Transcript Report on Asian Miracles from World Bank

‘Asian Miracles’, or Not?
J.D. Han
1. ‘Asian Miracles’ by World Bank
• The first official report started in 1993.
• The full report can be found at http://wwwwds.worldbank.org/external/default/main?pagePK=64193027&pi
PK=64187937&theSitePK=523679&menuPK=64187510&searchM
enuPK=64187283&theSitePK=523679&entityID=000009265_3970
716142516&searchMenuPK=64187283&theSitePK=523679
1. Fact
• Rapid Growth in HPAE’s
• (Recent) High Growth of China
What are in common in these
Asian countries?
•
The High Performing Asian Economies (HPAEs) : Japan, Hong Kong, the
Republic of Korea, Singapore, Taiwan, Indonesia, Malaysia, and Thailand.
•
It finds that the diversity of experience, the variety of institutions, and the
variations in policies among the HPAEs does not allow a model to be developed.
•
However, some lessons for other developing countries can be learned from the
East Asian experience.
•
First, growth is not Automatic: HAPEs use a variety of government intervention or
policies to achieve three functions of growth - accumulation, allocation, and
productivity growth.
•
Second, it is essential to get the fundamentals right. 1) High levels of domestic
saving, 2) good macroeconomic management, and 3) broad based human capital.
•
Third, the government intervention should have specific orientations, such as
limited price(market economy) distortions.
2. Word Bank attributed the Asian
Miracles to
1) Accumulation of Physical Capital (Savings);
2) Fostering Human Capital (Education);
3) Social Capital (Harmony-not confrontation,
Law and Order, Lack of Corruption);
4) Sound Government Policies (Macro as well as
Microeconomic Policies: for example, Export
Promotion and Industrial Policy, etc.)
* Ambivalent about Technology(?).
5) The composition of Capitals is important:
-World Bank report classifies K into at least 4
(Physical; Natural; Human; Social)
West Africa: Natural Capital is relatively large,
but Human Capital is relatively small
East Asia: Human Capital is relatively large and
Natural Capital is relatively small
The World Bank Report
mainly focuses on
• Human Capital,
which is fostered by Education; and thus
• Emphasis on Education,
which is rooted in Neo-Confucian culture
Public Expenditure on Education is misleading:
It is not High in Asia
• Evaluation of the World Bank Model of
East Asian Economic Growth focusing
on Human Capital measured by
certain types of Education
However, not including Expenditures on Private
Education and Other Educations leads to
underestimate of Human Capital in East Asia.
1) Private Spending on Education is large in East Asia
• Juku (Japan)
• Hank-Won or Ga-Wai (Korea)
• Buxi(China)
2) East Asia is the major source of International
Migration for Education:
Largest groups of International Students in English
Speaking Countries are from East Asia
• Refer to Paper by Han and Ibbott(2005).
3) There are other social educations, such as education
through compulsory military training (China, and
Korea just like Swiss, and Israel).
*
Individual’s Motivation/Demand for Education
in East Asian History reflects
• Neo-Confucian Concept of Social Class
• Social Class Structure
• Social Mobility and Education
Click here for an interesting paper on the social
mobility of China
Encyclopaedia Britannica says
•
Ch’ing (Qing) dynasty
Social mobility increased during the early Ch'ing, supported by a pervasive
belief that it was possible for a peasant boy to become the first scholar in the
land. An ethic that stressed education and hard work motivated many
households to invest their surplus in the arduous preparation of sons for the civil
service examinations. Although the most prestigious career in Ch'ing society
remained...
• Ming dynasty
...the Ming civil service, that influential families did not monopolize or dominate
the service, and that men regularly rose from obscurity to posts of great esteem
and power on the basis of merit. Social mobility, as reflected in the Ming civil
service, was very possibly greater than in Sung times and was clearly greater
than in the succeeding Ch'ing era.
• T’ang dynasty
...examination system had facilitated the recruitment into the higher ranks of the
bureaucracy of persons from lesser aristocratic families, most officials
continued to come from the established elite. Social mobility increased after the
An Lu-shan rebellion: provincial governments emerged, their staffs in many
cases recruited from soldiers of very lowly social origins, and specialized
finance...
