Shooting to succeed
(Second of three parts; click here for part one)
Having created humongous domestic markets of many, many, many small income consumers, who vastly outnumber a handful of landlords and rent collectors who shop in Hong Kong or New York anyway, Taiwan, Japan and South Korea supplied their captive markets first with shoddy, more expensive local goods made with imported machinery—but never with better and cheaper imports. That was a no-no.
There are many ways to do that even under WTO including teaching your people to hate foreign products you already make at home. I saw that in South Korea; hate is the strongest motivator of national development.
First they made small stuff like electric fans, toys, fridges that looked bad and worked worse, and were priced 10 times more than the superior genuine product from the US.
But protected from international competition, the local maker had no incentive to improve his products and lower his prices for the foreign markets since he could milk domestic markets for any price. Exports are key to sustained development.
But how do you make him to do that? How do you make him make better products, sell them for less, and so increase his exports. How do you appeal to a businessman. Put a gun to his head.
In South Korea, Gen. Park Chung Hee locked up the big businessmen and told them to manufacture well and export a lot. They answered, “We will think about it.” Park said calmly, “Sure, go ahead and take your time—in prison.”
Amazing how well businessmen respond to that kind of incentive. It wasn’t easy; mistakes were made; it took a long time. But Hyundai and Samsung have come to dominate the world market for autos and electric gadgets; and before that it was Sony, Toyota and Nissan.
The banks were ordered to lend only to exporters and only as much as they exported.
The less they exported the less they could borrow; until one by one they started to die out; and only one or two, who swallowed the dead and dying, were left standing to take on the world outside.
Businessmen were forced to be creative to make better products; so they were encouraged to enter into foreign partnerships.
Foreign partners naturally brought in lousy technology to make products good enough for the local market but which could not compete with their own products abroad.
The South Koreans took what they were given, worked with it until they knew it so well, they reversed engineered it and threw out their foreign partners. Then they took on new partners with whom they shared the stolen technology and together made improvements on it to the benefit of the exports of both.
Then they threw out those partners and improved the products on their own until they made far, far better products for exports that came to dominate the markets of the world.
They called this learning by doing; which is better than learning in school; you earn as you learn; and learn what you need to earn. And all this time, while the foreigners think they are screwing you, you are screwing their wives.
In this second stage of economic development contracts are sacred until it is time to break them and enter into a better contract to be broken as well in turn. A businessman’s word should never be his bond.
There is nothing to fear; foreigners cannot retaliate; their governments may threaten but they are all mouth. They have higher geopolitical priorities than saving even their own suckers.
This was the story of Northeast Asian development and of Southeast Asian failure about which we spare you any account except to say we did none of the things that Japan, Taiwan and South Korea did but what the West told us to do and so we were screwed.Disclaimer: The views in this blog are those of the blogger and do not necessarily reflect the views of ABS-CBN Corp.