StudyCorgi Politics & Government

East Asian Capitalism and Its History


This paper examines capitalism in East Asia. East Asia follows the model known as state-sponsored capitalism. In this sense, the government makes an investment in certain sectors of the economy with the view of spurring growth in the private sector. Countries, which pursue state-sponsored capitalism, include Japan, Singapore, Taiwan, and South Korea. In addition, mainland China has gradually moved toward this type of capitalism over the last several decades. Some of the chief characteristics of the East Asian model include the direct funding of state-sponsored businesses, the control of finance by the government, and high dependence on the export market (McCrow 450). The goal of this paper is to examine the degree to which an individual or group of Asian capitalists fit into the overall process of adapting to capitalism.

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Adapting to Capitalism

According to Najita, the evolution of East Asian capitalism has been shaped by the Western version of entrepreneurship to a certain extent, although it is also partly localized (1751). For people to understand the certain varieties of capitalism (VOC) that are typical of East Asia, they must study how institutions approach sustainable development. With the exclusion of Japan, the rest of the East Asian countries cannot be classified as liberal economies in the sense of western markets.

Understanding the VOC of East Asian countries requires consideration of historical events that have shaped the countries’ local affairs over the centuries. Arguably, the western involvement in the region is so far the most significant influence in the recent past. Interest in the East Asian economies emerged once the countries successfully transformed their economies from ‘developing’ to the same standard as the west. The last three decades saw countries such as South Korea and China attain living standards that match those of the west. However, the struggle between capitalism and socialism in the region remains evident. It is the reason that these countries have sustained an abridged version of capitalism (Yeh 138). This struggle between the two ideologies commenced in 1945. Several revolutions in these countries were staged to counter capitalism with success in China and Korea. Since the end of the Second World War, China and Korea have used their military supremacy to suppress any potential revolutions. These two conflicting behaviors bespeak of the conflict of integrating capitalism in a historically socialist society.

The 1960s saw most East Asian nations embarking on a journey of economic growth. All of them, except China, emulated the western ideology of economic advancement and hence capitalism. Private property (distinguished from “private enterprise”) became the norm since they followed in the footsteps of the west. This approach caused the rest of the world to view East Asia as attempting to catch up with the (booming) rest of the world. Countries such as Japan continued to experience economic growth even when the rest of the world was undergoing depression. As a young industrializing nation, Japan experienced a robust surge in opportunities, hence absorbing the momentary economic depression (Wade 10). Overall, as the region became industrialized, the economies began to strengthen at a faster pace compared to the rest of the developing nations, for instance, India and Brazil. The “third industrial revolution” is the term, which is commonly used to describe the entry of Japan and other East Asian countries into the rank of developed nations. England, Belgium, and France were the leaders in the first industrial revolution while the USA and Germany emerged the frontrunners in the second one.

Socialism arose during the second industrial revolution. As such, it managed to incorporate the tenets of both the first and the second industrial revolution. Japan was the frontrunner in the third era of the industrial revolution, overtaking both China and Russia, who leaned onto the ‘less promising’ socialism (Wade 12). To date, China and Russia are still attempting to catch up with the third revolution, even though their economies have grown large. For example, China struggles with creating new technologies, a field in which Japan has succeeded immensely. Thus, it makes sense to use Japan as the representative in describing the process of capitalism in East Asia. However, this claim does not imply that the individual experiences of the other nations are insignificant and/or they can be adequately represented by the unique Japanese experience.

The three important aspects of any industrial phase are technology, organizational principles, and the influence of the industrialization process on the rest of the world. The state and government-sponsored institutions play a key role in the development of a nation (Gates 269). Japan is the leading capitalist nation in the East Asian region. Indeed, two of the leading “dragon” nations in the region, namely, Taiwan and South Korea, were the colonies of Japan for nearly fifty years. Additionally, the remaining countries, including China, were conquered by Japan at some point in the mid-20th-century (Hamilton 23). To date, many of them depend on Japan for technology, a situation that emphasizes the country’s position as the industrial powerhouse of East Asia.

