The East Asian Growth Regime and Political Development

The East Asian Growth Regimeand Political DevelopmentKenichi Ohno (GRIPS)July 2007East Asia’sAchievements and Issues Diversity in performance Participation in the regionalproduction network Policy as key to economic success Authoritarian developmentalism asa dynamic and temporary regime The exit problem Democratic developmentalism?1

High PerformanceNo doubt about high average growthin recent decades4000Per Capita GDP(Measured in 1990international Geary-Khamis dollars)35003000250020001500Eas t As iaAfricaSource: Angus Maddison,The World Economy: AMillennium Perspective,OECD Development Centre,2001.100050001950 1960 1970 1980 1990 1998Diversity in Political andEconomic DevelopmentGovernance, WGI2005600500400300200MongVNCamb IndoE TTimor100PNGLaoN KorMya0100 1000 10000 100000MalTThaiPhilChinaSinS KorHkgJpnTTwnBruPer capita income ($PPP2004, log scale)High correlation(0.90) butcausality cannotbe argued fromthis diagramOnly circledeconomiesparticipate inregional dynamismSources: Compiledfrom World Bank,Worldwide GovernanceIndicators, Sep. 2006;and World Bank, WorldDevelopmentIndicators, 2006.2

East Asia’s Uniqueness The region is like a big factory wheremember economies compete Growth starts by participating in thisregional dynamism The sandwich effect—pressure fromabove and below to work harder FDI as relocater of industries Clear but shifting order and structure(flying geese)Manufactured ExportsManufactured exports / total exports100%90%80%70%60%50%40%30%20%10%JapanTTaiwanKoreaSingaporeMalaysiaTThailandPhilippinesIndonesiaChinaVietnamMyanmar0%1975197619771978197919801981198219831984198519861987198819891990199119921993199419951996199719981999200020012002200320042005Sources: Asian Development Bank, Key Indicators of Developing Asian and Pacific Countries, 1993 & 2006; Statistical Bureau,Ministry of Internal Affairs and Communications, Japan Statistical YYearbook 2007.3

Development and Aid StrategyThere is a clear gap in developmental thinkingbetween Eastern practitioners and Western aidcommunity.GoalPoliciesKeyactorsEast Asia’s WayEconomic prosperityand national prideIndustry, investment,trade, technologyCentral governmentand businessesWestern DonorsPoverty reduction(MDGs)Health, education,governanceLocal communitiesand peopleEast Asia’s Policy Mix4

Growth policies—vision, strategy, technology,HRD, infrastructure, SMEs, FDI, trade, finance,logistics, etc.Supplementary policies—inequality, pollution,urbanization, congestion, labor migration,corruption, drugs, HIV/AIDS, etc.--Rapid growth always creates newproblems, which destabilize society.--Unless both policies are implemented,development will fail (Murakami).--Success depends on these policies,rather than diligence or ConfucianismAuthoritarian DevelopmentalismE. Asia chose authoritarian developmentalism(AD) for economic take-off.Key ingredients of AD Powerful and economically literate top leader Development as a supreme national goal Technocrat group to support leader andexecute policies Political legitimacy derived from growthThe leader, as primary force of change,can create the other three conditions.5

Authoritarian Developmentalism in East Asia1945 50 55 60 65 70 75 80 85 90 95 2000KoreaTaiwanPhilippinesIndonesiaSingaporeMalaysiaThailandVietnamMyanmar60 61 79 87 88 92 97Noh TaewooRhee Syngman Park Chung-hee Chun Doo-hwanKim Dae-jung49 75 78 88 Kim Young-samNationalist Party Chiang Kai-shek Chiang Ching-kuo Lee Teng-hui46 48 53 57 61 65 86 92 98Magsaysay Macapagal 9955 59 65 90 HabibieLabor People'sLee Kuan-yewGoh Chok-tongParty Action Party57 70 76 8146 48 57 58 63 73 75 77 80 88 91 97IndochinaCommunist PartyQuirino Garcia Marcos Aquino51 76 Kriangsak Chatichai48 62 88RamosChenShuibianEstradaSkarno Suharto WahidUMNO / Rahman Razak Hussein MahathirPhibun Sarit ThanomLabor PartyPremVietnamese Communist PartyU Nu Burma Socialist Programme Party / Ne Win SLORCChuanSource: Akira Suehiro, Catch-up Type Industrialization , Nagoya University Press, 2000, p115.Emergence of AD AD emerges through a coup as well as election. AD is more likely to rise when the nation’sexistence is threatened by: External enemy Internal ethnic/social instability Incompetent and corrupt leader The rise and fall of AD is conditional mainly onthe development stage of each country, butinternational environment also influences them.Eg. Cold War – reduced global criticism of AD6

