Transcript Economic Growth and Development

East Asian Miracle
Economic Growth and Development
EAST ASIA’S ACHIEVEMENTS
 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?
HIGH PERFORMANCE
No doubt about high average growth in recent
decades
4000
Per Capita GDP
(Measured in 1990
international GearyKhamis dollars)
3500
East Asia
3000
2500
2000
A f ri ca
1500
Source: Angus Maddison, The
World Economy: A
Millennium Perspective,
OECD Development Centre,
2001.
1000
500
0
1950
1960
1970
1980
1990
1998
DIVERSITY IN DEVELOPMENT
Governance, WGI2005
High correlation
(0.90) but
causality cannot
be argued from
this diagram
600
Sin
500
Hkg
Jpn
S Kor
400
Mal
Mong
300
Twn
Only circled
economies
participate in
regional dynamism
Bru
Thai
Phil
VN
China
200
Camb
E Timor
Indo
PNG
Lao
N Kor
Mya
100
0
100
1000
10000
100000
Per capita income ($PPP2004, log scale)
Sources: Compiled
from World Bank,
Worldwide Governance
Indicators, Sep. 2006;
and World Bank, World
Development
Indicators, 2006.
EAST ASIA’S UNIQUENESS
 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)
OVERVIEW OF EAST ASIA’S GROWTH
 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
GEOGRAPHICAL DIVISION
GROWTH IN EAST ASIA
 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
GROWTH IN NIE’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
GROWTH IN NIE’S
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
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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
INCREASE IN PRODUCTIVITY


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
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



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 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)
KOREA’S GROWTH PATH
 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
STATE INTERVENTION
Ability
Low
High
High
Intent
Low
India, Philippines
(weak)
U.S., U.K
(minimalist)
Japan, Taiwan
(strong)
Hong Kong
(market driven)
ASIAN VALUES?
 commitment to hard work
 sense of thriftiness
 emphasis on education
 well-defined family structure
 filial piety
 respect for political authority
 society above self
POLITICAL STABILITY
 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
MANUFACTURED EXPORTS
Manufactured exports / total exports
100%
Japan
90%
Taiwan
80%
Korea
70%
Singapore
60%
Malaysia
50%
Thailand
40%
Philippines
Indonesia
30%
China
20%
Vietnam
10%
Myanmar
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
1979
1978
1977
1976
1975
0%
Sources: Asian Development Bank, Key Indicators of Developing Asian and Pacific Countries, 1993 & 2006; Statistical Bureau,
Ministry of Internal Affairs and Communications, Japan Statistical Yearbook 2007.
DEVELOPMENT AND AID STRATEGY
There is a clear gap in developmental thinking between
Eastern practitioners and Western aid community.
East Asia’s Way
Goal
Economic prosperity
and national pride
Policies Industry, investment,
trade, technology
Key
Central government and
actors
businesses
Western Donors
Poverty reduction
(MDGs)
Health, education,
governance
Local communities and
people
EAST ASIA’S POLICY MIX
EAST ASIA’S POLICY
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, etc
Rapid 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
AUTHORITARIAN DEVELOPMENTALISM
E. 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.
Authoritarian Developmentalism in East Asia
1945
50
55
60
65
70
75
80
60 61
Korea
49
46
75
Philippines
48
53
Quirino
61
Thailand
Phibun
63
Sarit
76
Razak
73
Wahid
Habibie
81
Mahathir
Hussein
75
77
80
88
91
97
Prem
Chuan
Kriangsak
Chatichai
Vietnamese Communist Party
62
U Nu
Estrada
Goh Chok-tong
Thanom
Labor Party
48
Ramos
Lee Kuan-yew
76
Indochina
Communist Party
98
90
70
57 58
Chen
Shuibian
99
People's
Action Party
51
Myanmar
Aquino
65
UMNO / Rahman
46 48
92
Suharto
57
Malaysia
Kim Dae-jung
Macapagal
59
Labor
Party
Singapore
Vietnam
86
Skarno
55
97
Lee Teng-hui
Chiang Ching-kuo
Marcos
2000
Kim Young-sam
88
65
Garcia
Magsaysay
Indonesia
78
Chiang Kai-shek
57
95
87 88
92
Noh TaeChun Doo-hwan
woo
Park Chung-hee
Nationalist Party
90
79
Rhee Syngman
Taiwan
85
88
Burma Socialist Programme Party / Ne Win
Source: Akira Suehiro, Catch-up Type Industrialization , Nagoya University Press, 2000, p115.
SLORC
EMERGENCE OF 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
WHY POWER CONCENTRATION IS
NEEDED?
 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
ADRIAN LEFTWICH (2005)
“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.”
Development
Democracy
Change
Speed & flexibility
Accumulation
Compromise
Accommodation
Procedure
CRITIQUES OF AD
Democracy 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)
KOREAN EXPERIENCE
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.”
Korea: Per Capita GDP in 1990 USD
10000
9000
8000
7000
6000
5000
80%
4000
farmers
3000
2000
1000
0
1960 62 64 66 68
90% middle
class
End of
AD
70
72
74
76
78
80
82
84
86
88
90
92
94
Catching-up
period
(AD useful)
EXIT OF AD
High income
society
Democracy
Pluralism
Low
income
trap
 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 LESS OPTIMISTIC VIEW
 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.
THE EXIT PROBLEM FOR ONE-PARTY RULE
(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
Full
democracy
Democratic
institution
(Form)
Constitution
Laws
Parliament
Election
Court
Party
Setback
Pure
dictatorship
(Content)
Reform vs conservatism, big vs small
government, foreign policy, etc
Political
competition
Democratic
institution
(Form)
Constitution
Laws
Parliament
Election
Court
Party
THE CASE OF JAPAN
US rule
Showa2
1960
2007
1945-51
Democratization
New constitution
Full
democracy
LDP dominance
Lack of policy debate
Military rises
1931 Democracy
movement,
Party cabinet
1937
Defeat
War
Male suffrage 1925
Showa1
Taisho
Constitution 1889
Parliament
Fascism 1937-45
Edo
Pure
dictatorship
Meiji
Political fights
Reform vs conservatism, big vs small
government, foreign policy, etc
(Content)
Political
competition
“DEMOCRATIC DEVELOPMENTALISM”?
(MILD FORM 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
COMPONENTS OF DEMOCRACY
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?
DESIGNING DD:
TENTATIVE SUGGESTIONS
 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.
FINAL REMARKS
 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 (topdown quick decisions with supporting elites) with
added democratic elements.