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Session 2 March 2011 The East Asian ‘Miracle’ Revisited: Growing Years

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Session 2 March 2011 The East Asian ‘Miracle’ Revisited: Growing Years

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  1. Graduate Institute of International and Development StudiesAcademic Year 2010-11MDEV-MIA-MIS/HPI-MAS(PEA)E 762 - Spring Semester - Course/Seminar - 6 ECTSFrom the East Asian ‘Miracle’ to the World ‘Re-ORIENT-ation’Successes and Failures in the Articulation of Development PoliciesJean-Luc MaurerProfessor in Asian Development PoliciesThe Graduate Institute Session 2 March 2011 The East Asian ‘Miracle’ Revisited: Growing Years

  2. Interest and origin of the EAM concept • Focusing attention on the so-called “East Asian Miracle” is interesting per se, for the simple fact that it constitutes in the end the only large development success story since WW2. • But a detailed analysis of this “miracle” (and of its further debacle during the Asian financial crisis) is also the best possible example one can find to study the the links existing between development and globalization, and their effects on growth, poverty and inequality. • The concept is also a landmark in the state versus market debate. Elaborated by the World Bank in its famous 1993 report, it results from of an ideological compromise between market fundamentalism and the recognition of the strong role played by the State in development. GIIDS 2010/11 - CS MAO/GROW JLM - Session 2 March 2011

  3. A tale of dragons, tigers and geese GIIDS 2010/11 - CS MAO/GROW JLM - Session 2 March 2011

  4. GIIDS 2010/11 - CS MAO/GROW JLM - Session 2 March 2011

  5. Historical process and animal branding • In the 50’s and the 60’s, South Korea, Taiwan, Hong Kong and Singapore launched a successful process of very rapid industrialization. Soon known as the “Four Little Dragons”, they followed the example previously given by Japan in a so-called “Flying Geese Pattern” of regional development. • In the 70’s and 80’s, Thailand, Malaysia and Indonesia often referred for their part as “Asian Tigers”, joined the club of these Newly Industrialized Countries (NIC’s), • In 1993, the World Bank study on the “East Asian Miracle” focused on these 7 countries, putting them in the same new category of High Performing Asian Economies (HPAE’s). • Since the early 90’s, the “East Asian Miracle” concept can be applied to Vietnam and China given their performance. GIIDS 2010/11 - CS MAO/GROW JLM - Session 2 March 2011

  6. An EAM Map of Asia Scope and Linkages Source: F. Muniga, OCD GIIDS 2010/11 - CS MAO/GROW JLM - Session 2 March 2011

  7. GIIDS 2010/11 - CS MAO/GROW JLM - Session 2 March 2011

  8. EAM countries: demographic dimensions GIIDS 2010/11 - CS MAO/GROW JLM - Session 2 March 2011

  9. The 3 major characteristics of the “East Asian Miracle” • High and sustained economic growth About 6% a year from 1960 to 1995, that is 3 times more than Latin America and 8 times more than Africa. • Spectacular poverty reduction From more than 70% in 1960 down to 57% in 1975, 21% in 1995 and most probably less than 15% today. • Social inequality remains moderate In 1990, in Taiwan, Q5 is only five times richer than Q1, against around 20 to 25 times in Mexico or Brazil. GIIDS 2010/11 - CS MAO/GROW JLM - Session 2 March 2011

  10. The «East Asian Miracle »: Growth with Equity Source: J. Page, World Bank, 93 GIIDS 2010/11 - CS MAO/GROW JLM - Session 2 March 2011

  11. The 5 basic indicators defining Newly Industrialized Countries (NIC’s) • Share of agriculture in GDP inferior to 20% • Share of industrial manufacturing in GDP superior to 20% • Saving rate superior to 15% • GPP per capita superior to US$ 1’000 • Human Development Index (HDI) superior to 0.75 GIIDS 2010/11 - CS MAO/GROW JLM - Session 2 March 2011

  12. Situation of the “East Asian Miracle” NICs, 1997 GIIDS 2010/11 - CS MAO/GROW JLM - Session 2 March 2011

  13. The 5 factors explaining the EAM according to the World Bank (1993) • Strict macroeconomic stability (BOP and budget deficits, inflation, debt, exchange rate, etc) • Appropriate public investment policies (infrastructures and human resources) • Export-led growth strategy • Efficient allocation of productive factors (labour versus capital) • Flexible and adjustable economic policies GIIDS 2010/11 - CS MAO/GROW JLM - Session 2 March 2011

