The Key to the Asian Miracle: Making Shared Growth Credible

The Key to the Asian Miracle: Making Shared Growth Credible

The Key to the Asian Miracle: Making Shared Growth Credible

The Key to the Asian Miracle: Making Shared Growth Credible


"Easily the most informed and comprehensive analysis to date on how and why East Asian countries have achieved sustained high economic growth rates, [this book] substantially advances our understanding of the key interactions between the governors and governed in the development process. Students and practitioners alike will be referring to Campos and Root's series of excellent case studies for years to come." Richard L. Wilson, The Asia Foundation Eight countries in East Asia--Japan, South Korea, Taiwan, Hong Kong, Singapore, Thailand, Malaysia, and Indonesia--have become known as the "East Asian miracle" because of their economies' dramatic growth. In these eight countries real per capita GDP rose twice as fast as in any other regional grouping between 1965 and 1990. Even more impressive is their simultaneous significant reduction in poverty and income inequality. Their success is frequently attributed to economic policies, but the authors of this book argue that those economic policies would not have worked unless the leaders of the countries made them credible to their business communities and citizens. Jose Edgardo Campos and Hilton Root challenge the popular belief that East Asia's high performers grew rapidly because they were ruled by authoritarian leaders. They show that these leaders had to collaborate with various sectors of their population to create an environment that was conducive to sustained growth. This required them to persuade the business community that their investments would not be expropriated and to convince the broader population that their short-term sacrifices would be rewarded in the future. Many of the countries achieved business cooperation by creatingconsultative groups, which the authors call deliberation councils, to enhance accountability and stability. They also obtained popular support through a variety of wealth-sharing measures such as land reform, worker cooperative


Three explorers, Ken, Doug, and Rebecca, reached a planet that resembled earth only to find themselves trapped in a broad crater, twenty feet deep and six feet wide. the soil in the crater was rich enough for small wild plants bearing edible berries to grow during the spring and summer. But the cold months had just arrived, and although the explorers had enough clothing to keep warm, they had saved barely enough berries to last a few days. Thus death by starvation awaited them if they failed to climb out.

To solve their problem, Rebecca, an applied neoclassical economist, suggested that Ken stand on Doug's shoulders and she on Ken's. Doug was the tallest of the three, and Rebecca was the shortest. Their combined height would enable Rebecca to reach the shoulder of the crater and climb out.

Ken, an economic theorist, argued that the plan was flawed. He asked what would prevent Rebecca from simply abandoning the remaining two once she got out. Hence, he opposed the solution. Doug, an institutional economist, concurred with Ken but then countered with a variant. He agreed to be the bottom person and thus the last one out. But then he required both Rebecca and Ken to surrender their clothes to him. That way, he argued, they would have to pull him out, because without clothes they could not survive more than a few hours in the cold. Rebecca and Ken recognized the validity of Doug's argument. Without clothes the two explorers who went first had an incentive to pull the third one out. the solution to the problem required an agreement or bargain among all three parties.

The task of climbing out of poverty and underdevelopment is similar to the dilemma of the three explorers. the appropriate policies are well known, but mechanisms must be designed to gain the support of those parties whose cooperation is necessary for the policies to work. Rebecca's solution for getting the three out of the crater was ideal. But making it work required a mechanism--surrendering the clothes to the bottom person--that guaranteed all three a reasonable chance to . . .

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