Themes and Goals
This unit uses an inter-regional comparison of East Asian and Latin American economies to illuminate the nexus of politics, economics, and social change as they developed in select countries from both areas. Focusing on Japan, South Korea, and Taiwan from East Asia and Mexico, Brazil, and Argentina from Latin America, the unit illustrates the ways in which different development strategies yielded widely divergent results. Where East Asian economies have often been called “miraculous” or characterized as ferocious “tigers” or “dragons,” Latin American economies have typically been cast in somewhat less flattering terms, producing academic theorizations on “dependency” and “bureaucratic authoritarianism” which aim to understand the origins of the region’s relative lag. Mindful of both similarity and variation, the unit helps students explore the causes and consequences of different approaches to economic development in both regions.
By examining East Asian and Latin American development from a comparative perspective, this unit will explore:
Students might be asked the following questions over the course of the unit:
Audiences and Uses
This unit is designed to be useful to a wide variety of undergraduate courses, including but not limited to:
Instructors and students need not have substantial knowledge of Latin America or East Asia. The following textbook provides an excellent general introduction to economic terms and theories:
You may also wish to consult the following textbook for a more programmatic discussion of economic principles:
Instructors can adopt the entire unit or select sections based on interest and the amount of time available. The unit is divided into four sections as outlined below. With the exception of the case studies in Section D, most of the readings compare both regions in the same article so that students do not lose comparative perspective. If one wishes to give a broad comparison of the two regions, Section A should suffice. The purpose of the unit is not only to compare the two regions, but also to begin exploring the causes for their relative difference. With this in mind, instructors are encouraged to incorporate some of the issues raised in Section B. Section D is useful for those who would like to know about specific countries or industries. It can also provide the basis for individual student research projects.
Inter-regional comparison is one of the most effective ways to gain a balanced view of economic development and the nexus of politics, economics, and social change. This unit takes East Asia and Latin America as the cases for such a comparison. The comparison of these two regions is valuable because the selected countries from each region can be roughly classified as “middle income,” (except for Japan, which is high-income) and yet each set of countries took different development approaches resulting in different results. The origin of these differences can be attributed to historical and social factors as well as to contrasting governmental strategies. At one point in history, some Latin American countries seemed on the verge of becoming fully developed economies, but this period of growth came to a close in the 1980s, when the economic model adopted by these governments reached its limit. Over much the same time period, East Asian economies, guided by a different approach to development, emerged as perhaps the most successful case of economic development of the post-World War II era.
In this unit, we focus on a few selected countries from both regions. The definition of such diverse regions as East Asia and Latin America is itself is open to debate. East Asia, for example, might include North Korea (the Democratic People’s Republic of Korea), whose development path is too unique to be useful in this context. In Latin America there are many small states, such as El Salvador and Honduras, whose comparison with larger economies such as Brazil may not be helpful for students. In response to this diversity, we limit our comparison to a few selected countries from both regions. Those countries are: Japan, South Korea, and Taiwan from East Asia; Mexico, Brazil, and Argentina from Latin America.
The selected countries have the following similarities. First, the population of each economy is greater than twenty million people. Second, all of them have at one point or another exhibited the type of economic growth that pundits have labeled “miraculous,” and two of the countries, Japan and Argentina, continue to rank among the richest in the world. Third, all of the economies under consideration have achieved a certain level of industrialization (manufacturing) — they are able to produce heavy and chemical industrial products such as steel, ships, and automobiles.
Some may wonder why the People’s Republic of China (PRC, henceforth referred to as China) is not included in this unit in spite of its rapid economic growth in recent decades. China has been excluded because of the difficulties involved in determining its level of economic and industrial development. It is still too early to clearly understand China’s development path, particularly in terms of technological catch up.
All of the selected Latin American economies were far more economically advanced than their East Asian counterparts (with the exception of Japan, whose per capita GDP was higher than that of all other countries under consideration by 1960) prior to the 1960s and 1970s. Be that as it may, Argentina (the second largest economy under consideration in terms of per capita GDP) was one of the richest economies in the world at the turn of the 19th century. The East Asian economies (including Japan) were far behind at that time. And in fact, Japanese engineers visited Buenos Aires in the early 20th century to learn how to make a subway system. Even more recently, the category of NIC (Newly Industrialized Countries) has included such Latin American countries as Mexico and Brazil. Brazil had its own economic “miracle” in the mid-1960s. It was only in the late 1960s that South Korean per capita GNP surpassed that of the Latin American economies under consideration. According to the World Bank’s World Development Indicators database, South Korea surpassed Mexico in 1969, Brazil in 1978, and Argentina in 1988. Similarly, the strategic choices made by Latin American and East Asian leaders illustrate a remarkable degree of contrast.
