by Vittorio Valli, University  of Turin and OEET *

 

Sintesi

Partendo dalla discussione dei principali ostacoli che un paese può incontrare sulla strada dell’emersione economica, la nota risponde al perché storicamente alcuni paesi sono emersi mentre altri sono rimasti in una condizione di arretratezza. Focalizzandosi su cinque medio-grandi economie asiatiche (Giappone, Corea del Sud, Cina, India e Indonesia) che sono emerse in periodi storici differenti, l’analisi individua i seguenti fattori di sviluppo: promozione dell’eguaglianza economica e sociale; sfruttamento del dividendo demografico; vantaggi dell’arretratezza economica relativa; applicazione del modello fordista di sviluppo; forte crescita degli investimenti; diffusione della conoscenza; ambiente politico e sociale relativamente stabile; presenza di uno Stato sviluppista.

 

In economic history there has been several examples of economies which have succeeded in firmly emerging from poverty and deprivation and of economies which have remained poor or have emerged for a while and then have submerged.

In order to emerge one economy must face, and be able to surpass, two great obstacles: the vicious circles of poverty and the middle-income trap.
In literature the overcoming of the first obstacle has been called in various ways: take-off (Rostow), critical minimum effort (Leibenstein), big push (Rosenstein Rodan), etc.

The way to overcome this obstacle has been mainly devised as a robust increase in private and public investment and, if possible, the transfer of low productivity workers (agriculture) to higher productivity activities, such as industry or modern services (Lewis model or its variants). Development economics has also added the necessity to diminish excessive concentration in wealth and land ownership (land reforms), reduce corruption and introduce radical improvements in social and economic institutions.
The surmounting of the second obstacle, the middle income trap, can be even more challenging. The strategy advocated by many authors is usually associated to a greater diversification of the productive system, technological upgrading, advances in modern services, building of solid economic institutions, selective trade and FDI policy, continuous improvements in knowledge and infrastructures, etc.
After a long period of robust growth and progressive catching up, the already emerged economy can be faced with a third obstacle, that might be called the higher income trap. This final hurdle usually happens after it had been possible to reach about 60% of the per capita GDP of a rich country such as the United States. This, for example, happened in Argentina in the 1950s and about two decades later in Japan. Japan surpassed the two -thirds level of the US per capita GDP in the 1970s, but, since the beginning of the 1990s its economy has frozen in a long semi-stagnation. Something similar is maybe happening after the global financial crisis in Greece and partly also in Italy and some other European countries.
In this note we will try to analyse the main reasons which have led some countries to emerge.
Restricting the analysis to the the period following the second world war and to a group of medium-size and large Asian economies, we can consider some particularly instructive examples.
Five great Asian economies (Japan, South Korea, China, India and Indonesia) can illustrate phases of successful emergence in different historical periods **. Japan has emerged in the 1953-1973 period Increasing its per capita GDP level in PPP (purchasing power parities) in percent of the US level from 23% in 1953 up to 67.5 %% in 1973 ***. South Korea has emerged somewhat later than Japan, but has continued to grow better than the world average also in the last two decades, although temporarily slowing down during the great Asian financial crisis (1997-8) and partially also during the recent global financial and real crisis. Since 1978 China, about fifteen years later India and, in a less vigorous way, also Indonesia in the last fifteen years, have rapidly emerged.
What are the common roots of this rather extraordinary economic performance in various historical phases in five very different countries?
A) There had been after the war under the impulse of the US authorities, both in Japan and in South Korea, a large land reform and the dispossession in Japan of the owners of large Zaibatsu and, in South Korea, of the rich landowners or industrialists who had collaborated with the Japanese. All this had greatly reduced wealth and income inequalities in the two countries and had contributed to open the access to higher education to the children of a large part of the population. At the end of the 1970s also in China there had been limited wealth and income inequalities, although they had then progressively increased in the following decades. Finally, In India and Indonesia income and wealth differentials had been substantial, but much lower than in most Latin American and African countries, where vast economic differentials contribute to feed social and political conflicts.
B) All these countries in their emergence period could benefit from some of the advantages of the so-called demographic dividend, of Gershenkron’s relative economic backwardness and of the fordist-toyotist growth model.
The demographic dividend occurs when many young people can enter the labour market and at the same time the dependency rate of the country begins to diminish as long as the fertility rate decreases. Gerschenkron’s advantages mainly consist in the possibility of transferring masses of workers from the agricultural sector to the more dynamic industrial and service sectors and to acquire modern technology from advanced countries. The fordist-toyotist model is essentially based on the combination of large economies of scale in mass-production sectors, such as electric domestic appliances and automobiles, and the introduction of Japanese lean production methods.
C) There was an extraordinarily high rate of growth of physical investment especially in Japan in the 1953-73 years, in South Korea, in the 1954- 1996 years, in China in the 1978- 2011 period and in India from 1992 up to now. In Indonesia the growth of real investment has been more fluctuating, but rather important in the last decade.
D) Moreover, In Japan and South Korea, there has been in the emerging periods an impressive progress in knowledge, through massive buying and imitation of foreign advanced technology, vigorous progress in schools and university attendance and quality, and a rapidly growing investment in research and development activities and in the autonomous creation of new goods and services. In China too there has been a very rapid rise in knowledge since the 1980s. In India the progress in knowledge has been strong for a limited part of the population, but much weaker for a large part of the labour force employed in the enormous informal sector of the economy, and the same has been partially true also in Indonesia.
E) In all five countries there has been, in the emerging years, a relatively stable political and social environment. This result is partially due to the high rate of economic growth and the relatively low unemployment level in those years, though the passage from authoritarian government to democracy in South Korea and in Indonesia has been arduous and rather gruelling. However, since the 1980s also in China there have been the Tiananmen square, Tibet and Urumqi severe repressions and in India there has been a number of local ethnic and religious tensions.
F) In all these countries there had been, with very different effectiveness and transparency, a developmental State, which has tried to sustain the economic growth in strategic sectors and then to gradually open the economy when at least some of the domestic firms were able to successfully compete with international competitiveness.
If some of these six basic conditions were weak or absent, as it has happened in Brazil or South Africa, where wealth and income inequalities have remained very high, the possibility to emerge for a long period of time without falling in years of severe crisis is indeed very feeble.

 

Notes

* Vittorio Valli is Emeritus professor of Economic Policy at the University of Turin.  (Questo indirizzo email è protetto dagli spambots. È necessario abilitare JavaScript per vederlo.).

** See   on these countries: Valli V., The Economic Rise of China and India, Accademia University Press, Turin 2015, and The Economic Rise of Asia. Japan, Indonesia and South Korea, Accademia University Press, Turin, 2016 (forthcoming).

*** See Conference Board, Total Economy Data base (2016). The data are in PPP EKS.

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