2 Strong states, weak societies

State and class in the Asian rimlands

[Materialist dialectics] holds that external causes are the condition of change and internal causes are the basis of change, and that external causes become operative through internal causes. In a suitable temperature an egg changes into a chicken, but no temperature can change a stone into a chicken, because each has a different basis.

Mao Zedong, On Contradiction

Surveying the economic meltdown spreading across Asia's Pacific Rim, Alan Greenspan, the Chairman of the US Federal Reserve, prophesied in January 1998 the coming triumph of ‘the Western form of free market capitalism’ (quoted in Hamilton, 1999: 46). Seizing the opportunity to exploit the leverage presented by cascading declines in values of East and Southeast Asian currencies since 1997 and to remake them in the Anglo-Saxon image, mainstream economists sought to retrospectively indict administratively guided industrial strategies by attributing the economic malaise to ‘crony capitalism.’ Viewed through this orthodox lens, ‘crony capitalism’ had two connotations – as collusion between governments and businesses, and as cartel-like networks based on interpersonal associations – both of which undermined, subverted or otherwise distorted market forces. Caught flat-footed by the velocity and intensity of the crisis, like an earlier generation of apostates who had recanted that their ‘god had failed,’ a new generation of apostates in the region also ruefully concluded that ‘Asian capitalism’ had merely been a footnote in the history of capitalist development, ‘a temporal detour in the longer historical evolution of capitalism’ (Chung In Moon and Sang-young Rhyu, 2000: 98).

In both cases, the common assumption was that there was an ‘East Asian model’ of capitalism counterposed to a ‘Western’ model of free markets. If one had failed, only the other could provide succor to economies devastated by capital outflows and insolvencies, was the unwavering message from Western capitals and the International Monetary Fund (IMF). Leaving aside the issue of an ideal-typical ‘Western’ model, though proponents of ‘Asian miracles’ had attributed the success of these economies to a common model, the differential impact of the crisis on these several economies suggests grounds for skepticism. Derived from studies of national-economy making, notions of an ‘East Asian model’ were typically extrapolations from the experience of a single state to the region as a whole and tended to homogenize different patterns of resistance and accommodation. Without high levels of corporate debt, Robert Wade and Frank Veneroso (1998a) have argued, the South Korean chaebol (conglomerates) would never have been able to scale the peaks of industrial production and emerge as formidable competitors in the most technologically-exacting markets in so short a time. Yet, while corporations in Thailand and in other ailing economies also incurred high levels of debt, they functioned in an entirely different context and to generalize from the South Korean experience is to obscure the fundamental importance of national economic planning. Indeed, as we shall see in a subsequent chapter, as South Korean economic growth made national economic planning increasingly anachronistic, continued reliance of high debt-equity ratios without corresponding checks led to overproduction.

Nevertheless, the development of regionally-integrated production and procurement networks, and the concentration of sustained economic growth along the Pacific perimeters of Asia suggest the need to examine the systematic integration of these countries with each other and of the region with the world ‘at large.’ Central to this project is the reconstruction of state-society relations in Japan and the ‘Four Dragons’ after the Second World War, a reconstruction conditioned by the strategic imperatives of the Cold War. The relative autonomy of states taken by theorists of the developmental state to be crucial to the spectacular economic successes registered by the Asian ‘miracle’ economies was a feature shared by the state apparatuses of these five jurisdictions. Although the ‘mini-dragons’ of Indonesia, Malaysia, and Thailand may have formally constituted similar institutional mechanisms to provide ‘administrative guidance’ for national economic planning, none of their pilot economic agencies had the autonomy enjoyed by elite planning agencies in Japan, Singapore, South Korea, and Taiwan – Hong Kong being a partial exception to this blanket characterization as we shall see shortly (see Henderson, 1999). Moreover, the expansion of corporate production and procurement networks based in Japan and the ‘Four Dragons’ was the fundamental ingredient in regional integration across the Asian rimlands. Hence our focus here is on the similarities and differences underpinning the constitution of the ‘bureaucratic-authoritarian industrializing regimes,’ to use Bruce Cumings' marvelously adequate phrase, in Japan and the Four Dragons.

Postwar reconstruction was perhaps the most significant climacteric in state-society relations in East and Southeast Asia since the incorporation of these territories into the capitalist world-economy. The American occupation of Japan and South Korea, civil war and revolution in Korea, Vietnam, and China, the establishment of an ethnically-bifurcated state in Taiwan, decolonization of European empires, and the marginalization of elites in several key locations, led to an unprecedented concentration and centralization of power in state apparatuses in these locations. Since our focus is on the local processing of larger global forces of transformation, we will begin by examining how the strategic political and military arrangements of US hegemony that conditioned postwar rehabilitation and reconstruction of its client states along Asia's Pacific Rim were extended, deflected, or otherwise modified by internal constellations of power in each of these states, as well as by their prior experiences of social transformation and their varied cultural heritages. Hence, we sequentially examine changes in the relations between governing elites and domestic classes in each of the five jurisdictions in the immediate aftermath of the Second World War.

Recasting state-society relations

Just as the foundations of dynastic empires in Central and Eastern Europe were eroded at the end of the First World War by a resurgence of radical national movements, Japanese defeat destabilized the political order all across the Pacific coasts of Asia. When military defeat, economic devastation, and US occupation irrevocably tarnished the legitimacy of the Japanese ruling elite and divested them of the material bases of their power, the liberation of territories occupied by Japan had unleashed a wave of nationalist movements that undermined the foundations of European colonial empires. Meanwhile, rampant corruption and intense exploitation of the peasantry during decades of civil war combined with external aggression had discredited Guomingdang (GMD) rule in China. Where disruptions of rural institutions, social relationships, and agricultural routines had been the most intense either through war, as in China and Vietnam, or through forced industrialization since the 1930s as in Korea (Cumings, 1981: 54), nationalist movements were also accompanied by demands for the radical redistribution of land. Everywhere, runaway rates of inflation in the immediate postwar years made urban insurrection an almost inevitable accompaniment of agrarian revolt.

If unsuccessful attempts to restore the antebellum status quo in French Indochina and the Dutch East Indies demonstrated how thoroughly Japanese occupation and wartime destruction had destabilized colonial structures of control, the restoration of Chinese sovereignty over Taiwan was tantamount to a process of recolonization as the mainlanders had no historical or social links with its native inhabitants. While nationalist forces ousted their colonizers in Indonesia and Indochina, and the GMD consolidated its power in Taiwan by marginalizing the indigenous elite, the presence of Soviet troops on the Korean peninsula and the revolutionary redistribution of land by ‘people's committees’ changed the equation in the US occupied zone south of the 38th parallel. Here, within three months of the Japanese surrender, in a dress-rehearsal of what was to become US policy in the Cold War, the American Military Government (AMG) revived colonial structures of control and rehabilitated the Koreans who had collaborated in the Japanese colonial enterprise. Finally, predicated on the assumption that Japanese militarism was an aberration stemming from anachronistic ‘feudal’ survivals, American plans to reconstruct Japan on a democratic and demilitarized basis entailed policy measures to fundamentally restructure power relations through land reforms, to promote the rights of labor, and to dismantle industrial-financial monopolies (see Schonberger, 1989: 3–4, 90–110).

Based on coercion rather than consent, the occupation regimes in Japan, Taiwan, and South Korea represented genuinely new constellations of power not only because prewar elites had been sidelined, but also because social and economic dislocations caused by war, revolution, and civil strife necessitated a complete overhaul of the foundations of rule. As the marginalization of prewar elites in Japan, South Korea, and Taiwan conferred unprecedented autonomy on their reconstituted state apparatuses, the demolition of the ideological bases of Ancien Regimes, symbolized by the Japanese emperor's renunciation of his divinity, made it incumbent on politicians and bureaucrats to seek new bases of legitimacy. Simultaneously, massive devastation caused by allied bombing, the dismantling of its colonial empire and the consequent loss of sources of raw materials and markets had aggravated the task of economic reconstruction in Japan. Three years after surrender, Japanese economic output was only at one-third its level in the mid-1930s (Pempel, 1998: 83). A large influx of refugees – with an estimated 1.7 million fleeing from the Soviet-occupied zone to South Korea, and the inflows of the defeated remnants of the GMD army and their supporters accounting for the sharp rise in the population of Taiwan from less than 6 million in 1944 to more than 8 million in 1950 (Kuznets, 1977: 31; Hamilton and Biggart, 1989: S54) – similarly exacerbated processes of reconstruction in the two former Japanese colonies.

Reverting to their status as British colonies after wartime occupation by the Japanese, colonial administrators in Singapore and Hong Kong faced different, though no less compelling, pressures as their reconstitution as entrepôts was undermined by social upheavals in their respective hinterlands – the Chinese Revolution and the anticolonial insurgency in Malaya. The staggering influx of refugees from war and revolution in China, for instance, almost quadrupled Hong Kong's population – which rose from 600,000 to 2,360,000 – between 1945 and 1951 (Castells et al., 1990: 15; Cheng and Gereffi, 1994: 200), and compounded the effects of the loss of production facilities and markets in the People's Republic. On the heels of this disruption of commercial and social networks, the imposition of a United Nations embargo on the export of strategic goods to China in 1951 fatally undermined Hong Kong's entrepôt role, as China had accounted for 36.2 percent of its imports (Haggard, 1990: 120–1). These adverse consequences were partly offset by inflows of capital from China – estimated to be around HK$300 to 600 million each year between 1948 and 1950 – as wealthy entrepreneurs repatriated their assets just before and soon after the Communist takeover (Choi, 1994: 43).

Just as revolution in its hinterland thwarted Hong Kong's reconstitution as an entrepôt, the postwar reorganization of British colonial possessions in Southeast Asia jeopardized Singapore's restitution as the pre-eminent entrepôt in the area. Reflecting both the geostrategic importance of Singapore to Britain and Malay apprehensions of the challenge to their political ascendancy posed by the island's dominant Chinese community, Britain consolidated its colonies in the area – the Malay states, the Straits Settlements, and the Borneo territories – into a Malay Union in 1946, renamed the Federation of Malaya in 1948. Simultaneously, to assuage Malay nationalism, Singapore was separated from the Union and declared a Crown Colony – ‘a sort of District of Columbia,’ the seat of the British governor-general for Southeast Asia (Turnbull, 1989: 219; Rodan, 1989: 53–4). By thus placating Malay nationalists, these political arrangements undermined Singapore's entrepôt function by severing the citystate from its hinterland (Rodan, 1989: 87).

