1 Advisory Statement Professor Lim’s PowerPoint presentations are optimized for the Mac (OS X). Windows-based PC users may find some or all of the slides

1

Advisory Statement

Professor Lim’s PowerPoint presentations are optimized for the Mac (OS X).

Windows-based PC users may find some or all of the slides unviewable due to formatting incompatibilities. These

slides have not been tested on Vista.

This presentation is the intellectual property of Professor Timothy C. Lim • Most images, pictures and charts are from third party sources

POLS 459 Politics of East Asia

POLS 459 Politics of East Asia

Lecture ThreeTheories of Political

EconomyA Brief Introduction

October 4 and 6, 2007

Timothy C. LimDepartment of Political Science

California State University, Los Angeles

Lecture ThreeTheories of Political

EconomyA Brief Introduction

October 4 and 6, 2007

Timothy C. LimDepartment of Political Science

California State University, Los Angeles

Background Image: The Akihabara district in Tokyo, best known as one of and perhaps the largest shopping areas in the world for consumer electronics

3

The Neo-classical Perspective

Politics of East AsiaTheories of Political Economy

Miracle? What miracle? Asia’s economic success is no

mystery, and it’s not even particular noteworthy. Bah

humbug, I say!

Miracle? What miracle? Asia’s economic success is no

mystery, and it’s not even particular noteworthy. Bah

humbug, I say! Paul Krugman

According to Paul Krugman--a good representative of the neo-classical perspective--there has been no miracle in Asia. Asia’s economic growth, instead, can be explained very simply as a product of ______________________________ .

a rapid growth in inputs

4

The Neo-classical Perspective


Paul Krugman

What is Krugman’s basic argument? Why does he spend so much time talking about economic growth

in the former Soviet Union? What’s his main point?

Asian growth is a lot like Soviet growth. It depended primarily, almost wholly, on a huge increase in basic inputs, such as labor power. This was impressive (in both cases), but economic growth through massive increases input is basically a one-shot deal.

5

The Neo-classical Perspective: Other Aspects

• Other neo-classical analysts understand that Asian growth is not entirely a function of a rise in inputs: productivity has also increased, albeit not a the same level or pace

• Most neo-classical economists argue that Asian productivity, however, is not the product of government or state intervention; indeed, government intervention is seen as anathema to capitalist development since it interferes with the free workings of the market


So what is the basic reason for increases in productivity?


6


Simple answer …




“Getting the prices right”“Getting the prices right”

7


• “Getting the prices right” means letting prices find their right levels, where “right” refers to the the prices established in freely operating domestic and international markets (via “supply and demand”)

• To neo-classical economists, then, East Asian economic success is largely--even necessarily--a product of participation in and adherence to free market principles. Simple.

• More concretely, neo-classical economists argue that East Asian economic success derives from a strong bias toward … ?


export-oriented industrialization

8


Export-oriented industrialization (EOI)


“Exports contribute to resource allocation according to comparative advantage. At

the same time, these gains cumulate over time as the

efficiency of new investment is enhanced through its

orientation toward industries that correspond to the

comparative advantage of the countries concerned.”

~ B. Balassa

9

The Neo-classical Perspective: Evaluation

What do So and Chiu have to say about the neo-classical perspective?

• Rightly points out the importance of EOI: it is indisputable that the Asian economies are export-based and that exports played a key role in their development

In particular, export-led growth helped Asian economies overcome limitations of (relatively) small domestic markets

EOI also forced domestic companies to compete internationally; rent seeking and inefficient production, therefore, were made much more difficult


RENT SEEKING occurs when an individual, organization, or firm seeks to make money by manipulating the economic and/or legal environment rather than by making a profit

through trade and production of wealth. The term comes from the notion of economic rent, but in modern use of the term,

rent seeking is more often associated with government regulation and misuse of governmental authority than with

land rents.

10

The Neo-classical Perspective: Evaluation

On the other hand, the neo-classical perspective fails to account for the impact of …

Transnational corporations

The Interstate system

Regional dynamics

Other potential factors

The state and otherinstitutions

Cultural dynamics


Issues: What impact do the interests and power of large corporations play in the economic prospects of

developing countries? What impact have changes in

production process have? What role does competition among

TNCs play?

Issues: What impact do the interests and power of large corporations play in the economic prospects of

developing countries? What impact have changes in

production process have? What role does competition among

TNCs play?

Issues: What role did de-colonialization and Cold War dynamics play in Third World development? How did the

construction of the Bretton Woods system impact developing

countries? What part did changes in trade policy--from mercantilism to free trade--

play? Did different wars play a key role?

