Lecture 2001-02-19

Japan and Asia in a new Global Age: Can Asia become the most dynamic centre of the world economy in the 21st century?

Professor Makoto Taniguchi

This was the first of a series of three meetings scheduled to be held in the Shibuya Kyoiku Gakuen. Prof. Makoto Taniguchi was Japanese ambassador to the United Nations from 1986-89, and is now Director of the Research Institute of Current Affairs at Waseda University.

Prof. Taniguchi said that he proposed to present his own personal views on this broad subject, based especially on his experiences in international organizations like the United Nations (UN) and the Organization for Economic Cooperation and Development (OECD). Asia was now going through a process of rapid change, and southeast Asia was in turmoil following the financial crisis of 1997, brought on largely by premature liberalization of their banking systems. Globalization was not in fact something new in Asia, but went back to the end of the 19th century, through the links with the West. Prof. Taniguchi was appointed deputy secretary-general of the OECD in Paris in 1990, after thirty years of service in Asia and at the UN, and was struck by the difference in ideology. The UN had 189 members, most of whom were developing nations; the OECD had 24, all Eurocentric. He applied himself to broadening the outlook of the OECD, and initiated the drawing up of a report "The World in 2020: Towards a New Global Age" (unusually, he is specifically named as the initiator in the introductory acknowledgements). The world was changing, but the OECD countries did not understand other regions, and had little experience of Asia. They were shocked at the "inhuman" high savings rate of 50% in Singapore, which they felt smacked of bureaucratic dictatorship, and yet this rate was typical of Asia as a whole. In 1990 the OECD invited the "Asian tigers", Korea, Hong Kong, Taiwan and Singapore, and two others, Thailand and Malaysia, to attend one of its meetings, the first time Asians had been invited. The meeting ended in chaos, as the OECD tried to get the Asians to follow their own rules of the game and open up their financial markets, while the Asian financial authorities preferred to follow a steadier course of development, as their infrastructure, especially their banking system, was weak. Prof. Taniguchi argued against the pressure of the OECD economists for fast liberalization, and was accused of trying to protect his fellow-Asians; but he said no, he was speaking as an economist. (There were also some American economists who cautioned against premature liberalization, having been warned by the case of Mexico.)

The Asian economies have learnt from their financial crisis, and are in fact in a better position to grow than those of other regions, having benefited from globalization. In the 1950s, Nigeria, an oil-producing country, had a higher per capita income than Korea. In 1980 its per capita income was US$1,010, while Korea's was $1,520; in 1997 it had dwindled to $280, while Korea's had risen to $10,550. In 1980 there were 10 "low income" countries, five in Africa and five in Asia. In 1997 the African countries remained in the same category, while most of the Asian countries had moved up. Prof. Taniguchi's experiences in the Economic Commission for Asia and the Far East (ECAFE) (1966-68) had made him pessimistic about the future of Asian economies, where the commodity markets were stagnant, and efforts to industrialize (as in India) had failed. But a number of factors had contributed to a favourable development. There was a high quality of labour, and good economic policies had been adopted. Moreover, the links with the OECD economies had led to trade and investment and the transfer of technology. Another factor was the effect of the Japanese economic recovery. The Asian economies were at different stages of development, like a skein of wild geese flying; Japan was in the lead, then came the NIEs, then the ASEAN countries, and then China and India.

The study "The World in 2020" shows that Asia will benefit from globalization more than other regions. Asian economists have been flexible and realistic, not slaves to any particular theory (even China opened up its markets in 1979). There is a good financial basis for development; there has been a steady 6%-7% rate of growth, prices have been stable, and foreign reserves high. But sometimes they have been too greedy for development, and the opening of the market to speculative private investors from overseas had led to the financial crisis of 1997. So the Asian countries must learn not to try to become rich too quickly, and certain policies for guiding development were needed. One consideration was that industrial development would depend on oil imports. By 2020 China would need to import 40% of its oil, and oil-exporting Indonesia would become an importer to the extent of 43%. With such a dependence on oil imports, East Asia would be very vulnerable if another oil shock occurred. So it was best to aim at a steady long-term growth.

Another problem concerned food. By 2020, China could be the biggest importer of food after Japan. Then there was the question of population increase. China could not continue its policy of one child per family indefinitely, and its population could be expected to be around 1.5 billion by 2020, and India's population would exceed that of China. But the most serious problem would be that of environmental pollution. Both China and India were largely dependent on coal, and China was likely to become the country with the largest CO2 emissions. What could Japan do to help? Japanese technology was still the best in Asia, especially in the field of combating environmental pollution, and Japan was also the steadiest giver of overseas aid. In such circumstances Japan could help China to overcome its environmental problems. In other parts of the world there were academic groupings such as the European Union (EU), North American Free Trade Agreement (NAFTA) and Association of South-East Asian Nations (ASEAN), but there was no comparable structure combining Japan, Korea and China, although these three countries together have more economic power than the EU. (By 2020 Chinese Gross Domestic Product (GDP), in terms of purchasing power, will be 20% that of the world, the US 11%, and Japan 5%, though in terms of the exchange rate the share of both China and Japan will be 11%.) There was therefore a need for a loose cooperative economic structure.

In conclusion, by 2020 the OECD economies, in particular the Group of Seven (G7), would not be the only major actors on the world stage. East Asia would make effective use of globalization, but it was absolutely essential to control the environmental problems.

After his presentation, Prof. Taniguchi happily answered questions. One concerned training students in new ways of thinking. Here Prof. Taniguchi said that he found the Chinese students more responsive than the Japanese, some of whom even had no concrete purpose in studying. In the UN, where the developed and the developing countries tended to be divided into confrontational groups, hours were spent on issues like the environment. The developing countries were not responding to the question of controlling environmental pollution, and now the US was also pulling back. Of the eight great CO2-emitting countries, four were in Asia. In a lighter vein, he said his teacher at Cambridge, Joan Robinson, had formed a group called the Heretics, which he joined; he had learnt from her to accept the bright side of globalization and resist the dark side.

The meeting closed with a vote of thanks proposed by Mr. Sakamoto, who, recalling Sir Vere Redman's words to the Society on the occasion of its centenary, in which he said that the ASJ had given scholars the chance to include Japanese studies in international disciplines, observed that this time Prof. Taniguchi had given the Society the opportunity to widen its horizons to include all of Asia.

Adapted from "The Asiatic Society of Japan Bulletin No. 3", March 2001, compiled by Prof. Hugh E. Wilkinson and Mrs. Doreen Simmons.