Paul Mckinney Paul has been in higher education for 17 years.
Third World Economic Development [Editor's note: Forty years ago the developing countries looked a lot more like each other than they do today. Take India and South Korea. By any standards, both countries were extremely poor: Life expectancy was about forty years and fifty years respectively.
In both countries roughly 70 percent of the people worked on the land, and farming accounted for 40 percent of national income. The two countries were so far behind the industrial world that it seemed nearly inconceivable that either could ever attain reasonable standards of living, let alone catch up.
If anything, India had the edge. Its savings rate was 12 percent of GNP while Korea's was only 8 percent. India had natural resources. Its size gave its industries a huge domestic market as a platform for growth. Its former colonial masters, the British, left behind railways and other infrastructure that were good by Third World standards.
The country had a competent judiciary and civil service, manned by a highly educated elite. Korea lacked all that. In the fifties the U. Less than forty years later—a short time in economic history—South Korea's extraordinary success is taken for granted. None of today's rich countries, not even Japan, saw such a rapid transformation in the deep structure of their economies.
India is widely regarded as a development failure. Yet over the past few decades even India has achieved more progress than today's rich countries did over similar periods and at comparable stages in their development.
This shows, first, that the setbacks the developing countries encountered in the eighties—high interest rates, debt-servicing difficulties, falling export prices—were an aberration, and that the currently fashionable pessimism about their future is greatly overdone. The superachievers of East Asia South Korea and its fellow "dragons," Singapore, Taiwan, and Hong Kong are by no means the only developing countries that are actually developing.
Many others have also grown at historically unprecedented rates over the past few decades. As a group, the developing countries— of them, as conventionally defined, accounting for roughly three-quarters of the world's population—have indeed been catching up with the developed countries.
The comparison between India and South Korea shows something else. It no longer makes sense to talk of the developing countries as a homogeneous group.
The East Asian dragons now have more in common with the industrial economies than with the poorest economies in South Asia and sub-Saharan Africa. Indeed, these subgroups of developing countries have become so distinct that one might think they have nothing to teach each other, that because South Korea is so different from India, its experience can hardly be relevant.
That is a mistake. The diversity of experience among today's poor and not-so-poor countries does not defeat the task of analyzing what works and what doesn't.
In fact, it is what makes the task possible.
Lessons of Experience The hallmark of economic policy in most of the Third World since the fifties has been the rejection of orthodox free-market economics.
The countries that failed most spectacularly India, nearly all of sub-Saharan Africa, much of Latin America, the Soviet Union and its satellites were the ones that rejected the orthodoxy most fervently.
Their governments claimed that for one reason or another, free-market economics would not work for them. In contrast, the four dragons and, more recently, countries such as Chile, Colombia, Costa Rica, Ivory Coast, Malaysia, and Thailand have achieved growth ranging from good to remarkable by following policies based largely on market economics.
Among the most important ideas in orthodox economics is that countries prosper through trade. In the sixties and seventies the dragons participated in a boom in world trade.
Because the dragons succeeded as exporters, they had abundant foreign exchange with which to buy investment goods from abroad.
Unlike most other developing countries, the dragons had price systems that worked fairly well.A recession refers to a period of negative economic growth that according to economic research experts lasts for two consecutive quarters. It presents through a reduction in the gross domestic product, income, increased unemployment and low production and sales.
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