Evolution of Development Paradigms and Socio-Economic Systems ...

Evolution of Development Paradigms
and Socio-Economic Systems:
Japanese/Asian Experiences, Global Changes,
and Africa-Asia Mutual Learning
(Economic Development Lecture in Accra, Ghana)
Prof. Shigeru T. OTSUBO
GSID, Nagoya University
August 2009
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Organization of This Lecture
1. Evolution of Development Paradigms &
Development Economics
2. Evolution of Socio-Economic Systems
3. Economic Growth, Governance, and
Empowerment
4. Japanese Development Model
5. Mutual Learning between Africa and Asia:
(from the Working Group on Development Strategy for TICAD IV)
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The Evolution of a Development Paradigm
1. Evolution of Development Paradigm…..
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The Evolution of a Development Paradigm
The Evolution of a Development Paradigm:
A Simplified Review
NIE
1989-
Governance
After WWII
1960s (early 1970s)
ISI
1980s
SAP
End of the 20 th C.
& Beyond
PRSP
New Political
Economy of
Development
???
BHN
Social Capital
-2015
MDGs
Role of Government
5
1985-
Globalization
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Revolutions and the Evolution of Economic Systems
Private ownership of
the means of production
Capitalism
Primitive Market Economy
2. Revolutions and the Evolution of
Economic Systems…..
2 1
IT-driven Market Economy
Larger-scale-organization oriented
Smaller-scale-organization oriented
3 4
Socialism
Utopian Socialism
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State ownership of
the means of production
8
2

Revolutions and the Evolution of Economic Systems
Capitalism
Imperialism
Monopoly Capitalism
Socialist Revolution
Japan under the
1940-system
Larger-scale-organization oriented
USSR
Private ownership of
the means of production
Industrial Revolution
IT Revolution
China under Mao Zedong
(Maoist China)
Industrialized China
Primitive Market Economy
IT-driven Market Economy
The US economy after the IT
revolution
Smaller-scale-organization oriented
Linux
Colonialism
Revolutions and the Evolution of Economic Systems
Capitalism
Imperialism
Monopoly Capitalism
Socialist Revolution
Larger-scale-organization oriented
State Socialism
Development Planning
USSR
Market-oriented
Transitional
Private ownership of
the means of production
Industrial Revolution
IT Revolution
China under Mao Zedong
(Maoist China)
Industrialized China
Primitive Market Economy
IT-driven Market Economy
The US economy after the IT
revolution
Primitive Economy
Informal Sector
Smaller-scale-organization oriented
Linux
Socialism
Utopian Socialism
Socialism
Utopian Socialism
State ownership of
the means of production
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State ownership of
the means of production
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Revolutions and the Evolution of Economic Systems
Revolutions and the Evolution of Economic Systems
Capitalism
Imperialism
Monopoly Capitalism
Socialist Revolution
Japan under the
1940-system
Larger-scale-organization oriented
Private ownership of
the means of production
Industrial Revolution
IT Revolution
Environmental Technologies
?
Industrialized China
Primitive Market Economy
IT-driven Market Economy
The US economy after the IT
revolution
Smaller-scale-organization oriented
Capitalism
Socialist Revolution
MNCs
Private ownership of
the means of production
Industrial Revolution
IT Revolution
Primitive Market Economy
IT-driven Market Economy
Production Networks (Nike model, VISIO model, etc.)
Private Capital/Investment-Driven
Global Outsourcing…
ICT Service Networks (IT, IE, SE, back office)
Globalization
Larger-scale-organization oriented
Smaller-scale-organization oriented
USSR
Socialism
China under Mao Zedong
(Maoist China)
Linux
Utopian Socialism
Economic Infrastructure State Coordination
Social Network (national scale)
Education-Human Resource Development
Protecting the Environment
Governance
Socialism
Quality of State
Social Networks (community scale)
Social Safety Net Provision
Utopian Socialism
State ownership of
the means of production
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State ownership of
the means of production
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3. Three Pillars of Poverty Reduction…..
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What is Development? 1
Introduction to International national Development Studies:
An Interdisciplinary Approach
co-edited with Prof. H. Kimura, political scientist,
Prof. S. Ito, development sociologist
In this book, we define ‘development’ as the reform of the
whole structural system that produces material as well as
non-material poverty.
