East Asia has become a key region of the world economy in the last twenty years and a successful global governance of finance will depend partly on the position of East Asian countries. East Asia in a unique way combines a need and a huge potential fo...
East Asia has become a key region of the world economy in the last twenty years and a successful global governance of finance will depend partly on the position of East Asian countries. East Asia in a unique way combines a need and a huge potential for global governance with a reluctance to use this potential and exercise leadership on the international level. So far, East Asia has left the initiative within the G20 to the ‘old G8’. It is an urgent task to understand why this is the case and what will happen when East Asia awakes and steps out of the shadow of the established powers.
In order to understand the position of East Asian countries in the G20, it is necessary to understand the development and the political economy of East Asia. Unfortunately, from looking at East Asian recent history and the political economy of the region, scepticism about a leadership role of East Asia is advisable. Despite their differences in size and political economy the three East Asian members of the G20, Japan, China and South Korea, have three similarities that justify dealing with them in one project. East Asia has become the only region outside the Western world that has been successful in late industrialization and capitalist development. All countries share a strong developmental state with comprehensive development plans and control or strong influence in the banking sector that financed industrialization through credits while financial markets played a small role (Woo-Cumings 1991; Evans 1995; Kim 1997; World Bank 1993). All three countries are export-oriented countries with export surpluses, their financial institutions play a subordinated role in the political economy and they have a distinct nationalist state-oriented form of capitalism. They thus differ significantly from the British/US style of capitalism and while they are more similar to the European form of organized capitalism concerning export-orientation, low level of financialization and the organization of the banking sector (Yamamura and Streeck 2003).
Despite their different political economic structure, East Asian countries have similarities with the US concerning their foreign economic policies and their position in the G20. The reaction of East Asian states to outside challenges is inward looking stemming from their state led development that combined export-oriented growth with protection of the home market. Similar to the European and particularly German style of export oriented problem solving, this strategy accepts beggar you neighbour strategy by taking away export market shares from competitors. However, unlike the European version that is open to international arrangements and engages in creating regional frameworks to react to challenges, East Asia remains inward looking. The very success of nationalist developmental state has created a strong bias for inward looking problem solutions that impede East Asia’s ability to react to challenges in a regionally or internationally coordinated way. Unlike the US that see the world as their sphere of influence as the only remaining superpower and European countries that see themselves as part of the European Union, East Asian countries perceive the outside world as generally hostile and ‘Hobbesian’ (Katzenstein 1996: 153-54). Unlike the US that tries to solve problems by manipulating international agreements (as we have seen with the Plaza accord of 1985) or Europe that is trying to solve the problems by fostering regional integration, East Asia remains on a nation state centred track. Until today, East Asian countries are exercising very few influence in international financial institutions if we consider the size of their economy and their contribution to these institutions. Current reforms of voting systems in the IFIs will not generally change this. Their strong bilateral ties to the US also limit the influence of East Asian countries within international organizations.