  14. The 5 explanatory theories of the EAMaccording to Richard Stubbs (2005) • Primacy of economic factors: Market, globalization, liberalization, etc (basically WC and World Bank) • Primacy of political factors: Strong state, institutions, public policies (Amsden 1989, Wade 1990, etc) • Primacy of cultural factors: Asian values discourse, Confusianist tradition, etc • Primacy of regional factors: Role of Japan in East Asia before WWII • Primacy of international factors: Role of the Cold War and of the US hegemony in the region after WWII GIIDS 2010/11 - CS MAO/GROW JLM - Session 2 March 2011

  15. The 5 main reasons behind the EAM:a multi-factorial and diachronic approach (JLM) • Nothing arrives by chance: culture and history are down the road the main explanatory factor • “First things first”: priority to agricultural and rural development translating into broad-based and pro-poor growth strategy • “Governing the market”: States and Governments have been playing a key role in the process • Capacity to combine rigor with pragmatism/flexibility • A very favourable regional/international context GIIDS 2010/11 - CS MAO/GROW JLM - Session 2 March 2011

  16. EAM countries growth performance, 1965-1995 GIIDS 2010/11 - CS MAO/GROW JLM - Session 2 March 2011

  17. Main comments on economic growth • For the major part, the economic growth performance of the “Four Little Dragons” has taken place from the mid-60’s to the late-80’s, in the midst of Cold War, behind strong trade barriers and protections of infant industries. • Since the beginning of the last phase of globalization in the 80’s and the acceleration of economic liberalization, their growth performance has clearly tended to slow down. • Things are well marked but comparable for the three other HPAE’s and there are signs that they basically follow the same trend, with a time differential of 10 to 20 years. • This does not apply to China and Vietnam, whose later departure, starting level, huge needs and size probably explain that growth continued to be sustained longer. GIIDS 2010/11 - CS MAO/GROW JLM - Session 2 March 2011

  18. EAM countries poverty reduction results, 1975-95 GIIDS 2010/11 - CS MAO/GROW JLM - Session 2 March 2011

  19. Main comments on poverty reduction • The “Four Little Dragons” are not part of the picture since poverty had already been eradicated before 1975. • Globally, the number of people suffering from most severe forms of poverty (< 1 US$ a day) has been halved between 1975 and 1995 in the whole of East Asia, China included. • But China still makes about 78% of the poor in East Asia. • In Thailand and Malaysia, where poverty had already diminished before 1975, it had fallen below 1% in 1995. • In Indonesia, the number of poor people has been divided by 4 times and their proportion by 6 times in 20 years. • In Vietnam, the beginning of the trend is as impressive. GIIDS 2010/11 - CS MAO/GROW JLM - Session 2 March 2011

  20. EAM countries inequality trend, 1970-95 GIIDS 2010/11 - CS MAO/GROW JLM - Session 2 March 2011

  21. Main comments on inequality trend • Inequality has increased on 8 out of the 10 countries over the period of time concerned, but with marked differences. • For Hong Kong, Singapore and the Philippines, inequality, which was already high, has become even higher. • Starting from moderate to rather low levels, inequality has literally exploded in Thailand, China and even Vietnam. • Inequality has also slightly increased in Taiwan and Korea, but was starting from low and remains low to moderate. • Inequality has decreased only in Malaysia and Indonesia, but it was starting from high and keeps high in the former while it is still rather moderate in the latter. GIIDS 2010/11 - CS MAO/GROW JLM - Session 2 March 2011

  22. Conclusions on the « East Asian Miracle » • The process of accelerated development combining growth with equity which has taken place in East Asia from the mid 50’s to the mid-90’s is definitely not a “miracle” and can perfectly be explained in rational terms. • For the major part, this so-called “miracle” has taken place before the end of the Cold War in 1989 and the beginning of the wave of economic liberalization characterizing the last phase of globalization. • Since the early 90’s, the acceleration of this liberalization trend has on the contrary had adverse effects on growth and equity and its extension to the financial sector is largely responsible for the 1997-98 debacle of the Asian Financial Crisis which will put an end to the “miracle”. GIIDS 2010/11 - CS MAO/GROW JLM - Session 2 March 2011

  23. For now, that’s all folks! Thanks GIIDS 2010/11 - CS MAO/GROW JLM - Session 2 March 2011

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