When the US military occupiers of Japan introduced democracy, American investors opposed.

"You can imagine what would happen in a family of children of ten years or less if they were suddenly told...that they could run the house and their own lives as they pleased" wrote business lobbyist James Lee Kauffman in 1947.

They also opposed raising labor standards:

"If you have ever seen an American Indian spending his money shortly after oil has been discovered on his property you will have some idea of how the Japanese worker is using the Labor Law."

The US business community predicted that Japan would be destroyed as workers went "hog wild" . In 1947 business did not have the power it has today, and they were ignored.

( John Roberts, "The `Japan Crowd' and the Zaibatsu Restoration," The Japan Interpreter, 12, Summer 1979.)

In a major study, 24 leading Japanese economists reviewed the Ministry of International Trade and Industry (MITI) and their decision to choose "a system that is rather similar to the organisation of the industrial bureaucracy in socialist countries."

Heavy protection, subsidies and tax concessions, financial controls, and other big government interventions were used.

MITI determined that "long-term self-reliance for Japan would be delayed or even undermined by following its apparent comparative advantage into labour intensive sectors." In short, they decided not to take advantage of low pay.

This is how Japan was turned from ashes and bomb craters to a wealthy nation - literally rags to riches.

Fitzgerald, Between, citing Ryutaro Komiya, et al., Industry Policy of Japan (Tokyo, 1984; Academic press, 1988). Johnson, National Interest, Fall 1989.

According to economist Michael Hudson, the destruction of Korea during the Asian economic crisis was a "dress rehearsal" for the take over of Japan's financial sector by a few rich Western banks. US politicians including Secretary of State Madeleine Albright even pressured Japan to rewrite its constitution so that Americans would be able to own Japanese banks and industries, just like in Russia.

Secretary of State Madeleine K. Albright and Japanese Foreign Minister Keizo Obuchi, Joint Press Conference, Ikura House, Tokyo, July 4, 1998 contained in Official Press Release, US Department of State, Washington, 7 July, l998.

Percentage of the population living in poverty increased from 11% to 40% in 1997 and 1998 during the "austerity measures". The IMF even had Jakarta, one of the world's most polluted cities, to suspend ALL environmental programs.

Alice Amsden pointed out that by American standards land distribution and wages were very equal.

The government works to "get prices `wrong' in order to stimulate investment and trade," and even uses "price ceilings, controls on capital flight, and incentives that made diversification into new industries contingent on performing well in old ones."

Economist Stephen Smith showed that the NICs used "activist trade and industrial policies" that distort the market, prefering "long-run development goals over short-run comparative advantage."

Now compare Brazil and the East Asian NICs.

Until 1980, they both developed, both using "active industrial and export policies" - government intervention.

But when Brazil listened to the IMF-World Bank, choosing "trade liberalization over domestic growth objectives" and turning to the export of cheap goods and raw materials, the result was disaster.

Amsden, "Diffusion of Development: the Late-Industrializing Model and Greater East Asia," AEA Papers and Proceedings, 81.2, May 1991. See particularly her Asia's Next Giant. Smith, Industrial Policy; citing Hollis Chenery, Sherman Robinson, and Moises Syrquin, Industrialization and Growth: A Comparative Study (Oxford, 1986). Brazil, see ch. 7. Comparisons, see DD, ch. 7.7.

In December 1997 the IMF introduced a "rescue operation"- including having Korean banks "made more attractive" with government handouts to western bankers - funded by borrowing from the same westtern bankers

4,000 workers became unemployed every day in this tiny country. Unemployment increased from 2.6% to 7.7% in 1998.

Resistence

Strikes and street battles have been happening regularily. October 2000 has seen over 20,000 protest at an Asia Europe meeting.

When 56 domestic banks and financial institutions were closed down on orders of the IMF, unemployment virtually doubled overnight. The Poverty rate rose from 11% to 15% during neo 1998.

China is a mixed bag. On one hand it is a goldmine for investors with its brutal crushing of unions and liberals. On the other hand, it ignores the neos - it does not even have a convertible currency! Intellectual property was an alien idea, for example China is infamous for software piracy.