** Contemporary China
•
X.Wu, Institutional structures and social mobility in China: 1949-1996
•
Results show that (1)receiving education or obtaining political credentials are two major
channels for individuals to achieve upward social mobility in the hierarchical status system
of socialist China; (2)there exist high rates of inter-generational inheritance in terms of
status as defined in the Chinese institutional context; (3)although one can overcome
disadvantages in family background by acquiring educational and political credentials,
access to these two fundamental currencies of mobility is highly constrained by one's
hukou origin and first work unit affiliation. The analysis reveals an intertwined relationship
among hukou status, work unit status, and employment status. The temporal trend of social
mobility, especially the impact of economic reform, is also addressed. Economic reform,
especially during its late stage, has yielded limited consequences for the Chinese
stratification system. The research contributes to understanding of how the Communist
party-state controlled and allocated life chances and status, which in Western societies is
allocated mainly through competition in labor markets.
•
What does this mean?
•
Fully paper is at
http://72.14.205.104/search?q=cache:bSx1y9NxpFoJ:www.ecsocman.edu.ru/db/msg/2436
2.html+social+mobility+in+china&hl=en&ct=clnk&cd=7
Научный руководитель, edited by D.J.Treiman, 2001
A high demand for education reflects the
institutional and historical tradition that
the East Asian society has been
a meritorious one or
a society of a high level of class mobility in
which the most able people
can become the rulers through
open competition.
3. Criticisms of
the World Bank Report on East Asian Miracles:
“There was no miracle”
1) Paul Krugman
- Growth is due to increased factor intensity,
or increases in K, and L input, and Not
much due to Technical Innovation;
- East Asia's phenomenal growth was "mainly
a matter of perspiration rather than
inspiration".
-Neoclassical Theory is enough, and
Endogenous theory is not necessary*.
- According to Neoclassical Theory, there will
be convergence, and the East Asian growth
is not sustainable.
*Of course: Krugman does not think much of Social Captial, or
* Evidence:
• Growth Accounting applied to East Asia does
not show Technology as an Important Factor
*Refer to my note on Growth Accounting
In the East Asian setting; In most countries, the
economic growth can be explained by mostly
dL or/and some dK. There is no room left for
dT.
• Likewise, in explaining the extraordinary postwar growth
of the Four Tigers, Young (1994b) concludes that
• one arrives at total factor productivity growth rates,
both for the nonagricultural economy and for
manufacturing in particular, which are well within the
bounds of those experienced by the OECD and Latin
American economies over equally long periods of time.
While the growth of output and manufacturing exports
in the newly industrializing countries of East Asia is
virtually unprecedented, the growth of total factor
productivity in these countries is not.
but GA is limited and incomplete.
Read Michael Sarel’s IMF paper
Yes, in Neo-classical model, growth
slows down without technical innovation.
However, in Endogenous Growth Model,
even if technology is not an important
factor, it does not mean that the growth
will slow down.
Institution can be a substitute for
technology.
2) Asian (Financial) Crisis of 1998
showed the weakness of the East Asian
Economies
• Western Economists attribute the Crisis
to internal problems of the East Asian
economy, such as
• Corruption at all levels of society
• Lack of Transparency - Opaqueness of
Governance
• Vulnerable to ‘Herding’
• Joseph Stiglitz and Shahid Yusuf,
Rethinking the East Asian Miracle,
Oxford University Press, 2001
• A good summary is given here
(of course it includes Krugman’s paper)
• This is the opposite of the Endogenous
Theory of East Asian Economic Growth
focusing on the positive sides of the
East Asia.
*Reflection
• Opaqueness also exists in Western Economies
• Transparency may not be the only way to Information
Efficiency
: “Dominicans and Jews Need not Apply” in Cents and
Non-Senses by J. Carr
• Transparency may not be culturally possible
: “Zen”(禅）； ”From Heart to Heart”(以心传心）
3) Japan’ Long Term Recession
• What were the causes of the Japanese Economic
Recession since the 1990s?
-Liquidity Trap（Krugman), or simply ‘Hollowing of the
Domestic Economy(经济 空洞化）?
-Both are due to ‘Grim Prospect of the Economy’ and
thus the lack of investment despite a high saving.
-What are the causes for “Hollowing”?
* There is always a possibility of hollowing in East Asia.
• Will she be able to rise again so that her economic
growth picks up?
4) Japanese Extension of
‘East Asian Miracle’ has some element of
imperialism or ‘crony capitalism’.
• Flying Goose Model (雁行）
Japan as the leader
Korea and Other LDC’s
China
• This is not just the order of economic
development across countries over time,
but the East Asian Supply Chain that
U.S. and Japan have in mind.
U.S. -> Japan -> Korea / Taiwan
-> China
• Those countries based on this type of ‘
crony capitalism’ should always look for
countries at a lower rank and transfer
3D industries to them.