Liberalization in the Process of Economic Development - Hardcover

Hardcover

ISBN 10: 0520063570 ISBN 13: 9780520063570

Verlag: UNIV OF CALIFORNIA PR, 1991

Inhaltsangabe

Economic growth in all developing countries is guided, and often accelerated, by generally intrusive policies implemented by governments intent on playing an active role in furthering development. As economies have grown and become more complex, however, even small market distortions are magnified, and the tendency is to rely more heavily on the market for continued growth. In this volume, leading experts in economic development examine the variety of issues that arise as governments in some of the newly industrializing countries of Southeast Asia, such as South Korea, Taiwan, and Singapore, grapple with this difficult process of liberalization.

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Über die Autorin bzw. den Autor

Lawrence B. Krause is Professor of International Relations and Pacific Studies at the University of California, San Diego. Kim Kihwan is President of the Sejong Institute.

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Liberalization in the Process of Economic Development

By Lawrence Krause and Kim Kihwan, editors

University of California Press

Copyright ©1991 Lawrence Krause and Kim Kihwan, editors
All right reserved.
ISBN: 0520063570
Introduction
Lawrence B. Krause

The story of development is one that mixes economics and politics. Economic development so profoundly changes a society that political change must be involved on both sides of the equation—that is, as a cause of economic development and also as a result of it. Many economists and other social scientists thus view economic development as part of a process of overall modernization; some, however, argue that growth initiated and controlled from abroad does not lead to the modernization of a society. Such a case could exist in theory; in reality, however, whenever a country has managed to raise per capita income for an extended period of time, significant societal change has taken place.

No matter how abruptly change may occur, the evolution of a society reflects its previous history. Thus the story of development is different in every country. There are similarities among countries (the science of development is aimed at discerning these similarities), but unique elements always mark the development experience in a given country.

The story of development is also one of a swinging pendulum. Pressures force public policy in one direction to a point of exaggeration, followed by a reaction in the opposite direction. Upon achieving political independence, most developing countries found Adam Smith's invisible hand wanting and the lure of free markets not very appealing. Laissezfaire did not satisfy the desire of Third World governments to be active and do something to speed development.

In the early literature of economic development, economists viewed the state as a solitary, benevolent actor behaving solely in the societal interest. The state was seen as being able to obtain needed information, and then, with that knowledge and the policy instruments available

to it, to intervene in an optimal way to correct any market failure and capture positive externalities. It would thereby in theory not only promote rapid development but also achieve distributive justice. With this in mind, policies were instituted to control the primary sector (mainly agriculture), to create and structure an industrial sector, to interfere with the trade and payments regime to provide needed incentives and distribute resources according to a plan, to constrain the labor market to make it conform to a desired wage structure, and to mold the capital market to allocate resources according to a distribution selected by policymakers.

However, the pendulum was pushed too far. The view of the state as a benevolent actor was dissipated by the reality of governmental actions that often did more harm than good. Government failure became more serious than market failure. Government bureaucrats were often forced to make business decisions with even less information than was available to the private sector. Politicians and bureaucrats turned out to be motivated by personal ambition and desires that did not necessarily lead to public good. And government power was manipulated by private agents to benefit particular groups, often at the expense of the general welfare. The policy of liberalization was devised to counter and correct these exaggerations.

Liberalization, by which we mean a policy shift toward market or marketlike devices, is a reaction to excessive intrusion of governments into national economies. The pressure to liberalize may arise because of widespread government failures (for example, it has been suggested that agricultural liberalization in China following the death of Mao grew out of a spectacular crop failure in the province of Anhui), or it may come from the fear of potential government failures in the future, despite generally good results in the past (such is reported to be the case in Singapore). If as economies grow and become more complex, the role of government remains large or even expands, then significant problems can be anticipated. Liberalization is a way of avoiding these problems, or at least of depoliticizing them.

Liberalization is itself a policy of government, and therefore the political setting in which it takes place must be part of the analysis. Rarely is the promise of significant economic gain sufficient to bring about a fundamental change of policy. Policy change occurs as a result of a crisis. If the status quo cannot be maintained, then change will be contemplated. If the situation is very difficult, then a change of policy direction has a chance of being considered.

What kind of government is best suited to bring about liberalization? The evidence is by no means clear on this issue. It has been noted that some of the most successful liberalization programs have been undertaken either by authoritarian governments or by ones whose quality of democracy falls far short of Western ideals. Some have even suggested that a regime that does not have to seek approval from an electorate has greater freedom to make difficult decisions and take actions involving short-term losses in order to obtain long-term benefits. Experience indicates. however, that many authoritarian regimes do not take liberalizing measures or introduce economic reforms of any sort. Indeed, some of the most market-distorting policies are followed by "populist" authoritarian governments in Latin America. Furthermore, under the right conditions, democratic governments can introduce liberalization—New Zealand is the most recent example. What appears to be the case is that in order to devise and make effective a program of liberalization, a government must be able to command a consensus within the society, and this can be achieved under several different political forms.

While a liberalization program may need a crisis to trigger it, not all crises lead to desirable policy adjustments—some just debilitate. The job of the analyst is to discern which elements promote effective policy adjustment and which simply retard it. This is a task that cannot be done by one academic discipline, but rather requires inputs from many branches of social science. One observation that seems to be a common feature of most crises is that a workable policy strategy for adjustment cannot be devised in the country after a crisis has begun, especially by the policymakers who are responsible for crisis management. Either the alternative policy direction must long have been under discussion within the country, or major elements in the plan must be suggested from the outside. Often both occur. Thus it is difficult for historians to unravel the story, to document the date when "reform" began, and to give proper identification to its origin.

Liberalization in the Process of Economic Development

This volume systematically explores the theory and practice of liberalization as it has been applied in a number of developing countries. The experiences of the East Asian newly industrializing countries (NICs)—and especially South Korea—have been given the most attention, as is appropriate in a volume dedicated to the memory of Kim Jae-Ik.

The volume takes the perspective of economics, since all of the authors are professional economists. This means that it is economic issues that are selected for analysis and primarily economic forces and instruments that are turned to...

Details zur Ausgabe

• Verlag: UNIV OF CALIFORNIA PR
• Erscheinungsdatum: 1991
• Sprache: Englisch
• ISBN 10: 0520063570
• ISBN 13: 9780520063570
• Einband: Gebundene Ausgabe
• Anzahl der Seiten: 413
• Herausgeber: Krause Lawrence B., Kihwan Kim
• Kontakt zum Hersteller: Nicht verfügbar
• Verantwortliche Person: Nicht verfügbar