East Asian Miracle Economic Growth and Development.
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Transcript of East Asian Miracle Economic Growth and Development.
East Asian MiracleEast Asian MiracleEconomic Growth and Economic Growth and
DevelopmentDevelopment
EEASTAST A ASIA’SSIA’S A ACHIEVEMENTSCHIEVEMENTS Diversity in performance Participation in the regional
production network Policy as key to economic success Authoritarian developmentalism as a
dynamic and temporary regime The exit problem Democratic developmentalism?
HHIGHIGH P PERFORMANCEERFORMANCENo doubt about high average growth in
recent decades
Source: Angus Maddison, The World Economy: A Millennium Perspective, OECD Development Centre, 2001.
Per Capita GDP(Measured in 1990 international Geary-Khamis dollars)
0500
1000150020002500300035004000
1950 1960 1970 1980 1990 1998
East Asia
Africa
0
100
200
300
400
500
600
100 1000 10000 100000
Governance, WGI2005
Per capita income ($PPP2004, log scale)
Sin Hkg
J pnTwnS Kor
BruMal
ThaiMong
PhilChinaVN
E Timor IndoCambPNG
LaoN KorMya
DDIVERSITYIVERSITY ININ D DEVELOPMENTEVELOPMENT
Sources: Compiled from World Bank, Worldwide Governance Indicators, Sep. 2006; and World Bank, World Development Indicators, 2006.
High correlation (0.90) but causality cannot be argued from this diagramOnly circled economies participate in regional dynamism
EEASTAST A ASIA’SSIA’S U UNIQUENESSNIQUENESS The region is like a big factory where
member economies compete Growth starts by participating in this
regional dynamism The sandwich effect—pressure from
above and below to work harder FDI as relocater of industries Clear but shifting order and structure
(flying geese)
OOVERVIEWVERVIEW OFOF E EASTAST A ASIA’SSIA’S G GROWTHROWTH Average growth rate higher than those
of any other region in the world Superior performance of the eastern
half of Asia• Japan, South Korea• China’s mainland, Hong Kong, Taiwan• Indonesia, Malaysia, the Philippines,
Singapore, and Thailand
GGEOGRAPHICALEOGRAPHICAL D DIVISIONIVISION
GGROWTHROWTH ININ E EASTAST A ASIASIA
Japan’s economy took off in 1960s NIE’s (newly industrialized economies)
• Hong Kong, Taiwan and Korea“very high” growth in the 1960-1975
period“outstanding” growth in the 1975-1990
period• Singapore: opposite pattern
Irony of Myanmar and the Philippines
GGROWTHROWTH ININ N NIE’SIE’S East Asian NIE’s accumulated capital
and increased labor participation at a much faster rate than other economies
The increase in these two factors far from fully explains their exceptional growth rates
productivity growth also accounts for a significant fraction
GGROWTHROWTH ININ N NIE’SIE’S Growth of capital Hong Kong: “high” Taiwan & Singapore: “very high” Korea: “outstanding” Public investment/GDP similar to other
developing economies Private investment/GDP much higher Productivity growth Higher than that of United States Proportion of growth of GDP per person that
is explained by productivity growth was not systematically different from those of Japan and the United States
IINCREASENCREASE ININ P PRODUCTIVITYRODUCTIVITY Interlocking cooperation free enterprise government financial intervention guidance-minded technocratic bureaucracy Imports of foreign knowledge and technology Expanding education opportunities Better organization Improved work practices Asia growth pattern
• two-thirds of the growth is input-driven• the remaining third is attributable to increased
efficiency or total factor productivity (TFP)
East Asia’s ExperienceEast Asia’s Experience A long history of development (break out of isolation,
modernization) Defeat in war and military occupation (social reform,
new system, constitution) U.S. aid and influence The right economic model (export orientation) Authoritarianism (early stage of development) Institutional design (close ties b/t govt, bureaucracy,
private sectors, banks) Culture—Confucianism Resource (stimulation due to absence of natural
resources) The neighborhood (rich neighbors)
KKOREA’SOREA’S G GROWTHROWTH P PATHATH
High rates of saving with funds channeled into the industrial sector
Strong export orientation Strict limits on “non-essential” imports and
direct foreign investment Strict zoning laws and other restrictions on
the distribution system
SSTATETATE I INTERVENTIONNTERVENTION
Ability Low
High High India, Philippines Japan, Taiwan Intent (weak) (strong) U.S., U.K Hong Kong Low (minimalist) (market driven)
AASIANSIAN V VALUES?ALUES?