The first interaction with westernization for Japan happened in the late 16thcentury when European missionaries arrived in the country. This period led some Japanese to embrace Christianity and western ideologies. Arguably, these events were laying the groundwork for capitalism in the country because traders from Spain and Portugal soon followed suit. The Japanese rise to economic superiority was also helped by a deep culture of industriousness that is portrayed by its people. For example, in the late 16th century, the Portuguese first introduced guns to the Japanese. However, because they were selling them costly, the Japanese sought to make their own. They succeeded in the endeavor. By the end of the century, Japanese wars were being fought with more guns relative to the situation in the European continent (McCrow 455). When the Meiji Restoration took place in the 1870s, the priority was now to catch up with the west because the ruling tier felt threatened by the westerners. Hence, the slogan “strong country, strong army” (McCrow 447) emerged as the guiding principle for economic advancement in the country.

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As stated earlier, the governments of the East Asian countries played a key role in embracing capitalism. In Japan, the ruling class admired the western economy and leadership style during the time when the country (Japan) was interacting with the west. Already, Japan had failed at state ownership of property, a practice earlier adopted from China. Thus, when the Europeans came to Japan, they encountered a ruling class that owned land privately (feudalism) (Cumings 305). The ruling class did all it could to maintain the ownership of all property while allowing peasants to utilize the land for purposes of cultivation. The tendency of capitalism was still growing in Japanese society between the 1600s and 1800s. In 1854, Matthew Perry (a US Commodore), successfully coerced the Japanese to open their ports to western trade as a move toward embracing westernization. The Japanese ruling class complied only to avoid becoming colonized as it happened with China.

Japan welcomed westernization (industrialization) as a way to avoid becoming the subjects of western colonization. The Shogunate (ruling class) believed that if Japan became as powerful as the west, it would become impossible for any western power to colonize it. Hence, the period of industrialization in Japan began in 1870 when the first rail track commenced its construction. By 1874, a third of Japan’s revenue was being invested in the railways. Because Japan’s ruling class was weak, the proletariat supervised the construction of these railways, as well as the setting up of industries in the country (McCrow 450). Ironically, later the country would lack private investors, thus forcing the government to invest in the private sector.

Unlike Japan, China has arrived late in the capitalist sense, owing to its deep-rooted socialism. Mencius, one of the most popular Chinese philosophers, advocated for a government that would put humanity ahead of profits. Thus, for thousands of years, China embraced the type of leadership where social justice was valued above the private ownership of property. The people were expected to work to support their government. At the same time, autocracy was deeply entrenched to the extent that the revolution was tough to stage. However, with the rising of the Song dynasty, Chinese society became more secular and sophisticated, thus allowing the emancipation of the Mencius. For example, education and talent were now more emphasized relative to the situation in the past. In addition, anyone could rise to prominence and success if he or she was educated and talented. This situation gave birth to the phenomenon that is commonly referred to as “petty capitalism” (Gates 270). Beginning in the early 20th century, China saw technology as the path to economic advancement. This move could have been borrowed from its neighbor, Japan, which was doing quite well at the time.

Xun Zi and Guan Zi argued that for society to thrive, each person had to specialize in a certain skill. For example, farmers would till land while artisans made tools. The success of the early and mid-20th-century governments began working toward industrialization. Many industries, which were set up then, relied on western and Japanese technology. Just like Japan, China saw technological advancement as a way to defeat Western imperialism. However, the Chinese were slower relative to their Japanese counterparts in embracing capitalism in its totality. As such, the government remained in control of the means of production. Additionally, China was being influenced by the communist trends of Russia under Joseph Stalin’s leadership. These factors (China’s closeness to Russia and the existing socialist networks) slowed down the country’s progress toward capitalism. To date, China struggles between capitalism and socialism, with the state still controlling most of the resources. However, globalization is transforming China’s ideology from leaning toward socialism to become a capitalist society in the conventional sense (Reed 327). For example, people are now free to own property and/or protest poor pay in industries. These trends could not be allowed in strictly communist China. Another evidence of China’s transformation is that its markets are becoming free to international trade.

