Why The "Asian Tiger" Miracle
Is An Endangered Species

by Gail Billington

Speech at Schiller Institute Conference, February, 1997. Printed in The American Almanac, April 7, 1997.


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In the aftermath of the December 1994 Mexican peso crisis, the most aggressive promoters of the ``Asian Tiger'' economic model have been the London-centered financial oligarchy, with Chancellor of the Exchequer Sir Kenneth Clarke and European Union Vice President Sir Leon Brittan playing key roles. In 1995, Kenneth Clarke toured Asia to promote this model, while Sir Leon Brittan and Singapore's Prime Minister Goh Chok Tong co-sponsored the founding of the Asia-Europe Meeting in 1996, as an institutional voice for this model.

As we proceed, I'd like you to keep this image in mind. No matter how much praise may be heaped on tigers, this is how the British prefer their tigers (see photo).

As Prince Philip himself would tell you, the Asian Tigers are an endangered species. Today we will examine why that is true for the ``Asian Tiger'' economic model. In 1993, the World Bank published a report, entitled the ``East Asian Miracle,'' which identified eight countries that had achieved ``seemingly miraculous'' rates of sustained growth over the 25-year period from 1965 to 1990. The eight were Japan, the ``Four Tigers:'' Hongkong, South Korea, Singapore, and Taiwan; followed by the ``newly industrializing economies,'' now called ``emerging Tigers:'' Indonesia, Malaysia, and Thailand. To these eight, we add the Philippines, whose President Fidel Ramos is determined to earn his country's stripes through ``entigerment,'' as he calls it, by the shortest route possible.

What the World Bank has done is a classic accounting trick. With the stroke of a pen, they have said that South Korea and Taiwan, countries of 44-plus and 21-plus million people, respectively, are functioning on a par with two city-states, Singapore and Hongkong, with under three million and six million population, respectively. Taiwan's capital, Taipei, alone, is as big as, if not bigger than, all of Singapore, while South Korea's capital, Seoul, is more than twice as big as Hongkong. But let's start peeling away the layers of this fraud.

But, the ``emerging Tigers'' of Indonesia, Malaysia, Thailand, and the ``entigered'' Philippines, still have 50% or more of their productive labor force tied up in just these two sectors, overwhelmingly in agriculture. If you want to know why there is so much child labor in Asia, this chart is part of the answer. Indonesia and Thailand have 55% and 62% of their labor working paddy, and, in total, over 60% and 70%, respectively, in agriculture and manufacturing. Where do all these people come from? More likely than not, children, rather than the elderly. One recent study predicted that by the year 2000, 70% of Thailand's workers will have received only a primary school education, which means kids aren't staying in school past the primary level.


"Full Set" Economies

Japan, South Korea, and Taiwan developed on the basis of an economic model, known as the ``full set'' concept, which was rooted in the principles outlined by America's first Treasury Secretary Alexander Hamilton, and the National System of Political Economy of Germany's Friedrich List. Hamilton wrote that it was impossible to found a lasting and free nation-state, without government protection and fostering of industry, and especially of new scientific invention.

These ideas were fully adopted in Japan as early as the 1870s, and in Taiwan and South Korea after World War II and the Korean War, respectively. Rather than allow their countries to be ``colonized'' by foreign capital, all three mobilized government credit, issued through government development banks, to develop infrastructure. Their central banks judiciously guided the commercial banks to loan specifically to such projects and to private companies to create entirely new industries. As each new industry came on line, the government then sold its share to a private firm to develop further.

Japan, Taiwan and South Korea were all cut off from the mainland, poor in raw materials, and dependent on foreign fossil fuel, yet they chose to meet their postwar national security needs by developing industrial independence. This shows up overwhelmingly in the density of infrastructure development per capita, per square kilometer, and per household, as already shown, in part, by the relationship of manufacturing to agricultural labor force, energy generation per capita, and the significant extent to which that energy is derived from nuclear power, unlike any other countries in the region.

