Politics of East Asia's mirage

Politics of East Asia's mirage

By Vedi R. Hadiz

JAKARTA (JP): The highly vaunted East Asian economic miracle
is now quickly being dubbed the East Asian economic mirage.

As recently as the middle of last year, leaders of countries
and international financial institutions now voicing their grave
concern about the fate of East Asian economies, were virtually
nothing but full of praise for the performances of the likes of
Indonesia, Thailand, Malaysia, and South Korea.

Here in Indonesia, all but a handful of people swallowed whole
such praise, as both the government and the affluent business and
middle classes confidently charted a future that was supposed to
be marked by even more magnificent riches and prosperity.

Now the whole edifice of sustained economic growth has all but
crumbled. As various local and international experts and analysts
survey the rubble produced by the currency crisis that is
sweeping across East Asia like an angry tornado, everyone is
asking what on earth went wrong?

One of the answers emerging, particularly in the Indonesian
case, is not purely economic in nature. Many observers have
pointed to the faults of a political system which allows for
things like corruption, cronyism, and pervasive state and
business collusion to thrive unchecked.

There is no way, they say, that the economy will mend itself
if there is no movement toward significant political reform. The
kind of political reform required is one that, at the very least,
will enhance government accountability to the people and increase
the degree of transparency in the whole business of running the
government.

At the same time, they rightly point to a deepening crisis of
public confidence in our institutions, which has bred distrust of
just about every single pronouncement that any official would
care to make about steps being taken to revive our economy.

The level of abuse of state power which has taken place in
Indonesia in the interest of a few politically connected business
groups is a problem which is well documented and familiar to
everyone who lives or has lived in this country.

There is no need to travel through this familiar ground again
except to reiterate that the heavily criticized practices
involving state and business are an integral part of a carefully
built structure of political patronage that, when well-oiled, has
ensured that our antiquated, closed political system survives.

Although the Indonesian malaise is not confined to Indonesia,
its greatest manifestation in East Asia may indeed be found here
(after all, even before the crisis, some quarters already
anointed us the most corrupt country in the world).

The problem of unchecked state and business collusion is
something which has in fact slowly contributed to the internal
rotting away of many other East Asian societies. And again, a
large part of the problem is closed, partially democratic, if not
largely authoritarian political systems, which need to be
sustained by less-than-transparent economic practices.

The much vaunted East Asian "model" of economic development,
at the most general level, has been characterized by close
cooperation between state and business.

Such a model has been contrasted with the more free market,
"laissez-faire model", which is supposed to have characterized
the experience of countries that industrialized earlier in
Europe.

Such a dichotomy, in fact, is rather misleading, as the later
industrializers of Europe (for example Germany, in contrast to
early industrializing Britain) benefited much from the pervasive
and active intervention of strong states in the economy,
especially in the early phase of industrialization.

Nevertheless, it is clear that in Korea, for example, all the
giant, now troubled, chaebols, could not have prospered without
preferential treatment from the state.

A variation of the theme is found in Malaysia, where the
promotion of indigenous business groups as a matter of official
policy is intertwined with the strengthening of the economic
resource base of the ruling party, UMNO.

In Thailand, there was a long history of close relations
between a very small capitalist class and politicians and
technocrats. While that class is now much more diversified, a
political system in which success depends on access to large
amounts of money saw business and state officials reaffirm their
close links.

Even Japan, the most advanced economy (and earliest
industrializer in East Asia), is characterized by strong links
between state and businesses, at the personal and institutional
level, involving practices which are often quite nontransparent.

In Indonesia, virtually all large business groups, in one way
or another, and at one time or another, have benefited from
preferential treatment from the state power holders.

It is fair to say that in almost every East Asian country, the
emergence of some of the largest business groups has been
intertwined with the practice of state power.

But to a lot of people the economic model seemed to work,
notwithstanding its various unsavory aspects. The trouble begins
when the nontransparent practices become so excessive that they
eat away at all the economic gain that the model was supposed to
have produced in the first place.

This is certainly what has happened in Indonesia, despite the
fact that the current economic crisis was initially triggered by
external forces beyond our control. The same could be said to be
true about some other countries as well.

Certainly, in Korea, state-business collusion ensured that,
like in Indonesia, nothing was done to rein in the burgeoning
debt of the politically connected private sector (though in this
case, the borrowers were mostly banks), a failure which now has
had devastating effects.

If part of the problem which is now faced by East Asian
countries in turmoil stems from their respective political
systems, then another concept that has been debunked by the
current crisis, though perhaps to a lesser and much more
ambiguous extent, is the function of uniquely Asian democracies.

Such democracies are supposedly rooted in indigenous Asian
values that favor harmony, stability and mutual cooperation,
values which are said to be supportive of rapid economic
development in Asia.

Indeed the leaders of such countries as Malaysia, Singapore
and Indonesia have been stridently antiliberal, arguing, for
example, the unsuitability of the "Western" concept of human
rights to their respective countries.

In Indonesia, even the notion of a functioning political
opposition, able to check the actions of state officials, has
been rejected in official circles as contradicting the values of
Pancasila.

In Korea, where Confucian values of harmony are greatly
esteemed but where some limited democratization has come as the
product of a decade characterized by widespread mass unrest (in
which workers and alienated sections of the middle class play an
active role), the kind of state-business collusion alluded to
earlier continues to thrive.

In years to come, a large number of popular books and articles
will be written to explain what went wrong in East Asia in 1997.

Will the attachment to the East Asian economic model be
relegated to the status of a passing fad? And will this also
undermine the dubious notion of uniquely Asian forms of
democratic political systems?

Dr. Vedi R. Hadiz is a research fellow of the Asia Research
Center, Murdoch University, Australia.