Overarching Concerns Programme Paper 3: Globalization, Liberalization and Equitable Development: Lessons from East Asia
9 Oct 2003
The paper situates the discussion in the context of the dominant global trend toward economic liberalization, especially the policies promoted by the “Washington Consensus”. The author is critical of such policies, and the World Bank in particular, which has touted the economies of Malaysia, Indonesia and Thailand (the Southeast Asian trio) as examples of successful rapid export-led growth with equity. Ostensibly because they did so by liberalizing—that is, by reducing state intervention—the trio were held up as models for emulation by other developing countries. The message was that external liberalization would bring about not only faster growth, but also greater equity. Yet, this paper shows that the trio performed less well than the Republic of Korea and China (Taiwan Province).
While still pursuing certain state interventionist policies, the five economies have selectively undergone considerable liberalization since the 1980s, and the consequences have been uneven.
This paper shows that while state intervention, particularly industrial policy, in East Asia was crucial for the region’s rapid economic growth and late industrialization, this was truer of Northeast Asia (the Republic of Korea and China (Taiwan Province)) than Southeast Asia (Malaysia, Thailand, Indonesia). The more effective nationalist economic policies of the former were accompanied by considerable social development and more equitable income distribution. In Southeast Asia, by contrast, state interventions were more compromised and income inequalities greater.
The paper indicates that the economic phenomena associated with globalization are varied and require specific responses. It finds that developing country governments are poorly equipped to deal with the very complicated agenda associated with globalization. Solidarity and co-operation among these governments, as well as enhanced European support for them, must be restored for the realization of a viable alternative to the status quo. It concludes by saying that although recent initiatives may well offer the prospect for such co-operation, more effort needs to go into these tentative steps.
Jomo K.S. (Kwame Sundaram) is a Professor in the Applied Economics Department at the University of Malaya, Kuala Lumpur, Malaysia.
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