East Asian Miracle: Replicability and Radical Critiques. By: Tathagat SinghRead Now
The particular example of East Asian Growth success that we will be examining in this essay deals with the uniquely remarkable- high rates of GDP growth in what is referred to as the first-tier industrialising economies in East Asia, viz., South Korea, Taiwan, Singapore and Hong Kong. An added, if not the most important, characteristic feature of this growth story is the relatively nonincreasing levels of inequality accompanied by high-income growth rates during the period from the 1960s to the late 1990s. In 1997, the East Asian Financial Crisis destabilised the growth paradigm significantly. Nevertheless, the historically specific case study remains a vital example today on discourses and debates around the nature of policy which can induce similar levels of high growth (and development) in various third world countries- especially the Asian counterpart of South Asia.
This, in turn, raises the questions of replicability, so to say, of the East Asian model in other underdeveloped parts of the world. The world of prescriptive policy, solidified further by the hegemonic appearance and consolidation by the Washington Consensus on the global policy scale, has time and again sought ‘recipes’ of development that once set in motion through the simple, if not easy, correction of institutions would almost automatically lead to the underdeveloped world catching up with the rest. The ‘lagging’ of the underdeveloped world is often homogenised as a prerequisite for policy dominance.
In a similar vein, one of the earliest debates and controversies that emerged around the characterisation of the particular processes that had led to the success in first-tier East Asian countries divided the house along the lines of those who saw it as an edifying vindication of free-market orthodoxy as opposed to those who saw in the success a significant role of the State, which the former might have been uncomfortable to identify. Thus, before analysing the scope and possible paths of replicability of East Asian success for the Global South, it becomes imperative to understand what this success entailed as a process. The growth responsible for manufacturing the East Asian success story was inclusive in the following aspects- relatively low levels of inequality, rapid reduction in poverty, significant improvement in social indicators, and consistently high employment intensity. Contrary to the early claims of free-market orthodoxy being the crucial ingredient in cooking up this growth story, later research and scholarship differed along two lines.
One line of critique, following from scholars like Dani Rodrik, Ha-Joon Chang, Bradford DeLong and others, argued that even if the market did play a role in the success, the role of the State in leading the path was equally, if not more decisive in charting a trajectory of sovereign and inclusive growth. The other line of critique against the orthodoxy of the market stems from a line of radical critics like Hiroshi Uchida, M. Wakabayashi, and Samir Amin, among others, who argued that the reasons for the success of these economies lie in the historically contingent nature of the function that they played in the core-periphery production and exchange relations of the capitalist world economy. As expected, the exposition and interpretation of these two lines of arguments have important repercussions on the feasibility of replication of the model for other countries of the world. We thus explore our position on the lines laid out through this critique.
Scholars discussing the role of the State in raising productivity and living standards in East Asia have, with increasing evidence, claimed that high growth resulted from the remarkably high investment rates. The investment rates themselves can be seen as being secured by the enabling macroeconomic framework that the State ensured. A key and crucial ingredient in the macroeconomic stability that East Asian countries experienced was the relative absence of obsession about curtailing the inflation rates to very low levels. Inflation was allowed to a certain extent as long as it translated into higher productivity and higher growth consequentially. This narrative runs counter to the dominant paradigm of inflation-hawks’ conservative monetary policy regime as the only suitable method of transforming a backward country into a well-functioning market economy.
Moreover, the State played an important role in ensuring that the profits from increasing capital accumulation were reinvested into productive channels. In order to do so, the State undertook some important measures like curtailing luxury imports and consumption and giving tax exemptions oriented toward export-led industries. As far as the replicability of these methods is concerned, one can argue that even if the act of veering the monetary policy of most third-world countries would require significant political effort and contestation, the overall feasibility might not be entirely unimaginable. Third-world countries have in the past been able to perform in this direction with mixed results. Though it might be difficult to do the same in the post-Washington Consensus political and economic climate, the desirability of the policy still holds true. One obstacle might be the reigning hold of finance capital over controlling investment flows in underdeveloped countries. Moreover, the current paranoia about raging inflation in the first world after the Russia-Ukraine war may be an added hindrance to any well-meaning dissolution of the obsession with strict anti-inflation monetary policy in the third world. The replicability in that sense may be an issue thus.
Another reason commonly cited for the institutional stability of the high-growth environment is the nature of bureaucracy in the East Asian economies. The precision with which the bureaucracy of the State was involved in planning and implementing the plans in these economies is often lauded, along with the strictly meritocratic employment nature of the bureaucracy itself. This autonomous role of bureaucracy raises the question of the level of actual democratic decision-making and participation in the economy. It is almost like claiming that democracy was not allowed to interfere with the mandated plan of action that the bureaucracy had laid out. Regions like South Korea, Taiwan and Singapore have been famous for right-wing bourgeois dictatorships. Apart from the feasibility of replicability here, the desirability of such a replication of anti-democratic regimes must be questioned.
