This is a book of essays. What I did was summarizing their conclusions. Some of the essays do not have conclusions; and I have difficulties understand a few (especially regarding the financial aspect of the economies). These are omitted.
Table of Contents
- Explaining the Success of the Four Little Dragons: A Survey
- Taiwan's Economic Miracle: A Singaporean Perspective
- Singapore's Experience of Industrial Restructuring: Lessons for the Other Asian NIEs
- Korean Industrial Policies for Declining Industries
- Transition from Import Substitution to Export Expansion: The Thai Experience
- Adjustment Problems of a Small Oil-Exporting Country: Did Indonesia Suffer from the Dutch Disease?
- Direct Foreign Investment and the Economic Development of Korea
- Japanese Investment in Thailand: Looking Back and Into the Future
- The Effects of Direct Foreign Investment on Taiwan: A Macroeconometric Investigation
- Agricultural Growth and Food Imports in Developing Countries: A Reexamination
Explaining the Success of the Four Little Dragons: A Survey
by George HicksHicks thinks that economic policies can successfully explain the development of the four Dragons. The shift from ISI to EOI is of uttermost importance here. This shift of policy enabled them to exercise their respective comparative advantage, which was the export of labour-intensive manufactures. And when wages rose as a consequence of such good policies, they moved to upstream markets.
The effectiveness of government intervention, as Hicks puts it, depends on what the government did. When their activities fell into the traditional role of the governments, such as the improvement of infrastructure and the enforcement of the rule of law, their interventions were successful. However, when interventions became excessive, as was the case for Korea in the late seventies and Singapore in the mid-eighties, the economies suffered. Compared to the rest of the LDCs, the four Dragons were doing relatively well, so they were able to realize their comparative advantage in labour-intensive productions.
In this way, Hicks declares the 'death' of 'development economics'.
[I really doubt Hicks' idea about development economics, as Asian governments did not only intervene in the construction of infrastructure, but also participated actively in defining the direction of development; and some industries resulted from such interventions grew to world influence, such as the automobile industry of Korea.
Also, it might be worthwhile to check how the Dragons succeeded in moving away from labour-intensive export to capital- or technology-intensive exports, instead of falling into the problem of path dependency, and failing miserably as wages inevitably rose. Actually this is the case with China now, as the struggle to move to upstream market is really a life-and-death matter.]
Taiwan's Economic Miracle: A Singaporean Perspective
by Lim Chong-YahQuantitative records show that post-war Taiwan economy more than doubled every 12 years from 1952--87. Some causal factors have been identified, such as (1) EOI policies, and (2) high saving function. These two are largely agreed upon by all.
However, Lim points out that differences arise in:
(1) the perceived ability and orientation of the government and bureaucracy,
(2) the importance of the pursuit of an essentially free-enterprise system,
(3) the impressive investment in human capital, particularly in areas vital to the economic transformation, and
(4) the critical role of post-war mainland immigrants.
(Note that these four are direct quotes.)
Lim also mentions colonial rule, (in this case, the rule of Japan from 1895--1945), although could not explain all, but nevertheless provided conditions for Taiwan's post-war take-off. In the colonial period, Taiwan became more trade oriented, with the export of rise, sugar, and tea almost all going to Japan. Education was neglected before Japanese rule, but primary education became widespread since that.
American aid is also mentioned, but just as the Marshall aid is dismissed as one vital factor for the European recovery, (I do not have anything to back this up though; this is a conclusion from Prof. Ristchl's class last term.) the American aid does not seem to answer the question. Specifically, there is a lag between the aid and the actually take-off of Taiwan. Aid ceased altogether in 1968, while Taiwan experienced the fastest rate of growth in the 1970s. Scott (1979) points out that some heavily aided countries failed to perform well, while others that received less aid posted remarkable performance.
Singapore's Experience of Industrial Restructuring: Lessons for the Other Asian NIEs
by John WongTwo lessons from the Singaporean experience:
Using high wages to rush economic restructuring is not a good idea.
Too much government intervention could do harm.
[Sorry for this extremely simple summary.]
Korean Industrial Policies for Declining Industries
by Ji-Hong KimKim uses the cases of Korean shipbuilding and coal mining industries to show that government intervention should be market-conforming rather than market-displacing.
Kim classifies the shipbuilding industry as in cyclical decline, while the coal mining industry experienced absolute decline.
