Chapter 5, Economic Globalisation in Asia

Economic Globalisation in Asia
Ashgate Publishing, Ltd., 2005
자료: 구글도서(Google books), Economic Globalisation in Asia

목차:

■ The Role of Complexity Theory in International Business Strategy

■ Dynamic Changes of Japans FDI in South Korea from 1985 to 1997
■ Causes Prevention and Cures
■ Social Progress and the Asian Crisis
■ The Asian Crisis and Financial and Capital Account Liberalization
■ Questioning the Explanations of the Asian Crisis

Chapter 5, Social Progress and the Asian Crisis, by Clive Hamilton

5.1. Introduction

Why has the Asian economic crisis been a bad thing? This may seem like a trivial question because the answer appears to be so obvious. But it this chapter I would like to examine the assumptions that underlie the process of growth and development that appears to have been so cruelly interrupted by the crisis. By exploring the reasons for believing that the crisis has been undesirable we will raise the question of whether the objective now should simply be to get the affected economies back on to the paths they previously followed. (... ...)

5.2. Aspects of Well-being in Developing Countries

5.3. Growth and Poverty

Absolute poverty is defined as a state in which a person, household or section of the community is able to meet only its bare subsistence essentials of food, clothing and shelter from the elements(Todaro 1977, p. 411). People above this level can exercise some choice over what they consume or their living conditons. In the South, poverty is usually thought of in absolute terms, although as soon as we begin to consider the effect of poverty on human well-being we cannot avoid the influence of relative factors on the state of mind of the poor. The role of custom must be acknowledged, even at the lowest levels of living. Observing the sate of under-development in 18th century England, Adam Smith wrote:

By necessities I understand not only the commodities which are indispensibly necessary for the support of life, but whatever the custom of the country renders it indecent for creditable people, even of the lowest order, to be without (Smith nd p. 693).

Smith illustrated his point by reference to leather shoes: 'The poorest creditable person of either sex would be ashamed to appear in public without them'. Leather shoes should thus properly be regarded as necessities. At the time of the French revolution, the term used for poor of Paris was sans culottes, those who could not afford knee-breeches. In a modern parallel, a columnist in the Australian Financial Review recently noted that the lack of money can lead to feelings of deprivation and personal failure:

I reached similar conclusions at hearings this year on the ACTU's 'living wage' claim, listening to a low-paid factory worker who struggle to afford necessities talk about his children's desire for Nike and Reebok. ... in a culture where consumption means so much, not having much money becomes a profound social disability (Stephen Long, AFR, 29 June 1999)

Smith's leather shoes are today's Reebok, even in Kampongs of Jakarta. (... ...)

5.4. Growth and Inequality

As a generalization, it is probably true to say that economic growth is more likely to improve poverty levels than it is to reduce inequality. It is also probably true to say that growth leads to more inequality unless governments have long-term policies and institutions that avoid it. The issue of the relationship between inequality and improvements in well-being is less clear cut than the relationship between growth and poverty. In general, more equal societies are more happy societies, ceteris paribus. There are two sets of reasons for believing this. First, there is a body of evidence showing that, with respect to income, people judge their level of well-being not by the absolute level but by the level relative to others. Thus psychological well-being is shown to depend not on one's level of income, but on the perceived gap between one's level of income and what one wants, what one expected to have and what others have. Easterlin, who did much of the early work in this field, referred to a 'hedonic treadmill' in which people have to keep running in order to keep up with others, but they never go forward(Easterlin 1973). Other studies suggest that as income rises, income and economic factors become less important in welfare. This has been described by the British economistSir John Hicks as the 'law of diminishing marginal significance of economics'.

It is widely accepted that the growth processes in East Asia countries have been remarkable for combining high growth rates with relatively little decline in income inequality. Sometimes the relative equality of income at the start of the rapid growth process is adduced as a reason for economic success. South Korea, Taiwan and Indonesia are often mentioned. Malaysia and Hong Kong appear to be exceptions in that inequality has worsened. Table 5.4 shows Gini coefficients and income shares of the bottom quintile for East Asian countries. South Korea, Japan, Indonesia and China all have coefficients in the 30s, reflecting a relatively high degree of income equality, while Thailand, Malaysia and the Philippines are significantly more unequal. Overall, the data indicate that East Asian countries are more egalitarian than countries in Latin America where Gini coefficients are typically in the 50s. It is too early to have the data to measure changes in the distribution of income in countris hit by the crisis, but some increase in inequality is likely. As have seen, poverty has risen sharply in the countries most affected by the crisis. The extent to which the resumption of growth reduces this poverty will depend on the distribution of the fruits of growth. The World Bank has made some estimates of the impact of the crisis on the incidence of poverty; the key factors are the decline in national income and the change in inequality. In terms of the incidence of poverty, a 10 percent decline in inequality can more than offset a 10 percent fall in national income. As an exercise, Table 5.5 shows expected poverty levels in the year 2000 after a 10 percent fall in national output between 1998 and 2000, combined with a 10 percent deterioration and a 10 percent improvement in inequality. (...)

5.5. Growth and Education