The fundamental difference lies in the development, in depth, of the machine tool sector, comprised mostly of small and medium-sized firms, feeding the larger ``mother plants'' of the major firms with an increasing rate of qualitative improvement in product design and labor productivity, producing entirely new generations of machine tools (see Fig. 5). Author Mitsuhiro Seki, in his book Beyond the Full-Set Industrial Structure, captures the density of such machine-tool capacity in the Ota Ward, south of Tokyo, where some 2,000 such highly specialized shops operated. One systems designer told Seki, ``Within the radius of one-and-a-half hours travel from here are located all the development divisions of Japan's leading companies. I can make a paper airplane of my blueprint, toss it out the window, and in a few days the finished product will be ready.''

``Tigers'' Singapore and Hongkong represent the counter-example. Founded as forward bases for running British Imperial financial and drug warfare against China, in particular, and continuing to this day as the pre-eminent, money-laundering centers for the region's vast black market economy, complemented by lower levels of low-skill, cheap-labor assembly operations, the stuffing in these tigers is pure fluff.

As for the ``emerging Tigers'' of Southeast Asia, their attempts at serious industrial development have largely been still-born. Whatever intentions Thailand and the Philippines had of large-scale infrastructural and industrial development, fell victim to the double-whammy of the late-1970s oil shocks and Federal Reserve Chairman Paul Volcker's stratospheric interest rate policies. In the early 1980s, the IMF ordered any such intentions shelved, and, in the case of the Philippines, unleashed a three-year process, from 1983-86, to ``break'' that country on the basis of a program of deregulation, privatization, and liberalization that dominates economic and financial policymaking to the present.

For Indonesia and Malaysia, both oil and gas producing nations, the oil bonanza sustained their development policies until 1985-86. While it lasted, President Suharto of Indonesia, with the assistance of his Minister of Technology, B.J. Habibie, created a ``strategic industries'' sector of eight industrial firms, as the core of an independent national security production capability, serving both the civilian and military sectors.

Habibie also advised Malaysia's Prime Minister Mahathir Mohamad in building a similar ``Heavy Industrial Corporation of Malaysia (HICOM).'' But with the collapse of the oil price after 1985-86, the boom was lowered by the international financial elite. In Indonesia, the IMF-trained technocrats in the economic and financial bureaucracy successfully leashed the ``strategic industries'' sector such that it remains a potentiality for the future, but does not function as a ``technology driver'' for the economy as a whole. In Malaysia, the HICOM program was largely scrapped.


No New Japans

The failure of Southeast Asia to develop in the footsteps of Japan, South Korea, and Taiwan has to be laid, in part, at the door of such London-trained officials, as former National Security Advisor Zbigniew Brzezinski, who told Tokyo officials in 1978 that the international financial elite ``will permit no new Japans.'' The 1985 Plaza Accords, imposed on Tokyo by Bush-buddy, U.S. Treasury Secretary Donald Regan and the Bank for International Settlements, unleashed a process to dismantle Japan's ``full set'' economy, deliberately driving up the value of the yen, creating a huge speculative bubble in Japan itself, which led to a collapse in exports and skyrocketing prices, including in real estate. Thus, began the diversion of investment away from the productive sector and physical economy and into feeding the speculative bubble.

Now, let's look at the innards of these ``Tigers.'' Here you see that, indeed, ``Tigers'' Taiwan and South Korea were cutting a ``full set'' of teeth. And, it's only fair to point out, that in 1995, Singapore and Indonesia, taken together, at least appeared as a blip on the radar screen of world machine tool producers, representing 0.4% of total production, an amount that would show up as a pinhead-size dot on this chart.