What is Development? 2
When ‘proper incentives to get out of poverty’ so defined by
a development economist are given to the ‘structural poor’, if
they are equipped with ‘capabilities’ and ‘adaptability’ to
respond, those who cannot easily benefit from ‘trickle-down’
may rise to their feet and overcome poverty by themselves.
The ‘potential poor’ who may easily fall into poverty given
external economic/social/natural shocks are equipped with
resilience supported by social capital including social safety
nets, they may not have to fall into poverty repeatedly.
The poor have to be treated as active participants to
development. For that end, people have to be ‘empowered’.
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What is Development? 3
The state of ‘development’ should be the
situation where people are empowered and a
country is full of empowered human beings.
‘International development’ should be the
international i cooperation/collaboration
i
heading for this end.
Three Pillars of Poverty Reduction
Therefore, we set the three pillars of poverty
reduction as follows:
1. Attainment of ‘pro-poor’ growth (the growth
engine has to be running),
2. Adoption of proper public policies, incl.
exercising good governance and building
institutions, and
3. Empowerment of the ‘structural poor’ and the
‘potential poor’.
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4. Japanese Development Model
and Challenges It Faces…..
LINK
Post-war Development of
the Japanese Economy
― Development, Japanese/Asian Style ―
Link to Japanese Development Model
19
April, 2008
Shigeru T. Otsubo*
GSID, Nagoya University
(w/ input from Prof. A.Furukawa, Ritsumeikan Univ.)
(Downloadable from: http://www.gsid.nagoya-u.ac.jp/sotsubo/index_EDPAM.html)
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Structural Reform: Agenda for Sustainable Growth
Expansion of Corporate
Activity and Investment
Self-reliance
of Individuals
Role of the Diaspora for Ghana
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30
Job choice society
25
Corporate governance
Employment practices
Human capital investment
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Corporate accounts disclosureCorporate pension (401k type)
Corporate restructuring
Portfolio investment diversification
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10
Gross capital formation (% of GDP)
Gross domestic savings (% of GDP)
FDI into Japan
IT revolution
Regulatory reform
Entrepreneurship promotion
Corporate taxation
Personal income taxation
Financial system reform
Social security
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0
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
SME policy
Public investment reform
Information network
Budget consolidation
Administrative reform
FILP reform
Local gov’t autonomy
Electronic government
Education reform
Labor market liberalization
Compact and
Efficient Government
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16
14
12
10
8
6
4
2
0
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
Current transfers divided by GDP
Current transfers divided by GNI
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5. Africa-Asia A Mutual Learning
for Development…..
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Why Africa-Asia Mutual Learning?
Pull Factors
1. African scholars studying Asia’s ‘developmental(ist)
state’ and ‘industrial policies’ have emerged. (ex.
Mkadawire 2001, Edigheji 2005, Ndulu 2007)
2. Recent penetration of rapidly-growing China (and India)
into the African continent inevitably raised Africa’s
awareness of growing Asia.
3. Improvement in macroeconomic conditions and
performance of African nations in the 21 st century shifted
their (African) attention to economic growth. This
coincided with the shift back to economic growth from
(direct) social development in the global development
community. ‘Pro-poor’ growth and ‘broad-based’
development should be pursued in this context.
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Why Africa-Asia Mutual Learning?
Pull Factors
4. The second generation PRSP of Tanzania, titled “National
Strategy for Growth and Reduction of Poverty (NSGRP)”
placed ‘economic growth and reduction of income
poverty’ as their No. 1 strategy.
5. On private investment-led expansion of employment and
income, productivity growth in agriculture, and the role of
developmental state, Asian experiences can serve as a
reference.
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Why Africa-Asia Mutual Learning?
Push Factors
1. Japan’s ongoing commitment as a co-host (with the UN, UNDP,
WB) of the Tokyo International Conference on African
Development (TICAD) that started in 1993 in Tokyo has increased
awareness of the need to expand our cooperation with Africa.
2. Japan has traditionally been attracted to African natural resources.
Many say that Japan needs 54 votes from Africa for her to obtain a
permanent membership of the UN Security Council. More recently,
the private sector has started to show keen interest in business
investments in Africa.
3. The TICAD IV process where Japan announced cooperation for
accelerating growth, establishment of human security, and
protecting the environment, has drawn wider attention from the
Japanese business sector and Japanese citizens. Our ODA (more
growth-oriented) to Africa will double in size by 2012. With this,
private investment to Africa is also expected to double.