commitment to hard work sense of thriftiness emphasis on education well-defined family structure filial piety respect for political authority society above self
PPOLITICALOLITICAL S STABILITYTABILITY
Strongman rulers• North Korea, South Korea, Singapore,
Malaysia, the Philippines, Indonesia ... Single-party dominance
• Japan, Taiwan, Malaysia, Singapore … Trading civil rights and freedoms for
economic growth• presumption of basic material well-being
MMANUFACTUREDANUFACTURED E EXPORTSXPORTS
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Manufactured exports / total exports
J apan
Taiwan
Korea
Singapore
Malaysia
Thailand
Philippines
Indonesia
China
Vietnam
Myanmar
Sources: Asian Development Bank, Key Indicators of Developing Asian and Pacific Countries, 1993 & 2006; Statistical Bureau,Ministry of Internal Affairs and Communications, J apan Statistical Yearbook 2007.
DDEVELOPMENTEVELOPMENT ANDAND A AIDID S STRATEGYTRATEGY
East Asia’s Way Western DonorsGoal Economic prosperity
and national pridePoverty reduction (MDGs)
Policies
Industry, investment, trade, technology
Health, education, governance
Key actors
Central government and businesses
Local communities and people
There is a clear gap in developmental thinking between Eastern practitioners and Western aid community.
EEASTAST A ASIA’SSIA’S P POLICYOLICY M MIXIX
Growth policies—vision, strategy, technology, HRD, infrastructure, SMEs, FDI, trade, finance, logistics, etc.Supplementary policies—inequality, pollution, urbanization, congestion, labor migration, corruption, drugs, HIV/AIDS, etcRapid growth always creates new problems, which destabilize society.Unless both policies are implemented, development will fail (Murakami).Success depends on these policies, rather than diligence or Confucianism
EEASTAST A ASIA’SSIA’S P POLICYOLICY
AAUTHORITARIANUTHORITARIAN D DEVELOPMENTALISMEVELOPMENTALISME. Asia chose authoritarian developmentalism
(AD) for economic take-off.Key ingredients of AD Powerful and economically literate top
leader Development as a supreme national goal Technocrat group to support leader and
execute policies Political legitimacy derived from growth The leader, as primary force of change,
can create the other three conditions.
1945 50 55 60 65 70 75 80 85 90 95 200060 61 79 87 88 92 97
Korea49 75 78 88 Kim Young-sam
TaiwanChenShui-bian
46 48 53 57 61 65 86 92 98
PhilippinesMagsaysay Macapagal 99
Indonesia55 59 65 90 Habibie
Singapore57 70 76 81
Malaysia46 48 57 58 63 73 75 77 80 88 91 97
Thailand51 76 Kriangsak Chatichai
Vietnam48 62 88
Myanmar
Source: Akira Suehiro, Catch-up Type Industrialization , Nagoya University Press, 2000, p115.
Kim Dae-jung
Nationalist Party Chiang Kai-shek Chiang Ching-kuo Lee Teng-hui
Rhee Syngman Park Chung-hee Chun Doo-hwan Noh Tae-woo
Ramos Estrada
Skarno Suharto Wahid
Quirino Garcia Marcos Aquino
LaborParty
People'sAction Party Lee Kuan-yew Goh Chok-tong
Vietnamese Communist Party
Authoritarian Developmentalism in East Asia
Phibun Sarit Thanom
UMNO / Rahman Razak Hussein Mahathir
U Nu Burma Socialist Programme Party / Ne Win SLORC
IndochinaCommunist Party Labor Party
Prem Chuan
EEMERGENCEMERGENCE OFOF AD AD AD emerges through a coup as well as election. AD is more likely to rise when the nation’s
existence is threatened by:• External enemy• Internal ethnic/social instability• Incompetent and corrupt leader
The rise and fall of AD is conditional mainly on the development stage of each country, but international environment also influences them.
Eg. Cold War – reduced global criticism of AD
WWHYHY P POWEROWER C CONCENTRATIONONCENTRATION I ISS NNEEDED?EEDED?
Growth requires a critical mass of mutually consistent policies. A strong state is needed to mobilize resources quickly and flexibly.
If broad participation is allowed, policies are too slow and can’t achieve critical mass due to:• Power struggle, party politics, interest groups• Processes requiring patience and compromise,
including parliamentary debate and consensus building
• Some groups may refuse to cooperate with state purposes
“The institutional characteristics and requirements for development and for democracy pull in opposite directions.”
“Democracies have great difficulty in taking rapid and far-reaching steps to reduce structural inequalities in wealth.”