Why Power Concentration isNeeded? Growth requires a critical mass of mutuallyconsistent policies. A strong state is needed tomobilize resources quickly and flexibly. If broad participation is allowed, policies aretoo slow and can’t achieve critical mass due to:--Power struggle, party politics, interest groups--Processes requiring patience and compromise,including parliamentary debate and consensus building--Some groups may refuse to cooperate with statepurposesAdrian Leftwich (2005)“The institutional characteristics andrequirements for development and fordemocracy pull in opposite directions.”“Democracies have great difficulty intaking rapid and far-reaching steps toreduce structural inequalities in wealth.”DevelopmentChangeSpeed & flexibilityAccumulationDemocracyCompromiseAccommodationProcedure7

Critiques of ADDemocracy and development are separateissues:“I do not subscribe to the idea that youneed to delay democratization just so thatyou can actually have growth or that youcan have democracy only when you canafford it.” (Dani Rodrik, 2006)Democracy is required for development“Expansion of freedom is viewed both asthe primary end and as the principal meansof development.” (Amartya Sen, 1999)Korean ExperienceN.T.T.Huyen “Is There a Developmental Threshold forDemocracy?: Endogenous factors in the Democratizationof South Korea” (2004)“Democracy as an advanced form of politics isnot independent from socio-economicdevelopment.”“Developmental threshold for democracy [is]a point in the development process beyondwhich democracy can be effectively installedand sustained.”8

10000900080007000600050004000300020001000080%farmersKorea: Per Capita GDP in 1990 USD90% middleclassEnd ofAD1960 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94Exit of ADLowincometrapCatching-upperiod(AD useful)High incomesocietyDemocracyPluralism AD is a temporary regime of convenience,needed only to push up the country to a higherlevel. Once a certain level is reached, AD becomes anobstacle to further development. Watanabe (1998) argues that successful ADmelts away automatically through socialchange and democratic aspiration.“if development under authoritarian regime proceedssuccessfully, it will sow the seeds of its own dissolution”[improved living standards and diversified social strata]9

Exit of AD:A Less Optimistic View However, barriers do exit: stubborn leader,bureaucratic resistance, interest groups.Therefore, leadership and strategy are alsoneeded for an exit. Strong leaders often refuse to step downbecause they will be revenged, jailed andeven executed after transition, with most orall of their policies denied and reversed.The Exit Problem for One-partyRule (China and Vietnam) Rapid growth and social transformation drivenby private dynamism (local & FDI) Success so far in managing liberalization, butnot industrial activism Policy challenge is in social areas, notaccelerating growth Future options:(1) Greatly enhancing party’s policy capability(2) Multi-party system under social democracy(3) Other10

Democraticinstitution(Form)FulldemocracyConstitutionLawsParliamentElectionCourtPartySetbackPuredictatorshipReform vs conservatism, big vs smallgovernment, foreign policy, etc(Content)PoliticalcompetitionDemocraticinstitution(Form)ConstitutionLawsParliamentElectionCourtPartyUS rule20071945-51DemocratizationNew constitutionDefeatThe Case of JapanShowa2LDP dominanceLack of policy debateMilitary rises1931 Democracymovement,Party cabinetWar 1937Showa11960Male suffrage 1925TaishoFulldemocracyFascism1937-45ConstitutionParliament1889PuredictatorshipEdoPolitical fightsMeijiReform vs conservatism, big vs smallgovernment, foreign policy, etc(Content)Politicalcompetition11

“Democratic Developmentalism”?(Mild Form of AD) Research on DD--Robinson and White eds (1998)--Centre for Policy Studies study on “TheDemocratic Developmental State in Africa”--Ethiopian Prime Minister Meles Zenawi Can we separate resource mobilization fromfreedom and human rights? Countries that already have free election,functioning parliament, human rights—canthey adopt developmental policies withoutthrowing out their political achievements? Need to decompose democracy into partsand analyze its structureComponents of DemocracyPurposesProceduresPropertiesFreedom, human rights, equality,social and economic benefits for all,security, peaceful coexistenceLegitimacy (election), rule of law,participation, multi-party system,balance of power (L-E-J), localautonomyTolerance, compromise, fairness,transparency, accountabilityRandom & excessive oppression should never be allowed.Can some of these restricted for resource mobilization?12

Designing DD:Tentative Suggestions Democratic criteria should go beyond“free election.” Generally speaking, policy purposesshould be upheld but procedures andproperties may be partly adjusted. The executive branch should havesufficient power, but with a mechanismto overthrow it if it performs badly. Excessive decentralization at an earlystage is not desirable.Final Remarks When income is very low, a bottom-upregime based on rural population orsocial democracy (poor farmers or poorworkers) may not work. More realistic: use the East Asian ADmodel (top-down quick decisions withsupporting elites) with added democraticelements.13