W12 - Politics, Institutions and a review of EA growth

Question 1

Empirically, is short-term capital good for economic growth?

Answer 1

No evidence that short-term capital is good for economic growth

Question 2

Is corruption at the highest levels good for growth?

Answer 2

If there is a balance of power among a small and stable set of government and business elites, money politics can actually reduce transaction costs and make long-term agreements and investments more efficient

Question 3

What were the main differences between Marcos and Park’s Phillipines v Korea?

Answer 3

• Park overthrew the old system where Marcos preserved the oligarchies
• Phillipines had close ties with the west but severed them and Korea built them
• Import substitution v export oriented
• Little v large social change

Question 4

Summarise the nature of economic growth in East Asia?

Answer 4

• A relatively inclusive process (but with authoritarian governments; Singapore, Korea, China) with diverse groups involved together.
• Market based but with government direction benefitting from export-oriented growth under US security assurances.
• Used benchmarking

Question 5

What are the challenges facing East Asia now?

Answer 5

• An ageing population
• Deficient AD not responsive to monetary policy
• High debt in Japan (public), Korea (household), China (local governments)
• Stagnant productivity
• Large informal sectors
• Low value added

Question 6

According to Acemoglu and Robinson, what is needed for long-term growth?

Answer 6

Inclusive political institutions (pluralism)

Inclusive Economic institutions (Public services and regulation)

Question 7

What is needed to be a superpower?

Answer 7

We will see, to be a respected superpower you need to provide security and public goods to neighbours

Question 8

Will China replace the US as the superpower in Asia?

Answer 8

Depends if China can establish both economic demands and security for it’s neighbours

Question 9

What is Thucydides trap?

Answer 9

When one great power threatens to displace another, war is almost always the result

Question 9

What is the Kindleberger trap?

Answer 9

At the global level, superpowers need to create public goods such as stable climate, financial stability, freedom of seas and public security