East Asian Development: Will the East Asian Growth Miracle Survive?
It is an invaluable resource book with theoretical sources and approaches for economists, business people, researchers, and, most importantly, policymakes for Asian countries.? Preface by S. Abe and M. Gerard Adams and Heidi Vernon Index. Du kanske gillar. Economic Activity, Trade, and Industry in the U. How To Randall Munroe Inbunden. Inbunden Engelska, Conversely, if a conservative discusses the successful neoliberal Nordic model, do they also mention the high taxes?
Just to be clear, Hobart wrote a very thoughtful piece, based on extensive reading. Outcomes happen in countries with policies.
It was sort of exciting to be on the neo-liberal front lines on those days. The need for an effective state central bank seems to be accepted. On the other hand, it may be a lot easier to run a city state t with a dominant Han population than a polyglot nation of several hundred million people. I think a key to the East Asian economies is that the governments there are pro-business or at least pro enterprise which is not the same as being for free markets. Governments in East Asia intelligently regard business people as valuable citizens or constituents who need cooperation and sometimes protection.
As for Latin Americans, I think they are my favorite people and I would happily live in safe parts of Latin America provided I had a steady source of income. I also love the Italians the Filipinos and the Thai. The friendliest people are lousy at economics. First, economics does not actually have a robust long term theory of economic growth, which is why there are these perennial debates. Second, one suspects that 1 enough institutional stability for sustained saving and 2 good enough incentives for generally effective investment will generate 3 sustained bursts of growth but that quite a wide range of policy and institutional regimes are capable of creating 1 and 2 for long enough to generate 3.
With 1 and 2 being even more able to generate 3 when also being able to play technological catch-up. I think we do have a pretty good theory explaining why, for instance, South Korea has grown a lot more than North Korea. Do we have a robust theory of economic growth that allows us to reliably evaluate the policies that are politically feasible in the US or the Western world generally in terms of their effect on growth? To the casual observer it seems as though many different combinations of policies are compatible with similar acceptable levels of growth.
Admittedly, it would be hard to be a more casual observer than I am. The problem in North Korea is communism, which also failed in other countries where it was tried. Yes, explaining why South Korea has a better growth trajectory than North Korea is not hard. I was more thinking in terms of why take off economic growth occurred when and where it did and why some regions and countries have proved much better than at emulating that takeoff than others.
There are certainly many explanations on offer, but not what you would call a robust general theory. Hence the sort of debates you mention in this blog post. To clarify, a robust theory of long term economic growth would be able to explain the social dynamics of creating, sustaining, and undermining, growth-friendly institutions. Economics is not there yet. Property rights pretty much define capitalism, are hindered by regulation, and are mostly absent in socialism.
Zoning violates property rights and accounts for many of the problems in the US economy. But other regulations like the ethanol mandates, stifling of nuclear power, and especially barriers to entry in the medical field also are causing great harm. Goods and services improve when their makers or providers face competition from other suppliers.
Competition between governmental units also works. James Madison and his compatriots understood that, so they created a federal system wherein most governance happened in states that competed with each other.
Monuments to folly
Then they went even further in splitting the national government into three branches that compete with each other for power and prestige. When people can easily move from one jurisdiction to another, governments have to compete with each other to attract citizens. This capital never found its way into the domestic manufacturing sector or agriculture - low-yield sectors that would provide a decent rate of return only after a long gestation period.
The high-yield sectors with a quick turnaround time to which foreign money gravitated were the stock market, consumer financing and, in particular, real estate. Not surprisingly, a real estate glut developed rapidly. Monuments to folly were everywhere - the Bangkok Land Company's desolate 'residential complex' near the airport, the empty thirty-story towers in the city's Bangna-trat area. The rest of the pieces fell quickly. Commercial banks and finance companies were horribly overexposed in real estate. Foreign portfolio investors and banks that had loaned to Thai entities discovered that their customers were carrying a load of nonperforming loans.