AADRIANDRIAN L LEFTWICHEFTWICH (2005)(2005)
ChangeSpeed & flexibility
Accumulation
CompromiseAccommodation
Procedure
Development Democracy
CCRITIQUESRITIQUES OFOF AD ADDemocracy and development are separate issues: “I do not subscribe to the idea that you need to delay democratization just so that you can actually have growth or that you can have democracy only when you can afford it.” (Dani Rodrik, 2006)
Democracy is required for development “Expansion of freedom is viewed… both as the primary end and as the principal means of development.” (Amartya Sen, 1999)
KKOREANOREAN E EXPERIENCEXPERIENCE N.T.T.Huyen “Is There a Developmental
Threshold for Democracy?: Endogenous factors in the Democratization of South Korea” (2004) “Democracy as an advanced form of
politics is not independent from socio-economic development.”
“Developmental threshold for democracy [is] a point in the development process beyond which democracy can be effectively installed and sustained.”
0100020003000400050006000700080009000
10000
1960 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94
Korea: Per Capita GDP in 1990 USD
80% farmers
90% middle class
End of AD
EEXITXIT OFOF AD ADLow income trap
High income society
Catching-up period(AD useful)
DemocracyPluralism
AD is a temporary regime of convenience, needed only to push up the country to a higher level.
Once a certain level is reached, AD becomes an obstacle to further development.
Watanabe (1998) argues that successful AD melts away automatically through social change and democratic aspiration.
“if development under authoritarian regime proceeds successfully, it will sow the seeds of its own dissolution” [improved living standards and diversified social strata]
A LA LESSESS O OPTIMISTICPTIMISTIC V VIEWIEW
However, barriers do exit: stubborn leader, bureaucratic resistance, interest groups. Therefore, leadership and strategy are also needed for an exit.
Strong leaders often refuse to step down because they will be revenged, jailed and even executed after transition, with most or all of their policies denied and reversed.
TTHEHE E EXITXIT P PROBLEMROBLEM FORFOR O ONE-PARTYNE-PARTY RRULEULE (China and Vietnam)(China and Vietnam)
Rapid growth and social transformation driven by private dynamism (local & FDI)
Success so far in managing liberalization, but not industrial activism
Policy challenge is in social areas, not accelerating growth
Future options:(1) Greatly enhancing party’s policy capability(2) Multi-party system under social democracy(3) Other
Pure dictatorshi
p
Full democracyDemocrati
c institution
(Form)
Political competition
ConstitutionLawsParliamentElectionCourtParty
Reform vs conservatism, big vs small government, foreign policy, etc
(Content)
Setback
Pure dictatorship
Full democracyDemocratic
institution(Form)
Political competitio
n
ConstitutionLawsParliamentElectionCourtParty
Reform vs conservatism, big vs small government, foreign policy, etc
Edo Meiji
Taisho
Fascism
ConstitutionParliament
Democracy movement,
Party cabinet
DemocratizationNew constitution
Showa2
War1937
1945-51 LDP dominanceLack of policy debate
Male suffrage
19602007US rule
Defeat
Showa1
1889
1925
1931Military rises
1937-45
(Content)
Political fights
THE CASE OF JAPAN
““DDEMOCRATICEMOCRATIC DDEVELOPMENTALISMEVELOPMENTALISM””?? (MILD FORM (MILD FORM
OF AD)OF AD) Research on DD
• Robinson and White eds (1998)• Centre for Policy Studies study on “The
Democratic Developmental State in Africa”• Ethiopian Prime Minister Meles Zenawi
Can we separate resource mobilization from freedom and human rights?
Countries that already have free election, functioning parliament, human rights—can they adopt developmental policies without throwing out their political achievements?
Need to decompose democracy into parts and analyze its structure
CCOMPONENTSOMPONENTS OFOF D DEMOCRACYEMOCRACY
Purposes Freedom, human rights, equality, social and economic benefits for all, security, peaceful coexistence
Procedures
Legitimacy (election), rule of law, participation, multi-party system, balance of power (L-E-J), local autonomy
Properties Tolerance, compromise, fairness, transparency, accountability
Random & excessive oppression should never be allowed. Can some of these restricted for resource mobilization?
DDESIGNINGESIGNING DD: DD:TTENTATIVEENTATIVE S SUGGESTIONSUGGESTIONS
Democratic criteria should go beyond “free election.”
Generally speaking, policy purposes should be upheld but procedures and properties may be partly adjusted.
The executive branch should have sufficient power, but with a mechanism to overthrow it if it performs badly.
Excessive decentralization at an early stage is not desirable.
FFINALINAL R REMARKSEMARKS
When income is very low, a bottom-up regime based on rural population or social democracy (poor farmers or poor workers) may not work.
More realistic: use the East Asian AD model (top-down quick decisions with supporting elites) with added democratic elements.