Neither Washington nor Whitehall could countenance continuing instability along the Asian rimlands. If the specter of communism haunted US officials, natural resources from its Southeast Asian colonies were vital for Britain's precarious balance of payments situation.¹ Given the magnitude of wartime destruction of manufacturing facilities, disruption of production and procurement networks, and socio-political changes in the aftermath of Allied victory, it quickly became evident to policy makers in the United States and Britain that the stability of postwar administrations in the Asian rimlands could only be ensured by a wholesale restructuring of the relations between state and civil society in each location.

What was peculiar to the postwar reconstitution of Japan, South Korea, Singapore, and Taiwan and the characteristic that separated them from all other state apparatuses outside the centrally-planned economies was their relative autonomy from domestic constellations of power and class interests. Perched precariously along the ideological faultlines of the Cold War, even as American occupation authorities and their local collaborators in Japan and South Korea and the GMD regime in Taiwan waged an unrelenting offensive against militant labor movements, this offensive was tinged with the realization that their subject populations could be inoculated against the appeals of revolutionary socialism only if the regimes could plausibly promise to raise living standards (Johnson, 1982; Johnson, 1987; Amsden, 1989; Wade, 1990; Appelbaum and Henderson, 1992). This was achieved both by extensive land redistribution schemes and by substantial infusions of economic assistance and food aid from the hegemonic power. Pressures to seek new bases of legitimacy through economic growth also assumed a more pronounced urgency as the US ended its occupation of South Korea and Japan and as the GMD administration in Taiwan grudgingly acknowledged that the prospects of their victorious return to the Chinese mainland were becoming increasingly remote.

The imperative to promote material prosperity was no less compelling for the colonial administration in Hong Kong both because a cash-strapped British government insisted that the colony be financially self-supporting and because the imposition of the United Nations embargo on the exports of strategic goods to China led to a dramatic decline in its export earnings (Haggard, 1990: 103–10, 120–1; Castells et al., 1990: 190–1). Singapore alone was a partial exception to these pressures in the early 1950s, because even though it was jurisdictionally divorced from its hinterland, it continued to be substantively integrated with the Federation of Malaya as both remained British colonies. It was only when peoples of both these territories began inching toward political independence from the mid-1950s that the adverse consequences of an entrepôt set adrift from its hinterland became a pressing concern for the presumptive ruling elite of the future city-state.

Widespread acknowledgment that the greater relative autonomy of state apparatuses and their propensity to intervene in the economic realm were common denominators shared by the new regimes in Japan and the ‘Dragons’ must be qualified by the diversity of their internal structuring and their varied insertions within larger political and economic networks. Ranging from Hong Kong, which does not even have a central bank, to South Korea where Syngman Rhee's government controlled over 90 percent of all industrial establishments when it took over from the AMG, the nature of their internal structures of power and class interests represented significant differences. These differences were heightened by the modalities of their political alliances and economic linkages with external powers – most notably with the United States and Britain. Patterns of state intervention, contoured by domestic constellations of power and privilege and resource endowments, will be examined in detail in the next chapter. Here we focus on how the post-Second World War dispensation reshaped domestic class alliances and how these refracted the strategic imperatives of the Cold War in each jurisdiction.

Land reforms and the elimination of landlords

As the legitimacy of established elites unraveled under the impact of political upheavals, social dislocations, and economic devastation, the United States sponsored land redistributions in Japan, South Korea, and Taiwan to diffuse the destabilizing consequences of the Japanese defeat. Land reforms assumed central importance in all three US client states, not only because there were ‘few assets besides land left to redistribute,’ as Susan Greenhalgh (1988: 92) observed of Taiwan, but also because it was the most effective strategy to transform the countryside from a fertile ground for agrarian revolt into a largely conservative base. Thorough-going agrarian reform, widely considered to have been the most successful in the capitalist world (Tuma, 1965; Ladejinsky, 1977), undermined the foundations of class privilege in all three states and led to a remarkable decline in the inequalities of income and wealth. But even as far-reaching changes in patterns of land ownership were implemented in the three client states, their modalities and outcomes were strikingly different.

Among the ‘basic concepts’ that General Douglas MacArthur and the occupation forces under his command sought to instill in the Japanese were the values of ‘Jacksonian democracy’ – a smallholding peasantry, small-scale manufacturing entailing the dissolution of the zaibatsu monopolies, and a greater recognition of the rights of labor. Within this trinity, land reform was accorded primacy because it was thought that the landlords were the backbone of Japan's ‘feudal’ structure, the ones who had derailed the locomotive of Japanese modernization. The implementation of land reforms between 1946 and 1950 led to over 90 percent of all cultivated land being in the hands of owners by 1950 and to the virtual extirpation of tenancy (Schonberger, 1989: 52–3, 65). Spiraling rates of inflation in the first two years of the Occupation, which pushed prices to ninety times their level at the end of the war, rendered the compensation paid to landlords almost worthless as it was based on 1945 land prices.²

Ironically, the chief beneficiary of the US-sponsored land reform was the state bureaucracy, not only because the reforms eliminated agrarian magnates as a social class, but also because the occupation forces could not conduct land surveys or registrations without bureaucratic assistance. Consequently, despite three waves of purges ordered by the occupation authorities, these were much less pervasive in Japan than in the US-occupied zone in Germany. Whereas the number of people purged accounted for 2.5 percent of the population in the latter, the corresponding figure in Japan was only 0.29 percent, and 80 percent of the 210,000 Japanese who were eventually purged and barred from holding public office were military officers. The bureaucracy, in fact, emerged stronger than it had ever been since the purge of military officers and the imposition of the famous ‘no-war’ clause in the ‘MacArthur Constitution’ removed the military as a force in Japanese politics (Schonberger, 1989: 61, 66, 115, 163; Toshihiko Kawagoe, 1993: 370; McMichael and Kim, 1994: 30; Pempel, 1998: 85).

Accompanying the land reforms, the government sought to integrate the agricultural cooperatives that had sprouted across the country – growing from less than 900 at the beginning of 1948 to almost 28,000 by the end of that year. This was achieved by sponsoring the National Association of Agricultural Cooperatives – better known by its Japanese acronym, Nōkyō – as an umbrella organization to integrate farm families. Organized in national, prefectural, and at local levels, the cooperatives provided a comprehensive array of facilities to farmers covering virtually all aspects of farm operations. Apart from purchasing and marketing facilities, they also provided credit, banking services, insurance and even instituted driving schools and mail-order bride arrangements. Since the government also provided subsidies and loans through the cooperatives, there were powerful incentives for farm families to join cooperatives and this provided conservative politicians with an important tool for voter mobilization. Though opposition parties had some small rural organizations, none could compare with Nōkyō in the size and range of their activities (Donnelly, 1984; Pempel, 1998: 73, 96–7; Eccleston, 1989: 130).

The United States government, through the Sino-American Joint Commission on Rural Reconstruction, also encouraged the GMD to implement land reforms in Taiwan. A redistribution of land was attractive to Chiang Kai-shek's administration because it not only did not have a vested interest in land in the island but also because agrarian reform enabled the regime to eradicate the last vestiges of power not yet under its effective control. The Japanese had nationalized the industrial assets of the native Taiwanese elite during the war and those that had not been destroyed were transferred to the GMD government. The financial assets of the local elite had largely been eliminated by the massive postwar inflation.³ Land reforms – implemented in two stages with the placing of a ceiling on maximum rents at 37.5 percent of the annual yield of the main crop in 1949, and the Land-to-the-Tiller Act of 1953 – led to the redistribution of some 70 percent of eligible land, with a ceiling of three hectares on individual holdings (Gold, 1986: 66; for a marginally different estimate, see Ho, 1978: 355). Landowners were compensated with land bonds for 70 percent of the value of their lands and shares in four state corporations – often hastily cobbled together by merging expropriated Japanese firms – for the remaining 30 percent. Low interest rates on land bonds triggered panic selling which further lowered their values, while many landowners unused to the separation of ownership from control also quickly divested themselves of their shares in the corporations.⁴ Only a select few – such as C. F. Koo (Taiwan Cement), T. T. Caho (petrochemicals, plastics), and Hsieh Ch'eng-yuan (Taiwan Pineapple) – used their land bonds to build successful industrial concerns in the ensuing favorable environment for manufacturers (Yang, 1970: 157; Ho, 1978: 160–7; Koo, 1987: 170; Greenhalgh, 1988: 92; Barrett, 1988: 134; Gold, 1986: 64–6, 71; Gold, 1988b: 188–9; Simon, 1988a: 140–1, 147–8; Haggard, 1990: 82–3).

The GMD party-state consolidated its control over the countryside by merging the various credit cooperatives, and community and peasants' organizations into some 340 Farmers' Associations. While these associations displaced rural moneylenders, they were also instrumental in the subordination of agriculture to the requirements of an industrialization drive as the regime instituted a rice-fertilizer barter system and a compulsory program of rice sales at prices that were 25–30 percent below the wholesale market price (Ho, 1978: 181–2). A government monopoly over the production and import of fertilizers enabled it to manipulate the terms of trade and in the 1950s and 1960s, the price paid by cultivators in Taiwan for ammonium sulfate – the most widely used fertilizer – was 50 percent more than the price paid by Japanese farmers and more than double the price in Pakistan, Sri Lanka, and Thailand. Declining conditions in the countryside, in turn, provided a cheap labor force as an estimated 1 million people migrated from rural areas to the cities between 1950 and 1965, and a further 860,000 between 1965 and 1982 – though these rates of rural-urban migration were lower than in Japan and South Korea for reasons discussed below. Additionally, the government's Food Bureau was empowered to collect taxes and rents in rice on publicly-held lands, and half of this intake was rationed to military personnel, civil servants, and other government employees (Ho, 1978: 179–84; Gold, 1986: 66–7; Haggard, 1990: 82–3; Bello and Rosenfeld, 1990: 184–6).

