'Asian Century:' A reality check

Book review of RESURGENT ASIA: Diversity in Development

In his 1968  magnum opus Asian Drama, the Swedish economist Gunnar Myrdal was wrongly pessimistic about Asia’s development prospects. That is the starting point of Deepak Nayyar’s  Resurgent Asia, which offers a panoramic vision of Asia’s economic transformation.   In 1968, Asia was the world’s poorest continent. Half a century later, its share of the world economy has risen from one-tenth of the world’s industrial production to one-third. Its gross domestic product (GDP) and GDP per capita are higher than those of industrialised countries, Africa and Latin America.  Asia is the source of one-third of world trade.   Literacy rates and life expectancy have risen in all Asian countries.
 
Imperial domination, serving the interests of Western imperial powers, resulted in the deindustrialisation and decline of Asian countries in the world economy. In the mid-18th century, Asia produced three-fifths of the world’s income. Under colonial rule, that share fell to 15 per cent.  China and India generated nearly half of the world’s income and accounted for 57 per cent of its manufacturing production. By the early 1960s that had fallen to 5 per cent.
 
Political independence in the 20th century restored the economic autonomy of Asian states and enabled them to pursue their own development policies. Over the last 50 years, each Asian country’s economic and social transformation has been shaped by its unique history, culture and politics.
 
Post-independence, most Asian countries have been helped by their long history of statehood and cultures — which survived colonial rule.  Asia’s political systems include authoritarian states, oligarchies and democracies. They have been influenced by different ideologies including communism, state capitalism and democracy.
 
Education, investment, savings and exports have been the main drivers of Asia’s progress. High investment has led to increased exports and GDP growth. Technology will be a driver of progress in the years to come, so the technological education of Asians is of great importance.
 
Administratively effective states have made more progress than inefficient ones.  Together with openness, they have contributed to growth. Sound industrial policy combined with effective governance has led to quicker development. States and markets have played complementary roles. Countries where governments and markets have found a balance in their respective roles advanced relatively quickly. (Could India learn from the experience of other Asian countries?)
 
Mr Nayyar’s view that, generally, democracies have made more progress than authoritarian states is corroborated by UNDP’s Human Development Index, in which the top 30 states are democracies.  On the whole, even flawed Asian democracies have fared better than dictatorships because their politically institutionalised checks and balances have been conducive to development. The competent bureaucracy of democratic Japan (which he does not discuss in detail) has ensured accountable governance, based on a strong rule of law. Carrots and sticks have been used by Asian governments, but sticks have not ensured compliance with official policies.
 
East Asia has turned out to be the economic leader, South Asia the straggler. Especially in China and Singapore exports stimulated demand.  Singapore, Taiwan and South Korea are now industrialised countries. More than half of Asia’s trade is within the continent.
 
Progress has not done away with inequality and poverty in Asia. As growth slows down the persistence of inequality and poverty within countries is exploited by populist parties. They press governments to introduce protectionist measures and limits on immigration. Exclusionary nationalisms are rising in some countries.  India and China have relied more on domestic markets and resources for development. Taiwan and South Korea have paid greater attention to external markets and domestic resources. For many ASEAN countries, external markets and resources were of greater import than domestic ones.
 
China has relied more than South Korea and Taiwan on foreign direct investment (FDI), but it has also used its efficient supply networks, large domestic market and skilled workers to impose conditions on export commitments and technology transfers. Vietnam is trying to follow suit. FDI  and connectivity with global value chains have  increased manufacturing  for global markets. Greater progress has been made where governments led their countries into integration with the world economy. 
 
Mr Nayyar rightly dismisses the “hyperbole” about the ‘Asian Century’. By 2050 Asia will account for about half the world’s population. But in terms of income per capita it will not match the US or Europe.

RESURGENT ASIA: Diversity in Development

Author: Deepak Nayyar

Publisher:Oxford University Press

Pages: 295 

Price: Rs 895

 
The reviewer is a Founding Professor of the Centre for Peace and Conflict Resolution in New Delhi ;  www.anitaindersingh.com