Alongside economic development, there was a move across China to have a centralized government. Before, China had been composed of many distinct clans that ruled themselves distinctly from the others. However, the desire to develop brought with it the need to pool together resources for this purpose. Thus, in the 1920s, Sun Yat-sen launched the Shiyejihua (industrial plan) that would guide the country’s road to industrialization and hence economic development. This plan has been lauded as the beginning of modern China (James 405). One of the direct results of Sun’s plan was the extensive railway network that would later facilitate industrialization by offering efficient transportation of materials. Sun believed in a Chinese economy that pursued the interests of all the Chinese people. He made the world a socialistic place. His beliefs were upheld by his successors, both communists, and nationalists. For years to come, China’s ultimate goal was the implementation of the industrial plan.

Today, Korea is divided into two regions, namely, the north and south, a division that emerged amid the struggle between communism and capitalism. Up to the mid-20th-century, the country was a single territory. As such, its distant history is discussed as one. Korea’s economic history can be categorized into distinct historical eras. The first was the Malthusian period, which lasted for six centuries up to about 1910, the year Korea was colonized by Japan. The second era is marked by the period that Korea was under Japanese colonization (1910-45). It is during this second period when the country began on a path to economic development. Already, Japan was moderately industrialized and was busy spreading its newly found ideology across Southeast Asia (Cumings 303). Another country that benefited from Japan’s industrialization was Taiwan. The third period was the post-colonial era. During this time, a major difference emerged between the north and south of the nation. While South Korea continued on the path of economic development and improved standards of living, North Korea fell back to impoverishment. Thus, when discussing capitalism in Korea, scholars tend to focus on the south because it is the true representation of the ideology and in particular, the East Asian VOC.

Just like in Japan and China, the government of South Korea played an important role in facilitating industrial growth and the liberalization of markets. Between 1392 and 1910, the Chuson dynasty had laid in place a tax system where the subjects worked to support the government. However, in the 16th century onward, Japanese and Chinese armies invaded the country repeatedly, a situation that served to damage the preexisting command system. Instead, a market system arose. Money began to be circulated (Cumings 303). By the time Japan colonized the country in 1910, capitalist society was already budding. Over time, this system evolved and blended with industrial growth to give rise to modern free markets. Today, Korea is leading regarding free trade in the East Asian region.

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The East Asian region has a historical background of socialism where private ownership of property was not common. For many centuries, the teachings of philosophers such as Mencius and Xun Zi were adhered to. However, during the 16th century, East Asia was exposed to westernization, leading to the emergence of free trade. Consequently, people began owning land privately, hence laying the groundwork for capitalism. With industrialization in Japan, the region fully embraced capitalism, motivated by the urge to become technologically advanced. However, China remained behind due to the existing socialist trends attributable to the country’s past. Other countries such as Taiwan and Singapore demonstrated varying levels of capitalism that can be fitted in between Japan and China.

Works Cited

Cumings, Bruce. Korea’s Place in the Sun. Norton, 1997.

Gates, Hill. China’s Motor: A Thousand Years of Petty Capitalism. Cornell University Press, 1996.

Hamilton, Gary. Cosmopolitan Capitalism. University of Washington Press, 1999.

James, Tracy. Rise of Merchant Empire. Cambridge University Press, 1990.

McCrow, Thomas. Creating Modern Capitalism. Harvard University Press, 1995.

Najita, Tetsvo. Ordinary Economies Japan: A Historical Perspective, 1750-1950. University of California Press, 2009.

Reed, Carol. Regional Analysis: Economic Systems. Academic Press, 1976.

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Wade, Robert. Governing the Market. Princeton University Press, 2004.

Yeh, Wen-Hsin. Becoming Chinese: Passage to Modernity and Beyond. University of California Press, 2000.

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