Land reforms in South Korea were an altogether different proposition. The stronger nationalist impulse in colonial Korea and peasant opposition toward the yangban who collaborated with the colonizers had resulted in a groundswell of support for independence and radical land reform through popular committees that sprang up in the countryside. Korea was also the only place in Asia where the military forces of the United States and the Soviet Union directly confronted one another. Stumbling upon domestic social upheaval, revolutionary land redistributions, and the presence of Soviet troops, the AMG established south of the 38th parallel in Korea strengthened the colonial state by reviving and even expanding the colonial Government-General bureaucracy and police forces and by reinforcing the power of the yangban elite that had been irretrievably tarnished through their collaboration with the Japanese. In contrast, the US occupation authorities had weakened the Japanese state, at least before the ‘reverse course’ was inaugurated in 1948. Within three months of the Japanese defeat, Korea in fact became the testing ground for strategies that would assume center-stage in Cold War US foreign policy: containment of the Soviet Union and the neutralization of labor movements. Yet, however much class and bureaucratic privilege were reinforced in South Korea, neither the AMG nor the Syngman Rhee regime it sponsored could ignore the tidal wave of popular demand for land reforms. As continuing rural unrest also made it amply evident that the thirst for land would not be quenched merely by the sale of confiscated Japanese properties to tenants, the government reluctantly enacted land reforms which, as in the case of Japan and Taiwan, placed a ceiling of three hectares on individual land holdings. However, not a single hectare was redistributed until the outbreak of the Korean War when the conquering North Korean forces dispossessed landlords everywhere outside the Pusan perimeter (Cumings, 1981; Koo, 1987: 167, 170–1; Haggard, 1990: 55; Bello and Rosenfeld, 1990: 78–9; Choi, 1993: 15–20; Cumings, 1989: 12).

The more authoritarian nature of the regime was also illustrated by the contrast between the Japanese agricultural cooperatives which remained far more democratic institutions even as they eventually came to organize the rural vote for the Liberal Democratic Party and the South Korean NONGHYUP which, like the Taiwanese Farmers' Associations, was a parastatal organ designed to impose government policies in the countryside. Differences in the implementation of land reforms were heightened by the different cultural milieux of the three states. Whereas land was equally divided between all male heirs in Taiwan, the eldest son in South Korea inherited most of the land, while all the land went to a single heir in Japan. Consequently, farm population in Taiwan increased from almost 3.5 million in 1946 to 6.15 million in 1969 before declining slowly. In contrast, farm households declined by 3.5 percent between 1950 and 1980 in South Korea, even though the rural population as a whole declined by over 50 percent, and by a whopping 24.5 percent in Japan in the same period (Ho, 1978: 150–1; McMichael, 1993: 104–5; McMichael and Kim, 1994: 27, 30–1; Greenhalgh, 1994: 756–7).

Notwithstanding such differences, the elimination of landlords as a class removed a potential source of resistance to the subordination of agriculture to the industrialization drive in all three states. The requirement that new landowners reimburse the government in crops over a 15- to 30-year period – in conjunction with inflows of PL 480 deliveries to Taiwan and South Korea, and imports of cheap wheat from the United States to Japan – kept a lid on food prices, fostered the subsequent development of an import-substituting industrialization strategy in Taiwan and South Korea, and facilitated the expansion of cheap manufactured exports from Japan (Kobayhashi Chutaro, 1987: 32; McMichael, 1993: 105; McMichael and Kim, 1994: 32). The imposition of rigid limits on individual land holdings – which remained in place in Japan until 1962, in Taiwan until the mid-1980s, and in South Korea until 1991 – is also held to have created remarkably egalitarian social structures in rural areas, especially since financial assets had largely been wiped out with the runaway inflation of the early postwar years.⁵

Perhaps most importantly, by conceding the demand for land, the elimination of agrarian magnates and land redistribution to small peasants and tenant farmers created a large constituency of support for the new regimes and enabled administrations in the US client states to rollback urban insurgency. A quiescent countryside, then, was a necessary condition for the emergence of a state-led industrialization drive based on cheap labor.

Coercion, cooptation, and corruption in labor subordination

Virtually no one doubts that the emergence of Japan and the other East Asian ‘miracle’ economies as exporters of manufactured goods was based on low wages and labor peace. Yet, there is considerable disagreement on the well-springs of cheap labor and non-conflictual industrial relations in the Asian rimlands. On the one hand, conservative scholars are liable to stress the unique cultural legacies of a shared Confucian tradition of harmony, achieved through a symbiosis between a paternalistic concern for subordinates and loyalty toward superiors, and a mutually satisfactory consensus between political and business leaders and workers to subordinate their sectarian interests to the wider national good (Morishima, 1982; Berger and Hsiao, 1988). Indeed, Chie Nakane (1970) has even argued that Japan was, and remains, a homogenous society that is not riven by class divisions. More generally, in a survey of patterns of women workers in Asian industries, Aihwa Ong (1991: 280) argues that

workers' struggles and resistances are often not based upon class interests or class solidarity, but comprise individual and even covert acts against various forms of control. The interest defended, or the solidarity built through such acts are more often linked to kinship and gender than to class.

Such timeless and ahistorical essentializations not only obscures the complex, conflict-ridden evolution of capital-labor relations (see Gordon, 1985; Garon, 1994; Deyo, 1989) but also virtually biologizes culture and ignores that cultural forms and genres are the symbolic resolutions to historically contingent political and social contradictions. On the other hand, more discerning analysts emphasize structural aspects of labor subordination in postwar industrialization – notably the repression of workers by American occupation forces, authoritarian client regimes, and managements; high turnover rates in labor-intensive, low-skilled work that discourage collective action; and ‘nonproletarian’ labor systems enmeshed in communal paternalism (Deyo, 1989; Bello and Rosenfeld, 1990; Hart-Landsberg, 1993; Seiyama, 1989).

As already indicated by the discussion on rural restructuring, similar outcomes in the three US client states were achieved by significantly different means and labor subordination in the Asian ‘miracles’ cannot be understood merely as the product of cultural traditions or repression: labor peace was achieved by coercion, cooptation, and corruption. While anti-communist drives in the early years of the Cold War in Japan and under authoritarian governments all through the 1980s elsewhere led to the repression of militant labor movements, this was tinged by the coopt-ing of privileged sections of the working class through the revival of patriarchal familial rhetoric which preserved their status. The strategic imperatives of the Cold War also corrupted union movements by compelling governments to lower the cost of basic wage goods, provide low-cost housing of relatively good quality, and to ensure steady improvements in material conditions. In every case, the specific mixture of these strategies was determined by the complex interplay between the nature and strength of the different regimes, the size and organizational strength of the labor movement in each location, and the activities of agencies external to the region, most obviously the United States occupation forces but also the Chinese Communist Party and, in the cases of the two Crown Colonies, the British government and its colonial satraps.

In Japan, where the numerical strength and organizational maturity of the working class was most advanced despite repression since the 1930s, one of the earliest initiatives of the occupation authorities was to issue a civil liberties directive, SCAPIN-93 in October 1945, rescind anti-union laws, and force the Japanese parliament to enact the Labor Union Law by December of the same year (Yonekura, 1993: 223–5). These measures led to a spectacular rise in trade union membership – from 5,000 when SCAPIN-93 was passed to almost 5 million or 40 percent of all adult wage earners by December 1946 (Schonberger, 1989: 115; Itoh, 1990: 147; Gordon, 1996a: 17–18; Pempel, 1998: 88). Political liberalization combined with harsh economic conditions due to the devastation caused by allied bombing, disruption of production and procurement networks, and rampant inflation – according to the occupation authorities themselves, ¥509 per month was required to support a worker and three dependents in January 1946 when the average monthly wages of a 40-year-old male worker was only ¥213 – led to a wave of militant action and to a leftward drift that soon alarmed MacArthur. Where a strong and independent trade union movement had initially been seen as a check on the untram-meled power of conservative Japanese politicians and business monopolies, the growing incidence of strikes was increasingly viewed as representing a setback to economic recovery. Along with the ‘red scare’ associated with the ‘manufacture’ of the Cold War, the austerity measures of the Dodge Plan were designed to rein in the labor movement: enabling the government to retrench the more active militants, remove the right of government employees and employees of public corporations to strike or engage in collective bargaining, sponsor right-wing unions, and purge unions suspected of affiliation to the Communist Party. Despite these measures, real wages grew three-fold between 1947 and 1951 due to increased militancy, and labor peace was achieved only with the tremendous spurt given to the economy by the Korean War (Allen, 1981a: 136–7, 141; Schonberger, 1989: 6–7, 62–4, 82–3, 114–33; Cusumano, 1985: 137–56; Itoh, 1990: 147).

For the long-term evolution of relations between capital and labor, American occupation was far more significant in setting parameters of permissible protests. As it was evident to radical factions that the occupation authorities would not tolerate a revolutionary overthrow of the system, militant actions took the unique form of ‘production control’ strikes whereby the management was locked out by workers who took over plants in increasing numbers. Since the occupation authorities controlled access to raw materials and capital, these plant occupations quickly fizzled out but their real significance lies elsewhere. In the unsettled and uncertain conditions of the early phases of the Occupation, when unemployment soared and food was scarce, the workplace offered the best means of economic survival for those employees who had not forsaken the towns for the countryside. As plans for war reparations, break-up of zaibatsus, and purges of the business elite inhibited production operations, in order to retain a core of experienced and skilled workers, firms were content to let them use their facilities to produce goods for barter – extracting salt by boiling sea water in giant kettles in steel mills, or growing crops on unused company land, or even trading company supplies for food (Gordon, 1996a: 36–8). While anxieties regarding their own futures and uncertainties about the occupation authorities' intentions made managements concede workers' demands for marriage, birth, and funeral arrangements, and for a veto over production decisions and hiring practices, these measures also reinforced workers' conceptions of the workplace as a community. At least as important, economic deprivation led to a widespread consensus that workers and managements were in the same predicament of subordination to the Occupation and fostered what has been called an ‘enterprise society.’ Differently put, if economic sustenance derived from the workplace where workers had significant veto rights over production and personnel decisions at least in early phases of the Occupation, membership in the workplace took precedence over membership in the class. Indicative of this sense of workplace-as-community were the bitter struggles over status – in prewar Japan, supervisory staff wore special uniforms to denote their superior status and had separate facilities from workers – and the success of workers' demands that status distinctions between them and supervisory staff be abolished. However, a corollary to this was that Japanese enterprise unions included not only blue-collar workers, but also white-collar workers and even the management (with the exception of the firm's president) and were confined to a single shop. Consequently, the new organizational structure of labor unions tended to limit working class power and foster intra-plant cooperation (Schonberger, 1989: 299, n. 6) and laid the basis for the cooperative labor-management relations – or ‘coercive consensus’ in Norma Field's (1991: 29) nice phrase. Perceptions among workers that the workplace was their primary source of identity and locus of community, rather than class or neighborhood, was also to have more wide-ranging resonances when industries migrated off-shore in increasing numbers, as we shall see in subsequent chapters.

