Although the economic transformation of many nations in Asia is widely recognized, equally profound processes of social and cultural change in these same societies have gone largely unnoticed. Yet without knowledge of those changes we cannot fully appreciate the extent of the Asian economic miracle or adequately assess its significance for the future incorporation of the rapidly developing Pacific Rim nations into the emergent world order of the twenty-first century. This essay presents the first results of a continuing program to assess the extent and form of changing popular values and attitudes in a number of the most important of the growth engines in the area such as Taiwan, mainland China, Singapore, Korea, and their forerunner, Japan. The evidence is drawn from public opinion polls and social surveys covering a span of decades. To be sure, the region provides evidence of the persistence of tradition, and even of its actual strengthening, under conditions of modernization. Examples are the sentiment of filial piety and the value of hard work and frugality. Nevertheless, the main fact is that in a large number of domains popular attitudes and values have been changing profoundly and at a surprisingly accelerated rate. Within little more than one generation the approach to selecting a marriage partner, the ways of spending leisure time, and basic values about what one's goals in life should be have all undergone profound and rapid shifts. Communal responsibility has come to be replaced by individual expression; the present is increasingly stressed over the past and the future; consumption more and more displaces saving and accumulation. These are all the hallmarks of modernity. The diffusion of these tendencies in Asian populations increases the facility with which they can be integrated in a new blending of the cultures of East and West. But the same processes present great challenges to the traditional bases of social integration and political cohesiveness of these societies.

North Korea remains a country difficult for outsiders to analyze, given the paucity of hard data. Yet certain facts have been established. The economy is in crisis, a product not only of the Russian demise and the recent floods but of the inadequacies of a Stalinist economic strategy: autarky, imbalance, and overbureaucratization. A growing number of the elite now recognize these facts, and the momentum for reform is rising despite perceived political hazards. Whether it will be in time to prevent collapse is debated by outside observers.

Politically, the effort is to maintain the existing order by reproducing Kim Il Sung in his son, Kim Jong Il. Young Kim is cultivating the military assiduously and carefully replacing his father's guerrilla generation with individuals closer to his age, some of them relatives. There are no signs of cleavage at this point, but the decision-making structure remains difficult to discern. The goal, however, is clear: total unity under the leader and party.

The Democratic People's Republic of Korea's (DPRK's) foreign policy is rational from the North's perspective: achieve diplomatic relations with the United States and Japan while relegating the Republic of Korea (ROK) to the sidelines. Yet improvements in North-South relations will be essential if the broader goal is to be reached. Meanwhile, relations with China are relatively satisfactory but lack the old warmth, and those with Russia are still tepid not- withstanding Moscow's efforts.

Despite the uncertainties surrounding the DPRK's future, the interests of others, including the ROK and the United States, lie in seeing this state undergo an evolutionary process rather than a collapse. Thus policies should be directed toward that end, acknowledging that the outcome will depend heavily on North Korean leaders and their decisions.

If China is to become an economic superpower in the next century, financial markets will be essential to arbitrage risk. Such markets may fail to develop because of uncertainty over the role of government. Efficient financial markets will require that the Chinese Communist Party reduce its political leverage over economic decisions and decision makers.

Not every newly industrializing country has well-functioning liquid financial markets in which investors can diversify their risks. Nor do all developing countries have efficient legal systems in which a broad range of property rights can be enforced. China, for example, has experienced considerable growth without either liquid financial markets or an efficient legal system by using intermediaries--officeholders who construct broad exchange networks that are based on relationships rather than on formal institutions. The reputation of individual power brokers and the strength of their connection to party power centers provide the system's coherence. The capital requirements for future growth, however, may surpass the capability of these intermediaries, putting the system under severe strain. To overcome this strain, alternative methods of contracting agency relations that will require considerable elaboration of the legal system are needed. A rule- compliant, constitutionally grounded society and economy must be established so that contracts can be maintained independent of the personal authority of power holders. The danger of not acting is a liquidity crisis, intensified by the absence of institutions to reduce risks.