To the Editor:

In “Underdevelopment Revisited” [July], Peter L. Berger makes many interesting points about Pacific Asia’s economic success. But one line struck me as false: “The question that should be of burning urgency . . . is why capitalism has succeeded in some places and failed in others.”

I doubt that capitalism has failed in any developing country. In my experience in Asia, capitalism has succeeded brilliantly where it has been tried. As Mr. Berger notes, those places include Japan, South Korea, Taiwan, and most other countries along the Pacific rim where annual growth rates over the past two decades have averaged between 5 and 10 percent. But where growth has been slower, the fault does not lie with capitalism; it lies instead largely with government policies that have interfered with capitalist incentives. This is true even in some countries that claim their economies are free.

Consider the Philippines, the only Asian nation with a Latin-style debt problem. Its growth rate has become negative; it now needs a bailout from the International Monetary Fund. Much of the renewed political opposition to President Ferdinand Marcos has been led by businessmen, not Communists. But the Philippines does not represent a failure of capitalism. . . . In fact, Marcos has intervened massively in the Philippine economy, misallocating billions in borrowed dollars to state-run projects, protecting local industry with high tariffs, aiding friends in business with government loans, making life difficult for foreign investors, and creating monopolies in agriculture. The World Bank and a few Philippine policy-makers have in recent months begun to convince Marcos to allow freer markets, but only after the manifest failure of his earlier intervention.

Similar state meddling has hampered growth in Indonesia, in Chile, and in any number of other countries commonly thought to favor free markets. A common misperception is to assume that because an authoritarian ruler is anti-Communist he must therefore be a capitalist. Not at all. He may not be a classic socialist, either. But like Mussolini, he may be a statist of a different sort, believing that the state, rather than the private sector, produces the most wealth. It pays to remember that old aphorism: the problem with capitalism is capitalists; the problem with socialism is socialism.

Paul A. Gigot
Hong Kong

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To the Editor:

Peter L. Berger has done a splendid job in his article, but I am mystified by his comment that sometimes we do not know why capitalism has failed in the developing countries. On the contrary, it appears to me that such failures are due to causes which seem to be fairly well known. . . .

It is important to remember that there are at least two identifiable kinds of capitalism: (1) basic or primitive capitalism, and (2) advanced, or high-output, or industrial capitalism.

Basic capitalism has been with us since the primitive organization of society thousands of years ago. It is extremely hardy and never fails; no brutal totalitarian government has ever been able to stamp it out. It is based on the fact that people, whenever it is to their personal advantage to do so, will buy, sell, trade, or barter their goods and services in the marketplace; further, they will save and invest in entrepreneurial risk-taking if it seems personally advantageous to them to do so.

The first capitalists were probably the men who decided to save some of the grain seeds they had gathered for planting the next year, or who decided to specialize in making spears and weapons and to trade them for a share of the meat that the hunters had brought home.

But high-output capitalism is not so hardy. It takes a long time to develop and can falter or even fail when there is excessive government regulation, taxation, or interference; when it is not deemed advantageous or practical to save and invest; when the market is restricted or excessively skewed; or when money and banking are fraught with uncertainty. (The last item had much to do with the faltering of capitalism in the Depression.)

Mr. Berger has pointed out the grim fact that socialism has been a failure everywhere it has been tried in the Third World. It is one of the great mysteries of our times that those on the liberal-Left simply will not face that fact, and continue their anti-capitalist posture. . . .

John H. Harwood
Birmingham, Michigan

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