Development: The East Asian Miracle

THE FOREST: The big issues that I’m going to touch on in my lecture and
discussion are:

1) Through the late 1980s and early 1990s, there was a debate as to the
causes of the miracle economic growth in Southeast and East Asia. In
this debate, different groups offered different explanations for that growth. We’ll
take a look at some different views offered from the right and from the left of
that debate.

2)We will go further and talk about some of the political effects of that
growth. You’ve learned about modernization theory which says that as
countries modernize, they go through various processes that will lead to
democratization. We'll take a look at one of the Southeast Asian countries to see
if that is in fact the case. Thus far, the case of Singapore has stood
modernization theory on its head.

3) As many of these countries experienced rapid growth, one explanation for

that growth that was offered by some of the region’s governments was that
strong authoritarian government and Asian values led to development.
This had both domestic and international repercussions. On the domestic level,
this explanation served as a justification for maintaining tight one-party control.
On the international level, this explanation meant that pro-democracy or pro-
human rights interference by the United States and other meddlers could be
resisted.

THE TREES: Many of the countries of East and Southeast Asia (specifically Japan,
Taiwan, South Korea, Hong Kong, Singapore, Thailand, Malaysia, and Indonesia)
were considered to be part of an “East Asian Miracle” of development. I will
focus today on the miracle in Southeast Asia.

1965-1995 per capita GDP growth

Singapore 7.2%

Indonesia 4.7%

Malaysia 4.8%

Thailand 4.8%

Sub-Saharan Africa 0.2%

Latin America 1.9%

We can see that growth in Singapore, Malaysia, Thailand, and Indonesia was high
—and for a sustained period, well above that achieved by other developing
countries. Imagine that kind of growth, every year for thirty years!

If you look at just the years 1980-1995, growth was even higher. Four countries
averaging 7-8% per year growth. Keep in mind the figures for Sub-Saharan Africa
and Latin America and you get a sense of which these countries’ growth was truly
miraculous!
From living in Southeast Asia, I can say that the optimism generated by the
growth was palpable. Living in Singapore in 1991, you could get a sense from
people you met that everyday would be better than the one before it. The kind
of optimism made me think of perhaps the optimism that the Americans of my
parents' generation enjoyed in the 1950s.

But, these countries by no means had been guaranteed economic success

as a birthright. Singapore in the early 1960s was considered a “basketcase,”
the future Cuba of Southeast Asia. Singapore had inter-ethnic strife as well as a
radical labor movement that led perpetual strikes that often paralyzed the
country’s economy. It was believed it was only a matter of time before the island
"went Communist."

Indonesia in 1965 was experiencing hyper-inflation and hyper-political turmoil.

Her first president Sukarno was overthrown and a military regime under General
Suharto took over. Suharto’s rise was paralleled by massive killings in an
attempt to rid the nation of the Communist threat. In these pogroms, it is
estimated, 500,000 people were killed across the country.

Malaysia had fought off a Communist insurgency by the early 1960s but had
inter-ethnic strife to worry about. That strife erupted into riots in 1969 that
caused democracy to be suspended and the country to go through a period of
emergency rule in which radically new political and economic policies were
introduced.

Thailand was under a succession of military governments and continued to

battle Communist insurgency through the 1960s and 1970s, but the generals
who ran the country adopted a conscious strategy of the battle against
Communism as not being just a military matter, but also a matter of delivering
the economic goods to the people. Thailand’s generals led the way in fostering
economic development as a primary goal of the state.

So, we can see that there was nothing particularly special about these countries
that marked them as future development stars. Remember that one of the
reasons the US was involved in the Vietnam War was to prevent the Southeast
Asian states from collapsing like dominos, falling to Communism. There was a
real fear in the US in the 1960s and into the early 1970s that these countries
might become Communist, fall like dominos.
As the miracle progresses and these countries racked up tremendous
development successes into the 1980s and 1990s, a great debate arose
among policymakers and scholars in different parts of the world as to
how—given this tumultuous beginning of fears of Communist
revolutions—East Asian miracle growth was achieved. Never before had so
many people been lifted out of poverty so quickly, never before had such rapid
growth been achieved on such a sustained basis—especially true after China
joined the development bandwagon. What caused the growth? Could other
countries do the same things and achieve similar results? Or were these
countries somehow special?

The debate over East Asian growth:

Can envision the different arguments about growth as if on a spectrum.

On the right was the neoclassical or orthodox view. What these countries
did right was to establish a business-friendly environment and get out of the
way. This is the “Washington Consensus,” so named for the international
financial institutions headquartered in Washington. These international financial
institutions, with their aid and lending policies, fostered a specific view of the
state’s role in the economy that was extremely minimalist. So, the best thing a
state can do to foster development in this view is to establish a market-friendly
environment and get out of the way.