Though the Korean War provided the Japanese economy with a consid-erable boost since it was cheaper for US forces to obtain goods of the requisite quality from Japan than from elsewhere, Japanese corporations were apprehensive that the boom may not last very long. Hence rather than incurring heavy capital expenditures by building new plants that may soon be under-utilized and avoiding unneccessary increases in their labor forces, they sought to use idle productive capacities of parts manufacturers by creating a wide variety of subcontracting arrangements, as we shall see in Chapter 3 (Smitka, 1991: 6–10, 53–78; Eccleston, 1989: 31). For our present purposes, it is important to note that multi-layered subcontracting arrangements permitted Japanese manufacturers to contain labor conflicts by maintaining relatively homogenized wages within the corporation

Source: Itoh (1992b: 122, table 5.3).

through the contracting out of lower-skilled labor processes to a variety of ancillary firms. The wage disparities between large and small enterprises were even greater than indicated by the data presented in Table 2.1 since employees in medium and small enterprises received fewer fringe benefits (such as the annual bonuses which typically amounted to two months' salary and welfare plans administered by company unions).⁶ They were also not entitled to a continuous escalation of wages based on seniority and to a lifetime of guaranteed employment (Itoh, 1992: 123). It was hence a strategy for preserving homogeneity in wages in a heterogeneous labor market (Smitka, 1991: 89–114; Hill, 1989: 467; Morales, 1994; Shapira, 1993).

At the other end of the spectrum was South Korea. Far from supporting the rights of labor and instilling the values of ‘Jacksonian democracy’ here, the AMG was centrally concerned with suppressing the ‘people's committees’ and excluding the left from political power. By the end of 1946, after the autumn harvest uprising had been brutally cauterized, revolutionary popular organizations in the countryside were dismembered, and the National Council of Korean Trade Unions – which represented almost the entire non-agricultural workforce, with almost a half a million members at the end of 1945 – decapitated and banned. It was replaced by the Federation of Korean Trade Unions which was officially an organ of Rhee's Liberal Party and had only 40,000 members. Laws protecting new unions from challenging the incumbent union gave the ruling party's union a legal monopoly. Even if collective bargaining was permitted, an elaborate mediation mechanism severely curbed the possibility of strike action (Cumings, 1981; Deyo, 1989: 118–21; Bello and Rosenfeld, 1990: 30; Choi, 1993: 18; Koo, 2001: 25–6).

The success of these repressive measures derived not only from the greater force deployed against South Korean workers, but also because industrialization under Japanese colonial rule had been disproportionately skewed in favor of the zone under Soviet control after the war and because of the demolition of war-related industries below the 38th parallel (Koo, 1996: 56, n. 8). Despite extensive industrialization under colonial occupation (Mason et al., 1980: 78–9; Cumings, 1981: 26–30; Cumings, 1987: 56), partition and the demolition of war-related industries led to a dissipation of the working class.⁷ Casualties during the Korean War, estimated to be almost 1.3 million civilians and armed forces personnel including some 98,000 who were executed (Kuznets, 1977: 37), further decimated the working class. This, perhaps more than any other factor, explains the relative quiescence of workers newly recruited to factories during the 1950s and early 1960s in spite of almost tyrannous conditions of life and work. Unlike their Japanese counterparts, the new working class emerging in South Korea after the end of hostilities were first-generation workers, alienated by urban life and unused to the rigors of industrial discipline.

If revolution and war decimated the working class in South Korea, the establishment of an ethnically-bifurcated conquest state undermined the strength of the working class in Taiwan. Reverting to GMD control after Japanese defeat, mass uprisings on the island in February 1947 against the corrupt and authoritarian provincial governor, Chen Yi, triggered a crackdown on labor which is variously estimated to have claimed between 10,000 and 12,000 victims (Gold, 1986: 49–54). The declaration of martial law and the transfer of Chiang's administration to the island in 1949 sealed the exclusion of labor from power and even led to a ban on the formation of political parties. To further consolidate the GMD's power, legislation also prohibited the unionization of workers in government employment, in educational institutions, and in military-related establishments. Strikes were virtually banned as they could not legally be called prior to mediation, and the decisions of tripartite arbitration boards were binding on all parties. Most damaging to the union movement was the provision that they could not ‘demand an increase in wages to the extent of exceeding the standard wage’ (quoted in Deyo, 1989: 115–16), a provision so ambiguous that it gave the government wide latitude to declare almost any wage demand ‘excessive’ and therefore illegal. The effects of these restrictions can be easily gauged from the fact that there was not a single major recorded strike in Taiwan from 1949 to 1987 when martial law was finally lifted, though there were many localized work stoppages (Deyo, 1989: 3, 58–9; Lee, 1995).

Since the GMD was a cadre-based party organized on Leninist lines, its organizational reach penetrated more deeply into the social fabric of the island than that of Rhee's Liberal Party. Reflecting this greater reach, it was able to foster what has been called ‘exclusionary corporatism’; only a single union was permitted at an enterprise and all enterprise unions were linked through a provincial federation which, in turn, was linked to the island-wide Chinese Federation of Labor. Structured thus, the organized labor movement was prevented from developing horizontal links across enterprises, industries, and administrative units. More importantly, as unions were forbidden in enterprises with fewer than 30 workers, the bulk of employees were excluded from collective bargaining since the overwhelming majority of industrial enterprises in the island were small-scale units as we shall see. Finally, the provision that unions could be formed at the enterprise level only with the approval of both the local labor department and the local GMD committee tightened the party's grip over the union movement (Bello and Rosenfeld, 1990: 221–2; Deyo, 1989: 115–18; Haggard, 1990: 80–1).

While a rural elite had never been prominent in the social topography of the lilliputian city-states of Hong Kong and Singapore, labor subordination was at least as much a foundation of their emergence as low-cost manufacturers as it was in the cases of the larger Asian ‘miracles.’ Following the extreme repression of labor in Hong Kong during its occupation by the Japanese, there was a wave of labor militancy which peaked in 1948 as the pulse of the Chinese Revolution reverberated through the colony. Though the colonial government legalized trade union activity that year, the Illegal Strikes and Lockouts Ordinance of the following year banned strikes of government employees and those which would ‘inflict social hardship on the community.’ Even though the Trade Union Registration Act of 1961 recognized the right to strike and to picket peacefully, by permitting the registration of unions with as few as seven members and by prohibiting unionization across industries, trades, and occupations, other provisions of the same law severely diluted the bargaining power of labor (Deyo, 1989: 131). The ability of the colonial administration to harness the labor movement was largely due to changes in Chinese policy. Just as the Chinese Communist Party (CCP) had encouraged strikes against the colonial government and GMD supporters in the immediate aftermath of the Second World War, it discouraged further disruptions after 1948 as its victory over the GMD became assured since a politically stable Hong Kong provided a window to gather political and commercial intelligence and a vital source of foreign exchange, providing almost 40 percent of China's import bill before the reforms of Deng Xiaoping (Miners, 1993: 105–6; Haggard, 1990: 118; Castells et al., 1990: 81–2). Simultaneously, a persistent split between the GMD-affiliated Chinese Labor Union and the CCP-affiliated Federation of Trade Unions weakened the organizational basis of the union movement. Not only was the labor movement split between these two opposing factions, but ethnic and dialect differences spawned a multiplicity of parochial and narrowly specialized unions (Lethbridge and Ng Sek-Hong, 1993: 86). Thus in 1961, of the 366 registered unions, 298 had a membership of less than 1,000 each, though they collectively represented only 20 percent of the total union membership (England and Rear, 1975: 83–5, 279; Selden, 1983; Deyo, 1989: 112–14).

Compounding the fragmentation of the working class by these divisions, the existence of a three-tier employment structure in many Chinese firms distinguished primarily by job security, skill differentials, and distribution of fringe benefits – with the ‘long-term or permanent worker’ or cheung-kung receiving bonuses, subsidized meals, and transport allowances, the ‘casual or temporary worker’ or saan-kung being hired on a daily basis and ineligible for these benefits, and the ‘long-term casual worker’ or cheung-saan-kung being eligible for some benefits – was also inimical to the creation of a strong and cohesive union movement. Finally, and perhaps uniquely among colonial administrations, the political thrust of the labor movement was blunted because British rule was universally seen as the only realistic alternative to Hong Kong's absorption into the People's Republic of China. The government of Hong Kong was, therefore, insulated from an anticolonial insurgency (England and Rear, 1975: 4–5; Lethbridge and Ng Sek-Hong, 1993: 80–6, 95; Miners, 1993: 108–9; Levin and Ng Sek-Hong, 1995).

No such inoculation was available to the British Military Administration in Singapore, where both middle class professionals and a working class dominated by the communist-affiliated Singapore Federation of Trade Unions intensified their anticolonial agitation after the war. Even as the colonial government's ferocious military assault on the Malayan Communist Party indicated the strategic importance of the area to Britain, and the Western alliance more generally, the same magnitude of repressive force could not be deployed against the skilled and unskilled workers in Singapore without destroying the economic interests Britain sought to preserve (Tremewan, 1994: 16). Though a broad spectrum of civil liberties was suspended in the Crown Colony under ‘emergency’ regulations, and the anti-colonial movement restricted to a narrow range of permitted trade union activity, the Left in Singapore was provided with a vital political space. The People's Action Party (PAP), founded in 1954, represented a mutually convenient alliance between middle class professionals and the Left. Given the close political, economic, and cultural affinities between the colony's small commercial and industrial bourgeoisie and British colonial administrators and business interests, middle class professionals seeking decolonization lacked a social base of any real consequence. The Left provided the missing mass base among the Chinese working class for the independence movement in return for a veneer of ‘respectability’ and political security that accrued from an association with middle class professionals (Rodan, 1989: 54, 57, 83). However, strains in this alliance became increasingly evident as the draconian emergency laws were gradually rescinded after the defeat of the Malayan Communist Party in 1953 and elections to the Singapore Legislative Council in 1955. If the more liberal atmosphere after the elections enabled the left wing of the PAP to gain strength, the detention of a swathe of activists in 1956 aborted its attempt to capture the party leadership. Thereafter, Lee Kuan Yew moved quickly to consolidate his position by restructuring the party organization and restricting the right to elect members of its Central Executive Committee (CEC) to ‘cadre’ members who themselves had to be approved by the CEC: ‘[t]he new structure simply amounted to the existing leadership selecting an elite band of cadres who in turn elected the leadership’ (Rodan, 1989: 60; see also Tremewan, 1994: 21–3).

