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Transferable Lessons?
Re-examining the Institutional Prerequisites
of East Asian Economic Policies
PETER EVANS
Prior to the East Asian financial crisis, trying to extract transferable lessons
from East Asia was a major cottage industry. And well it should have been.
If developing countries in other regions were to experience the economic
growth that countries like Korea and Taiwan enjoyed from the 1960s to the
1990s, an enormous increase in levels of human welfare would result. Since
the end of 1997, collective obsession with 'what went wrong' has almost
put an end to efforts to understand an institutional context that produced 30
years of extraordinary growth. This is unfortunate, especially since 'what
went wrong' almost certainly includes deterioration of the generative
institutional context and diagnosing deterioration requires a clear
understanding of the original. This contribution assumes that the
institutional lessons of the original 'East Asian Miracle' are still worth
learning and tries to decipher what they might be.
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difficult in East Asia and will be difficult elsewhere, but there is no obvious
reason to believe that it is beyond reach.
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renovation the state apparatus, only those parts of it most critical to effective
economic policy-making.
Given this more realistic goal, the state bureaucracies of other
developing countries appear less hopeless. Even with a more realistic sense
of the institutional target, the magnitude of the task involved in building
such bureaucracies should not be underestimated. Confronting vested
interests, disrupting established repertoires and changing prevailing norms
is never easy. None the less, existing public bureaucracies, certainly in Latin
America and even to some degree in Africa, are not the irredeemable
cesspools of incompetence that they are sometimes painted by neoliberal
rhetoric. There are dedicated individuals working in public service in almost
all countries. More important, most state bureaucracies, at least in Latin
America, contain key agencies that at least in certain periods have displayed
many of the institutional traits of 'Weberian bureaucracies'. Such agencies
have performed with levels of efficacy comparable to those their East Asian
counterparts, despite being surrounded by a public sector that is much less
effectual overall. Almost every country has something to build on. The
foundations may be less solid and extensive than they were in post-Second
World War East Asia, but the challenge of building on them is more like the
challenge faced by East Asian regimes than most readings of regional
contrasts tend to admit.
Renovating state bureaucracies would make it qualitatively easier for
other developing countries to generate more effective business-government
relations. Still, the challenge of constructing a relationship in which a
developmental quid pro quo is forthcoming from private elites in return for
government support is even more daunting than the challenge of
bureaucratic reform. In countries where governments have traditionally
collaborated with private elites, as in Latin America, elites have usually
extracted support without delivering. In countries where the development of
private elites is historically shallow, as in Africa, public officials have
usually been unwilling to construct a developmental bargain with local
business apparently out of fear that the growth produced by such a bargain
would threaten their own political control.
The possibility of breaking out of such ingrained patterns may depend
on the larger context in which government-business relations are inserted,
which brings us back to the two contextual issues mentioned at the
beginning of this study. Are the capable, coherent state apparatuses and the
combination of scepticism and rapprochement that characterises
government-business relations in East Asia possible in the absence of the
unusually egalitarian social structures that characterised East Asian
countries after their post-Second World War land reforms? Does the more
stringent, the 'post-WTO' world with its more intense internationalisation
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and invest in their own human capital. But, the argument is not so much that
inequality per se is a barrier to accumulation in economic terms. A concentration of returns on (reinvested) profits rather than wages should even
help stimulate growth [cf. You, 1996\. The principal problem with inequality
(beyond its negative welfare implications) is that it has corrosive
institutional effect. Concentrated wealth and income generate concentrated
private power, which in turn increases the likelihood that public institutions
will be captured by private elites. At the same time entrenched inequality
undercuts the legitimacy of state autonomy. As Campos and Root [1996]
argue, the persistence of extreme levels of inequality makes it very hard for
governments to credibly claim that they represent a national development
project. When the absolute gap between rich and poor is growing, as in
Latin America, populist clientelism seems to offer at least temporary relief
to the excluded and close government-business ties look more like a
conspiracy for redistribution upwards than a joint project of national
development. Such domestic social structures more likely to be a barrier to
renovating bureaucracies and building an effective government-business
relations than the new international context.
The problem of domestic inequality forms the strongest basis for a
pessimistic reading of the prospects of would-be emulators of East Asia
success. Such a pessimistic reading starts from recognition that the initial
societal conditions in East Asia, which underlay the proximate institutional
prerequisites of successful policy, depended on a unique set of historical
circumstances. The aftermath of the Second World War wiped out
traditional elites, forced egalitarian reforms in agriculture, gave
governments extraordinary leverage to reshape the behaviour of industrial
elites and led these same governments to see their political survival as
depending on rapid industrial growth. Equivalent surrounding conditions
will not be replicated in Africa or Latin America in the foreseeable future.