But, increasingly, following Britain's grudging agreement in 1984 to return Hongkong to Chinese control after June 1997, Southeast Asia has been sucked into the competition to see which country can best imitate that Royal Crown Colony's role at the center of financial looting operations in the region. The pace quickened radically following the blowout of the Mexican peso in December 1994. In January 1995, Britain's Chancellor of the Exchequer Sir Kenneth Clarke, leading a tour of senior London-financial officials laid down the rules: liberalize of the financial sector; dismantle restrictions on foreign ownership; privatize the state sector, especially power generation, telecommunications, and roads; lure Southeast Asian firms to ``play the market'' with the ``big boys'' on the London exchange. European Union Vice President Sir Leon Brittan has taken the privatization issue further, declaring that state funding of essential infrastructure is forthwith to be left to the ``private sector.''

The Dow Jones-owned, Hongkong-based Far Eastern Economic Review, published a survey of the ten top firms in each of the East Asian countries in January 1997, which shows just what the World Bank's ``Asian Tigers'' economic model is all about (see Fig. 6).

You see the preponderance of finance, real estate, service sector (such as hotels) in the economies of Singapore, Hongkong, and the Southeast Asian countries, by comparison with the still largely industrial, and productive, economies of the ``full set'' countries.

But let's take some singularities. Out of 30 companies listed for the ``full set'' countries, only one bank and one insurance company appear. For the rest, three-seven financial concerns are listed for each country, with Malaysia the high scorer at seven. Factoring in the number of real estate firms, you end up with 4.5 to eight out of ten in each country. The number one firm listed for Malaysia is Genting Berhad, 73% of whose revenue is generated by the Genting Highlands Casino overlooking the capital. Malaysia's majority Muslim population is barred entry to that casino.

The ``other'' category includes the No. 1 firm listed for the Philippines, the San Miguel beer brewery, One major brewery in Singapore, and two cigarette manufacturers in Indonesia. Hongkong's list is led by the world's premier drug-money laundering bank, Hongkong and Shanghai Bank. Thailand's No. 1 firm, C.P. Group, is a diversified company whose principal focus is not Thailand, but the 130 joint venture projects it is operating in all but two of China's provinces!

The 1990s in Southeast Asia has been dominated by rapidly increasing exposure and vulnerability to the global financial bubble. In Indonesia, the foreign debt exploded, rising to $100 billion, with debt service reaching 32% of exports. In June 1994, a series of deregulation measures went into effect, scrapping prohibitions on 100% foreign ownership of a range of industries and reducing tariffs on more than 700 items. In December 1995, the government slapped derivatives restrictions after two firms lost $66 million.

Thailand and Malaysia have leapt into the center of the financial bubble on all fours, opening offshore money-laundering centers to cut them in on an ever-bigger share of Hongkong's money laundering. In Thailand, the baht was made convertible in 1991; the stock exchange was deregulated; the Bangkok International Banking Facilities, an offshore center, was set up, fueling a real estate bubble, that is now threatening to detonate the Bangkok banking and financial sectors (see Fig. 7). At the same time, Thailand encouraged illegal labor to enter the country to keep wages arbitrarily low--at 44% below Thailand's own minimum wage.


Casino Economies

Malaysia launched its own offshore banking center, Labuan Island, off Sarawak, in 1990, aimed at creating a money-laundering center to rival the Cayman Islands. There are now 50 international banks operating in Labuan. Malaysia lost more than $10 billion in the early 1990s, trying to beat mega-speculator George Soros at his own game in speculating against the British pound, and in trying to outsmart speculators in commodities derivatives, such as tin. Today, Malaysia leads the region in exporting the casino economy, for example, to Cambodia, where the single largest ``infrastructure'' project is a $1.3 billion resort/casino offshore of Sihanoukville, for which the Malaysian firm Ariston will provide the necessary roads, airport, and power supply. The Malaysian firm Ekran has similar plans for a casino, offshore of Davao, in the southern Philippines island of Mindanao, where the Manila government reached a peace agreement with Muslim insurgents after a 20-year civil war.

Take a minute and consider this: Outside of Africa, the nations of Indochina: Vietnam, Cambodia and Laos, are among the most destroyed nations in the world. The estimates of landmine distribution in Cambodia range from six to ten million landmines covering a broad area, particularly along the border with Thailand. Were there ten million landmines, that means one landmine per person in Cambodia, which has the highest rate of amputees in the population, largely affecting young men in the productive age range. Average education, according to the government, is four years of schooling.

