| Abstract: |
This essay considers the economic performance of East Asia’s two largest
economies in the second half of the twentieth century and debates prospects
for the first half of the twenty-first. The discussion takes place in the
context of dynamic strategy theory. First in Japan, and then later in China,
‘developmental’ states adopted strikingly successful industrialisation
strategies with a common thread of outward orientation. Outward orientation is
distinguished from export dependence. The former is an autocatalyzing
sub-strategy that can sustain an economy all the way to full membership of the
strategic core. Outright export dependent strategies, in contrast, are finite
and imitative rather than auto-catalyzing, leaving their practitioners highly
exposed to adverse external shocks. Japan’s experience of strategic rise,
stagnation and eventual exhaustion is articulated at length to illustrate this
important distinction. China’s own outward-oriented strategy, which is
currently stimulating rapid economic growth and differs in many important
respects from Japan’s, is then analysed in an attempt to examine its future
viability. China’s prospects for adapting an alternative strategy prior to
exhaustion are then considered. The conclusion is that it is reasonable to
expect China’s strategic leadership to attempt to transition towards a
sub-strategy that continues to sponsor industrialization through exploitation
of the mass internal market in the broad context of outward orientation.
Furthermore, the contemporary sub-strategy is clearly far from exhausting
itself. However, the risks are consequential. On balance, prospects for a
successful transition are sound but not overwhelming. An Asian-facing resource
rich economy such as Australia should actively hedge the risks of unsuccessful
transition. In the face of this uncertainty, Australian strategists are
thankfully not facing an independent binary choice. To hedge against the
possibility of the more pessimistic projections coming to fruition in China,
thereby unhinging a resource dependent substrategy, Australia must make an
independent effort to make an assertive move towards the upper echelons of
productivity performance. This will involve a wholesale reassessment of the
scale of national resources that should be directed to the innovation
infrastructure. |