On the other side, on the left, there was offered a revisionist or heterodox
view. This emerged out of dissatisfaction with the prevailing wisdom. This view
posited that, in the case of East Asia, the state led the market in critical ways
that led to “miracle growth.” It was not in fact the case that the states
established a business friendly environment and got out of the way but that the
state consciously targeted economic sectors for growth and used its powers over
credit and taxation to encourage development.

RIGHT—symbolic of the views on the right, symbolic of the Washington

Consensus, was the view propounded by the World Bank in a book published in
1993 called The East Asian Miracle. This book sought to explain East Asian
miracle growth as it reflected prudent policy choices by governments, prudent
policy choices that happened to fit with the prevailing wisdom of the Washington
Consensus.
The types of measures highlighted and lauded by the World Bank
included:

Economic policies:

• Stable macro-economy—keeping inflation and deficits under control,

maintaining stable interest rates, ensuring a business friendly legal and
regulatory environment.

• Effective and secure financial systems

• Limit price distortions—in contrast to import substitution

industrialization (ISI) which often led to severe price distortions in an
attempt to protect domestic, infant industries and which led resources to
be used in not the most productive ways, the East Asian countries limited
price distortions by competing on the world market.

• Openness to foreign technology—remain open to outside investments,

so that countries can climb up the technology ladder. Singapore, an
example of a country that was very open to technology from the outside.
Singapore progressed from the 70s with light consumer goods (shoes,
clothing) to the 80s with electronics (period where most of the world’s
harddrives for computers came out of Singapore) to the 90s (financial
services, regional brain). Move gradually up the technology ladder in line
with comparative advantages.

• Develop agriculture—while declining in importance to the overall

economy—as manufacturing, especially for export, comes to play a greater
role, these countries did pay attention to the Green Revolution, attempt
to get more out of agriculture. Still a lot of people in Thailand and
Indonesia in the rural areas—everyone can’t move to the urban areas,
have to find a way to make agriculture more productive to provide a
sustainable livelihood for the 50% to 60% to 70% of the population that
remains in the rural areas.

• Selective interventions. This echoes the views on the left about how
growth was achieved, making selective interventions to favor certain
sectors of the economy. According to the World Bank, these worked best
when they were disciplined and performance-based (when they were doing
more harm than good, the countries pulled back--example Malaysia's
affirmative action New Economic Policy). So, for the World Bank, it was
important to have a reality-tested learning process in your policy making.
If something works, fine. If not, if introducing distortions, back off.

• Export push—this is most commonly associated with the East Asian

Miracle. Develop goods for export markets. As in the Singapore example,
 start small low-tech, play to advantages of cheap labor. Later, as labor
becomes more expensive and population more educated, move up the
ladder—export electronics, computer parts. But the emphasis stays on
exporting. For a country, like Singapore, small population 3-4 million.
Could never sell enough in home market to encourage development, so
foster export. Use the markets of the big countries to earn money to
finance own development. Less urgent for a country like Indonesia—
population 220 million today. Kept with export push. Nike shoes, textiles .
. .. Malaysia, small home market of 20 million people, following behind
Singapore, when Singapore could no longer manufacture the hard drives,
moved to Malaysia.

• Maintain competitive discipline—when government and business

working together, potential for problems (collusion, for example). This
works best when it is market-based, export-oriented so at least
accountable to world market (ISI—when not accountable to world market,
can develop wasteful lethargic enterprises).

Other supportive policies:

• High human capital—invest in education. Singapore JIT education.

• Technocratic insulation of policymakers (insulated from political

pressures, demands for favors, corruption)—could go through each
criterion and talk about how adherence varied across the region. Hard to
say one model at all. Here great differences across the region. From
Singapore’s squeaky clean technocrats to Indonesia’s corrupt ruling
kleptocracy.

• High quality civil service

• Information exchange among government, business, workers to foster a

collaborative development effort. Singapore example again. National
Wages Council.

• High levels of savings—a result and a cause of high growth

• Flexible labor markets (company unions, Singapore Wages Council)

That is a cursory look at the general East Asian model. Keep in mind the
diversity of approaches within the model. Some more laissez-faire, some more
interventionist than others.

ON THE LEFT—heterodox explanations

 • Heterodox explanations arose because some found the orthodox version
of how growth was achieved to be unsatisfying. These countries’
governments did intervene strongly in the market, so it couldn’t just be a
free market system that brought success.

• Evidence in the neo-mercantilism of Japan, Korea. The keiretsu,

interlocking firms of Japan. Korea’s giant chaebol.

• Strong role of the government in picking winners in development,

channeling credit to firms, and directing development. "We will move into
semi-conductors now," and it happens. Governments would offer
incentives to firms to begin to produce in that area . . .