Despite these measures, and the PAP's victory in the elections of 1959 when Singapore became self-governing, the left wing continued to broaden its base of support, and when thirteen members of the PAP resigned in 1961 to form the Barisan Socialis (Socialist Front) over the issue of merger with Malaysia, they took with them between 60 and 80 percent of the party's membership (Rodan, 1989: 68–9; Tremewan, 1994: 27). If defections reduced the PAP to a shell of its former self, it also clearly identified the regime's opponents against whom the full weight of the security apparatus could be brought to bear. Since an erosion of its mass base did not immediately jeopardize the PAP's legislative majority, Lee Kuan Yew sought to shore up his support both by persecuting his opponents and by creating a new social base for his regime. Thus, the government launched a systematic campaign to harass its opposition and deregister their grass roots organizations, accompanied by a propaganda barrage against communism (Rodan, 1989: 68–71; Tremewan, 1994: 26). Simultaneously, by touting the potential economic benefits of a merger with Malaysia and by undertaking a massive developmental program – between 1961 and 1963 the state Housing Development Board (HDB) constructed 22,336 new apartments to house almost 100,000 people and by 1963 increased expenditure on education meant that there was a place for every child in the primary schools (Rodan, 1989: 73) – it sought to foster greater public support for itself. Perhaps most importantly, as the formation of the Barisan Socialis had left the rump PAP with virtually no grass roots organization, the government built a network of community organizations, chiefly the Citizens’ Consultative Committees and the Street Committees, to deliver both welfare services and government propaganda. As in the case of the GMD in Taiwan, this symbolized the systematic merger of the PAP with the state (Rodan, 1989: 73–4; Castells et al., 1990: 193).

Finally, the Indonesian government's ‘Confrontasi’ (confrontation) policy provided the pretext for the administration to decapitate the opposition leadership through a round-up of over 100 leading activists in a February 1963 police raid, aptly named ‘Operation Cold Store’ since some of those arrested were incarcerated for almost twenty years. The eruption of ethnic riots in Singapore in 1964, stemming from the resentment of Malays who had been resettled from their kampongs to pave the way for the HDB flats, and the expulsion of the island from the Malay Federation in 1965 also contributed to the heightened sense of insecurity among the Chinese population. By skillfully exploiting the acute sense of isolation among the island's dominant Chinese population, and casting itself as a government not beholden to any interest group, the PAP was to subordinate labor more thoroughly. Stressing the importance of industrial peace for national survival, it was able to justify the wholesale deregistration of opposition unions immediately following the ethnic riots. Further restrictions were placed on industrial action in the following three years, banning sympathy strikes and strikes in essential services altogether; lengthening the working day and fortifying management prerogatives by excluding promotions, dismissals, and work assignments from the purview of union negotiations; and establishing arbitration procedures that effectively foreclosed the possibility of legal strike actions except with the consent of the government. The impact of these measures, perhaps the most restrictive legislations on worker organization anywhere outside the centrally-planned economies, is evident from the number of recorded work stoppages which declined from 116 and 88 in 1961 and 1962 to five in 1970 and to none at all between 1978 and 1986 (Bello and Rosenfeld, 1990: 303–5; Castells et al., 1990: 170; Deyo, 1989: 62–3, 121–30; Rodan, 1989: 91–2; Tremewan, 1994: 28; Haggard, 1990: 103–7).

Fortuitously for the PAP government, its expulsion from the Malaysian Federation coincided with the search for cheap, low-skilled assembly operations in the electronics industry by US corporations due to an intensification of competitive pressures caused by the reconstruction of the West European and Japanese economies (Pang Eng Fong and Lim, 1977). The requirements of US manufacturers in the semiconductor and electronics industries for cheap labor dovetailed nicely with the PAP government's strategy to buy labor peace by providing laborers with employment and material benefits (Bello and Rosenfeld, 1990: 304). Consequently, through its expenditures in public housing as well as in infrastructural development discussed later in more detail, the government created conditions conducive to investments by transnational corporations – and between 1968, when National Semiconductors established its first plant in Singapore, and 1972, industrial production, employment, and exports all increased at an annual average rate of 23 percent (Castells et al., 1990: 194).

Hence, while labor subordination was a common characteristic shared by all the Asian ‘miracles,’ the modalites of subordination were strikingly different. If American occupation was conducive to political liberalization in Japan, it also facilitated the creation of more cooperative relations between management and labor. Moreover, the rhetoric of paternalism, in the more democratic conditions of Japan with the presence of a numerically large and well-organized industrial labor force, was not all one way, even if it was skewed toward the management. Thus, to take one instance, workers at the Kawasaki steel mills couched their demands for a 200 percent wage hike in 1946 by arguing that it was their ‘burning love for the company’ that lay behind their demands, since without protecting their livelihoods they could not ‘revive Japan from this tragic condition’ (quoted in Gordon, 1996a: 40). Whereas the deployment of corporation-as-family rhetoric served to create a labor aristocracy in Japan, the evolution of hierarchical, multi-layered subcontracting systems fragmented the working class.

Unlike in Japan, in both South Korea and Taiwan their strategic location along the ideological fault lines of the Cold War was used as a justification for the retention of more authoritarian structures of control and for the virtual ban of public dissent. As containment of ‘communism’ in East Asia conveniently dovetailed with domestic farm policy in the hegemonic power, the United States underwrote the costs of industrialization in both countries by disposing of surplus farm products through the PL 480 aid program. The ample availability of cheap foodgrains not only lowered wage costs – directly by reducing reproduction costs, and indirectly by exerting a downward pressure on urban wage rates by providing a steady stream of migrants seeking to escape even poorer material conditions in the countryside – but also did not threaten to unravel the alliance between the regimes and the peasantry because of the lack of substitutability between rice and feed grains. The bifurcation between national production of food and the international sourcing of feed grains enabled these states, and Japan, to increase price support on rice while simultaneously importing feed grains without protection. In all three US client states, labor quiescence was hence also purchased by lowering wages through the disposal of American farm surpluses which did not threaten political alliances and processes of reconstruction in the countryside, unlike in the case of Europe where there was no bifurcation between national and international food sectors since food grains such as wheat and rye were perfectly substitutable for feed grains (Hayami, 1988; Friedmann, 1982; Friedmann, 1993; Friedmann and McMichael, 1989; McMichael, 1993; McMichael and Kim, 1994; Tubiana, 1989).

As British colonies, neither Hong Kong nor Singapore were recipients of American food aid. If the subordination of labor did not carry a high price in Hong Kong – both because of divisions within the working class and because colonial political control was not challenged either by the subject population or by the Chinese government – no such luxury was afforded to the PAP government in Singapore. Moreover, while the Chinese government's need for a ‘window on the world’ led it to conclude agreements to provide 80 percent of Hong Kong's food requirements since the early 1950s at prices favorable to the colonial government, Singapore could rely on no similar arrangements from its neighbors. However, by portraying the island as a Chinese enclave in a sea of Malays, the government played on the apprehensions of the Chinese majority to win support for its rule while provisions of better housing and job opportun-ities served as additional incentives in the subordination of labor.

In sum, the reconstitution of Japan, South Korea, and Taiwan as US client states in the context of the Cold War entailed a fundamental restructuring of social relations. The elimination of agrarian magnates and the redistribution of land not only created some of the most equitable distributions of income and wealth in the world but also guaranteed social peace in the countryside. By securing the countryside, governments were free to launch ‘anti-communist’ offensives against organized labor in the cities, though the strength and maturity of the Japanese working class enabled them to wrest some limited though significant concessions. While fragmentation of labor organizations and a recognition that British rule was the only viable alternative to Hong Kong's absorption to China curbed labor militancy in the Crown Colony, state repression was necessary in Singapore to subordinate its working class. Despite political quiescence in the countryside and labor subordination in the cities, it was widely recognized that the newly reconstituted regimes could only be secure by increasing the material prosperity of their subject populations. Yet, domestic bourgeoisies in each of these jurisdictions were too weak or non-existent. This prompted, as we shall see in the next section, symbiotic alliances between state and capital along the Asian rimlands.

Dependent bourgeoisies

Notwithstanding pressures on the reconstituted regimes to vigorously promote the material welfare of their subject populations to legitimize their rule and the ensuing congruity of interests between political elites and ‘captains of industry,’ the postwar reordering of the political order along the Asian rimlands intensified the dependence of bourgeoisies on their state apparatuses in all five future Asian ‘miracles.’ The convergence of interests was based on the removal of impediments to a more expeditious transfer of surplus from agriculture to industry through land reforms and the elimination of landlords in the three US client states, and the corralling of trade union movements and the creation of more optimum conditions for capital accumulation in all five jurisdictions. The destruction of production facilities and the disruption of prewar procurement and production networks, however, rendered bourgeoisies dependent on their respective state apparatuses for capital and protection. Indeed, in South Korea and Taiwan, the new regimes even had to incubate bourgeoisies to create domestic constituencies of support. The very weakness of the domestic bourgeoisie in Singapore and the small size of its domestic markets and low endowments of natural resources foreclosed even this possibility. The PAP government was compelled, therefore, to create structural conditions to attract transnational corporations (TNCs) to relieve chronic unemployment and thereby stabilize political conditions in the city-state. The large diversified commercial and financial bourgeoisie in Hong Kong may not have relied on the colonial state for capital infusions and protection. However, the Chinese Revolution undermined Hong Kong's entrepôt role and they depended on the government to provide the infrastructural underpinnings in the colony's transition to an export-oriented industrial platform.

Broadly speaking, relationships between political and business elites in each location were conditioned by the nature and structure of state power and the organizational strength and technological maturity of the bourgeoisie, by the size of their domestic markets and their varied endowments of natural resources, by the extent of the dislocations of their prewar production and sales networks and by the patterns of political and economic linkages in which they were enmeshed. Additionally, as the consequences of wartime destruction were overcome, as postwar reconstruction changed patterns of economic and political linkages with the wider world, and as the organizational capacity of enterprises expanded with the establishment of new production and procurement networks and the saturation of domestic markets, the dynamism of these relationships caused further variations as these changes impacted differently on enterprise and regime structures in each location.

