Transcript Krongkaew-Kakwani Paper

COMMENT
ON THE PAPERS
Kenichi Ohno
National Graduate Institute for Policy
Studies, Tokyo
Krongkaew-Kakwani Paper
Useful statistical decomposition into neutral
growth and redistribution effect
Question: Why Thai inequality remains
high by East Asian standards?
Thai uniqueness???
--Urban-rural, industry-agriculture gaps
--Labor structure shift is slower than output shift
--Growth drive under military dictatorship
--Strong executive, weak legislative
--Corrupt political system
Authoritarian Developmentalism in East Asia
1945
50
55
60
65
70
75
80
60 61
Korea
49
46
75
Philippines
48
53
Quirino
61
Thailand
Phibun
63
Sarit
76
Razak
73
Wahid
Habibie
81
Mahathir
Hussein
75
77
80
88
91
97
Prem
Chuan
Kriangsak
Chatichai
Vietnamese Communist Party
62
U Nu
Estrada
Goh Chok-tong
Thanom
Labor Party
48
Ramos
Lee Kuan-yew
76
Indochina
Communist Party
98
90
70
57 58
Chen
Shuibian
99
People's
Action Party
51
Myanmar
Aquino
65
UMNO / Rahman
46 48
92
Suharto
57
Malaysia
Kim Dae-jung
Macapagal
59
Labor
Party
Singapore
Vietnam
86
Skarno
55
97
Lee Teng-hui
Chiang Ching-kuo
Marcos
2000
Kim Young-sam
88
65
Garcia
Magsaysay
Indonesia
78
Chiang Kai-shek
57
95
87 88
92
Noh TaeChun Doo-hwan
woo
Park Chung-hee
Nationalist Party
90
79
Rhee Syngman
Taiwan
85
88
Burma Socialist Programme Party / Ne Win
Source: Akira Suehiro, Catch-up Type Industrialization , Nagoya University Press, 2000, p115.
SLORC
Remaining Thai Uniqueness?
Land reform failure
Never colonized (?)
Assimilated Chinese population (?)
Unique interpretation of development under
Buddhism (my addition)
 Persistent inequality remains a puzzle
Kurihara-Yamagata Paper
Labor-intensive, export-oriented industrialization is key to pro-poor growth (job creation)
Examination of labor shifts from agriculture
to manufacturing (“poor”= uneducated)
Relativity of “resource-rich” vs. “labor-rich”
--Taiwan, Malaysia, Thailand, Indonesia were
once “resource rich” (importing Chinese and Indian
workers)
--Successful industrialization made them now look
“resource-poor”
Beyond Petty-Clark’s Law
Labor shift from farming to manufacturing
= more jobs for poor, therefore pro-poor?
Some checkpoints:
--Working at subsistence wage? (Lewis model)
--Rising urban unemployment and slum? (HarrisTodaro model)
--Too hungry or unskilled to work? (efficiency
wage model—poorest may be excluded from
labor market)
East Asian Growth is Dynamic
Heckscher-Ohlin and Stolper-Samuelson?
--Static, one-time effect
--Dependent on initial factor endowment
--No increasing returns
East Asian experience
--Continuous re-formation of regional production
network through trade and investment
--Diverse endowment, similar catching up pattern
--Learning, agglomeration, and crucial role of
policy (not just laissez-faire or free trade)
“Pro-poor growth”
Morally correct, politically convenient and
currently very popular, but ...
Desirability?: is more equality always good?
Should we not balance equality and
incentive?
Channels and linkages: many ways to reduce
poverty, direct and indirect. Strategy must be
carefully geared to each society.
Equity-Incentive Tradeoff
John Rawls: “Choose the society which maximizes the
welfare of the poorest” (maximin principle)
Deng Xiaoping: “Those who can, get rich first. Let
others imitate and follow”
 Innovation requires reward, but too much inequality
destabilizes society. The right mix is needed.
 Perfect equality is the ideal of communism. “Propoor growth” seems to support convergence on it.
 Society can be “too equal” and stagnant: (i) general
poverty, (ii) socialism, (iii) welfare state
“Technocratic Model” and its failure
Economic growth
START
Political suppression
Rising inequality
Political instability
END
Social explosion!!!
Samuel P.Huntington and Joan M. Nelson, No Easy Choice: Political
Participation in Developing Countries, Harvard Univ. Press, 1976.
“Populist Model” and its failure
Equalization
START
Increased participation
Economic stagnation
Political instability
END
Political
suppression!!!
Samuel
P.Huntington and Joan M. Nelson, No Easy Choice: Political
Participation in Developing Countries, Harvard Univ. Press, 1976.
East Asian Way to Success
Two-tier approach
Primary: create source of growth.
Supplementary but very important: deal with
problems caused by growth—income gap, regional
imbalance, environment, congestion, drug, crime,
social change, etc.
Yasusuke Murakami: “industrialization policy must
be combined with supplementing policies or it will
fail” (Theory of Developmentalism, 1994)
Revised Technocratic Model (E. Asia)
Economic growth
START
Developmental state
Rising inequality
(checked
)
Political stability
Supplementing
END
policies
A freer & more democratic
society (a few decades later) cf. Korea, Taiwan
Three Channels of Pro-Poor Growth
(1) Direct channel (impacting the poor directly)
--Health, education, gender, rural development, etc.
(2) Market channel (growth helps poor via economic
linkages)
--Inter-sectoral and inter-regional labor migration
(cf. Chinese TVEs) [Kurihara-Yamagata Paper]
--Increasing demand (cf. proto-industrialization,
multiplier effect)
--Reinvestment (formal, informal and internal financing)
Three Channels (contd.)
(3) Policy channel (supplementing the market channel)
--Price support, taxes, subsidies
--Fiscal transfer, public investment, infrastructure
--Micro and SME credit and other financial
measures
--Proper design of trade and investment policies
--Pro-poor legal framework
Broadening the Scope
So far, disproportionate attention on the
direct channel—the question of sustainability and
the risk of permanent aid dependency
Emerging emphasis on pro-poor “growth”
--Focus still too narrow, not integrated
--Past debates on growth, equality, incentive,
migration, etc. have not been incorporated
--The right mix depends on each country
--The E Asian model is one option (but not for all)