Growth, Debt, and Politics: Economic Adjustment and the Political Performance of Developing Countries

By Lewis W. Snider | Go to book overview

significantly when different measures of property-rights security are introduced ( 1994: 16-17). It does not require a heroic act of faith to infer that increasing the security of property rights and the reliability of contract enforcement should reduce the level of inequality in society.

Another example is the East Asian "success stories": Hong Kong, Singapore, South Korea and Taiwan. One key to their phenomenal economic growth is their choice of an export-oriented industrialization strategy. Those strategies, however, were supported by active state policies to guarantee an equitable distribution of basic assets. Land reforms and high-quality egalitarian educational systems contributed more than industrial strategy to explaining the differences in income distribution ( Haggard 1990: 252). Haggard observes that industrial strategy unquestionably played a role in explaining distributional outcomes between East Asia and Latin America:

The incentives to use labor in the East Asian NICs and the flexibility of labor markets increased the demand for labor and led quickly to elimination of the labor surplus and to growth in real wages. In the aggregate the Asian NICs did better in providing employment, improving absolute income, and reducing poverty than their Latin American counterparts. Industrial strategy not only improved absolute income but contributed to a relatively equal distribution of income as well. ( Haggard 1990: 253)

To the extent that relative political extraction and contract-intensive money critically affect the choice of industrialization strategy in favor of export-oriented growth, there is no contradiction between increases in these variables and reduction of distributional conflicts.


Appendix 6.1
The Impact of Political Regime on Estimates of Changes
from Import-Substitution to Export-Oriented Industrialization

Table 6.7 shows the stripped-down logit model used in Chapter 5 (Table 5.5) with the addition of three variables designating type of political regime. These are the same dichotomous variables used in Chapter 4. The results in Table 6.7 clearly indicate that the odds of changing from an import substitution-based industrial policy to an outward-oriented and export-based policy are significantly increased for developing countries that are governed by transitioning or continuous democracies.

The magnitude of the odds ratios for the democracies indicates that the presence of democratic forms of government increases the probability of switching from an import substitution-based industrial strategy to one that is export oriented, assuming the values of all other independent

-209-

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