turned in Japanese and US financial markets

Author: Luke Nottage

In 2003, financial journalist Gillian Tett wrote a book with a self-explanatory title: Saving the Sun: How Wall Street Mavericks Shook Up Japan’s Financial World and Made Billions (Harper Collins). It epitomized a school of thought proclaiming a dramatic shift in Japan towards US-style corporate governance more generally. On 24 September, still writing for the Financial Times, Tett concluded that if she were writing her book again, she “would give it a more upbeat slant. Anyone know the Japanese for ‘eating humble pie’?”. The Japan Society of Scotland has already suggested “sunao ni ayamaru (to apologise obediently without protesting)” or “memboku wo ushinau (to lose face)”! Japan’s big financial institutions are certainly now back on the world stage, picking up some big pieces from America’s own financial crisis. And Japanese policy-makers and other commentators now want to lecture the US on how to deal with it.

Who would have thought, even a year ago, that Nomura Securities would be buying up the now-insolvent Lehman Brothers’ operations in Asia (including those in Australia, involving a total 3000 employees – with half in Tokyo) and then Europe (2500 employees)? And for just US$225m and “a nominal sum”, respectively, out of cash reserves of almost $6b Nomura has raised since April? Or that Mitsubishi UFJ, which spent $3.5b to buy out the Union Bank of California, would now be committing up to $9b to take 10-20% of Morgan Stanley, another precarious “Big Five” Wall Street investment bank? Or that Sumitomo Mitsui, which recently spent $1b for 2% of Barclays bank in the UK (which in turn has bought Lehman’s US operations), is prepared to invest US$1-3b in Goldman Sachs if requested by that other precarious Wall Street firm? Or that Mizuho would have recently pumped $1.2b into Merrill Lynch, another troubled firm that took refuge with the Bank of America in a $50b merger announced on 15 September? Read more…

Aso’s beautiful country

Author: Tobias Harris

MTC has a must-read post on a New York Times editorial rebuking Aso Taro for his ‘pugnacious’ nationalism.

Mr. Aso, MTC argues, differs from his fellow conservatives in his patriotism. Aso, he writes, “is infatuated with Japan, with what it is, whatever it might become. His is not the defensive possessiveness of an insecure man. He wants to share with everyone his enthusiasm. He hopes that everyone in the world can come to see his country the way he sees it: as flawed, yes, but for the most part wonderful, kind, quirky, appealing and charming. Like a lover, he underplays the faults of the object of his desire.”

This is an absolutely critical point in understanding Japan’s new prime minister.

He is not merely the ideological twin of Abe Shinzo.

Recall that Mr. Abe’s book is entitled Towards a beautiful country. That “towards,” in Japanese a simple へ, carries decades worth of baggage. Mr. Abe does not particularly like Japan as it exists today. Why else would he be so eager to cast off the post-war system, as he promised over and over again? His love is for the Japan that could be if only the country would follow his ideas. In some way the post-war system is a cul-de-sac for Mr. Abe, an extended detour from the path Japan ought to follow. Mr. Abe’s nationalism is about reclaiming the past to provide a guide to the future. Read more…

Kurlantzick’s distaste for nouveau riche democracy

Author: Ryan Manuel

Some friends of mine at grad school have a great saying: “using the word normative does not automatically improve your argument”.

Having read Josh Kurlantzick’s latest piece, I am tempted to change that to “using the words ‘middle class’ does not automatically improve your argument”.

Kurlantzick argues that “in country after country, democratic reforms are in retreat. The surprising culprit: the middle class”. A prime example, he argues, is Thailand, which was once the poster child for a successful switch to democracy until the rise of Thaksin Sinawatra.

Read more…

US and China playing hands over North Korea

Author: Peter Drysdale

Rumours and intelligence reports suggest that the North Korean leader Kim Jong Il is impaired from a stroke or similar illness he apparently suffered last month and that his illness might be more serious than reports from the region suggest.

The United States and China have apparently been holding talks about what to do if the government in

Kim Jong Il in 2005, Reuters: Korea News Service

Pyongyang collapses. A senior Bush administration official (reported by Fox news) says that although Kim may not be close to death, the US does not accept reports from South Korea that he’s on his way to a rapid recovery. It is therefore natural to engage the Chinese about what to do if there is ensuing instability in North Korea.

