What is “going out,” for a young Chinese citizen from the rural areas? Why do young people (especially young women) choose to “go out?” What other sorts of opportunities are available for young people in rural China, and is “going out” the best one for most?
This is a make-up post for mid-October:
Three notable societal factors allowed for Japan and the Asian tigers to successfully advance their economies through state-led development. First and foremost, I would posit that the type of corruption visible in countries that failed at state-driven development is less prevalent in the Asian tigers. For example, in states like Zaire, discussed in the Peter Evans reading, cronyism along family and kinship lines is the norm. The obedience to family presented a drawback for societies built on a kinship model, as described by Bates, since familial ties prevented unification of smaller social groups into an efficient whole. While cronyism definitely exists in Japan and the Asian tigers, it is institutionalized in a different fashion. The Amakudari system of transferring political elites into private sector jobs tied the political and economic world of Japan together. In addition, those officials who were part of the political (and later, economic) bureaucracy were selected among the top minds of the country, not what town somebody came from.
Elevating members of society highlights the second important factor of the Asian tigers: unification of the country along nationalist lines. Perhaps as a result of the Bates model (absence of violence = lack of unification) and/or other factors, LEDCs were not as socially cohesive as countries like Japan and South Korea? Asian cohesiveness can be seen in the education system of both nations, which selected the top minds of the country for advancement. From knowledge of a previous class, I want to suggest that Confucian values play a role here. A government emphasis on Confucian values, which included loyalty to authority and a responsibility to the larger society (more of a nationalist twist on Confucianism, but it worked) can also be seen as responsible for the lesser role of crony-capitalist politics.
Finally, Hong Kong, Singapore, South Korea and Taiwan (plus Japan) all organized large business conglomerates (Ziabatsu, Chaebols, etc.) that were given reign over portions of these nation’s economies. From start to finish, each member of the conglomerates understood that their mandate is advance society as a whole. This is an understanding that we do not see in narrations like Griffith’s The Economist’s Tale, and could be the ultimate determinant of what constitutes an economic development success.
I question how valuable it is to consider these differences? While we may find value in understanding what helped facilitate East Asian growth, a clear limitation exists in trying to transfer these principles to South Asia, Africa, and South America. The picture that is painted is so different from the countries that we have been studying that I have trouble relating the two regions. The take away is that perhaps success is not found in the specific policy, but success is more about the goals of each member of society being aligned, and the path to development in LEDCs lies in changing minds and providing new avenues for goal-driven growth. (487 words)
East Asia fared a lot better than Latin America and Africa when it came to state-led development. A big contributing factor to this is that, as Peter Evans says about Japan, “individual maximization must take place via conformity to bureaucratic rules rather than via exploitation of individual opportunities presented by the invisible hand”. This means that the norms in Japan are that one must conform to the bureaucratic rules instead of exploiting market resources for their own gain. Sticking to the norms is what maximized their individual gains—thus we largely did not see large political corruption of market resources like in Latin America and Africa—where it runs rampant. Whereas many countries in East Asia, especially South Korea, have institutionalized exam-based civil service recruitment—we see the majority of official positions given out in Latin America and Africa, given out of personal connection. This means that while South Korea, for over a thousand years, has been able to pick government officials out of the brightest students in country—Latin America and Africa are throwing people into governments that are not fully qualified—making state-led development extremely difficult as people are more likely to either corrupt state-led development for their own gain or are unsure of how to even lead state development due to under qualification. The states in Latin America and Africa did not create the essential preconditions to the effectiveness of state led developmental programs.
South Korea protected selected industries, nurtured them, steered them towards new innovations—and when these industries were hit with market shocks—instead of using International Monetary Fund adjustment policies, they borrowed money to get them out of these crises. This meant that the market got back on track quickly and they did not have to see other markets suffer. Where South Korea thrived was by focusing on nurturing specifically selected and targeted industries where those industries exports were nurtured. This allowed the exports for South Korea to increase significantly while they relied on imports to meet the remainder of local needs that these industries couldn’t meet. This gave South Korea a comparative advantage—making this state-led development more dynamic and less static. They even set a time limit on protection—eventually seeking a hands-off approach once the markets were thriving. Using this model, as they poured into certain industries, they recognized where others were not growing at all—and left them to die instead of trying to keep them afloat. This meant that they were managing industries better. They also nurtured agriculture and industry—benefitting urban and rural markets instead of just focusing on urban residents. This allowed for development across the span of the state instead of in highly populated areas. Overall, targeted state-led development was how South Korea overcame the potential drawbacks of state-led development.
Word count: 471
In East Asia generally, as in South Korea particularly, state-led development seems to have worked much better than in the countries of Latin America and Africa. What factors contributed to the success of state-led development in East Asia, and in Japan and/or South Korea in particular, and why was South Korea (at least, for a time) able to overcome many of the drawbacks of state-led development discussed in earlier readings and class meetings?
In Peter Griffiths’ mostly true memoir of his time as an economist in Sierra Leone, one of the biggest difficulties he faces is in getting both the Sierra Leonean government and the international financial institutions to actually recognize that there’s a problem. For your exercise, please describe and analyze the political, economic, and practical barriers faced by Griffiths in getting the government of Sierra Leone to abandon the World Bank’s plan to end the government’s role in rice importing.
The IMF and World Bank have given out numerous reform projections to the developing countries of the world throughout the past several decades. Though some have had greater success than others, the majority of reform projects have not been as effective as intended to be. In turn, this has lead countries to continue returning as reform recipients in order to continue on the process of reshaping their economies, despite both external and internal forces working against them.
