Academic journal article Journal of Southeast Asian Economies

Rethinking the Southeast Asian Development Model: Bringing Ethical and Governance Questions In

Academic journal article Journal of Southeast Asian Economies

Rethinking the Southeast Asian Development Model: Bringing Ethical and Governance Questions In

Article excerpt

I. Introduction

Since the mid-1980s, the core ASEAN economies, namely Indonesia, Malaysia, the Philippines, and Thailand, adopted an outward-focused, export-oriented, and foreign direct investment (FDI)-led approach to economic development, which was also underwritten by a broad commitment to free markets. This model--the Southeast Asian development model (SEADM)--reflected to a large extent the neoliberal practices commonly associated with economic globalization (1) and was, in fact, a means towards rapidly integrating the Southeast Asian economies with the global market. Recently, especially after the 1997-98 regional financial crisis, there have been growing calls to review the SEADM.

This article contributes to the debate on rethinking the SEADM. It does so by focusing on governance of the economy in an era of globalization. The issue of governance lies not only at the heart of the SEADM, but is also central to any review and refinement. Governance is simply defined here as the art of providing direction to society, whether directly or indirectly. It may be accomplished by markets, an idea much in vogue, as well as by authorities such as national governments, regional/global institutions, or networks of non-state actors (Pierre and Peters 2000). The notion of governance thus encompasses both the delineation of priorities or goals and possible mechanisms to implement those goals. Our core argument is that the SEADM, as practised in parts of Southeast Asia, reflected an overwhelming emphasis on growth as a goal at the expense of development. This is increasingly seen to be inadequate. In addition to growth and market efficiency, the values of social justice (2) and equity should form the core of any approach to economic development. Any economic system that fails to do so will be increasingly contested.

Section II of the article establishes the theoretical case for an approach to economic governance that places the values of equity and social justice as well as growth and market efficiency at its core. Using these theoretical insights and focusing on the Indonesian and Thai experiences, Section III asks how well the SEADM has served regional economies in the delivery of both growth and equity to citizens.

II. Emphasizing Equity and Social Justice as well as Growth and Market Efficiency

Neoclassical economics treats equity and efficiency as trade-offs (Okun 1975, p. 48), in effect setting up a tension between the values of growth and distribution (or equity). The former emphasizes the expansion of total income or wealth of a country, irrespective of its distribution among different groups in society. Equity, which is closely related to the notion of equality, is defined here as economic equality, or equality of wealth and in the distribution of resources (Bealey 1999, p. 121). Sen argued that growth is but a means to other objectives, including distribution (Sen 1983, p. 753). Thus, for Sen and other development economists, growth and distribution are not opposed as much as interrelated, with growth enabling distribution to take place in order to achieve some form of equity in society. As will be argued below, the converse may also be true. Distribution itself--to achieve equity in society--is now increasingly recognized as the key to sustaining growth-centred policies, particularly for open market systems. To be sure, development economists have always recognized the link between inequality and reduced growth prospects. This is, however, essentially seen as an economic relationship based on either productivity effects (Dreze and Sen 1987), or on the negative impact of redistributive tax and regulatory policies on capital accumulation (Persson and Tabellini 1984). This article emphasizes the political consequences of inequitable income and wealth distribution.

Okun's point about the trade-off between efficiency, which is presumed to maximize growth, and equity rests on the notion that the process of state-directed redistribution will result in administrative costs, reduced and misdirected work effort, and changed motivation (Okun 1975, pp. …

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