While landlords were being eliminated and the labor movement tamed in Japan, the decision of the US occupation forces to exercise indirect rather than direct rule conferred immense leverage on the revived bureaucracy to subvert or even to ignore the reform program concerning the financial-industrial conglomerates. For instance, the reluctance of the ultra-conservative Japanese cabinet headed by Yoshida Shigeru, which took office after the first elections based on universal adult suffrage in 1946, to rein in inflationary tendencies made a mockery of the punitive levies and indemnities imposed on the zaibatsu as the enterprises merely paid these fines in the devalued yen. The penalties were, in fact, effectively funded by the public exchequer since the Japanese government continued to pay for military contracts, indemnities for factories converted to munition facilities under wartime regulations, and war production loans and guarantees until June 1946 – in the first three months of the Occupation alone, disbursements to the zaibatsu under wartime ordinances and rules totalled ¥26.6 billion, or almost a third of the total Japanese military expenditures between September 1937 and August 1945. Even after the occupation authorities compelled the Japanese government to terminate these payments, the creation of the Reconstruction Finance Committee in January 1947 allowed the government to continue pumping money to the conglomerates in the guise of low-interest loans until the promulgation of the Dodge Line in 1949 (Johnson, 1982: 43, 178–9; Schonberger, 1989: 99, 102–3).

The zaibatsu were, however, subject to the highest-ever levels of government control during the Occupation. Unlike the bureaucracy, the rentier class which controlled the zaibatsu through family holding companies was not spared from the purges despite the premature termination of the program of zaibatsu dissolution. Though the purges were much less pervasive in Japan than in postwar West Germany, some 2,100 top executives from 632 firms were barred from office (Johnson, 1982: 25, 41–2, 44, 70–2, 174–88; Aoki, 1987: 268–9; Yonekura, 1993: 214–20).

In the immediate aftermath of defeat, the destruction wrought by war was so massive that the occupation authorities permitted the government to set up fifteen ködan or public corporations for rationing materials and products, and authorized the enactment of the Temporary Materials Supply and Demand Control Law of 1946 which empowered the government to control all commodities through the ködan and other public institutions – notably the Coal Agency and the Economic Stabilization Board. By purchasing all major products from the manufacturers at high prices and selling them to consumers at low prices, the government effectively subsidized economic recovery.

Control over foreign exchange and trade, including statutory powers to regulate the import of technology, gave the government considerable leverage in targeting specific industries for accelerated growth. Reinforcing this leverage, the onset of the Korean War led to a loosening of monetary controls to ensure that adequate investment capital was available to industries to meet the rapid expansion of US military procurements – for munitions, uniforms, trucks, and other war-related items – which accounted for 37 percent of all Japanese foreign exchange receipts in 1952–53 (Johnson, 1982: 200). To meet these requirements, the government increased its loans to the ‘city banks’ or the twelve national banks, enabling them to extend loans much larger than the net worth of individual firms, as well as setting up a string of government-owned banks, most notably the Japan Development Bank and the Export-Import Bank. As the ultimate guarantor of loans, the Bank of Japan and the Ministry of Finance acquired comprehensive control over the lending policies of banks while the availability of ample low-interest loans reduced the dependence of industrial corporations on equity capital. The policy of ‘overloaning’ not only enabled Japanese companies to raise money more cheaply – since interests on loans were tax-deductible while dividends on profits were not – but also freed them to concentrate on long-term product development rather than short-term profits. At the same time, the policy enabled the government to easily use monetary controls to modulate the rhythm of economic activity and target particular sectors with precision (Johnson, 1982: 194, 203–4, 302, 313; Yoshino and Lifson, 1986: 32; Eccle-ston, 1989: 31–3, 48).

Indicative of the extraordinary concentration of power in the Ministry of Commerce and Industry, the precursor to the Ministry of International Trade and Industry (MITI), was its control of the third largest share of the general account budget after the Prime Minister's office and the Ministry of Finance by 1948–49 when the Dodge Plan was implemented. Perhaps an even more telling indication of the depth and range of government control over economic activities during the Occupation is that when MITI was created in 1949 it employed 21,199 persons, while in 1974 it had only 13,891 employees even though the Japanese economy had become infinitely more complex. In this context, the institutionalization of the practice of amakudari (literally ‘descent from heaven’), or the reemployment of retired bureaucrats on the boards of industries, provided them with preferential access to the government while cementing the alliance between the government and private industry.

Despite the devastation of their physical plants through Allied bombing and disruptions to their supply and distribution networks, the big Japanese industrial bourgeoisie was highly cohesive and class conscious. The day after the surrender documents had been signed, top industrial and financial leaders met at the home of the Minister of Commerce and Industry, Nakajima Chikuhei, to forge a united strategy to revitalize their enterprises. To coordinate these efforts, they launched the Federation of Economic Organizations, or Keidanren, composed of the 100 top trade and industrial organizations and some 750 of the largest individual firms. Notably, unlike industrial and trade associations elsewhere in the world, Keidanren explicitly excluded small and medium-scale industries from its membership: it was the apex coordinating body of big business (Eccleston, 1989: 117–18; Pempel, 1998: 94–5).

Divisiveness among small and medium-size firms implied that though they accounted for some 99.7 percent of all firms in the country - and were grouped into some 50,000 organizations - they did not have the influence enjoyed by large firms. One chairman of the Keidanren, Ishikaza Taizo, even commented that organizing small and medium firms was akin to making rice balls with imported rice! Nevertheless, recognizing the electoral importance of these small and medium sized firms which employed 82.9 percent of the total national labor force in the mid-1950s, the government allowed small businesses to create cartels to harmonize production, marketing, and investment in selected sectors in 1952. Eventually, the creation of Sōrengō or the General Federation of Small and Medium Enterprise Organizations, institutionalized support from these firms to the government in return for subsidies. In tandem with these national measures, large firms began organizing their own suppliers and thus created further bonds between small and large firms (Pempel, 1998: 95–8)

If American occupation and its policies conferred enormous powers on the Japanese government to intervene in the economic arena, the dependence of the bourgeoisie on the state was even greater in South Korea and Taiwan than in Japan due to the virtual absence of the set of political and economic institutions which could be rebuilt through additional doses of capital and technology. Despite the location of industries and the creation of an industrial proletariat in colonial Taiwan and Korea,⁸ there was no corresponding development of an indigenous bourgeoisie or a technocratic strata in either colony.⁹ With the virtual absence of a bourgeoisie and institutional infrastructures essential for capitalist development, the political dependence of the Chiang and Rhee regimes on the United States in the context of the political ecology of superpower rivalry conditioned the postwar rehabilitation of both former colonies.

While both post-colonial regimes nationalized Japanese assets, the greater leverage exercised by the AMG on the Rhee administration compelled it to rapidly privatize state-owned enterprises and the South Korean-American agreement of 1954 led to the sale of 50 major industrial enterprises. In contrast, American ambivalence toward the GMD in the immediate aftermath of the Second World War meant that there were no corresponding pressures on Chiang's regime in Taiwan to privatize the economy. Indeed, concluding that the island's survival as an independent state was unviable, the Truman administration had even cut off all assistance to Taiwan in 1949. At the same time, unlike most other post-colonial states, the GMD regime not only had a large cadre of technocrats with extensive experience in industrial production and economic planning on the Chinese mainland but the establishment of a conquest state over indigenous islanders also rendered the party hierarchy very resistant to the idea of granting economic power to a relatively hostile subject population. Hence, the GMD party-state's domination of the economy in Taiwan was staggering especially since virtually no leading Chinese entrepreneur followed Chiang to the island.

State enterprises in Taiwan accounted for almost 57 percent of industrial production in the early 1950s and though the growth of private industries in the ensuing decades diluted this overwhelming dominance, the state sector still accounted for about 20 percent of industrial production in the early 1970s. Some ministries even established separate commercial ventures – as, for instance, the Ministry of Communications and the Ministry of Economic Affairs, both of which had their own ‘private’ engineering companies. The military's holding company – the Vocational Assistance Commission for Retired Servicemen – was perhaps the largest conglomerate in the island, with businesses spanning a wide spectrum of activities from restaurants, orchards, and dairy farms to trucking, construction, manufacturing, and foreign trade. Finally, quite apart from government enterprises, the ruling GMD itself controlled a network of some 50 corporations spanning a wide array of sectors including communications (Central News Agency), petrochemicals (Orient Union Chemical Corporation), finance (Central Investment and Trust Corporation), and transportation. The Asian Wall Street Journal Weekly estimated that approximately half of Taiwan's corporate assets were directly or indirectly controlled by the government or the GMD in 1989, a share higher than almost anywhere outside the centrally-planned economies and sub-Saharan Africa (Gold, 1986: 70; Wade, 1990: 176, 266, 273–4; Bello and Rosenfeld, 1990: 232–3). Moreover, since US assistance, channeled through the government, accounted for almost 40 percent of annual gross domestic capital formation in the island between 1951 and 1965 (Simon, 1988a: 149–50), business success or failure was unusually dependent on the GMD's favor.

Privatization of nationalized industrial assets was, however, a mixed blessing for Syngman Rhee. Though it deprived him of the institutional mechanisms of control available to Chiang, as he had no significant bases of support in Korea, the giveaway of confiscated Japanese assets to ex-managers and supporters of the regime at below-market prices enabled him to create a powerful constituency based on patronage (see Woo, 1991: 67).

South Korea's strategic location in the geopolitical calculus of the Cold War also more than compensated for the enforced privatization of expropriated Japanese assets. In the first instance, though the Korean War catapulted Taiwan to the front line of the US attempt to ‘contain communism’ and led to the resumption of economic and military assistance to shore up Chiang's regime and to dissuade it from attempting an invasion of the mainland – a venture that would have inevitably led to the commitment of significant numbers of US troops (Gold, 1986: 69; Wade, 1990: 82, 246) – South Korea received far larger infusions of overseas aid, as already indicated in Chapter 1. Apart from US economic and military disbursements of $12.6 billion between 1946 and 1976, South Korea received an additional $1 billion from Japan and some $1.9 billion from international financial institutions. Taking the South Korean population in 1960, the mid-point of these three decades, this total of over $15 billion amounted to a per capita figure of $600 in comparison to a per capita figure of $425 for Taiwan, or a total of $5.6 billion (Mason et al., 1980: 165, 185; Krueger, 1979).

Despite Rhee's greater dependence on US aid, he was less vulnerable to American pressures to implement wide-ranging social and economic reforms than Chiang because the presence of large numbers of American troops on South Korean soil and the country's precarious political and military location along the geopolitical fault lines of the Cold War enabled him – like Ngo Dinh Diem in South Vietnam – to play off security interests against aid officials (Barrett, 1988: 126–7, 133–5). Hence, frustrating American designs to re-create an East Asian trading bloc centered on Japan, Rhee resisted pressures to normalize diplomatic relations with Japan and pursued a vigorous import-substituting industrialization (ISI) program with US aid funds which resulted in the manufacturing sector registering an annual average growth rate of 10.8 percent during the 1950s compared with 2.5 percent for the primary sector and 3.9 percent for services (Haggard, 1990: 59; see Amsden, 1989: 40–1). Of course, the pursuit of an ISI program was also facilitated by the military volatility, political instability and the sheer poverty of the country which made it an unappealing market for US corporations, especially when much richer pickings were to be had in Western Europe, Australia, and Argentina. Similarly, parlaying the regime's political and military vulnerability, Rhee was able to thwart American pressures to devalue the currency after 1955, since an overvalued exchange-rate lowered the cost of imported capital and intermediate goods necessary for an ISI strategy while increasing the real value of inflows of foreign aid. At the same time, the maintenance of multiple exchange-rates – lowering exchange-rates for particular export items and destinations – eliminated some of the more egregious effects of an overvalued currency (Krueger, 1979: 61–5; Woo, 1991: 53–65).

