Lecture 2 Newly Industrialising Countries
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Transcript of Lecture 2 Newly Industrialising Countries
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Lecture 2
ECON456/556
8 July 2013
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Recap - A framework for analysis;
NIC definition;
Socio-economic performance (comparative statistics); The focus of analysis is the period from 1960s-1980swhere these
countries rapidly transformed from poor to high income economies.
Background of NICs;
Geography and history ; and
Institutional set-up.
Conclusion
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One (long) sentence explanation (See lecture 1-a):
Core areas of analysis:
Economic and social transformation ; and
Industrialisation patterns, process, outcomes and experience
Theories
An understanding of economic development theories are crucial inunderstanding these economic
Factors & metrics for analysis
Focus on indicators that measure economic change and policies thatfacilitated the economic change;
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Geography, history and institutions
These are important, but not the focus of this unit
While focusing on the economics, an understanding of the
geography, history and institutions are also important to provide thecontext. In fact these factors are the deeper determinants ofeconomic growth;
Read this article by Bloch & Tang to understand the role ofgeography and institutions in economic growth
[Note: These two short articles [LINK HERE and HERE] capturesthe big debates on a very big questionwhat determineseconomic growth?]
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http://charlesesalazar.pbworks.com/f/Deep_determinants_of_economic_growth_institutions__geography_and_openness_to_trade%5b1%5d.pdfhttp://harvardmagazine.com/2012/07/why-nations-failhttp://www.economist.com/node/21549911http://www.economist.com/node/21549911http://harvardmagazine.com/2012/07/why-nations-failhttp://charlesesalazar.pbworks.com/f/Deep_determinants_of_economic_growth_institutions__geography_and_openness_to_trade%5b1%5d.pdf -
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NICs/NIEsNo agreed definition.
Essentially to capture countries that have achieved high levelsof economic growth over a sustained period and concurrently,
rapid structural change;
A concept developed to capture two phenomenon:
A comparative-static view : a historical event which differentiatesindustrialisation experience before WWII, and after;
A dynamic view: see the emergence of NIEs
Main reference: Chowdhury & Islam (1993). The NewlyIndustrialising Economies of East Asia. Routledge.
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Unprecedented socio-economic achievements based not onnatural resources but on industrial production.
Rapid economic growth in comparison with past trends, and
with other countries;
Rapid structural change (contribution of sectors to GDP,employment ; technological advancement)
Rapid poverty reduction; and
Improvements in individual choice.
Next three slides illustrate NICs economic growth achievements.
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Rapideconomicgrowth
incomparisontoothereconomicregions
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26609
4383
55862
32105
13081
41114
0
10000
20000
30000
40000
50000
60000
1950
1952
1954
1956
1958
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
PPP Converted GDP Per Capita (Chain Series), at 2005 constant
prices
Hong Kong Japan Korea (RoK) Singapore Taiwan Australia
Penn World TableRapid catch-up and achieved high levels of average income per capita,and continues to grow. Note: Australia used as a benchmark.
https://pwt.sas.upenn.edu/php_site/pwt71/pwt71_form_test.phphttps://pwt.sas.upenn.edu/php_site/pwt71/pwt71_form_test.php -
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0
5000
10000
15000
20000
25000
30000
35000
1985 1990 1995
RGDPch
United States Singapore Japan Australia Hong Kong United Kingdom Taiwan Korea, Republic of
Graduated into high income economies in mid 1980s-1990s
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The first tier NICs transformed from poor/rural/backwardcountries in the 1950s to rich/urban/modern countries in the late1980s/ early 1990s;
How did they do it: NICs used a mix of industrial policies in two different
industrialisation strategy - import-substitution, export oriented &mixed (see next slide for a flavour) to drive economic growth;
Industrial policies can be classified in several ways. One usefulway is to follow Lall & Teubal (1998): functional, vertical &
horizontal; There are several views on the effectiveness of these industrial
polices as they are practised in the NICs (some positive, othersnegative, some mixed.).
http://siteresources.worldbank.org/INTEXPCOMNET/Resources/Technology_Policies_East_Asia.pdfhttp://siteresources.worldbank.org/INTEXPCOMNET/Resources/Technology_Policies_East_Asia.pdf -
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JICA, 2013
Broad sketch of Industrial Strategies & Policies of Selected NICs
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To give context to the economic change, it is important to get asense of the physical geography, the geo-political issues, and thehistorical context ;
Key questions: Physical geography of the country
Connectivity : accessibility to trade routes, markets?is it landlocked,mountainous, island, archipelago, etc.
Natural endowments: fertile agriculture land, minerals and fossil fuel,etc.
Climatic conditions: suitable for human living, agriculture, diseaseburden
NOTE: A brief knowledge of these factors to provide context to theeconomic factors is sufficient for this unit.
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Geo-political
Who are the immediate neighbours (friends, enemies?)
What are there spheres of influence ?
History (or initial conditions)
Society : (diverse?; feudal?; etc.)
Independent or colonised?
What happened post WWII?
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14Consider the geographical questions
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Source: Rowntree, Lewis, Price, Wyckoff (2008) 15Consider the geographical questions
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What is the political set-up of these economies (1960s-1980s)?
How were the leadership of these countries perceived by thelocal and international community?
How were the political system and economic systemconnected?
What was the relationship between state (the government) andsociety?
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1945 50 55 60 65 70 75 80 85 90 95 2000
60 61 79 87 88 92 97
Korea
49 75 78 88 Kim Young-sam
TaiwanChen
Shui-
bian
46 48 53 57 61 65 86 92 98
Philippines
Magsaysay Macapagal 99
Indonesia
55 59 65 90 Habibie
Singapore
57 70 76 81
Malaysia
46 48 57 58 63 73 75 77 80 88 91 97
Thailand
51 76 Kriangsak Chatichai
Vietnam
48 62 88
Myanmar
Source: Akira Suehiro, Catch-up Type Industrialization , Nagoya University Press, 2000, p115.
Kim Dae-jung
Nationalist Party Chiang Kai-shek Chiang Ching-kuo Lee Teng-hui
Rhee Syngman Park Chung-hee Chun Doo-hwanNoh Tae-
woo
Ramos Estrada
Skarno Suharto Wahid
Quirino Garcia Marcos Aquino
Labor
Party
People's
Action PartyLee Kuan-yew Goh Chok-tong
Vietnamese Communist Party
Authoritarian Developmentalism in East Asia
Phibun Sarit Thanom
UMNO / Rahman Razak Hussein Mahathir
U Nu Burma Socialist Programme Party / Ne Win SLORC
Indochina
Communist Party Labor Party
Prem Chuan
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This lecture presentation provides a guide on how tounderstand & analyse economic and social transformation inthe NICs. The framework presented can be used to analyse
(evaluate, compare and contrast) any economic unit (either acountry or a region);
Other than the hyperlinked readings in the PowerPoint, theother key readings are:
Tipton (1998): Chapters 3, 4, 6, 9, 10 and 12 [Read sections relatingto the NIC countries]
Chowdhury & Islam (1993). The Newly Industrialising Economies ofEast Asia. Routledge. Chapters 1 to 12. This is an excellent book tounderstand the mechanics of the transition. It is data intensive andprovides excellent documentation on the strategies and policiesthat the NICs took.
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