As recently as the 1950s, countries in both regions adopted similar development strategies. Most obviously, Taiwan, South Korea, Mexico, and Brazil all focused their efforts on the domestic manufacture of basic labor-intensive commodities (what theorists call “Primary Import Substituting Industrialization,” henceforth referred to as primary ISI). By the 1960s, however, approaches to development began to diverge.
East Asian economies moved to primary Export Oriented Industrialization, or EOI, immediately after mastering the technologies needed for primary ISI and Latin American countries moved to secondary ISI hoping that their relatively large domestic markets would be able to sustain economies of scale. As time passed, East Asian countries proceeded to secondary ISI and then, again, moved into secondary EOI. This is where significant differences emerged between East Asian and Latin American countries. Latin American countries incurred massive debt while East Asian economies benefited from significant trade surpluses.
At the level of theory, the comparison of East Asian and Latin American economic development is significant because many theories of economic and political development, most notably dependency theory and bureaucratic authoritarianism theory, were originally based on Latin American cases. East Asia provides us with an excellent opportunity to “test” these theories.
The different strategies and performances of East Asian and Latin American economies spawned academic and political debates. Mainstream economists and international financial institutions (e.g. the World Bank and International Monetary Fund) claimed that East Asian economic success was attributable to the development of free market economies while the Latin American failure was the result of excessive government interventions in the economy. Against this neoliberal claim, some economists, sociologists, and industrial economists argue that governmental involvement was, in fact, an essential component of the East Asian economic “miracle.” (This position has been labeled the developmental state argument). This unit allows students to experience this debate at first hand as they examine readings and reports from the 1980s and 1990s.
East Asian Economic Development
Latin American Economic Development
General Reference for Instructors and Students
The following textbook is recommended to those interested in the basic theoretical issues discussed in this unit:
Handelman, Howard. 2003. The Challenge of Third World Development. 3 rd. Ed. Prentice Hall. (esp. Ch. 1 “The Causes of Underdevelopment” and Ch. 10 “The Political Economy of Third World Development”).
Readings are marked according to the star* system:
*** Most Important
SECTION A: Economic Performance in East Asian Economies
The purpose of this section is to introduce the achievements of East Asian economies in comparison to other regions. The first reading provides a good overview.
*** The World Bank. 1993. “Overview: The Making of a Miracle” In The East Asian Miracle: Economic Growth and Public Policy. Oxford UP. (pp.1-26)
** The World Bank. 1993. Chapter 1 “Growth, Equity, and Economic Change.” In The East Asian Miracle: Economic Growth and Public Policy. Oxford UP.
* The World Bank. 1993. The East Asian Miracle: Economic Growth and Public Policy. Oxford UP.
* Wade, Robert. 1996. “ Japan, the World Bank, and the art of paradigm maintenance: The East Asian Miracle in political perspective.” New Left Review (217), June 1996, pp.3-36
SECTION B: The Issues of Economic Development
The readings in Section B are divided into four sub-sections (industrialization strategies, historical conditions and international environment, cultural explanations, and developmental state arguments). Instructors should select the readings based on their own interest and expertise. Most of the readings here explicitly compare Asia and Latin America. More specific case studies that do not specifically compare the two regions can be found in Section D below.
*** Gereffi, Gary. 1990. “Paths of Industrialization: An Overview.” In Gary Gereffi and Donald L. Wyman, Eds. Manufacturing Miracles: Paths of Industrialization in Latin America and East Asia. Princeton UP.
Historical Conditions and International Environment
*** Evans, Peter. 1987. “Class, State, and Dependence in East Asia: Lessons for Latin Americanists.” In Frederic C. Deyo, Ed. The Political Economy of New Asian Industrialism. Cornell UP.