Conversely, notwithstanding smaller inflows of American economic and military assistance, the GMD party-state's domination of the ‘commanding heights of the economy’ – including aluminum, fertilizers, heavy machinery, petrochemicals and petroleum refining, shipbuilding, steel, sugar, and synthetics – rendered the regime more vulnerable to American pressures to promote private enterprise, particularly in the context of the progressive bureaucratization of US aid disbursements. The greater vulnerability of the regime in Taiwan to US influence was vividly illustrated by the creation of two supra-ministerial agencies in 1953, the Economic Stabilization Board (ESB) and the Council on US Aid (CUSA), the meetings of both of which were routinely conducted in English to accommodate American advisers (Jacoby, 1966; Gold, 1986: 67–9; Haggard, 1990: 86–7; Wade, 1990: 82, 199).

In both cases, the political subordination of the bourgeoisie was further cemented by their reliance on the state for finance and tariff protection. In Taiwan, the GMD party-state not only monopolized the banking sector through its ownership of the banks that migrated from China and its confiscation of majority shares from Japanese partners of private banks on the island, but measures taken to curb hyperinflation in early 1950 to soak up excess money supply – chiefly raising nominal interest rates to 7 percent per month, or a real annual rate ranging from 28 to 82 percent – increased its control over domestic savings as well. Even if these interest rates quickly proved to be unsustainable and were cut to a monthly rate of 3 percent, the rate was high enough to ensure that time and savings deposits in banks accounted for some 56 percent of the money supply by late 1952 (Gold, 1986: 108; Wade, 1990: 58). Though nominal interest rates were lowered further as prices stabilized, these still averaged about 9 percent per year between 1955 and 1965 while nominal rates on unsecured loans in the ‘unregulated’ market averaged around 40.7 percent (Wade, 1990: 58–9).

Moreover, apart from the retention of strict controls over foreign exchange, import restrictions, bank credit, and industrial licensing, government control over the economy was cemented by the mandatory requirement that industrial associations be formed in any sector with more than five firms. As the GMD appointed the secretaries of the major associations, and monitored and controlled elections to their boards of directors, these functioned not as autonomous bodies representing the interests of their members but as conduits to gather information and convey government directives (Wade, 1990: 271–2).

Once again, even if US pressure compelled the Rhee administration to sell the commercial banks and grant autonomy to the country's central bank in 1957, as American interference in the management of aid funds was less intrusive than in Taiwan, the South Korean government could reward its supporters more freely than its GMD counterpart. Moreover, since large doses of US assistance – estimated to account for over 80 percent of the country's foreign exchange earnings between 1953 and 1958 (Koo, 1987: 167; Amsden, 1989: 39) – were funneled through the government, Rhee was able to use aid disbursements to provide windfall profits for his cronies: tolerating them reselling their allocation of scarce imported raw materials and countenancing their refusal to repay the ‘loans’ they received (Amsden, 1989: 39; see also Haggard, 1990: 54–61).

Indeed, beneficiaries of undervalued state assets in South Korea never lost their early lead and when commercial banks were sold in 1957, these were largely acquired by the favored industrialists. While access to political patronage gave these ‘entrepreneurs’ import permits and preferential rates of foreign exchange, they found it more lucrative to sell foreign exchange and lease their import permits rather than increase their productive capacity, as the regime had no mechanism to specify the use of these scarce resources (Cheng, 1990: 147–51). Finally, while Chiang's regime included a large cadre of economic managers, Rhee's Liberal Party, dominated by exiled nationalists and remnants of the Korean aristocracy, and collabor-ators in the Japanese colonial enterprise had no comparable cadre (Kuznets, 1977: 32–5; Cheng, 1990: 146–7; Wade, 1990: 246–7).

At first sight, the economic and political dependence of the bourgeoisie on their respective state apparatuses in South Korea and Taiwan stands in sharp contrast to Hong Kong. With a flat-rate income tax of 15 percent, no tax on capital gains, no restrictions on the movement of capital and commodities, no mandatory minimum wage, unemployment insurance or retirement pensions, minimal regulations on working conditions, generally balanced budgets, extremely low public debt, and with not even a central bank¹⁰, the Crown Colony presents an almost textbook example of a laissez faire economy. The dominance of the commercial and financial sectors in the colony's entrepôt economy also meant that government policy was set firmly against infant industry protection or subsidies to help manufacturers.

Yet, in 1949, even as its governor, Alexander Grantham, was proclaiming that ‘he was proud to be the “Governor of a Colony of shopkeepers”’ (Choi, 1999: 143), fundamental changes were transforming Hong Kong from an entrepôt to a locus of low-cost manufactures. In the first instance, Hong Kong was not only the recipient of a large influx of refugees in the late 1940s but also of a large inflow of capital from China as many firms from Shanghai transferred their assets to the Crown Colony – as much as US$50 million in 1947 alone according to a Fortune magazine estimate (England and Rear, 1975: 25) – and the number of industrial establishments increased from 972 in March 1947 to 1,788 four years later (Choi, 1994: 43–4).

If the commercial and financial bourgeoisie was initially reluctant to support policies conducive to the growth of manufacturing, the loss of markets and production facilities in China especially after the United States placed a virtual embargo on China in December 1950 due to the Korean War, provided an impetus for Hong Kong's large and diversified trading companies to establish closer ties with manufacturing establishments (Haggard, 1990: 121). With exports from the colony falling from HK$4.4 billion in 1951 to HK$2.5 billion in 1955 as a result of the loss of its entrepôt function, the colonial government began to respond to manufacturers' concerns that the hilly nature of the urban area limited the supply of land for industry. Land development for industrial use did not represent a significant departure from laissez faire principles, as Stephen Chiu (1996) has argued, since it ‘was similar to other kinds of logistic support that the colonial state offered to private enterprise.’ Government ownership of land also meant that lands could simply be transferred from the Government Lands Department to the Housing Authority and thus the estates, storage facilities, and industrial workshops could all be constructed at relatively low cost.

Moreover, soon after a devastating fire on Christmas Eve 1953 in the Shep Kip Mei squatter settlement in North Kowloon had made over 50,000 people homeless and spurred the government to embark on a massive housing policy, the Housing Authority soon realized the enormous commercial potential presented by the housing estates both as a means to provide profit-making facilities to residents of these estates and for the Authority itself. Public ownership of all land in the colony implied that the government's land policy was a redistributive tool as the large- and medium-scale businesses were charged high real estate prices which provided the government with the revenues required to construct the industrial infrastructure without incurring large debts and to subsidize low-cost housing for the poor. By 1981, the Housing Authority had leased space to some 5,000 private factories located in multistorey buildings and cottages, as well as to 13,750 shops, banks, and restaurants (Castells et al., 1990: 18, 33, 43–4, 95–7).

With the chronic inadequacy of domestic supplies of food and the large influx of refugees, cheap sources of basic wage goods were vital for the colony's transition from a commercial entrepôt to a low-cost manufacturer of industrial goods, especially since food expenditures accounted for approximately 55 percent of the incomes of all households in the early 1960s and 1970s, and was considerably higher for blue-collar households (Schiffer, 1991: 183). Apart from importing food from China, the Hong Kong administration also adopted a ‘Rice Control Scheme’ in 1955 and established a distribution network to deliver rice, vegetables, and fish at controlled prices. In conjunction with price controls on public transport and utilities, it has been estimated that government subsidies amounted to 50.2 percent of the average wage of a blue-collar household as late as 1973–74 (Castells et al., 1990: 79–80; Schiffer, 1991: 184–6).

Recognizing that export-oriented manufacturing could also provide large profits from foreign exchange services, some of the large expatriate-owned trading firms or hongs also diversified their operations and moved into man-ufacturing: Jardines into textiles, for instance, and Wheelock Marden into textiles and toys (Choi, 1999: 152–3). However, periodic bouts of political uncertainty – fear that strategic concerns during the Korean and Indochina Wars could outweigh economic advantages China derived from Hong Kong, that the Cultural Revolution would submerge the colony – meant that industrialists were as reluctant to invest in projects with long gestation periods as banks were to lend money for them. This implied that entrepreneurs in Hong Kong pursued what Kim-Ming Lee (1999) calls a ‘guerilla strategy’: they were ‘committed to making money, not to making goods for sale’ (England and Rear, 1975: 34; see also Choi, 1999: 145).

The colonial government's role in developing Hong Kong's infrastructure and in subsidizing wage-goods was crucial in the transformation of the colony from an entrepôt to a locus of low-cost manufacture. However, internal divisions among its industrial bourgeoisie enabled the colonial state to manipulate these ruptures for its own ends. Though the Chinese Manufacturers' Association (CMA), representing the interests of industrialists, consistently demanded protectionist measures and greater state intervention in the economy, the colonial state instigated and subsidized the creation of a rival organization, the Hong Kong Federation of Industries, controlled by Shanghainese industrialists rather than the Cantonese who dominated the CMA. By thus blunting the influence of the industrial bourgeoisie – and mobilizing its largest stratum behind itself – the colonial government insulated itself against the demands of small manufacturers (Choi, 1999: 154–5). Nevertheless, even though large-scale government intervention belied Hong Kong's laissez faire pretensions and fundamentally conditioned structures of accumulation, the large financial and commercial bourgeoisie had a great deal of influence on state policy – to a degree unmatched elsewhere along the rimlands. Hence, they prevented the emergence of selective state assistance for industrial development since greater public expenditure would result in higher taxes (Chiu, 1996: 243–4).

