The Political Economy of China's Financial Reforms: Finance in Late Development by PaulBowlesReview by: Donald ZagoriaForeign Affairs, Vol. 73, No. 4 (Jul. - Aug., 1994), p. 182Published by: Council on Foreign RelationsStable URL: http://www.jstor.org/stable/20046807 .

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Recent Books

the danger of a wider war. Stalin was pru

dent, and he feared getting involved in

a wider war with the United States. But

after April 1950, according to a Soviet

diplomat who had access to the archives, Stalin "for some reason changed his mind

and began to push for a military solution

very actively." What is not clear from this

volume is why Stalin changed his mind.

On this critical point, the authors are

reduced to speculation. They pile expla nation on explanation, most based on

conjecture about Stalin's motivations.

This is not to detract from their achieve

ment. This volume assembles a great deal

of information and will be essential read

ing for historians who follow the subject. The final word on Stalin's motivations

for changing his mind in April 1950, if indeed that was the case, will have to

await the opening of the Stalin archives.

One final point: students of deterrence

theory will find nothing here to contra

dict their long-held view that the U.S.

failure to include Korea in the U.S.

defense perimeter helped convince the

prudent Stalin that he could achieve a

major victory without great risk. Stalin

was constantly scrutinizing U.S. policy for signs of resolve or a lack thereof.

Thus, if the United States had taken a stronger line on the importance of

defending Korea in early 1950, the

Korean War might have been averted.

The Political Economy of Chinas Financial

Reforms: Finance in Late Development. by pa?l bowles. Boulder: Westview

Press, 1993, 206 pp. $49.95. In this extremely stimulating and contro

versial account of China's economic

progress, the authors advocate a strong

role for the government in directing financial reforms, a position that runs

against the orthodox advice offered by most international agencies. They con

tend that there is an East Asian model

of development, exemplified by South Korea and Taiwan, but also including

Japan, where high rates of growth have

been achieved because the state has

played a substantial role in owning finan

cial institutions, administering interest

rates and directing credit. Control of the

financial system, they contend, played a

crucial role in promoting the structural

transformation of the economy and was a

central component of a highly effective

pattern of state-directed development. Whether or not one accepts the analy

sis and its implications for China?and

the case is quite convincing?the authors

provide a lucid and scholarly analysis of

the financial reform process in China, thus

filling a substantial gap in the research on

the Chinese economic reform process.

Keiretsu: Inside the Hidden Japanese

Conglomerates, by kenichi miyashita

and david w russell. New York:

McGraw-Hill, 1994, 225 pp. $22.95. An American business journalist based in

Japan and his Japanese counterpart deliver

a wealth of information about the mam

moth corporate alliances that lie at the

heart of the Japanese business system.

They begin by observing how ignorant most American companies are about their

Japanese competitors, and they reflect on

the fact that so many U.S. corporations are not studying business as thoroughly and systematically as the Japanese. To the

Japanese, this is carelessness, and careless

ness is one step away from failure.

[182] FOREIGN AFFAIRS - Volume73No.4

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