Lecture 2 ECON456/556 8 July 2013

Recap - A framework for analysis;

NIC definition;

Socio-economic performance (comparative statistics);

The focus of analysis is the period from 1960s-1980s where these

countries rapidly transformed from poor to high income economies.

Background of NICs;
Geography and history ; and Institutional set-up.

Conclusion

 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 in

understanding these economic

Factors & metrics for analysis

Focus on indicators that measure economic change and policies that

facilitated the economic change;

 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 the context. In fact these factors are the deeper determinants of economic growth; Read this article by Bloch & Tang to understand the role of geography and institutions in economic growth

[Note: These two short articles [LINK HERE and HERE] captures the big debates on a very big question what determines economic growth?]

 NICs/NIEs No agreed definition. Essentially to capture countries that have achieved high levels

of economic growth over a sustained period and concurrently, rapid structural change;
A comparative-static view : a historical event which differentiates

A concept developed to capture two phenomenon:

industrialisation experience before WWII, and after; A dynamic view: see the emergence of NIEs

Main reference: Chowdhury & Islam (1993). The Newly Industrialising Economies of East Asia. Routledge.
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Unprecedented socio-economic achievements based not on natural 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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Rapid economic growth in comparison to other economic regions

PPP Converted GDP Per Capita (Chain Series), at 2005 constant prices
60000

55862
50000

41114
40000

32105
30000

26609
20000

13081
10000

4383

Rapid catch-up and achieved high levels of average income per capita, and continues to grow. Note: Australia used as a benchmark.

1950

1952

1954

Hong Kong

1956

1958

1960

1962

1964

Japan

1966

1968

1970

1972

Korea (RoK)

1974

1976

1978

1980

1982

Singapore

1984

1986

1988

1990

1992

Taiwan

1994

1996

Penn World Table

1998

Australia
8

2000

2002

2004

2006

2008

2010

35000

30000

25000

20000
RGDPch

15000

10000

5000

1985
United States Singapore Japan Australia

1990
Hong Kong United Kingdom Taiwan

1995
Korea, Republic of

Graduated into high income economies in mid 1980s-1990s

 The first tier NICs transformed from poor/rural/backward

countries in the 1950s to rich/urban/modern countries in the late 1980s/ 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; way is to follow Lall & Teubal (1998): functional, vertical & horizontal;

Industrial policies can be classified in several ways. One useful

There are several views on the effectiveness of these industrial

polices as they are practised in the NICs (some positive, others negative, some mixed.).
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Broad sketch of Industrial Strategies & Policies of Selected NICs

JICA, 2013
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 To give context to the economic change, it is important to get a

sense of the physical geography, the geo-political issues, and the historical 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, disease burden

NOTE: A brief knowledge of these factors to provide context to the economic 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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Consider the geographical questions

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Consider the geographical questions

Source: Rowntree, Lewis, Price, Wyckoff (2008)

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 What is the political set-up of these economies (1960s-1980s)? How were the leadership of these countries perceived by the

local and international community? connected? society?

How were the political system and economic system

What was the relationship between state (the government) and

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Authoritarian Developmentalism in East Asia

1945 50 55 60
60 61

65

70

75

80
79

85

90

95
97

2000

Korea Taiwan
46 48

Rhee Syngman
49

Park Chung-hee
75 78

87 88 92 Noh TaeChun Doo-hwan woo

88

Kim Dae-jung
Chen Shuibian

Kim Young-sam

Nationalist Party
53 57 61

Chiang Kai-shek
65

Chiang Ching-kuo
86

Lee Teng-hui
92 98

Philippines Indonesia Singapore Malaysia

Quirino Skarno
55

Garcia
Magsaysay Macapagal

Marcos Suharto

Aquino

Ramos

Estrada
99

Wahid
90

59

65

Habibie

Labor Party
57

People's Action Party

70

Lee Kuan-yew
76 81

Goh Chok-tong Mahathir

UMNO / Rahman
46 48 57 58 63

Razak
73 75

Hussein
77 80

88

91

97

Thailand Vietnam Myanmar

Phibun
51
Indochina Communist Party

Sarit

Thanom
76

Prem
Kriangsak Chatichai

Chuan

Labor Party
62

Vietnamese Communist Party

88

48

U Nu

Burma Socialist Programme Party / Ne Win

SLORC
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Source: Akira Suehiro, Catch-up Type Industrialization , Nagoya University Press, 2000, p115.

 This lecture presentation provides a guide on how to

understand & analyse economic and social transformation in the NICs. The framework presented can be used to analyse (evaluate, compare and contrast) any economic unit (either a country or a region);

Other than the hyperlinked readings in the PowerPoint, the

other key readings are:

Tipton (1998): Chapters 3, 4, 6, 9, 10 and 12 [Read sections relating

to the NIC countries] Chowdhury & Islam (1993). The Newly Industrialising Economies of East Asia. Routledge. Chapters 1 to 12. This is an excellent book to understand the mechanics of the transition. It is data intensive and provides excellent documentation on the strategies and policies that the NICs took.
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