Singapore's expulsion from the Malaysian Federation was perhaps even more cathartic than Hong Kong's loss of its Chinese hinterland, because the collapse of the merger completely undermined the government's strategy to transform the island from an entrepôt to an industrial center. Based on a blueprint formulated by a United Nations Industrial Survey Mission headed by Albert Winsemius, the rapid increase in manufacturing investment, especially since mid-1963,¹¹ had been predicated on a common market arrangement with Malaysia. Though anti-Chinese pogroms in Indonesia in the 1950s had triggered a flight of capital to Singapore, it did not lead to a spurt of manufacturing activity as Sino-Indonesians were from the commercial rather than the industrial strata (Haggard and Cheng, 1987: 89). Acknowledging the inadequacy of commercial activities and financial services to generate sufficient employment opportunities and the weakness of domestic capital, the government's economic policy had revolved around attracting foreign capital by the provision of a low-wage, docile labor force, tax incentives, well-developed infrastructural facilities including the construction of industrial estates, and the free remittance of capital – in short, state support for private capital. In the context of the trade embargo imposed by Indonesia, the failure of the merger with Malaysia not only dealt a fatal blow to the PAP's development project but it also threatened the party's grip on power. On the heels of its expulsion from the Malaysian Federation, the beleagured Singapore government was additionally confronted by Britain's decision to close its military installations – which had directly or indirectly accounted for almost 24 percent of the island's GNP in 1967 and employed about 20 percent of the workforce the year the decision was announced (Rodan, 1989: 87; Castells et al., 1990: 190–1; Cheng and Gereffi, 1994: 203) – by 1971.

The PAP government's strategy to attract foreign investments was underpinned by a massive construction scheme – funded by compulsory contributions to a government-organized social security scheme, the Central Provident Fund (CPF) – the creation of several major public sector undertakings, and by a concerted ideological campaign of ‘social engineering.’ Soon after Lee Kuan Yew's election victory in 1959, the government had begun one of the most successful public housing programs in the world, building some half a million units in 25 years and 15 fully-equipped satellite towns to house 85 percent of the population. The provision of relatively high quality housing for workers at low rents and prices along with a bundle of facilities in education, health, recreation, and other community services, eased pressures on wages without reducing the quality of labor. Additionally, public housing construction was also a device to curb unemployment rates, particularly in the late 1960s when it was feared that almost 100,000 jobs would be lost due to the closure of British military installations. The determined enforcement of the state's right of eminent domain and the enforcement of mandatory land-acquisition policies checked land speculation during a phase of rapid economic expansion, lowered project development costs, and facilitated not only the development of housing estates but also satellite towns and large industrial estates. In addition, by restricting the withdrawal of funds from the CPF almost exclusively for public housing, the government was able to effectively control the demand and supply of money. Finally, linking CPF rates to wage increases provided another string to the state's anti-inflationary bow (Castells et al., 1990: 191, 193, 267, 304–6). Cumulatively, these measures closed the wage gap between Singapore and its three main rivals in the region – Hong Kong, South Korea, and Taiwan (Rodan, 1989: 105).

In tandem with the construction of public housing, the PAP government also launched a major drive to improve infrastructural facilities to attract foreign investors. Following recommendations of the Winsemius Report, 58 percent of the M$871 allocated for public sector investments in the State Development Plan 1961–64 was earmarked for these programs. The largest single allocation was to the newly-created Economic Development Board (EDB), the pilot agency designed to lower the establishment and operating costs of manufacturing concerns by underwriting the issue of stocks and bonds, guaranteeing loans, developing industrial estates, and providing technical assistance (Rodan, 1989: 64–5). Despite the provision of attractive terms for foreign investors, Singapore's relatively higher wage levels meant that the bulk of overseas investments were in the capital intensive sectors. Hence, though investments in the manufacturing sector had increased by 3.69 percent in 1964 (in 1968 prices) and 13.44 percent in 1965, industrial employment had risen only by 3,120 in 1964 and 5,820 in 1965 (Rodan, 1989: 81–2). The realization that industrial peace alone was not sufficient to ensure large infusions of foreign investments galvanized the Singapore government to grant overseas investors greater fiscal incentives while simultaneously expanding efforts to upgrade the island's infrastructure. Consequently, since Singapore's transformation to a lowcost, labor-intensive manufacturing base for export to high-income markets in North America and Western Europe brought it into direct competition with other sites pursuing similar strategies, most notably Hong Kong and Taiwan, the PAP administration slashed taxes on profits on exports of manufactured goods to one-tenth of the normal corporate tax rate – to an effective rate of only 4 percent – besides allowing unrestricted duty-free imports of capital goods and raw materials intended for exports and accelerated depreciation rates (Haggard, 1990: 111; Rodan, 1989: 87–8). Not content to wait for foreign investments, several public sector undertakings were also established – for instance, the Sembawang Shipyard to take over the Royal Naval Dockyard, the Singapore Electronic and Engineering Pte. Ltd (Rodan, 1989: 95–6).

Reinforcing these incentives, government expenditures on development projects almost doubled, rising from S$184.4 million in 1965 to S$332.8 million in 1969–70. Underlining the increased scale and range of development projects, several specialized agencies were created in the late 1960s to relieve the EDB of the more complex and specialized functions: the Development Bank of Singapore to provide long-term finance at low rates of interest; the International Trading Company to facilitate market penetration for Singapore's exports and to source cheaper sources of raw material imports; the wholly government owned Neptune Orient Lines to reduce reliance on foreign shipping lines and to ease trade with centrallyplanned economies; and the Jurong Town Corporation with oversight responsibility for all industrial estates (Rodan, 1989: 93–5). The EDB, then, like the Taiwanese ESB, the South Korean Economic Planning Board (EPB), and the Japanese MITI became a general staff of macroeconomic planning, overseeing and coordinating the work of these specialized agencies and public enterprises, formulating long-range plans, and setting targets.

Summary

To recapitulate, however much the post-Second World War regimes may have been bathed in the alpenglow of the old order, be it of the Meiji state or the Yi dynasty, there was nothing ‘traditional’ about the new order along the Asian rimlands. Colonialism, war, internecine conflict and revolution, and military defeat and US occupation had fundamentally restructured state-society relationships in the future Asian ‘miracle’ economies. Though these regimes originated in very different circumstances, and operated under different socio-economic and political constraints, it was the relative autonomy that their state apparatuses enjoyed which distinguished them from other ‘newly industrializing economies’ such as those in Latin America, and other US client states like the Philippines and South Vietnam, where landed oligarchies remained firmly entrenched.

The breakout of massive strike waves in Japan and civil war in China and Korea created the conditions for a thoroughgoing restructuring of state-society relations. It prompted the United States occupation forces in Japan to implement far-reaching institutional changes to diffuse sociopolitical dislocations, and to pressure US client states in South Korea and Taiwan to implement similar changes. Attempts to ameliorate the destabilizing effects of Japanese defeat, particularly since these coincided with heightening tensions between the United States and the Soviet Union, revolved around strengthening state apparatuses in all three jurisdictions, though these were differently accentuated in each case. In Japan, measures instituted by the US occupation forces to divest the elite of its control over the economy strengthened the autonomy of the state bureaucracy while the increasing concern with containing ‘communism’ emasculated the newly enfranchised trade unions. If the AMG in South Korea initially collaborated with the discredited Korean landlords in resisting land reforms, strong US pressure prevented the Rhee administration from reversing the reforms implemented by the North Korean forces during their occupation of most of the peninsula during the civil war, while martial law imposed in Taiwan was emblematic of the institution of a conquest state. The autonomy of state apparatuses in all three cases was additionally bolstered by large infusions of American aid and military procurements.

As British outposts, Hong Kong and Singapore were not beneficiaries of large infusions of American aid, while Britain itself had few resources to offer. Though the adverse conditions caused by the loss of its hinterland was exacerbated in Singapore by the unrelenting hostility of the Malaysian and Indonesian governments toward their Chinese minorities, these circumstances provided the pretext for the Singapore government to invoke emergency powers and propelled it to enact a battery of interventionist measures as its historically small bourgeoisie was hesitant to expand investments when short-run prospects looked so uncertain. Unlike Singapore, the colonial administration in Hong Kong faced neither a strong external threat nor demands for greater political rights or for independence. However, the imposition of a United Nations embargo on the export of strategic goods to China undermined Hong Kong's entrepôt role and compelled the colonial administration, acting in concert with major commercial interests, to gradually take measures to transform the economy from a trading center to a locus of low-cost manufactures for export to high-income countries in North America and Western Europe. The continuing strength of financial and commercial interests ensured that state intervention in Hong Kong meant in essence lowering costs for all manufacturers regardless of size, ownership, or sector (Chiu, 1996: 231).

Though the reconstitution of the future ‘miracle’ economies along the Asian rimlands shared several characteristics and they all adopted a broadly similar strategy of subordinating agriculture to state-directed industrialization drives, their internal balance of class forces and domestic resource endowments conditioned different patterns of accommodation. The democratic structure of the post-bellum Japanese polity and the greater maturity of its bourgeoisie and its proletariat led conservative politicians and bureaucrats to create institutional structures to integrate farm families, small and medium enterprises as well as big businesses in a coalition that underpinned the long electoral dominance of the Liberal Democratic Party. Conversely, by fragmenting the labor movement through a variety of measures, the conservative alliance severely handicapped the electoral prospects of the Japanese Socialist Party. Though the commercial and financial bourgeoisie in Hong Kong were highly classconscious and formed a cohesive bloc, severance of their supply and marketing networks in China mitigated their strong laissez faire stance. Acting in concert with the commercial and financial bourgeoisie, the colonial government provided the infrastructural underpinnings for Hong Kong's transition from an entrepôt to a low-cost export-oriented manufacturing platform – though this did not involve subsidies, loans, protective tariffs, or other instruments deployed by the more interventionist states.

In the two former Japanese colonies of South Korea and Taiwan, the government had to virtually incubate a bourgeoisie. In the latter, the establishment of an ethnically-bifurcated state and the hostility of Mainland émigrées toward native islanders led to the state domination of the commanding heights of the economy. Pressure from US aid officials, however, compelled the regime to permit native islanders to develop small-scale industries, which relied largely on kinship networks as nationalized banks continued to discriminate against them. In South Korea, though the presence of US troops across the demilitarized zone enabled Rhee to play off strategic interests against aid officials, the lack of a cadrebased mass party restricted his ability to intervene deeply in the economy. By privatizing nationalized Japanese colonial assets, he created a domestic constituency for his regime but was unable to jump-start the economy. It was only after General Park Chung Hee's coup d'état in 1961 that the state's institutional capacity to pilot economic growth became entrenched, as we shall see in the next chapter. Finally, in Singapore, the weakness of the domestic bourgeoisie compelled the regime to create conditions conducive for foreign capital after the labor movement was knee-capped in the early 1960s.