Arkebe Oqubay | Explaining Asia’s economic transformations.

(based on blog published first by UNU-WIDER)

Arkebe Oqubay ( ODI Distiguished Fellow)

30 January 2020

Asia’s economic transformations hold crucial lessons for latecomer countries, including those in Africa. Deepak Nayyar’s latest book, Resurgent Asia, convincingly demonstrates the fundamental importance of technological development, learning and industrialisation in Asia’s transformational journey from developing to industrialised economies. The book also illustrates the essential role of the state as leader, catalyst and supporter of Asia’s transformation, albeit with different roles in different sectors, countries and development stages. Openness works well for industrialisation and transformation only when complemented by strategic actions and industrial policy.

A trilogy on Asia’s transformation

Deepak Nayyar — economist, thinker, leading scholar — has written yet another splendid book. Resurgent Asia: Diversity in Development, together with the excellent Asian Transformations: An Inquiry into the Development of Nations (2019), recently edited by Nayyar, and an earlier path-breaking book, Catch Up: Developing Countries in the World Economy (2013), form a trilogy of scholarly work on Asia. The significance of Resurgent Asia lies in its timing, coming as it does 50 years after the publication of Myrdal’s Asian Drama: An Enquiry into the Poverty of Nations (1968) – a seminal, if pessimistic, book on Asia’s prospects for development written after a decade of research.

Asia is undoubtedly the most dynamic region of our time. It has witnessed a phenomenal transformation, with profound implications for the global economy in the 21st century. According to Nayyar’s historical analysis, Asia accounted for more than two-thirds of total global manufacturing output in the mid-18th century but this had gone down to a meagre 7% in the late 19th century. Resurgent Asia is a bold and insightful analysis of the resurgence that has taken place over the last half century. The analysis is supported by a comparative review of sub-regions — East, Southeast, South and West Asia — and an in-depth enquiry into the diversity of development in 14 economies — China, South Korea and Taiwan in East Asia; Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam in Southeast Asia; Bangladesh, India, Pakistan and Sri Lanka in South Asia; and Turkey in West Asia — accounting for four-fifths of Asia’s population and income.

The book is written in a lucid and reader-friendly style. It analyses the economic and social transformation of the continent and the process of catch-up in Asia’s most dynamic economies (such as China and South Korea), highlighting the diverse paths they have taken in their development. Yet, despite such diversity, there are discernible patterns, pointing to substantive analytical lessons that emerge from the Asian development experience.

A multidimensional analytical approach

The richness of Resurgent Asia lies in the multidimensional analytical approaches through which the author unravels the continent’s transformation. The analysis is underpinned by (i) theoretical understanding, (ii) conceptual clarity, (iii) a historical perspective, (iv) empirical evidence at Asian, sub-regional and country levels, (v) consideration of the underlying drivers and (vi) critical issues in development. The book also looks forward, considering the future of Asia over the next quarter-century, without falling into the trap of prophesising.

The book emphasises two important messages – that there is no prescribed path or magic wand, or even an ‘Asian model’; and that latecomers travelling along their own paths have the opportunity to catch up. Unlike Myrdal’s Asian Drama, which epitomised the European perspective, Resurgent Asia is written from the Asian point of view. The political economy approach is based on ‘the premise that economic problems cannot be studied in isolation but must be situated in their wider historical, social, and political context’, without overlooking the role of government and politics, while amplifying the analysis of underlying economic and social factors.

The implications of Resurgent Asia

Key theoretical arguments examined in the book include the relationship between structural change and growth; the importance of synergies and complementarities of sectors for sustained growth and structural transformation; and the idea that the system is only as strong as the weakest link in the chain. Nayyar adduces empirical evidence to show the vital role of industrial transformation and industrial policy, and questions the notion of international openness as the key driver of Asian transformation. He convincingly demonstrates the fundamental importance of technological development, learning and industrialisation in Asia’s transformational journey from developing to industrialised economies. Nayyar also illustrates the essential role of the state as leader, catalyst and supporter of Asia’s transformation — although the role varies across sectors, countries and development stages.