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Why Africa-Asia Mutual Learning?
Push Factors
4. Recent penetration of rapidly-growing China (and India)
into the African continent in search of energy resources and
new frontiers for Chinese investments/citizens highlighted
ongoing competition in Africa among Asians. China started
the Forum of China-Africa Cooperation (FOCAC) in 2006
and wishes to host this forum every three years.
5. Since the publication of The East Asian Miracle in 1993, the
World ldBank khas been promoting application i of fAsian
policies/experiences to Africa, on and off.
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Research Findings
1. Agriculture—Non-Agriculture Resource transfers
In most of the Asian countries, a considerable amount of
resources have been drawn into the development process from
the agricultural sector through direct and indirect taxation.
However, an equally large amount of resource flows into this
sector existed in the form of public investment (irrigation,
agricultural research, agricultural extensions, etc). This created
a so-called ‘green revolution’ which boosted agricultural
productivity.
In Africa, given the socio-economic factors surrounding
agriculture, sufficient public investment and other forms of
resource transfers into this sector did not materialize. In Asia,
there was a preexisting feudal system, where farmers offer dues
to the landlord in exchange for the landlord’s protection and
basic infrastructure; this system did not exist in Africa….
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Research Findings
2. Interventionist Government
As the World Bank’s The East Asian Miracle showed, not all of
the Asian governments were interventionist. Indonesia,
Malaysia, Thailand developed with lesser degrees of
government intervention. Japan, South Korea, Taiwan (and
China and Vietnam today) are the leading examples of
successful growth with interventionist governments.
The interventionist state model may not easily be transferred to
Africa as it requires strong capacity and commitment on the
part of the public sector to analyze the development situation,
i
formulate interventionist policies, and carry out these policies
in a decisive manner throughout the long process of
development.
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Research Findings
3. Systems Approach
Japan and the other high performing East Asian nations
developed the system/institutions by which,
1. private and public sectors cooperated to attain (shared) development
goals,
2. business conglomerates and business groups acted together to
mitigate business risks and to obtain support from the public sector,
3. public sector promoted the market system to suit the needs of
business investors, and
4. government was able to exercise macroeconomic management to
preserve a healthy investment environment.
In Africa, economic systems and institutions are still
underdeveloped or new and unstable. This undermines policy
predictability and policy decisiveness.
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Research Findings
4. Governance
On governance, unlike what The East Asian Miracle praised, most
Asian economies have developed without high marks in
governance indicators (such as, macro-management, democracy,
accountability, transparency, political participation) as
preconditions for growth. Strong and stable bureaucracy laid the
path for economic growth in Asia. In fact, bureaucracy
constituted the core of the Asian ‘developmental state’, either
under autocratic/charismatic leaders or under more democratic
governments.
Governance in Africa has been characterized by a ‘patronage-
driven model’. Or if I may beg your indulgence and use a bit
stronger terminology, a ‘vampire state model’. Such governments,
and more importantly the bureaucracy that supports these types of
governments, cannot easily be transformed into
‘developmentalists’.
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Strategies for Mutual Learning?
(from TICAD IV discussions)
1.
a. Needs of Africa should be identified by Africans.
b. Given the identified needs, Asians should try to collect
cases/policy experiences they feel could be relevant.
c. From the cases and policy experiences suggested by the Asians,
Africans then evaluate applicability and manageability, and
make their own selection of cases/policies.
2. Asians should study the strengths of local African
systems/institutions, rather than continuing to focus on missing
elements.
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Strategies for Mutual Learning?
(from TICAD IV discussions)
3. Africa-Asia mutual learning should benefit both in finding
substitutes for the 1 st best. We all can learn from other’s
experiences because we learn of other options, some of which
could serve as substitutes for the “1 st best” which has worked for
another country but which may not be easily applicable to our own
socio-economic situation. It is not an identical system/institution
that we should share. It is rather a ‘function’ that has to be
replicated (and adapted to each country’s particular situation),
making the most of local institutions.
4. The optimal mix of state and market will vary across countries and
across time. A flexible approach with a lot of policy space is
essential.
5. The private business sector on both African and Asian sides should
be involved in this process of mutual learning.
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The fundamental question we all
have to answer is
whether we have the determination
and the commitment to partner
in development
and move this dialogue forward.
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For the Sustainable Development of
Ghana…..
Thank you.
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