In December 1995, the Philippines unleashed a sweeping privatization (as has Malaysia), including social security, the national railways, the Manila waterworks and sewerage system, the national power corporation, local waterworks utilization system, and the ports authority, while also opening up the mining sector to 100% foreign ownership and 100% repatriation of profits in joint ventures. The Philippines, please note, is the world's fifth largest producer of gold; the title of the privatization program was, ``The Hongkongization of the Philippines.''

Near the top of the list of ``growing industries'' in the Philippines is casino construction, including turning the former U.S. Air Force base at Clark Field into the ``Las Vegas of Asia,'' with five Disney theme-based casinos.

The British campaign to recolonize Asia through increased foreign financial control shows up in reports that for Southeast Asia as a whole, foreigners account for 25% of commercial banking, 70% of life insurance, and 40% of capital in the financial system as a whole. Britain, itself, has emerged as the top European investor in Thailand, and the top portfolio investor in the Philippines in 1994 and 1995; based on government-published materials, since 1967, Britain is the second largest foreign investor in Indonesia after Japan. Commonwealth ``hot money'' centers, Singapore and Hongkong are close behind.

The highly volatile character of this investment has likewise accelerated since the Mexican peso crisis. In 1995, 84.4% of all investment in the Philippines was foreign portfolio investment, more than 90% of it, British. Early this year, the Bank for International Settlements warned that ``Banking debt with a maturity of less than one year accounted for well over half of the total in Taiwan (86%), South Korea (71%), Thailand (69%), and Indonesia (60%).

But the most damning proof of what the World Bank ``Asian Tiger'' model is all about was released in a remarkable report prepared by a team at Thailand's Chulalongkorn University in 1996 (see Fig. 8). The report documented that the illegal ``black'' economy equalled more than the total annual budget for 1995 by $1.4 billion, and in GDP equivalants, equalled 30-58% of annual GDP.

The breakdown by category is: prostitution, $17.7-20 billion; narcotics, $3.9 billion; labor export brokerage fees, $2.4-3.2; weapons trafficking $512 mn to $2.4 bn; black market oil smuggling, $334 bn; gambling (casinos, underground lotteries, soccer betting), $17.71-53.21 bn.

Here you see the same picture in terms the World Bank can understand (see Fig. 9).

In fact, the reality is far worse than this chart, which reflects data from a year ago. Latest estimates indicated 6 million overseas workers, sending back remittances of $8 billion, by official estimates, $12 billion according to unofficial estimates. The OCW labor force is estimated to account for 10% of the total Filipino labor force.

These examples bring me back to the starting point of this presentation. The World Bank's ``Asian Tiger'' economy is, indeed, an endangered species. What I hope I have shown is that it can survive only on the basis of devouring the human and physical resources of these nations. Anyone familiar with the subject will know that ``man-eating'' tigers are considered ``sick'' tigers, either wounded, old and infirm, or running out of their natural food supply. Humans are not their preferred diet.


AIDS in Asia

The magnitude of the cannibalism resulting from the ``Tiger'' model was made public in 1995 during the proceedings of the Third International Conference on AIDS in Asia and the Pacific, which took place in Chiang Mai, Thailand. There it was announced, that by the year 2000, Asia will overtake Africa as the epicenter of the global AIDS epidemic. Already as of January 1995, some 4.5 million people in Southeast Asia were reported infected with HIV. Experts reported that by 2000, one in 15 Thai children will be indirectly affected by the infection of one or the other parent by HIV, and the infection will have the effect of wiping out an entire decade of development and a corresponding collapse of life expectancy by 30 years by the year 2010.

Let's be very clear what this means. Current life expectancy in Thailand is 69.2 years. By 2010, slightly more than 10 years from now, these officials estimate that life expectancy will have dropped to about 40 years.