Issues: What role did de-colonialization and Cold War dynamics play in Third World development? How did the

construction of the Bretton Woods system impact developing

countries? What part did changes in trade policy--from mercantilism to free trade--

play? Did different wars play a key role?

Issues: How did Japan’s dominant position in Asia shape the development of

South Korea and Taiwan? What impact will China’s emergence

have? What about regions without a dominant

industrial/technological power, such as Africa or the

Middle East?

Issues: How did Japan’s dominant position in Asia shape the development of

South Korea and Taiwan? What impact will China’s emergence

have? What about regions without a dominant

industrial/technological power, such as Africa or the

Middle East?

11

The Cultural Perspective

General Point: The cultural perspective is a complement to, rather than a substitute for, other explanatory accounts of economic development


“ … the cultural perspective is aimed at providing researchers with a frame of reference within which they can see how values, attitudes, and practices [i.e., the general elements of culture] have influenced the developing countries.”

12

The Cultural Perspective: Basic Points

To put it very simply, culturalists (or those who use culture in their analysis) believe that culture can and does have an important, although not always obvious or measurable, effect on social, political and economic processes

Culture, in short, “matters”Saying culture matters, however, is not enough: We also need to determine how it matters, to what extent it matters, and in what context it matters--needless to say, none of this is easy to do


IMAGE: The president of Korea’s National Academy of Sciences and the president of Dongduk Women’s University ask for forgiveness for the role in causing the character defects of the young generation during a “self-castigation” performance. Does this sort of culturally-informed practice matter? How important is it?

IMAGE: The president of Korea’s National Academy of Sciences and the president of Dongduk Women’s University ask for forgiveness for the role in causing the character defects of the young generation during a “self-castigation” performance. Does this sort of culturally-informed practice matter? How important is it?

13

The Cultural Perspective: Defining Culture

Here’s one very basic definition:


Culture is a shared, learned, symbolic system of values, beliefs and attitudes that shapes and influences perception and behavior -- an abstract “mental blueprint” or “mental code.” Culture is mutually constructed and inherently intersubjective. It is generally internalized

Shared by members of a society; no “culture of

one”

Shared by members of a society; no “culture of

one”

Learned: Culture is not transmitted genetically,

but must be passed down and learned

Learned: Culture is not transmitted genetically,

but must be passed down and learned

Culture is symbolic as opposed to tangible

Culture is symbolic as opposed to tangible

Mutually Constructed: Culture is not created through a one way process, but is a product

of social interaction

Mutually Constructed: Culture is not created through a one way process, but is a product

of social interaction

Intersubjective: Culture exists inside our

“collective heads”

Intersubjective: Culture exists inside our

“collective heads” Internalized: Culture is

habitual, taken for granted, perceived as

natural

Internalized: Culture is habitual, taken for granted, perceived as

natural

14

The Cultural Perspective: East Asian Development

From a cultural perspective, what the successful East Asian economies have in common is their Confucian tradition


QuestionWhat Confucian traditions, values or practices help explain East Asia’s economic success?

15


Important Confucian Values? Openness to learning

Ethical principles friendly to economic development (diligence, self-sacrifice, and delayed gratification)

Concern for social relations

Focus on educational achievement

Focus on community spirit and patriotism

Emphasis on familism or groupism (as opposed to individualism)

Emphasis on personalistic ties, loyalty, respect for tradition


16


One of the most salient Confucian values is respect for education

In East Asia, the enormous emphasis put on educational achievement, so the argument goes, has not only given East Asian societies a huge competitive advantage over less educated and less skilled societies, but also has allowed East Asia to catch up with the West more quickly than would otherwise have been the case

A 12-year old Japanese student cramming for school exams during the winter holiday


17

“The East Asian economic miracle was built on a number of sturdy pillars: hard work, high savings rates and Confucian values in particular, an almost fanatical belief in the value of education. And for years, Asia could rest easy in the knowledge that its school systems were producing the best and the brightest. Rising GDPs were proof …. East Asian students almost always scored higher in international math and science tests across the board, country by country than their counterparts in the West. All you had to do was walk into an Asian classroom to see what they were doing right. Students were diligent, quiet, involved in copying down the daily lessons. It was nothing like the chaos of, say, American schools with the spitballs and pierced eyebrows and the emphasis on attitude with-a-capital-A.”

