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Asiaweek Time Asia Now Asiaweek story

OCTOBER 8, 1999 VOL. 25 NO. 40

A Plan for Asia's Growth
Build on much that is good in the 'Eastern strategy'.

As the new millennium approaches, there is much soul-searching in every region of the world - not least in Asia. There has been a lot of talk in the last decade or two on the special nature of "Asian values" and its world-beating magnificence. Only a few years ago the magical role of "Asian values" was being repeatedly invoked to explain the high economic growth of the region. The reasoning was never particularly tight, nor historically well-informed, nor indeed based on much critical scrutiny. Once the recent economic crisis gripped the region, from 1997 onwards, that talk seems to have ebbed radically.

Master of Trinity College, Cambridge, is winner of the 1998 Nobel Prize for Economics

What has been often overlooked in this rush for ancient cultural glory is the special nature of the practical strategy underlying the contemporary developmental experience of Asia, particularly East and Southeast Asia, from which the world has much to learn. There is, I argue, an identifiable "Eastern strategy" - first initiated in Japan and then used in various forms in the rest of East and Southeast Asia - which has been particularly productive in terms of economic results and social progress. Indeed, even as we look at the downturn and the Crisis, the basic understanding underlying the "Eastern strategy," I believe, has much remedial lesson to offer regarding how to prevent similar problems in the future. Rather than undertaking deep mining for superior "Asian values" full of ancient Oriental wisdom, the region has good reason to be proud of its pragmatic recent history and the practical reason that the social and economic strategies have represented.

What, then, is this "Eastern strategy" of development? The innovative features included, first of all, an emphasis on basic education as a prime mover of change. Second, it also involved a wide dissemination of basic economic entitlements (through education and training, through land reform, through wider availability of credit), which broadened access to the opportunities offered by the market economy. Third, the chosen design of development included a deliberate combination of state action and use of the market economy. Going further into fundamentals, these successes were based on a far-reaching understanding - which came about through complex historical processes (including both design and chance) - that we live in a multi-institutional world, and that our ability to help ourselves and to help others depends on a variety of freedoms that we respectively may enjoy.

What the Japanese development experience, followed by the success of East and Southeast Asia, did was to discredit a common - and often unargued - belief that had been dominant in some policy circles, especially in the West, that human development is a kind of luxury that a country can afford only when it grows rich. Even at the time of Meiji restoration in the middle of the 19th century, Japan already had a higher level of literacy than Europe, even though Japan had not yet had any industrialization or modern economic development, which Europe had experienced for a century.

That focus on developing human capability was intensified in the early period of Japanese development, in the Meiji era (1868-1911). For example, between 1906 and 1911, education consumed as much as 43% of the budgets of the towns and villages, for Japan as a whole. In this period in Japan, the progress of elementary education in particular was most rapid. By l913, though Japan was economically still quite underdeveloped, it had become one of the largest producers of books in the world - publishing more books than Britain and indeed more than twice as many as the United States.

This general approach has been well used in the region as a whole, including South Korea, Hong Kong, Taiwan, Singapore, Thailand, and most importantly, mainland China. The so-called "East Asian miracle" was, to a great extent, based on focusing on human development, and more broadly on building on the complementarity between different institutions in general and the state and the market, in particular.

“When things are routinely good and smooth, democracy's protective role may not be desperately missed. But it comes into its own when things get fouled up”
However, the challenge of development includes not only the elimination of persistent and endemic deprivation, but also the removal of vulnerability to sudden and severe destitution. Success in one field may not guarantee success in another. For example, consider the comparative performances of China and India over the last half a century. It is clear that China has been much more successful than India in raising life expectancy and reducing mortality. Indeed, its superior performance goes back to well before the economic reforms of 1979. And yet China also experienced the largest recorded famine in history, when 30 million people perished in the famines that followed the failure of the Great Leap Forward, from 1958 to 1961. In the absence of public criticism or opposition, the erroneous policies were not revised for three years while tens of millions died. In contrast, India has not had a famine since Independence.

So, while on the one hand, China has continued to do very much better than India in expanding general education and the spread of human capability, and has reaped as it has sown both in raising living standards (from well before the economic reforms) and in making widespread use of market opportunities (since the economic reforms), India has an institutional set-up that gives more voice to the victims of sudden economic crisis and provides political incentives for speedy remedial action.

Economic progress is rarely monotonic. Indeed, rifts have appeared with unfailing constancy to interrupt what previously looked like the promise of an unending and unbending forward march. Asia does not have a special exemption from vulnerability. Even though different groups can all benefit simultaneously when rapid progress occurs, nevertheless when a crisis hits, different groups can have very divergent predicaments. United we may be when we go up and up, but divided we fall when we do fall.

Take the crises in Indonesia, or in Thailand, and earlier on, in South Korea. It may be wondered why it should be so disastrous to have, say, a 5% or 10% fall in gross national product in one year when the country in question has been growing at 5%-10% per year for decades. And yet, if that 5% or 10% decline is not shared evenly by the population, and if it is heaped instead largely on the poorest part of the population (the jobless and the marginalized, and their families), then that group may have very little left on which to live.

This is why "protective security" is such an important instrumental freedom, and why social arrangements for safety nets must be an integral part of development itself. There is also a related issue - that of political democracy. We human beings have reason to value liberty and freedom of expression and action in our lives. This can be central to our creativity as well as dignity. But aside from the foundational importance of political freedom and civil rights, there is also an instrumental connection here with protective security. The rulers have the incentive to listen to what people want if they have to face their criticism and seek their support in elections.

When things are routinely good and smooth, the protective role of democracy may not be desperately missed by a country. But this protective role comes into its own when things get fouled up, for one reason or another. And then the political incentives provided by democratic governance acquire great practical significance.

We have to see the Asian experience in a broad framework. The remarkable economic success of East and Southeast Asia has been based on the development of a set of institutions, of which the market is an important part, but which needs multi-dimensional supplementation. In my recently published book, Development As Freedom, I argue that the need for a multi-institutional perspective is important both in understanding the successes of the East and Southeast Asian economies and in analyzing the problems this region currently faces.

In looking for new strategies for the future of this region, the need for protective security has to be firmly seized. The issue of democracy is closely related and also quite central. Political and civil rights give voice to the dispossessed, and this in turn encourages protective security. These extensions can be seen as an intensification of the basic wisdom of the Eastern strategy - of the need to build on the complementarity between different institutions. There is much life left in the Eastern strategy, provided its domain of application is expanded. The new century and the new millennium call for a broadening of this wonderfully successful strategy. Much will depend on it.

This column draws on the Second Asia and Pacific Lecture given by Prof. Amartya Sen in Singapore in July. The arguments outlined here are more fully discussed in his book, Development As Freedom, published recently by Alfred Knopf.

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