• Gear to export, protect the home market.

Doesn’t look like the same explanation at all. Not just an academic matter.
Which side of the debate matters on the international level: what types of policies
will the international financial institutions support? To which policies will they
give their imprimatur, which could on its own serve to attract other investment
and buzz to a country. On a domestic level, which policies work? Should the
state lead? Or should it get out of the way?

Other types of explanations for the East Asian miracle:

Geography—All these countries happen to be near each other. Demonstration

effects of successful policies and reverberations from living in a good
neighborhood. Flying geese.

History—Networks of overseas Chinese throughout much of the region. With

their entrepreneurial abilities, education, and "immigrant ethic," they were often
among the most successful in the various countries. Other historical arguments:
former Japanese colonies, US support during the Cold War (aid, military
spending Thailand and Singapore and access to US market on favorable terms).

Finally, culture—This was an explanation that was attractive to many. These

countries were successful because their Confucian-influenced cultures were
supportive of strong states, order, and harmony. Culturally, the people were
seen to be submissive to government, hard-working, respectful of authority, and
oriented to the welfare of the group.
Take Singapore as an example and talk about some of the ways this cultural and
political argument was made by Singapore’s leaders, most prominently by former
Prime Minister Lee Kuan Yew (LKY). Singapore’s government is run by a party
called the People’s Action Party (PAP), which has been in charge of the
government since home rule was granted by Britain in 1959. Currently, there are
only two opposition members elected to parliament, in contrast to 81 PAP
parliamentarians. This is a strong government.

Growth brought a lot of changes to Singapore. It went from being the

region’s basketcase to being a gleaming example of economic success. Went
from thousands of man-hours lost to strikes in the 1960s to a gleaming high-tech
showcase, “the intelligent island” or “the wired island” as it is known.
Singaporeans live longer, live better, travel abroad, and are educated abroad in
tremendous numbers. Singaporeans moved from simple manufacturing up the
technological ladder, through higher technologies, current vision of the island is
to be the “brain” of the Southeast Asian region—hub of multinational
corporations operating in the region, center of excellence in medicine, education,
and financial services.

Leaders like LKY aware of the modernization argument. The idea that as
countries become more developed, rise of civil society, rise of a middle class,
that will press for democratization. Consciously looking at the end of the 1980s
for “a new political formula” (Current Prime Minister Goh Chok Tong) to take
Singapore into the next stages of growth.

Singapore’s leadership consciously sought to turn the modernization theory

argument on its head and create a different vision of modernization. The
government argued that the process worked differently. It wasn’t modernization
that led to democratization, but Singapore’s economic miracle which was
due to a wise, benevolent, and strong government.

Over the course of the 1980s and 1990s, the government consciously sought to
limit the growth of a potential opposition by propounding this view in a
number of ways.

1) The government propounded this view in seeking domestic

legitimacy. Made overt claims to linking economic success to PAP’s wise
management (“performance legitimacy”) The government made an overt
and anti-democratic case. The government said, the reason we are able to make
wise policies that have brought so much success is because we do not have to
take a short-term view that democracy would require. We are able to plan for
the long term and make policy choices in the national best interest.

Why would democracy require a short-term view? Well, according to the

PAP, the government would have to listen to clamoring interest groups and would
have to answer those specific interests, would wind up with budget deficits as
happened with “economic populism” of the United States during much of the
1980s and 1990s. This short-term perspective would “force the government to
take what it knows is the wrong turn” (Goh). This would cause the government
to lose sight of the long-term goal of development because it would always have
to be worried about the next election. In a famous article, a Singaporean
(Bilahari Kausikan) argued that Singapore’s system was “governance that
works.” He meant this in contrast to Western democracy, which, by implication,
doesn't.

2) The government consciously promoted policies that would foster its view of
what Singapore is—not only governance that works, but governance that is in
tune with the Asian values of the people. In this line of thought,
Singaporeans like harmony, respect authority, do not seek conflict. In fact, given
Singapore’s heterogeneity, conflict is dangerous. Government, in this different
values context, will look different. People want different things from government
and expect it to operate differently. Used policies to reinforce views about values
at crux of development. A) One example was the creation in the 1980s of a
White Paper on Shared Values. These values, mostly arising out of
Confucianism were:

• Nation before community and society before self

• Family as the basic unit of society

• Community support and respect for the individual

• Consensus, not conflict

• Racial and religious harmony

These types of views are reflected in Singapore policy. B) Children have an

obligation to provide for parents in their old age (parents can sue for support).
Say values arise from the population but reinforcing process-using policy to
shape values. C) Another example, woman cannot be a head of household for
various purposes in Singapore (access to insurance). Keep focus on family. Can
see this in other policies: Campaigns to encourage women, especially educated
women, to have children. Campaigns reinforced by tax incentives and various
other levers of policy. Keep focus on family, don’t want to see rise of rampant
and destructive liberalism and individuality as exists in the West.