One explanation of why the IMF and World Bank reforms are vastly unsuccessful falls heavily upon the dependency that countries have securitized their economies to. However, This outside intervention has enabled countries to reap the benefits of foreign aid without being willing to completely, or even slightly, change their own foreign policies that are in place regarding structural reform. It dismantles any sort of incentivizing and becomes extremely problematic due to governments own desire for self-gains. The dependency has harmed the recipients’ macroeconomics, by disabling the growth process due to government’s policy changing at a rate that is much slower than the influx of foreign aid, or results in policy not changing at all. The responsibility of successful reform falls upon the government officials receiving the projects and their willingness to comply with what the IMF and World Bank are asking to grow itself, rather than accept the dependency.
Continuing on with the historically flawed reform packages brings forth the cookie-cutter global reform package. It is this false notion that if a project worked in one country then it is ultimately going to succeed in another. What enables this mindset is the distinct gap existing amongst the people who are making the packages and those who are receiving them. Therefore, creating bad reforms and aiding in countries continuing to receive future IMF and World Bank assistance. This failed mechanism is exemplified by John Rapley, who states that the World Bank and IMF have invoked programs that had success throughout Latin America in countries throughout Africa, with the end goal being growth as it did in other regions. The reason this is problematic is that their success is heavily based on assumption rather than analyzing how these projects from Latin America will play out in African nations. The institutions have failed to view these recipient countries as individuals, and resorting to grouping reform recipients together in attempt to transfer reform success.
To return to Rapley, he argues that an added aspect to halting success with reform projects is the economic shift that takes places amongst the classes once they have received the packages. These packages are generally created to enable the poorer workers to catch up to the wealthier ones, which in turn have heightened tensions amongst the shifting classes. This argument presents great validity due to both the social and economic shifts that are occurring within a country as it receives outside aid, something that is not as visible as if it were enacted by a country’s own government. This internal conflict halts and distorts the growing process that a country could have potentially undergone from the reform projects.
(WORD COUNDT: 516)
In the readings for Monday, we begin to see the outlines of how neoliberally-minded reform projects and mandates actually played out in developed nations of the Global South. As our authors argue, there was often an appreciable gap between what neoliberal reformers promised and what they achieved. Your question, then, is why did IMF and World Bank-sanctioned (or imposed) reform projects rarely seem to work as they were supposed to?
The 70’s and 80’s marked a shift in the political climate for the most powerful and developed nations in the world (specifically the U.S. and Britain). Right-wing conservative ideology took hold of these powerful states. The Washington Consensus, although not explicitly discussed by any of the authors, is based on neoclassical economic theory. This includes trade liberalization, currency devaluation, privatization of state enterprises, and ultimately, placing the market at center stage. These ideas stand in polar opposite of State-lead development. A top-down assault of neoclassical thinking was forced onto the developing world without much resistance marking a shift of how development was thought about and applied.
All three authors talk about how the State lacked the capability of creating development. Rapley and Williamson discuss in detail how these new ideas about development can address the problematic effects from State-Led Development (ISI). At the core, developing nation’s biggest sector for growth was agriculture and ISI inherently disconnected this population from the rest of the economy. Policy prescriptions were needed to allow this comparative advantage to flourish. ISI pushed for investment in the public sector which didn’t create the incentive needed for development- further worsening agricultural production. It also poured resources into inefficient industry that lacked the ability to spread the wealth, creating corruption favoring the urban cohort. Overall, ISI lead to a rise of the cost in hiring labor relative to capital. Both authors outline policy prescriptions brought on by the Washington Consensus that point to the direction of less government intervention, more freedom in the market, and the abandonment of ISI in favor of outward orientation. Structural adjustments were used to make the market and people in charge of growth and the state as a secondary role in development. This to me, is a complete turnaround- it shifts the idea of development onto the people. It also assumes that the people will have the opportunities to engage in a free market and as we have come to learn- can only be offered if a government has the economic capabilities and institutions. This is one big contention of neoclassical theory as a basis for economic development. Furthermore, with more exporting and trade many of these developing countries are forced in trade deals and practices guided by powerful developed nations. The line of sovereignty is blurred and could especially be damaging to domestic progress if one nation decides to stop trading.
At the same time, an interesting shift of thought took place in the World Bank. Outlined by Finnemore, the focus for development was redefined which caused a complete shift of how people thought about the state. The issue of human rights expanded beyond the borders of the nation. The world became concern in making sure basic rights were granted to everyone and it grew as a necessary condition for a state to provide. Development projects focused on industry and job growth changed focus onto poverty alleviation. Likewise, these poverty projects became synonymous with projects focused on small farmers furthering the ideas of neoclassical policy trying to address the big problem of state-led development. In conclusion, it is interesting to see how this “war on poverty” attitude is still embraced by all World Organizations.
(WORD COUNT 532)
What is the “Washington Consensus”? And how do the policy prescriptions of the neoliberal economists described by Rapley, Williamson, and Finnemore seek to correct the problems caused by the state-led growth policies of structuralists and dependency theorists?
In our readings for Monday, we see a number of explanations for and evaluations of the state-led development strategies pursued by developing nations in the 1950s, 60s, and 70s. For your prep exercise, briefly respond to the following two questions:
1) Briefly, what was the strategic logic behind the state-led development strategies (particularly ISI) promoted by most development economists and tried by most developing economies in the postwar era?
2) What were the political and economic consequences of state-led development in this era for most developing nations (especially in Africa, the Middle East, and Latin America)? Why, in the assessment of our authors, did state-led development fail?