No country will be immune to this process. At a closed-door ASEAN task force meeting in October 1996, the head of the AIDS task force read out the expected body count: Thailand, one million (1:60 people); Indonesia, 750,000; Vietnam, 300,000; Philippines, 90,000; Malaysia, 20,000. Cambodia is already at 1:83 people.

This cannibalism is not a reflection of ``Asian'' values.

This graph shows that the acceptance of the World Bank's criteria for evaluating economic performance in strictly monetary terms has contributed to the collapse of the physical economy on a global scale. The financial bubble that is devouring the ``Asian Tigers,'' is likewise cannibalizing the productive potential of the formerly ``full set'' economies.

It is not the case that these jobs have been ``outsourced'' to ``cheap labor'' among the ``Asian Tigers,'' which never acquired the physical capacity nor skill levels required. These jobs were eaten, consumed by the same insatiable appetite of the financial AIDs that is fueling the epidemic that will shortly engulf Asia.

The World Bank technocrats who wrote the ``East Asian Miracle'' and the London-centered financial interests who have promoted the ``Asian Tiger'' model know what kind of monster they have created. An article appearing in the Manila Standard on February 13, 1997, and shows, according to World Bank data, that infant mortality (see Fig. 10) in the ``entigered'' Philippines is lower than in several African countries. The authors of the ``East Asian Miracle'' also know that the alternative to the ``Asian Tiger'' model, exemplified by the ``full set'' economic model we saw before, is the most successful model of economy ever created.

Let us save the tigers and ourselves. It is time for the nations of the world to join forces against those who kill for pleasure and greed.


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Figures

Gail Billington reporting on how the World Bank knocked the stuffing out of the so-called ``Asian Tigers.''

A Tiger Hunt The ``Asian Tiger'' economic model has been promoted by London. But, this is how the British prefer their tigers.

Creating the Myth of the ``East Asian Miracle''
This World Bank report identified the eight countries: Asian ``Tigers,'' and the ``Emerging Tigers,'' which had achieved ``miraculous'' growth 1965-90.

Figure 1
Change in GDP per Capita, 1960-85 On what basis does the World Bank compare these countries? Gross Domestic Product, i.e., the "bottom line."

Figure 2
Manufacturing and Agricultural Workers as percentage of labor force, 1992 Singapore and Hongkong are true believers in the notion that food grows on grocery store shelves--why grow it, when you can buy it?

Figure 3
Scientists per 1,000 Population This graph represents what Lyndon LaRouche has identified as the ``sole source of sustainable profit in economies: unleashing the creative power of the human mind.'' The discrepancies are self-evident.

Figure 4
Tigers with Teeth: percent share of world machine tool production Even in Japan's ``full-set'' economy. machine-tool production has been in sharp decline since 1990.

Figure 5
Ten Top Firms, by sector, 1996 This chart, based on a survey by the Far Eastern Economic Review, shows just what the World Bank's ``Asian Tigers'' economic model is all about. Note the discrepancy between the ``full-set'' economies and the others.

Figure 6
Thailand: Investment in real estate as % of direct foreign investment Thailand's real estate bubble, fueled by deregulation and off-shore banking, is threatening to blowout the financial sector.

Figure 7
Thailand ``Black Economy,'' 1995 A report issued by Chulalongkorn University documents that the illegal, ``black economy''--including prostitution, drugs, gambling, etc.-- equalled more than the total annual budget for 1995!

Figure 8
Thailand: Black Market as % of GDP Why the World Bank loves the ``black economy.''

Figure 9
Manila Standard on Infant Mortality in the Philippines This Feb. 13 article, based on the World Bank's own data, reports that infant mortality in the ``entigered'' Philippines is higher than in several African countries.


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The preceding article is a rough version of the article that appeared in The American Almanac. It is made available here with the permission of The New Federalist Newspaper. Any use of, or quotations from, this article must attribute them to The New Federalist, and The American Almanac.


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