East Asia as a Testing Ground for General Theory: Can MENA duplicate that success without the Pitfalls?

Atul Kohli explores the state’s capacities and relationships with business and labor to foster a set of conditions, which developing states tend to encompass to promote heavy industrialization.  He asserts that institutions that facilitate or inhibit economic decisions shadow even the state’s political elite assumed power; this emerges as a prominent feature of post-colonial nations.  By dissecting the political economies of Brazil, India, Nigeria, and South Korea, Kohli advances his argument:  states who demonstrated industrialization success, implemented effective policy to support investor profits.

As a result, he answers Lloyd Reynolds’ call to insert the “political” variable into the economic models by formulating three LDC prototypes:  neopatrimonial states, cohesive-capitalist states, and fragmented class states (Kohli p. 8).  Neo-patrimonial characterizes Nigeria since its experiences show how the authority and sectional’s personal interests damage the process of pursuing development goals.  Secondly, cohesive-capitalist states include South Korea and Brazil—at times.  Although they possess competent bureaucracies, centralized authority marginalize populist efforts as prescribed under Park Chung Hee’s leadership (Kohli, .21).  Finally he articulates that India, which exhibits multi-class interests but regress into a non-goal oriented mode during class alliance, acts as a fragmented-multiclass state.

Essentially, I believe that Kohli refuses to relegate the state to persona non grata since he challenges laissez-faire desire to remove the state.  Instead, the state must learn to balance its mandate to maintain political stability, but possess the flexibility to encompass social change.  Social change, as Kohli declares, catalyzes as well as results from industrialization (Kohli p. 17).  The mechanism for social dynamics to flourish appears to function also as an implementing body, or institutions.  Hence, I gain clarity on Kohli’s institution building discussion—stronger institutions within civil society and government can better gauge the match between societal needs and implementation efficiency.

Hakimian reminds us that the MENA region’s economic performance started to lag as a result of the post oil-boom’s statist policies.  This is an important point when considering that non-oil producing countries labor brought in remittances.  Despite the benefits of the oil boom to MENA, other regions like East and South Asia experienced a higher growth rate of 8% and 2.5% respectively during the 90s.  Meanwhile, the OPEC nations continue to see falling real per capita incomes, Syria and Tunisia have witnessed some moderate reversal of the their lagging performances.

Hakimian argues that the MENA region must embark on policies to diversity their economic structures in addition to improving its economic growth.  In fact, Foreign Direct Investment (FDI) into the MENA region has also declined while fast growth parallels increased FDI in China and Malaysia. While he blames demography as one of the causes for faltering growth, others, like Tarik Yusuf, stress that inefficient governance and heavy government intervention demonstrate stronger explanatory power than demography to deconstruct faltering economic growth.  However, Hakimian relies on data, which exemplify MENA’s increased population rate of 3% exceeds most other low and middle-income countries.  He also shows how the recent economic reforms in Tunisia complicate the MENA picture since Syria’s statist regime prompted recent high growth records (Hakimian, p. 86).  The oil sector enabled Arab nations to retard efforts to promote outward-oriented policy exhibited by the Far East.  Riordan and Hoekman suggest strategies for MENA to partake in the developing countries ability to capture 25% of the manufactured export market.  For example, Hoekman advances enlisting in the WTO or subscribing to the Mediterranean Imitative.

In analyzing the East Asian debt crisis, many reflect that indicators appeared subtle.  Hence, the structure of debt and its uses warranted more analysis as an explanatory factor since 80% coalesced in the private sector characterized by many short term loans that matured in less than a year (Hakimian p. 94).   As suggested by strict adherents of the Washington Consensus, “crony capitalism” precipitated the Debt Crisis because corporate governance excluded transparency.  Despite such an extreme interpretation, markets proved fallible.   Also another opportunity arises for MENA to hesitate with enacting pure market economy policy especially since Hakimian and Stiglitz emphasize that non-domestic factors contributed towards the economic shortfall.  Thus, while we try to encourage MENA countries to integrate globally, we should reflect on how to manage a future crisis since misallocating resources occurs on an international scale as well.  Furthermore, we could analyze the regional opportunities that can assist in stabilizing monetary shortages.  However, Hakimian posed the example of Japan’s reserves functioning within an “Asian Monetary Fund”;  the safeguard encountered opposition from the U.S (Hakimian p. 96).  I am curious to explore Chang’s challenge to the extreme claims.

It appears that Hakimian favors shared growth, which advocates gradual integration.  Government still possess a vital role since markets do fail, as seen not only with the Asian Debt Crisis, but in America’s own experience with the Depression.  Therefore, MENA countries like other LDCs should not be thrust into the global economy until the institutional capabilities of the MENA governments fully develop and possess the capacity to curtail macro-economic shocks.

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Filed under Analysis, PIDE (Policy, International Development & Economics), Politics

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