Decolonization, the Cold War regime and postwar East Asian growth

After the Second World War, Britain tried to regain her position as imperialist power, and the City of London attempted to restore the sterling area and maintain the status of sterling as an international currency.

By the late 1950s, however, with decolonization and Britain's relative economic decline, the restoration of the prewar order clearly became unrealistic. The City was to find a new role in the global development now led by the United States. In fact this hegemonic shift occurred in close interaction with another major development - the emergence of the Cold War regime.

In East Asia, the communist revolution in China and the outbreak of the Korean War reinforced the American 'reverse course' policy towards Japan, that is, to rehabilitate, rather than destroy, Japanese industrial power and use it to counter the penetration of socialist forces in the region. Thus during the 1950s and 1960s Japan successfully negotiated to become a full member of GATT, in order to benefit from the emerging liberal regime of international trade backed by the United States. In spite of political difficulties arising from the self-inflicted consequences of the Asia-Pacific War, Japan was able to import raw materials and fuel from all over the world, and export labour-intensive industrial goods, especially to the United States and other Asian countries, so that she could carry out economic modernizations at home. A new international division of labour gradually emerged where the United States specialized in capital- and resource-intensive industries and Japan (and later other East Asian countries) specialized in labour-intensive and resource-saving industries. The former industries were often military-related, for example, military, space, aircraft and petrochemical industries, while the latter concentrated on the production of non-military, mass consumer goods.

As far as the trade between the West and the rest of the world is concerned, this is a fundamentally different kind of division of labour from the one which operated since the industrial revolution in the early nineteenth century. Under the imperialist order dominated by Britain, the rest of the world was to provide primary products to the Western metropole. Now the nature of complementarity became more interindustrial and much less hierarchical.

As stated above, it was East Asia's industrialization between the wars, especially during the 1930s, that prepared this shift in the patterns of world production and trade. It was at that point that East Asia as a region began to industrialize, with the full use of Western technology. For the first time, a regional and substantially autonomous industrialization, involving hundreds of millions of people, occurred outside Europe. After the war, labour-intensive industrial goods began to be exported from East Asia back to the West, first in the form of textiles and sundries, then in consumer electrical goods, bikes and small cars. It is worth noting that from the early postwar period both competition and co-operation among Asian countries played a vital role in the growth of reverse industrial exports. By the 1960s and 1970s there was fierce competition among East and Southeast Asian exporters in the Western market of cheap mass consumer goods. Thus, if the exports of Japanese textiles were subjected to voluntary restrictions in the American market, it tended to give Hong Kong's textile exporters, rather than the domestic manufacturers, a chance to capture a slice of that market. There was also co-operation. For example, an 'East Asian textile complex', made up of Japanese man-made cloth manufacturers, Taiwanese weavers, Hong Kong apparel manufacturers and Japanese trading companies, combined Japanese technology, Taiwanese cheap labour, Hong Kong's designer skills and Japanese capital and organizational abilities, and emerged as a formidable competitor in the international market. As the Cold War turned to 'long peace' and the demand for mass consumer goods grew much faster than military-related needs, the rate of economic growth of East Asian countries became higher than that of the West.

By the 1980s, the quality of Japanese manufactured goods matched that of its American counterparts, and the Pacific became the focus of international competition in high-technology goods. The high-growth segments of the mass consumer market, including some top quality range, also shifted from the United States to East Asia around this time. By then the majority of world trade was being conducted across the Pacific Ocean, and the centuries-old pre-eminence of the Atlantic in world trade, on which the centrality of the City of London depended, had been lost.²²

The growth of competitive financial and service sectors was crucial for this rise of the Asia-Pacific economy. For much of the postwar period, both Hong Kong and Singapore played an important role in facilitating the recovery and growth of intra-Asian, as well as Pacific, trade and flows of capital. Hong Kong in particular acted as an international centre of trade, finance and services by fully committing itself to the principle of free trade, while remaining a British colony till 1997. Under the international environment of surging nationalism and the Cold War divide, Hong Kong was a crucial counter-force, which neither retaliated strongly against any protectionist actions by its trading partners nor was completely closed to communist China. By offering its neighbouring countries entrepot facilities and human networks, Hong Kong undoubtedly helped unite Asia's national economies and connect them with the United States through trade, capital, and information and technology flows. East Asian growth economies thus enjoyed both a committed industrial policy at home and an easy access to fast-growing regional and American markets. In this way, Hong Kong contributed to the dynamic growth of the Asia-Pacific economy. It should be possible to acknowledge this largely unintended consequence of global significance, without entering into the debate on the political assessment of British rule there. While its entrepreneurial strength largely came from Chinese merchants and manufacturers (many Shanghai capitalists migrated south to blend with overseas Chinese in Southeast Asia with traditional commercial skills), its institutional setting was unmistakably British, heavily modelled on gentlemanly capitalism.

The peculiar relationship between manufacturing, and finance and services was thus transferred to East Asia, to form the heart of its economic success.

Furthermore, there must have been many other international centres of finance and services, which encouraged the growth of manufacturing in the Asia-Pacific region. We need to identify these shifting sets of international apparatus, including indeed part of the activities of the City of London, at each stage of its development. In the most recent past, that is, after the collapse of the Cold War regime, it became clear that the United States came to specialize further in the financial sector, thus creating a new sense of complementarity with East Asian manufacturing interests. In some respects, the 'Wall Street-Treasury Complex' replaced the old 'Military-Industrial Complex'.²³ Thus the nature of complementarity between the United States and East Asia somewhat shifted, from the division of labour between capital-intensive and labour-intensive industries, to the one similar to the relationship between the City and late-developer industrial economies. The peculiar relationship, identified here as the Cain and Hopkins perspective, has arguably survived the hegemonic shift, and has remained a central device for the development of the capitalist world economy to this day.

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Source: Akita Shigeru. Gentlemanly Capitalism, Imperialism and Global History. Palgrave Macmillan Ltd.,2002. — 279 p.. 2002

Decolonization, the Cold War regime and postwar East Asian growth

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