The US talks with China are likely to be sensitive given North Korea’s nuclear capability, however limited it is estimated to be. There is no logical successor to Kim. He has not been grooming one of his sons to replace him, as Kim’s father, Kim Il Sung, groomed him. So there are real anxieties about what might happen in any transition process. While there are no obvious signs of instability in North Korea now, the likelihood of a smooth transition of power in that country is not high. The Chinese are reluctant to admit to the discussions with the US publicly, because of their close relationship with North Korea, they are in both countries’ interests. Read more…

The Aso cabinet circus

Author: Shiro Armstrong

A landslide victory for new Japanese Prime Minister Aso in the LDP presidential elections meant that he got to choose his own Cabinet and it’s a giggle a minute – if it weren’t so serious.

Hatoyama (Hato means dove in Japanese), known as the angel of death, is just the start of contradictions...

Hatoyama Kunio (the kanji Hato in his name means dove in Japanese, hence the costume in the photo) is the new Minister of Internal Affairs and Communications. He is known as a ‘shinigami’ which means ‘angel of death’ or ‘god of death’ after his record number of executions as Justice Minister… an unfortunate nickname for a portfolio which puts him in charge of the nation’s food supply. Read more…

Aso and Chinese history textbooks?

Author: Shiro Armstrong

Taro Aso starts his prime ministership in Japan this week.

A few years ago you couldn’t imagine headlines such as ‘Aso vows to build friendly relationship with S. Korea, China’ or ‘Japan PM Hopeful Aso Seeks Friendship With China, S Korea’.

There is an underlying dynamic in the Japan-China relationship that is too strong for a hawk even of Aso’s stature to try fight – he has to go with it. The turning point in the Sino-Japanese relationship in recent times was the 2005 anti-Japan protests in China.

Aso as foreign minister moving (un?)willingly with the tide, AP Photo by Everett Kennedy Brown

The revision of Chinese history textbooks in Chinese high schools is one significant yet little known outcome of the turning point in the relationship.
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US continues to talk big and act small

Author: Philippa Dee

The United States has agreed to join Singapore, New Zealand, Chile and Brunei in a free trade agreement which could set the pace for a broader Asia-Pacific free trade area, officials have said (The Straits Times, 22/09/2008). This is consistent with the US idea of ‘competitive liberalisation’ – the idea that if it signs up preferential trade agreements with some trading partners, others will want to join.

The trouble is, the partners that the US has snared have by and large been tiddlers – small countries with an inferiority complex who, in their perceived position of vulnerablility, are susceptible to this trade policy equivalent of emotional blackmail. And I am allowed to say this because I was born in New Zealand.

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China’s response to America’s financial meltdown

Author: Peter Drysdale

Harold James, Professor of History and International Relations at Princeton University, writes that only China has the firepower and capacity to rescue the international financial system from the threats from America’s financial meltdown today (Project Syndicate, September 2008). This is not just a financial and economic crisis, he suggests. Rather, like the financial and economic shocks that led to the Great Depression through the 1920s and 1930s, it is a drama that must play out on the world geopolitical stage.

Sound a little over-stretched? Perhaps. But there is no doubt that China’s response to the events that are unfolding in America will be pivotal to how readily the global economic and political system digests their impact in the medium and longer term.

China is today’s America, claims James. When the 1920s and ’30s crisis hit, America alone had the capacity to take the big public sector action at home that was needed to stem the panic and economic collapse and the reserves to save Europe and the rest of the world from massive contagion. Andrew Mellon, US Treasury Secretary of the time, resolutely stood back, determined to let markets collapse and ‘purge the rottenness out of the system’. The collateral economic and geopolitical damage from that adjustment path through the markets was well and truly done before Roosevelt’s New Deal was put in place. Then, and now, a globalised world means that the solution to such crises spans borders. Read more…

No honeymoon for Aso

Author: Tobias Harris

Voting began today in the LDP’s presidential election, which looks to be little more than a coronation for Aso Taro.

Ishikawa prefecture had its vote on Saturday, and it appears that Ishikawa will give all three of its votes to Mr. Aso. I expect Ishikawa will be only the first of many sweeps to come.