3) Use anti-democratic argument with modernization’s success to justify

certain anti-democratic features of the political system. A) control over
civil liberties. Government has an internal security act (ISA) under which it can
arrest and hold anyone for any reason deemed to jeopardize national security.
The government has also shown itself willing to interpret that widely. Some
democratic activists of the 1980s arrested and held on charges of being part of a
Marxist conspiracy. B) civil liberties include free speech. Can be put in jail for
speech in Singapore, especially if it is determined by the government to
jeopardize tranquil inter-ethnic relations. One scholar-activist, James Gomez,
says that controls over speech in Singapore are so pervasive that they have been
internalized by Singaporeans into “self-censorship.” C) free press. The press has
to be licensed in Singapore, licenses up for yearly renewal (Newspaper and
Printing Presses Act). Government can ban any publication deemed to go out of
line. Government can prohibit circulation of overseas publications. Most press
outlets controlled by a government holding company, Singapore Press Holdings.
Guided by government policy—as an example that reinforces values argument
above—government put the breaks on an argument in Her World magazine about
people living together ("flatting out")—didn’t want to encourage that type of
behavior. D) control over growth of civil society. Could not form autonomous
groups. All organizations integrated into the state or responsible in some way to
it. Impossible for civil society to rise as modernization theory suggests that it
will, if those same civil society organizations controlled by the government—
therefore, can’t serve as check. E) unfairnesses in the system of electoral
competition. With controls over the press, hard for any opposition to get its
message across. Government able to spin portrayal to make opposition look ill
informed, unprofessional, extreme. Government can also design electoral
constituencies to minimize prospects of troublesome wards. If there is a group,
like the minority Malay population, that you don’t trust, disperse concentrations
through other parts of the population (GRCs, housing estates)—drown out votes.
Created certain features to tell Singaporeans you don’t have to vote for an
opposition, we’ll give you an opposition. Included in parliament non-constituency
members of parliament—a couple of people each term who by virtue of election
results performed best. Also, nominated members of parliament, from the
professions—supposed to serve as a check on the government. F) unfairness in
timing of campaigns and elections—election campaigns have been getting
shorter and shorter. Down to seven to nine days. Difficult again for opposition to
get its message out. G) Even managing to keep political implications of internet
under control through government regulation (Singapore media, no use in
campaigning).
4) Cultural argument. We are Asians. We want an orderly government. We
don’t want any of this partisan sniping. All move in one direction with “Team
Singapore.” We want to avoid the “mistakes” made in Western countries—rise of
teen pregnancy, drug abuse, violent cultures, crime, homelessness, declining
educational standards in re: the rest of the world. Singaporeans have a longer-
term trusteeship vision of government. Elections are important as a measure of
the government’s legitimacy but the question is win by how much, not whether
or not the government will win at all.

In this way, while important domestic features to the debate, also implicitly an
international debate as well. Do Western countries have the right to intervene in
other countries’ internal affairs to push their vision of what democracy is?
Singaporeans, only able to talk about here, but backed up by the Malaysians and
China mounted a strong counterattack on the basis of necessity of keeping Asian
values and preserving strong government as the way to preserve harmony and
growth, avoid the mistakes of the West.

Conclusion: Singapore has attained remarkable economic success that

has led to certain political changes. The government has fought against
changes that would convert Singapore into a Western liberal
democracy, offering a robust challenge on the basis of values and
effectiveness of government in leading development. To today, can at
best characterize Singapore as a semi-democracy: with certain features
of democratic system like elections and parliament but limitations on
civil liberties and competition that make real alternation in power
elusive.

Nothing stands still. Things are changing in Singapore.

Free speech—the government opened up a sort of Singaporean Hyde Park

where people can apply, then go to have free speech in this park.

Civil society—government creation of civil society to meet challenge of

globalization. Singaporeans have to be more creative, more entrepreneurial.
Recognition that there were problems with the model of the past. Have to
change in order to keep up with globalization, business will go to better places.
Singapore’s best will go to better places unless open up. Singapore 21 and
Remaking Singapore projects, greater role for civil society but being pushed in
a humanitarian rather than political direction..
Asian crisis—Asian crisis hurt claims about Asian values. Some of those
features touted as successful like cooperation between business and
government, exposed in many cases as shells for corrupt cronyistic relationships
where business trades money to government for exclusive deals and breaks. Not
effective. Debate about Asian Values has become much less assertive, less
caustic as US economy went up and Southeast Asian economies went down. No
longer asserting superiority of Asian model, simply that international community
should respect diversity of cultures, histories, and political choices made by
different people around the world.