Through democratic-style government intervention combined with dictatorship-style exploitation of workers it has quadrupled its national income over the last 20 years.

Hong Kong has been used as an example of neo success, but according to an expert in the Asian Tiger economies, "to conclude . . . that Hong Kong is close to a free market economy is misleading." [Robert Wade, Governing the Market, p. 332]

In Hong Kong the government owned all the land - BEFORE it became part of communist China!

The government went into the economy many times (for example, in the 1950s, one of the largest public housing schemes in history was launched to house about 2 million people).

Can all of the world be like Hong Kong?

First of all, some interesting facts: Like most of the nations used as examples of neoism, Hong Kong was never a democracy. It is also a city, and all cities grow faster than nations, which have slow-growing rural areas.

Wade notes that "its economic growth is a function of its service role in a wider regional economy, as entrepot trader, regional headquarters for multinational companies, and refuge for nervous money." [Op. Cit., p. 331]. For example, it has the second largest stock market in Asia.

Translation: Hong Kong has the corporate bosses, banks and bureacrats - it is the headquarters of Asia. To say that we can all be like Hong Kong is like saying you can have an orcestra of conductors, or a movie filled with directors, or an army of generals, or a lottery where everybody wins.

Even Hong Kong has been hit by the race to the bottom. By the end of the 1970s, labor costs were rising - that is, people were finally getting rewarded for their hard work. When China was opened for investment by Deng Xiaoping in 1978 and investors moved jobs to the brutal (and profitable) Chinese dictatorship. However, as soon as another nation can somehow make a worse dictatorship where workers are pushed even harder, those jobs will leave China!

The first extensive study of the U.S. Aid mission in Taiwan discovered that the U.S. advisers and Chinese planners, "although versed in Anglo-American economics," ignored them. The U.S. technical experts in Taiwan chose "to jettison free-market nostrums from the start and collaborate with Chinese officials" in developing a "state-centered strategy,".Taiwan decided that growth would "depend upon the active participation of the government in the economic activities of the island through deliberate plans and its supervision of their execution" (K.Y. Win, 1953). Meanwhile U.S. officials were "advertising Taiwan as a private enterprise success story".

Komiya, R. et al., (1988) Industry Policy of Japan Tokyo, 1984; Academic press, Cullaher, N. (1996) "The U.S. and Taiwanese Industrial Policy," Diplomatic History 20.1, Wei-ching Wang, V. (1995-96) "Developing the Information Industry in Taiwan," Pacific Affairs 68.4, Winter.

As late as 1987 most imports of steel into Taiwan had to be approved by the nation's big steel maker, China Steel.

Despite the facts above, neoliberals have claimed Asia as their own.

In 1995, when the Heritage Foundation released its "index of economic freedom" 4 of the top 7 countries were Asian, including Japan and Taiwan.

David Aikman, a journalist for Time, wrote a book about Asia, saying that Taiwan and Hong Kong where "faithful" to "American conceptions of free enterprise."

The Economist magazine said that the Asian nations had "the least price-distorting regimes in the world."

The chief economist of the World Bank's East Asian desk wrote a book in 1993 claiming Asia as being neoliberal while a World Bank study concluded that "rapid growth in each economy was primarily due to...market-friendly economic policies." Jeffrey Sachs called the East Asian economies "highly market oriented, with a long period of relatively free trade... and limited distortions from government regulations".

But when the crisis hit, the neoliberals decided to rewrite history, just like Stalin and neo-nazi revisionists.

Paul Craig Roberts of Business Week said that government "industrial policy fostered appalling investment, banking, and monetary practices".

The Economist said that all along Korea was run by "civil servants," while Rudi Dornbusch said that in Korea "statism" was to blame. The op-ed pages of the Wall Street Journal were the same. Why investors sent billions of dollars into "appalling" situations was never explained.

At best, Neos are like a con-artist who pretends to be a friend when you are useful, but stabs you in the back when you need help. At worst they are Orwellians who rewrite history like Stalin and neo-nazi revisionists.

Notes:

What everyone can agree on is that The Asian Tigers have lots of women working, and well funded education. They also have high savings rates, which we could have if we had less advertising telling us to "buy buy buy".