Outcomes Flashcards
Achievement of economic growth - general narrative?
Strong growth in the short-term until 1980s - ‘Asian Economic Miracle’.
Began to stagnate by 1980s - not all could sustain growth in the 1990s
Problems culminated in 1997 AFC - inability to rebound quickly from AFC, required IMF aid
Clear exception: SG
Growth stats for Singapore
GDP growth - consistently highest in region except 80s-90s: 8.3%, 6.7%, 8.0% (70s to 80s, etc)
GNP per capita - by 1980: USD5130,
by 1995: USD26,730
Next highest, Malaysia, at USD3890
Growth stats for T and I
GDP growth
1970 - 1980: 7%
By 1990 - 99: 4.7%
Growth stats for P
Worst-performing in terms of GDP growth
From 1970-1980: 6.0%
to 1980-1990: 1.0%
1990-99: 3.2%
General trends in growth stats?
T,I,P in decline - stagnation by 90s
From 1970-80s: Growth was in 6-7% range
By 90s, was in 3-5% range - esp P 3.2%
SG consistently high - highest except for 1980-90: 6-8% range throughout
Socialist economies grew in 90s
B - 6.3%
V - 8.1%`
In what sense was there stagnation, unsustainable growth by 80s and 90s?
- Limited diversification, EOI, industrialisation
- Concentration of economic interests and limited deregulation
- Burden of external debt
- Problems culminated in 1997 AFC
Examples for limited diversification, EOI?
I: Despite substantive industrialisation, Indonesia remained a primary economy throughout the 1980s, relying mainly on export earnings from primary commodities (70-80%).
Even in 1985, three most important commodity exports (petroleum, plywood and rubber) constituted 69% of total exports
Impact of over protectionism/cronyism - Highly protected automobile industry for example continued to be dominated be Soeryadjaya and Sudono Salim, such that tariffs reached 300% in 90s and Indonesia never developed efficiency in producing engines for the industry
P: Philippine industrial production has remained fairly stable as a component of GDP (37% and 35%) showing the stagnation of its industrial sector since the 1980s
Examples for concentration of economic interests and limited deregulation?
I: Power of state in granting licenses, influencing bank loans and implementing preferential tariffs and protection guaranteed the interests of Suharto’s closest family members and cronies: 1969 Bulog appointed Bogasari (miller owned jointly by govt, Liem Sioe Leong and Suharto’s step-brother) as sole flour miller,
1988 Bulog awarded soymeal monopoly to P.T. Sarpindo, a company owned by Tommy Suharto and Bob Hasan
P: Benefits of whatever growth there was were distributed disproportionately to the Marcos family, his relatives and close friends, Consolidated power and wealth in the hands of a small elite in society: Marcos’ close friend Roberto Benedicto installed as the head of the govt-owned Philippine Sugar Commission and operated through two state agencies. Lucio Tan and Marcos’ equity in his tobacco empire
Examples for burden of external debt?
I: By 1989, nursed Asia’s largest debt at US$58B
T: External debt of 38% of GDP in 1986
Examples of achievement of equity?
B: Tenancy Law 1965 abolished tenancy and re-distributed land to the poor farmers
M: Moderate pursuit of both growth and equity - the New Economic Policy (NEP) of 1971 - 1990 distributed economic wealth to the bumiputras, achieving 20% of corporate equity for them by 1990, from a mere 2.4% in 1971
Example of more successful EOI? - privatisation
T: 6th Five Year Plan in 1987 re-envisaged the role of public sector as “planner, supporter and facilitator” of the private sector, evident in NESDB being relieved of its role as supervisor for all major govt investment projects. Led to 14% growth in exports in the 1980s - highest in SEA (qualify - still mainly pri exports like rice)
SG: From 1979 diversified from manufacturing to technology and services with establishment of Government Investment Corporation (GIC) and Singapore Technological Corporation (STC). A ‘total business center’ vision was pursued with a S$1B cluster fund in 1995. Led to stronge average growth rate of 8.3% from 1961 - 2001, in contrast to the 4% - 6% of other countries.
What are some overall trends?
- Initial constraints are not paramount in eventual ED
P and B had positive conditions at point of independence, eventually did poorly
M and SG: both did well. Other conditions were more important for LT economic growth - Importance of regime’s doctrines and economic direction/policies
Clear trends between capitalist and socialist economies
Importance of focus on comparative advantage and growth due to the conflict between economic goals
Seeking external expertise: T, SG vs B, V - Outward-looking nature of economy important factor for ED
Capitalist vs socialist economy: foreign investments, loans and advice
Socialist economies pre- and post- 1986 (V) and 1988 (B)
On the other hand, limited international exposure buffered socialist economies from the worst effects of AFC in 1997 - Need for moderate nationalism and nationalisation
Nationalisation is both a political and economic necessity. But needs to be limited to strategic industries. Continued radical anti-foreign nationalism hurts ED
M vs I,P,T; Extreme: B - Inability to transition to EOI is the critical failing for most capitalist countries
Result of systemic cronyism and limit to privatisation/deregulation
Economic decisions based on economic criteria (transparency) or political criteria (cronyism)?
I,P vs SG - Important internal political events at critical junctures
Negative impact of internal crises: P’s political crisis from the assassination of Aquino and People’s Power Revolution in 1980s, V’s Indochina Wars, B civil war from 1950s - Key factors for Singapore’s success
Internal political stability
Not endowed w natural resources, early expertise in export trade and commerce
Outward-looking economic philosophy
Sound principles of governance (transparency; economic criteria) allowed capitalisation of economic opportunities
Zero reliance on foreign loans and indebtedness
Outcomes of central planning?
Govts with overall macro view of the economy able to steer production in appropriate direction to achieve economic goals - focus on CA, etc
T: 6th Five Year Plan in 1987 re-envisaged the role of public sector as “planner, supporter and facilitator” of the private sector, evident in NESDB being relieved of its role as supervisor for all major govt investment projects. Led to 14% growth in exports in the 1980s - highest in SEA - growth
V: Second Five-year plan - large-scale collectivisation in Mekong Delta, reallocation of people into new economic zones (NEZs) - equity
Outcomes of focus on CA?
Focus on Comparative Advantage led to early growth
T: Focus on agricultural devt from 1947 - by 1968 export value of other crops surpassed that of rice for the first time
SG: Focus on investments and human capital devt as early as the Devt Plan of 1960 - 1964 before independence - foreign investments in manufacturing rose 24 times by 1970
Outcomes of Infrastructural devt?
Infrastructures allowed governments to support economic activities
I: Bulog and Bimas as programs/boards which oversaw the logistics of rice production and trade, led to increased rice production by 50% between 1960 - 1980, a rate unparalleled in Asia
M: Heavy Industry Corporation (HICOM), which provided subsidies to domestic capital goods industry, gave rise to important industrial corporations such as Proton and Perwaja Steel from the 1980s with Mahathir’s new economic direction