A more aggressively enforced internationalisation of the global economy,
built around rules that work primarily to the benefit of current holders of
financial capital and intellectual property, exacerbates the problem by
encouraging passive conformity to corporate preferences. In this pessimistic
reading, most citizens of Africa and Latin America are condemned to
marginalisation within their domestic economies and exclusion from the
fruits of growing global productivity.
Plausible as this pessimistic reading may be, there is no reason to
consider it inevitable. To begin with, the mechanisms connecting initial
levels of inequality and policy possibilities are much too subtle to justify
giving up on the possibility of other Third World countries taking advantage
of East Asian lessons simply on the basis of crude estimates of their size
distribution of income.14 (Malaysia and Singapore have been quite
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NOTES
1. This discussion draws heavily on Cheng, Haggard and Kang. For descriptions of the
Japanese and Korean bureaucratic recruitment see also Johnson [1982], B.K. Kim [1987],
Campos and Root [1996] and Root [1996].
2. Singapore's bureaucracy has been analysed in great depth by Jonathan Quah [e.g. 1982,
1984, 1993]. See also Gillian Koh's very extensive study [1995], as well as Campos and
Root [1996], and Root [1996].
3. According to World Bank data, Singaporean public sector salaries are 114 per cent of
comparable private sector salaries [World Bank, 1993: 187]. Even discounting the Singapore
case, the contrast between East Asia, where salaries tend to run at two-thirds of private
salaries and other developing countries in Latin America and Africa where the ratio is closer
to a quarter is striking. See Campos and Root [1996: 144].
4. According to Cheng, Haggard and Kang [1995:45] pay in these elite agencies was five times
higher than normal civil service pay in the 1950s and 50 per cent higher in the 1970s.
5. In a number of countries regular surveys to make sure salaries are not falling too far behind
private salaries. For example, Japan's National Personnel Authority runs an extensive annual
salary survey [Campos and Root, 1996: 145,] as does Hong Kong [Root, 1996: 56].
6. This is not to say that earlier, more traditional, bureaucratic forms did not provide important
foundations. Confuscian examination systems, British and Japanese colonial administrations
and pre-Second World War efforts at economic development all offered elements to build on.
The crucial point is that an objective observer, surveying these elements at the close of the
Second World War, would not necessarily have found them any more promising than the
foundations available elsewhere in the Third World.
7. Hong Kong and Singapore have also had to struggle to contain corruption. In Hong Kong,
large scale corruption was only brought under control after the creation of the exceptionally
powerful and effective Independent Commission Against Corruption (ICAC) in 1974 [Root,
1996: 57-8; Campos and Root, 1996: 169-70]. Singapore's Corrupt Practices Investigation
Bureau (CPIB) was given equally extensive powers from the beginning of the island's
history as an independent state.
8. See Cheng, Haggard and Kang [1995: 63-5] for a description of these conferences and a
listing of dates and titles.
9. Cheng, Haggard and Kang report an initial proportion of only one sixth businessmen,
whereas business leaders formed the majority of participants in the Japanese case [Campos
and Root, 1996: 82-9].
10. See Koh [1995: 416-18] for a description of the 'Global Strategies' conferences organised
by the EDB which brought together a thousand senior TNC executives for two days of
sessions on Singapore's proposed economic policies at the end of the 1980s.
11. Flamm [1987] and Anchordoguy [1988] provide excellent descriptions of the organisation of
government business ties during the emergence of Japan's information technology sector.
12. See Noble [1988]. Wade [1990] offers numerous other examples. See also Ernst and
O'Connor [1992].
13. The Economic Development Board's revitalisation under Philip Yeo and Tan Chin Nam
around a strategy aimed at 'marketing' Singapore to TNCs as a site for information and
service intensive operational headquarters is an interesting case in point [cf. Koh, 1995:
Ch.4].
14. You [1996] does a fine job of making it clear that, while the original East Asian success
stories (Japan, Korea and Taiwan) are clearly unusual in their egalitarian distributions of
wealth and income, the variations across different dimensions of distribution and the way in
which they have changed over time are much too complex to be used as an argument for
arbitrarily eliminating the possibility of other countries replicating East Asian institutional
forms.
15. For a general discussion of the possibility of using international constraints as domestic
leverage, see Evans, Jacobson and Putnam [1993].
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