Resurgent Asia, through scrutiny of Myrdal’s work, explores the strong scholarly tradition of the development economists of the 1960s and 1970s. Although Myrdal emphasised an interdisciplinary approach, and the importance of political and historical perspectives, as well as understanding the values and subjectivity of the researcher, he was no doubt a victim of the European perspective. Resurgent Asia unequivocally exposes the error of hasty predictions or prophecies that scholars make based on observed trends, which invariably tend towards the pessimistic. Optimism is also an important lens (a ‘beam in the eye’) – rooted in the belief that the human race has a strong survival instinct and is a powerful force for transformation.

Lessons for Africa

Resurgent Asia also has significant relevance for Africa. First, it shows that countries can transform their development trajectory, bringing about fundamental socioeconomic transformation and economic catch-up within the space of one to two generations. Underdevelopment and poverty is not a destiny.

Second, the Asian experience shows that diversity in development paths is the rule rather than an exception. African countries should discover and pursue their own economic development paths, based on their own specific conditions and contexts, among which the legacy of colonial rule is significant.

Third, both the standard Afro-pessimism view advocated by influential scholars and the African-dummy research approach, which denies African diversity, are erroneous. Finally, African policy-makers and scholars should note that the state’s developmental role and industrial policies are essential to sustained growth and fundamental structural transformation. As for all latecomers, policy learning by government and technological learning by firms are key ingredients for economic catch-up.

Among the additional insights that Resurgent Asia brings are issues related to colonialism, openness and inclusiveness. First, the decline and fall of Asia was attributable to colonialism and imperialism. Unlike countries in Latin America and Africa, most Asian countries have a long history of well-structured states and cultures, which colonialism did not entirely destroy. The political independence that restored their economic autonomy and enabled them to pursue national development objectives has been an important underlying factor motivating their drive to catch up.

Second, economic openness has supported development in Asia when it has taken the form of strategic integration with, rather than passive insertion into, the world economy. Openness – a necessary but not sufficient condition – has been conducive to industrialisation only when combined with effective industrial policy.

Third, development outcomes in Asia have varied greatly across countries and between people. The massive reduction in absolute poverty might have been even greater had it not been for the rising economic inequality among people and across regions. Only development that is inclusive, that creates employment and reduces inequality, can lead to economic growth in Asia that will be sustainable over the next 25 years.

Latecomer advantage and ‘newness’

History shows that economic miracles occur in the least expected regions and countries: as the classical political economist Frederick List (1841) underlines, ‘no nation has been so misconstrued and misjudged as respects its future destiny and its national economy as the United States of North America, by theorists as well as by practical men’. The US political economist Thorstein Veblen (1915) reminds us ‘The German industrial system was some two-and-a-half or three centuries in arrears … Germans are new to this industrial system.’ Contrary to the conventional view, backwardness is not only a disadvantage but also an advantage. Gerschenkron (1952) highlights ‘the development of a backward country may, by the very nature of its backwardness, tend to differ fundamentally from that of an advanced country’, because the ‘relative backwardness’ (the degree of backwardness and industrial potential of each county) ‘diverges in terms of variations in the pace of the development or the rate of industrial growth, productive and organizational structures of industry, the application of institutional instruments, “spirit” or “ideology”’.

Resurgent Asia sets a high bar for new contemporary publications on Asia and broader development economics research. It is required reading for policy-makers, researchers and students, particularly in emerging and developing countries. Policy-makers will benefit from the lessons drawn, which take full account of the complexity of development endeavours. Researchers will appreciate Nayyar’s methodology, with its integration of economic theory, empirical evidence and policy analysis, always situated in historical perspective. This book is a most welcome contribution to development economics.

Photo: A city park in Tianjin, China. Yang Aijun / World Bank. CC BY-NC-ND 2.0