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With a worsening balance of trade, the country's capacity to repay the debts incurred by the private sector became very cloudy. That the current account or balance of trade in goods and services was in deficit to the tune of 8.
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By early many investors concluded it was time to get out and get out fast. With too many baht chasing too few dollars, there was huge pressure for devaluation.
The scent of panic attracted currency speculators, among them George Soros. Speculators spotted similar skittish behavior among foreign investors in Manila, Kuala Lumpur and Jakarta, where the same conjunction of commercial bank overexposure in real estate, weak export growth and a widening current account deficit was stoking fears of a currency devaluation that could devastate their investment. As in Thailand, speculators rode on the exit of foreign investors.
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By late October , the Philippine peso, the Malaysian ringgit and the Indonesian rupiah were still on a downspin as capital continued to exit, resulting in a catastrophic combination of skyrocketing import bills, spiralling costs of servicing the foreign debt of the private sector, heightened interest rates spiking economic activity, and a chain reaction of bankruptcies. The Southeast Asian miracle had come to a screeching stop. Meanwhile, things were disintegrating in Korea, where over the past year seven of the country's mighty chaebol, or conglomerates, had come crashing.
Unlike Southeast Asia, Korea built its strength principally on domestic savings, generated partly through equity-enhancing policies such as land reform in the s. Foreign capital had played an important part, but local financial resources extracted through a rigorous system of taxation plus profits derived from the sale of goods to a protected domestic market and to foreign markets opened by an aggressive mercantilist strategy constituted the main source of capital accumulation.
The private sector flourished under a regimen in which the state had the commanding role. By picking winners, providing subsidised credit and protecting them from transnational competition in the domestic market, the state nurtured companies that it later pushed out into the international market. In the early s, the state-chaebol combine appeared unstoppable, as the deep pockets of commercial banks, extremely responsive to government wishes, provided the wherewithal for Hyundai, Samsung and other conglomerates to carve out international markets.
By the early nineties, however, the tide had turned. Failure to invest significantly in research and development translated into continued dependence on Japan for basic machinery, manufacturing inputs and technology, worsening Korea's trade deficit with that country. To maintain shrinking profits, business pushed legislation in late to expand its rights to slough off 'excess labour' and make the surviving work force more productive, on the American model.
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This was essentially a return to the formula of the early years of the miracle, when the primitive accumulation of capital was derived from harsh exploitation of unskilled labor. When fierce street opposition arose in response to this move, many chaebol had no choice but to rely on the government and the banks to keep money-losing operations alive.
That lifeline could not be maintained, though, without the banks themselves being run to the ground. Recession is certain, as direct investors follow the example of portfolio investors in reducing their profile in Southeast Asia. Already, nearly all the key Japanese vehicle manufacturers - Toyota, Mitsubishi, Isuzu and Hino - have either shut down or reduced operations in Thailand.
The future is likely to be one of prolonged deflation rather than quick recovery. Japan has been unable to shake off its six-year recession, and unlike the early nineties, when its weakness was offset by the boom in Southeast Asia and steady growth in Korea, today all three sources of regional demand have been doused, while a fourth, China, remains highly protectionist.
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This leaves Europe and the United States as significant mass markets. But low growth and high unemployment continue to dampen demand in Europe; and in America, East Asian exporters will encounter an uphill battle for market share against China and newly competitive Latin American countries. How the United States will respond politically to the crisis is, of course, a matter of great concern to the Asian elites, and it is unlikely that Washington will desist from exploiting the situation to achieve what it has been aiming at for over the past decade: the free-market transformation of economic systems that are best described as state-assisted capitalist formations.
Since the late s Washington has relentlessly sought to 'level the playing field' for US corporations via liberalisation, deregulation and privatisation of Asian economies. It has used IMF and World Bank 'structural adjustment' programs; a harsh trade campaign threatening retaliation so as to open markets and stop unauthorised use of US technologies; a drive to create an Asian-Pacific free-trade area; and a push to implement GATT agreements eliminating trade quotas, reducing tariffs, banning the use of trade policy for industrialisation purposes and opening agricultural markets.