But will it matter at all? In the early days of the LDP race, it seemed possible that Mr. Aso might be able to heal the LDP’s wounds as if by magic, as if simply by having the five candidates stand side by side in apparent agreement on the problems facing Japan (and their solutions), the public would forget the years of incompetent governance and re-embrace the LDP and its “charismatic” new leader.

Alas, the fairy tale is not to be. Read more…

East Asian integration and global imbalances

Author: Josef Yap, PIDS

The destabilising effect of the US subprime mortgage crisis and global economic turmoil has affected East Asia, with mounting inflation and escalating food and fuel prices around the region. There is serious imbalance in the world economy. This is in part due to worldwide overreliance on the US dollar – a currency that is weakening, and one in which confidence has been eroded by persistent US current account deficits – and a lack of any sort of reform in the international monetary system. In the latest PIDS Policy Note I ask: what might East Asia do?

Read more…

A second response to Callick

Author: Ryan Manuel

Rowan Callick’s piece in the Australian discussing a protest from disgruntled shareholders in Jishou makes a number of insightful points. His thesis that China faces economic challenges which require reform is indubitable. But his central argument that all of this will be solved through the magic of the ‘party accepting limits to its power’ rather than through the tussle and interaction between Chinese civil society and markets seems to put the cart before the horse.

Callick argues that reform in China is too slow, and that ‘in the 19th century, the polity of most of Europe changed massively importantly, through governments and large corporations becoming answerable to courts and accountable to broad groups of the population.’

Indeed. But it was this very ability of broad groups in the polity to coalesce and develop a unified agenda that forced change. No political party voluntarily gives up power, a maxim that appears to hold almost as universally in democracies as under any other form of government. Read more…

The market, state owned enterprises and Chinese reform

Author: Peter Drysdale

Rowan Callick’s piece in the Australian last week on the collapse of the shonky real east estate company, Fuda, in Jishou, Hunan, provided a hook for him to do some philosophising about the process and history of reform in Chinese markets and elsewhere in the world, with a link thrown in to the state psychology of managing the Olympic Games.

There are too many leaps and bounds in logic in his piece to deal with them all here. But Callick’s comment that the observation by Christopher Findlay and me that ‘Chinese companies in which the state has a stake are ‘publicly listed at home and increasingly in Hong Kong and abroad’, and that ‘state-owned firms in China are increasingly subject to the disciplines of the market at home and abroad’ is self-evidently false because ‘their owners (the Chinese state) still own the market’ needs closer examination. Callick offers no evidence on how the state-owned enterprises relate to the state and its ‘ownership of the market’, let alone how that relationship has changed, or is changing over time.

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CASS gets with the fiscal program

Author: Ryan Manuel

A recent report from the Chinese Academy of Social Sciences (thanks to World China Bridges for the link) has listed the 10 most serious social problems in China at the moment. The high expense and a lack of access to medical services topped the list.

“It’s very rare in other countries that health care was the most serious social problem,” the report said. “Instead of a simple problem about poor medical service, it is related to the country’s reform on all public service sectors.”

Given the authority of this source, this is an incredibly important admission. It is also a surprising admission. China has suffered dramatically from an inability to formulate comprehensive solutions to public policy problems. The most substantial of these weaknesses has been an inability to reform its fiscal system, which has been a considerable hindrance to the delivery of public goods. Nowhere has this been more obvious than the health care system.

Read more…

Keeping up with Asia

Author: Peter Drysdale

Whoever takes the Presidency next year, Asia will be need to be a bigger part of the US foreign policy agenda than it has been under President Bush. That’s the heart of the argument, too, in Yoichi Funabashi’s piece on ‘Keeping up with Asia’ in the latest issue of Foreign Affairs. (Link)

That’s not the conventional wisdom in most places. Geoff Garrett, head of the American Studies Centre at Sydney University argued the exactly opposite on Thursday at a talk at the Crawford School on ‘the US Presidential Elections and Their Impact on Australia’. Whether it’s McCain or Obama, it is pre-occupation with the Middle East and Afghanistan that will continue to dominate the US foreign policy agenda, so the conventional wisdom runs.

Read more…