The Confucian Perspective: An Example

The Confucian Perspective: An Example

Quoted from “School Daze,” Time Magazine (available online at http://www.time.com/time/asia/features /asian_education/cover.html)

Advocates of this type of argument may also note that Asia-Americans exhibit the same tendency as Asians in East Asia. Consider the following statistics: in the US, Asians are much more likely to complete college than any other group: White, 29%, African-American,

14%, Hispanic (non-white), 11%, Asian, 50%. In America’s elite colleges, Asian American students are dramatically “over-represented.” At UC Berkeley, for example, 46% of freshmen in 2006 were Asian American.

In addition, Asians made up 24 percent of the undergraduate population at Carnegie Mellon and at Stanford, 27 percent at the Massachusetts Institute of Technology, 14 percent at Yale and 13 percent at Princeton. To put these numbers in perspective,

consider that Asian Americans are only 5% of the US population. These figures tell us something.

Advocates of this type of argument may also note that Asia-Americans exhibit the same tendency as Asians in East Asia. Consider the following statistics: in the US, Asians are much more likely to complete college than any other group: White, 29%, African-American,

14%, Hispanic (non-white), 11%, Asian, 50%. In America’s elite colleges, Asian American students are dramatically “over-represented.” At UC Berkeley, for example, 46% of freshmen in 2006 were Asian American.

In addition, Asians made up 24 percent of the undergraduate population at Carnegie Mellon and at Stanford, 27 percent at the Massachusetts Institute of Technology, 14 percent at Yale and 13 percent at Princeton. To put these numbers in perspective,

consider that Asian Americans are only 5% of the US population. These figures tell us something.

http://www.time.com/time/asia/features/asian_education/cover.html



18

The Cultural Perspective: Evaluation

At first glance, the cultural perspective seems right: after all, it is hard to deny that East Asian culture has played a role in the region’s economic success ….

However, as So and Chiu point out, “the cultural perspective generally fails to examine the specific historical and geopolitical conditions through which different forms of Confucianism emerged (or failed to emerge) in Asia.”

Consider the timing: For decades, Confucianism seemed to play no role--or a negative role--then suddenly it became central. Why? How?

Consider the differences: Confucianism is not the same in all the East Asian societies; indeed, the differences are substantial


19

The Cultural Perspective: EvaluationTo recap, it is important to consider the general limitation and criticisms of the cultural perspective, particularly in terms of explaining East Asian economic success

Generic and overly general: Assumes that Confucianism is the same in all East Asian societies

Superficial: Fails to account for the different ways in which Confucian values have been embedded into different societies

Unidirectional: Does not explain why and how Confucian values did not lead to rapid development in earlier periods

Simplistic: Fails to account for how cultural values interact with political, social and economic processes to produce specific outcomes in specific contexts


20

The Statist Perspective: The Statist Perspective: OverviewOverview

The statist (sometimes known as the institutionalist) perspective is arguably the most widely accepted explanation The statist (sometimes known as the institutionalist) perspective is arguably the most widely accepted explanation of East Asian economic success. of East Asian economic success.

It emerge as a critique of the neoclassical (and cultural) interpretationsIt emerge as a critique of the neoclassical (and cultural) interpretations

The basic contention is simple …The basic contention is simple …

States matter*States matter*


* But not all states are created equal or * But not all states are created equal or are equally capableare equally capable

21

Question

The Statist Perspective: Overview

What type of state matters?Quick answer: A type of state that is capable of playing a strategic role in the economy and in “taming domestic and international market forces and harnessing them to national ends”

Such states must have a high degree of competence; they must be relatively free of rent seeking bureaucrats; and they must have relative autonomy from social actors; states have the ability, at least indirectly, to “get the prices right” (among other attributes)


22

The Statist Perspective: Overview

More recent studies, however, do not necessarily posit an oppositional relationship between the state and the market; rather, they try to uncover the relationship and/or dynamic between the “visible hand” of the state and “invisible hand” of the market

The most pertinent question is how to find the appropriate mixture of market orientation and government intervention in a manner consistent with rapid and efficient late industrialization

Equally central is the issue of which set of social and political institutions is compatible with this state-economy mixture (e.g., an authoritarian state and a semi-open economy?)


23

The Statist Perspective: East Asian DevelopmentWhat are the characteristics of the East Asian States?

• They are “developmental,” which means that they possess the following features …

o Economic development is their foremost priority

o They are firmly committed to the concept of private property and the market

o They have a highly developed state bureaucracy with a “pilot agency” in charge of overall economic planning (e.g., MITI in Japan, the EPB in Korea); the bureaucracy, moreover, is “King”

o They make heavy use of subsidies and discipline


Image: A picture of POSCO in Pohang, Korea. The steel factor in Pohang was one of the Korean government’s first major investment decisions. It was originally state-owned and operated, but is not privatized. Steel manufactured at POSCO

helped subsidized Korea’s shipbuilding and automobile industries.