[But isn't the shipbuilding industry in Korea still very prominent? Wikipedia claims that Hyundai is the world's largest shipbuilder. Anyway, someone familiar with Korea is very welcome to comment.]
Transition from Import Substitution to Export Expansion: The Thai Experience
by Narongchai Akrasanee and Somsak TambunlertchaiThe authors recognize that there are major limitations to ISI, but point out nevertheless that it seems to be necessary for a quick industrialization start up, as are the experiences of Korea and Taiwan tell us.
Thailand has already changed the policy to EOI, but the situation today is critical. (1) There is threat of protectionism against Thai exports including tapioca products, textiles and garments and canned food. Thailand is also facing competition from other EOI LDCs.
While export expands, domestic absorption of industrial output in Thailand today is substantial. It seems that where the industrial goods go does not really matter much.
[Again, I am going to relate this to China, as China is suffering from a shrinking capacity of domestic consumer market.]
Adjustment Problems of a Small Oil-Exporting Country: Did Indonesia Suffer from the Dutch Disease?
by Mari PangestuThe finding is that the symptoms of the Dutch Disease is present. Policy implication is that the government should resort to fiscal rather than monetary policies if it wants to minimize the effects of the Dutch Disease.
This is quite a statistical work, so I am not going to go further into the summary. If you are interested, please read the paper, examine the stats, and see for yourself whether the author's point is valid or not.
Direct Foreign Investment and the Economic Development of Korea
by Chung H. LeeIt seems that the author draws a rather broad conclusion from this article:
The fact was that Korea exercised a restrictive DFI policy until the mid-1980s.
As DFI would work against government industrial policies, the effect of DFI on the economy will be affected by the effect of the governmental policies: if the policies are helpful, DFI is bad, and vice versa. As we do not yet know if such policies have benefited the Korean economy, no answer regarding the effect of DFI can be given yet.
Japanese Investment in Thailand: Looking Back and Into the Future
by Mingsarn Santikarn Kaosa-ardEmpirical studies during the 1980s show that Japanese investment in Thailand has not benefited the host economy significantly, as it mostly responds to tariff incentives.
The Effects of Direct Foreign Investment on Taiwan: A Macroeconometric Investigation
by Eric D. RamstetterThe author points out that Taiwan is unique in:
(1) endowment--scarce labour, abundant capital, and scarce resources;
(2) political status, which changed greatly in the 1970s.
However, two general themes are clear:
(1) the effect of DFI can be dampened if it reduces domestic capital formation (I do not really understand this.)
(2) MNC's are important in that they can bring entire new markets (and the know-how) into an economy.
Agricultural Growth and Food Imports in Developing Countries: A Reexamination
by Romeo M. BautistaThis articles carries interesting findings. By analyzing 34 developing countries with a significantly large agricultural sector as a share of GDP, the elasticity of net cereal imports with respect to agricultural production is positive, and is estimated to be close to unitary, indicating that agricultural growth on a country's import of food is no small deal. (However, for this conclusion to hold in the future, we will need to take a close look at the interrelated markets for cereals and livestock products, and consider the demand for cereal by human as well as by livestock production...This is becoming complex, and I have difficulty analyzing the author's point; just remember, apply this conclusion with caution!)
Also, interestingly, many LDCs which promoted industrialization at the expense of agriculture have shown low growth rate and a demand pattern oriented at nonfood products, therefore their demand for food imports was lower. Based on 1983 and 1984 data for 48 LDCs, a 10% rise in agricultural productivity was associated with roughly 10% of increase in GDP per capita, while a 10% rise in manufacturing productivity was associated with only a 1.5~2.6% increase (Houck 1986).
[However, considering the development of Latin America, specializing in agriculture might not be a good thing in the long-run.]
My own concluding remarks:
It seems that Hicks is still on the right direction to point out that the market is the ultimate force for development. However, unlike the European pioneers in the market economy, Asian countries do seem to have difficulties in making the market 'just work'. What is good intervention, and what not, is not a 'dead' topic for discussion.
Notes:
As usual, [] indicates my own opinion, rather than something you can find in this book.
ISI: import substitution industrialization
EOI: export oriented industrialization
LDC: less developed countries (Note this term is not consistantly used throughout the book; rather, I choose to use it to represent developing countries and many other names that can be associated with such countries, for the sake of clarity.)
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