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Flashcards in Outcomes Deck (26)
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1

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

2

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

3

Growth stats for T and I

GDP growth
1970 - 1980: 7%
By 1990 - 99: 4.7%

4

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%

5

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%`

6

In what sense was there stagnation, unsustainable growth by 80s and 90s?

1. Limited diversification, EOI, industrialisation
2. Concentration of economic interests and limited deregulation
3. Burden of external debt
4. Problems culminated in 1997 AFC

7

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

8

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

9

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

10

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

11

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.

12

What are some overall trends?

1. 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

2. 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

3. 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

4. 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

5. 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

6. 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

7. 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

13

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

14

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

15

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

16

Outcomes of nationalisation (moderate)?

Moderate Nationalisation policies led to the generation of wealth for subsequent industrialisation

P: Congress bill in 1958 for at least 60% of all important industries to be at least 60% owned by native Filipinos. Led to threefold increase in Filipino participation in import trade from 1948 to 1965

I: Pertamina (oil)

T: Thai Rice Company

17

Outcomes of nationalisation (excessive)?

Excessive nationalisation led to the flight of foreign capital

I: Sukarno’s nationalisation and expropriation of Dutch property and businesses led to reduced trade, declining GNP per capita and a collapsing economy by 1965

B: Nationalisation of all manufacturing and commerce sectors led to a collapse of the private sector and international trade, continued negative export rates of close to -5% in the 1980s

18

Outcomes of moderate protectionism/ISI?

Moderate protectionist policies led to the growth of early industries and spurred early ISI

P: Import and forex controls extended to new industries, led to rapid industrialisation as manufacturing expanded from 8% - 20% of GDP from 1950-1960

M: Pioneer industries programme in 1958 focussed on processing and other consumables. Led to a 10% increase in consumption goods as % of industrial output till 1970

19

Outcomes of LT overprotectionism?

LT over protectionism led to failure to scale back GI - inefficiency, inability to move on to EOI

P: Bailed out Benedicto’s sugar empire with 14B pesos despite sugar price collapse in 1970s - complacency and lack of incentive to produce efficiently
70% of export revenue still generated by sugar, coconut and forestry products (1967-71)

I: Highly protected automobile industry continued to be dominated by Liem Sioe Leong - remained dependent on export earnings from primary commodities (70-80%) by 1980

20

Outcomes of foreign investment?

The drive for foreign investment led to drive for industrialisation

SG: export incentive policies such as low interest rates and Export Credit Insurance Scheme (1976, insured exporters against risks) saw foreign investments accounting for 71% of total exports by 1976

M: Free Trade Zone Act in 1971 led to 20% surge in foreign investments in both textile and electronics exports by 1975

21

Outcomes of foreign aid?

Led to over-dependence on foreign loans/funds

I: IGGI. By 1989, nursed Asia’s largest debt at USD58B

T: External debt of 38% of GDP in 1986

22

Outcomes of privatisation?

Timely privatisation and diversification led to more successful EOI

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

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.

23

Outcomes of export-oriented policies, diversification?

Continued and sustained growth of the economy, vs stagnation

Growth stats
SG (successful EOI and diversification):
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

24

Outcomes of equity policies?

Some interventions in certain countries led to lessened economic inequities

B: Tenancy Law 1965 abolished tenancy and re-distributed land to the poor farmers

M: 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

25

Outcome of failure to intervene for equity?

Failure to intervene - higher inequity

I: Economic growth during New Order era widened economic disparities between rich elite and masses, urban and rural areas. By 1993, urban incomes 92% higher than rural incomes

26

Difference in outcomes between socialist economies?

V More outward-looking in reality by 90s, B only illusion of reform
Growth in V (8.2% GDP growth average 1986), B persisting poor GDP growth