East Asian Industrialization and the Third World

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East Asian Industrialization and the Third World
by Kassian Polin
Stellar growth, rising living standards, and escalating international competitiveness in the economies of East Asia have captured the attention of policymakers and researchers in other Third World countries. Much has been made in recent years of the differences between the patterns of development in East Asia and those in Latin America, Africa, and the Caribbean. The remarkable success of the East Asian �miracle countries� has left a deep imprint on scholars and policymakers. Latin America achieved independence more than a century before many East Asian countries, although the latter had a much briefer colonial experience. By the time East Asian trailblazers such as South Korea and Taiwan gained independence after World War II, many Latin American countries had had far higher standards of living and levels of industrialization, urbanization, education, and health. By the 1980s, however, East Asia had overtaken even the more developed countries of Latin America such as Argentina, Uruguay, and Chile, and those in Africa and the Caribbean. This article will analyze the patterns of economic development in these regions, and attempt to draw conclusions about this disparity in the pace of industrialization. In the 1930s, decades of economic malaise in Latin America prompted many local intellectuals to question the soundness of the Western theory of comparative advantage, and by extension, the neo-classical development model. Raul Prebisch, the renowned Argentinean economist, complained that industrialized countries such as the U.S. and those in Europe depressed prices in the region by buying substitutable goods elsewhere and producing surplus materials for export themselves. Third World countries, including those in Latin America, began to call for growing Keynesian state intervention to stabilize local industries and provide jobs. Prebisch, who was the Director-General of the newly founded United Nations Economic Commission in Latin America (ECLA) in 1948, declared that the theory of comparative advantage was responsible for Latin America�s widespread poverty and for the area�s dependence on industrialized nations. Concluding that a long-term trend exists for the terms of trade to be unfavorable towards the primary-good exporting periphery, the ECLA advocated a policy of import substitution industrialization (ISI), in which development was to move from an export-oriented economic model towards one more focused on inward-directed growth. Prebisch, in criticizing the U.S. and Europe for refusing to purchase commodities from the region, called on Latin American governments to impose high tariffs for cheap imported goods, encouraged local producers to industrialize and launched a new phase of development based on heavy industry producing durable consumption and capital goods. Argentina, under Juan Peron, was the first Latin American country to adopt ISI, with Chile, Brazil, and Mexico closely following behind. African countries also began to pursue the ISI path afterwards, and the much vaunted export orientation and market liberalization that have been hallmarks of the East Asian newly industrialized countries (NICs) were preceded by an ISI strategy as well. In analyzing the resounding success of economic development in the East Asian region � starting with Japan in the 1960s and the four �little tigers� of Hong Kong, Singapore, Taiwan, and South Korea � neoclassical theorists have argued that these governments employed market-based development strategies combined with an outward orientation of trade, known otherwise as a non-interventionist strategy. In certain respects, these aspects echo the principles laid out by the neoliberals. However, an obvious ingredient in the East Asian development recipe has been an interventionist state, to a degree that would give pause to most neoclassical economists. In South Korea,...
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