24

The Statist Perspective: East Asian Development

What is the relationship between the developmental state and other social institutions in the society?

The developmental state always has autonomy from other social actors; that is, it has the ability to make decisions independently of the interests and influence of major private sector actors, especially big business and labor

At the same time, the developmental state generally maintains close links with private sector conglomerates, banks, and trading companies; this allows for strong state-business coordination and cooperation

One scholar (Peter Evans) has called this combination of autonomy and close linkage embedded autonomy


25

The Statist Perspective: Evaluation

As with the cultural perspective, at first glance, the statist perspectives seems quite solid …

• It is, for example, virtually undeniable that the East Asian states have played major--and largely similar--roles in their respective economies

• It is equally clear that less successful “late industrializers,” for the most part, have lacked a comparable type of state …

So what’s the problem? What, if anything, is missing from the statist perspective?


Question

26


One BIG problem is …

The statist perspective usually fails to bring in geopolitical factors and regional dynamics to explain the origins of the developmental state

Nor does the statist perspective tell us how these broader factors and dynamics may have influenced the power and capacity of the developmental states in the first place


27


Another problem

The statist view (even if unintentionally) legitimizes the developmental state and privileges rapid economic development over other social, political and economic issues

As a result, significant aspects of state-led development are often overlooked or entirely ignored: labor repression, human rights violations, political violence, authoritarian political rule, environmental degradation, inequality, and so on


A recent labor riot in Seoul (2003). Although recent, the protest depicts a normal use of violence used by the “state” against labor.

Video file removedVideo can be viewed directly on lecture notes

page, or at this link:

http://www.youtube.com/watch?v=sz8lXlIiqaI





28

The Dependency Perspective: OverviewOverview

The dependency approach comes from the “radical” tradition, which means that its theoretical origins are in Marxist thought and, more specifically, in neo-Marxist theories of imperialism and class domination


29


Dependency was less concerned with explaining economic development than with explaining why economic development in the Third World was largely a pipe dream

Indeed, early dependency theorists argued that economic development among Third World countries was a virtual impossibility given the structure and nature of world capitalism--a structure that makesmassive inequality a “natural”part of the system


Example

30


Basic assumptions in dependency theory

• The primary causes of poverty are external

• The primary external cause is the unequal and exploitative relationship between the West and the developing countries; the West, in other words, is rich precisely because of the poverty of the poor

• As long as the basic relationship between poor and rich countries continues, the prospects for economic development in the developing world are minimal to non-existent

• To the extent that economic development is possible, it will always be a function of the interests of the richer countries or, more accurately, the social class that dominates them


31

The Dependency Perspective: The Dependency Perspective: Asian Asian DevelopmentDevelopment

Thus, East Asian economic success, while somewhat surprising, can be explained. In a nutshell, it is the product of …


1. A critical, but largely fortuitous link between the major East Asian countries, especially Japan, and the hegemonic post-war power, the United States

2. The regional linkage among Japan, South Korea, and Taiwan (originally), and with these three countries and the economies of Southeast Asia and China (later)

3. An international context that allowed “command capitalism” to thrive, at least temporarily

32

The Dependency Perspective: Asian DevelopmentAsian Development

The logic of dependency theory tells us that Asian development is ultimately unsustainable and still dependent on the interests and power of the dominant West

Consider …

The American turn toward protectionism in the 1980s, with the Asian economies the prime targets

The sudden and long-term decline of the Japaneseeconomy, beginning in the 1990s

The Asian financial crisis of 1997

The “structual squeeze” on all Asian economies,which are losing their competitive edge in globalmarkets


33

The Dependency Perspective: EvaluationEvaluation

The dependency perspective was the first major theory to focus on external factors; as such, dependency scholars helped fill a gaping hole in the research on economic development among late industrializers: their work was essential. Still, dependency failed to fully account for many interesting and important issues of East Asian development

The rise of Japan the major economic rival to the United StatesThe technological rise of Japan, South Korea and TaiwanThe emergence of Asian transnational corporations and their dominance of Western and global marketsThe ability of the Asian economies to overcome political, social and economic crisesThe role and position of non-capitalist states, China and North Korea


Documents

1 Advisory Statement Professor Lim’s PowerPoint presentations are optimized for the Mac (OS X). Windows-based PC users may find some or all of the slides