From poverty to power - Oxfam-Québec

FROM POVERTY TO POWERcompanies (for example South Korea), or by encouragingforeign companies to import technology and operate directly(for example Malaysia), but in both cases successful governmentspursued activist policies, rather than laissez faire ones.• The state used its regulatory powers over investment, accessto capital (for example via subsidised loans to preferredindustries), a panoply of tax breaks, and other incentives tomanage industrial transformation.As economies developed and became more complex, and industriesachieved international competitiveness, the costs and benefits ofstate intervention in both agriculture and industry shifted, andgovernments started to reduce their role and to open up the economy– exactly the sequence that rich countries pursued at an earlier stage oftheir development. 178 Deregulation and liberalisation are thus betterseen as the outcomes of successful development, rather than as initialconditions.BOX 3.7A TALE OF TWO TIGERSThe People’s Republic of China and Viet Nam have been twooutstanding success stories of East Asian development over thepast two decades. Both have achieved rapid economic growthand spectacular reductions in poverty, and both are Communistsystems in transition, moving from centralised state planning tomore market-based structures. 179 But China has seen enormousincreases in inequality, while Viet Nam has grown much moreequitably. Why?First, the two countries de-collectivised agriculture in verydifferent ways. During the 1990s Chinese farmers saw a 30 percent fall in the price of grains and a tripling of agricultural taxes,which left poorer regions in the centre and west of the country tostagnate and stimulated a vast out-migration to urban areas.In Viet Nam, by contrast, the doi moi reforms launched in 1986involved a widespread and largely equitable redistribution of landto private farmers, backed up by significant state support forirrigation schemes, seeds, technological upgrading, and pricestabilisation. As a result, Vietnamese agriculture has been animportant pillar of the country’s take-off.184