However, maintaining a more or less inclusive growth record under these regimes of conservative governments poses a puzzle in its own right. This apparent contradiction is where much of the State-led growth literature remains somewhat silent. The puzzle, however, can be resolved by examining the radical critiques of East Asian Success. Hiroshi Uchida claims that the correct way to characterise the East Asian economies is through recognising them as rentier-state capitalisms. This rentier state capitalism can be considered a landed state, taking the initiative for capitalist industrialisation. After the second world war, the United States of America had developed a special interest in the economies we have here characterised as first-generation newly industrialising economies. In all these countries, a fundamental factor of inclusive growth was land reforms in the form of redistribution. Land redistribution is specifically aimed at stimulating the productive morale of peasants, raising agricultural productivity, and, most importantly, supplying cheap industrial labour for rapid increases in industrialisation levels. The land was also offered to multinational Foreign Direct Investment in a phased manner guided by the State in Export Processing Zones like Gao Xiong in Taiwan. In Taiwan, the Guo Min Dang regime formed a hegemonic coalition with the landed interests and designed specific rent-seeking agreements. Various voluntary agricultural associations (Nong Hui) emerged, and the State monopolised one-third of peasants’ rice produce.
Several extra-market policies, such as implementing crop tax, compulsory purchase by the State and barter, and controlling the sales routes via sales monopoly, were effectively implemented. The Taiwanese State obtained 28.6% of Gross rice production in the fourteen years between 1951 and 1965. This proportion and absolute amount are bigger than the Japanese feudal class obtained under Imperial Japan. In this context, Uchida and Wakabayashi see the rentier state capitalism and developmental dictatorships in East Asia as having facilitated a rapid acceleration in primitive accumulation. However desirable the goal of land redistribution may be, one must also consider the specific context in which it was undertaken in these economies during this period when discussions about its replicability for other underdeveloped countries emerge. Japan was one of the first countries to undergo strategic land redistribution on a large scale under American influence. One of the most fundamental reasons for the said land reform is often argued to be the dismantling of the old feudal-imperial order of the Japanese political economy, making it more suitable to establish production and exchange relations with the USA. Similarly, in Taiwan, the radical land reforms were a part of the counter to what China had been practising under the Maoist regime. Wakabayashi argues that it was an important building block for the early formation of “anticommunism military dictatorship” and its subsequent transformation into a “developmental dictatorship”.
In South Korea, the land redistributions were the aftermath of the Korean war, where the Democratic People’s Republic of Korea had already experienced a radical alteration of the socioeconomic landscape under the Juche leadership, backed by the Soviet Union. Would it have been possible for these land reforms to happen on their own without the threat of communism is a counterfactual question. However, it might suffice to say that the presence of a strong socialist bloc did push them towards the reforms to a significant extent. Thus, when replicability is discussed in these land reforms, the historical conditions that once existed are no longer there. As mentioned above, US aid played a singularly important role in creating these inclusive success stories. The US gave Taiwan four thousand million dollars in aid from 1950-74 (Uchida). The development strategy to be charted with this amount of aid was also specific. Wakabayashi and Amin have argued that the aim was to transform these first-generation East Asian tigers into potent semi-peripheries of the post-war capitalist world economy.
The specific nature of growth thus hinged upon the absorption of cheap labour from the newly freed feudal holds and peripheries and the accumulation of capital funds and technology for labour-intensive production from the centre. In the absence of such a conscious direction of growth from the core, the replicability of the East Asian model again seems infeasible in the present context, where there might be little motive for the core to ‘upgrade’ peripheries into semi-peripheries en masse. On the contrary, there have been indications that the present hegemonic regime of the WTO uses Trade in goods and services as well as technological patents as an essential and effective tool in reinforcing the nature of unequal development through relations of core and periphery that further exacerbate the economic sovereignty of third world countries in the age of Multinational corporations. In this context, the protection offered strategically in the initial phases of these developmental dictatorships becomes difficult to implement for underdeveloped nations.
This is another area where the replicability of the East Asian model faces a severe obstacle. In Hong Kong and Singapore, two important factors that helped make the growth process sustainably inclusive have been access to public housing at affordable prices and cheap and universal education.Both of these measures fundamentally require a strong state for implementing and preventing private players from making a profit from the controlled market. In the present age of neoliberalism, when the State has substantially rolled back from its major responsibilities, ensuring that the State plays its role in providing basic amenities does not seem feasible for replication. One can argue that however desirable such policies on the part of the State might be, in the absence of a radical and revolutionary paradigm shift in the political economy of third world countries, the battle against disequalising growth remains an uphill task in the context of limited, if any, the scope of replicability of the East Asian tigers’ success mantra.
Tathagat Singh is a master’s research scholar in the Faculty of Economics of South Asian University, Delhi, India.
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