*** Dore, Ronald. 1990. “Reflections on Culture and Social Change” In Gary Gereffi and Donald L. Wyman, Eds. Manufacturing Miracles: Paths of Industrialization in Latin America and East Asia. Princeton UP
The Developmental State
The “developmental state argument” has been a heated issue in the discussion of East Asian economic development since the early 1980s. The publication of Chalmers Johnson’s seminal work on the Japanese Ministry of International Trade and Industry (MITI) in 1982 marks the highpoint of this debate. Understanding this debate, which is both controversial and complex, is essential to understanding economic development in Latin America and East Asia. Arguing against neoliberal theories that traced East Asia’s economic development to the emergence of a free market in the region, Johnson asserted that, in Japan at least, the state played a crucial role in sponsoring economic growth.
*** Evans, Peter. 1989. “Predatory, Developmental and Other Apparatuses: A Comparative Political Economy Perspective on the Third World State.” Sociological Forum. Vol. 4. No. 4 1989
** Evans, Peter. 1995. Embedded Autonomy: States and Industrial Transformation. Princeton UP.
** Woo-Cumings, Meredith. 1999. “Introduction: Chalmers Johnson and the Politics of Nationalism and Development.” In Meredith Woo-Cumings, Ed. The Developmental State. Cornel UP.
** Schneider, Ben Ross. 1999. “The Desarrollista State in Brazil and Mexico.” In Meredith Woo-Cumings, Ed. The Developmental State. Cornel UP.
SECTION C: The 1997 Asian Financial Crisis
When some East Asian countries, most notably South Korea, were hit by the 1997 Asian Financial Crisis, which started in Thailand, many neoliberal economists proclaimed the end of the “Asian Miracle.” The once-popular comparison between East Asia and Latin America disappeared from major academic discussions after this crisis. However, the 1997 financial crisis did not lead to the type of crisis that Latin American countries experienced in the 1980s. (This period is commonly known as Latin America’s “lost decade.”) The following works are helpful in understanding the 1997 Asian crisis. This section is not a comparison with Latin America. Some believe that the East Asian miracle ended with the 1997 crisis, and thus believe that the regions history of development has little to offer other than another cautionary tale. This section provides an answer to these concerns. It is important for us to understand the nature of the 1997 economic crisis. Was it fundamental enough to discredit East Asian economic success in the previous decades? Many authors here do not agree. Indeed, Taiwan was hardly affected by this crisis while one of the hardest-hit countries— South Korea—returned to a growth phase in just two short years.
* Hagard, Stephan. 2000. “Introduction: The Political Economy of the Asian Financial Crisis” In The Political Economy of the Asian Financial Crisis. IIE (Institute for International Economics): Washington, D.C.
* Pempel, T.J. Ed. 1999. The Politics of Asian Economic Crisis. Cornel UP.
* Weiss, Linda. 1998. The Myth of the Powerless State. Cornel UP.
SECTION D: Individual Country/Case Studies
The following is a list of books that can be used for further study and/or student projects. Please see the student activities section below for suggested projects and activities.
Due to the nature of this section, readings are not ranked according to the star* system. Rather, selections should be made according to specific interest.
Dahlman, Carl J. 1992. “Information Technology Strategies: Brazil and the East Asian Newly Industrializing Economies.” In Peter Evans, Claudio Frischtak, and Paulo Basos Tigre, Eds. High Technology and Third World Industrialization: Brazilian Computer Policy in Comparative Perspective. University of California Press.
Johnson, Chalmers. 1982. MITI and the Japanese Miracle: The Growth of Industrial Policy, 1925-1975. Stanford UP.
Samuels, Richard. J. 1994. “Rich Nation Strong Army” National Security and the Technological Transformation of Japan. Cornell UP.
Friedman, David. 1988. The Misunderstood Miracle: Industrial Development and Political Change in Japan. Cornell UP.
Tyson, Laura D’Andrea. 1992. Who’s Bashing Whom? Trade Conflict in High-Technology Industries. Institute of International Economics; Washington, D.C.
Okimoto, Daniel. 1989. Between MITI and the Market. Stanford UP.
Lorell, Mark A. 1996. Troubled Partnership: A History of U.S.-Japan Collaboration. RAND. (Transaction Publishers).
Amsden, Alice H. 1989. Asia’s Next Giant: South Korea and Late Industrialization. Oxford UP.
Kim, Linsu. 1997. Imitation to Innovation: The Dynamics of Korea’s Technological Learning. Harvard Business School Press.
Kim, Eun Mee. 1997. Big Business, Strong State: Collusion and Conflict in South Korean Development, 1960-1990. SUNY Press.
Gold, Thomas. B. 1986. State and Society in the Taiwan Miracle. M.E. Sharpe.
Wade, Robert. 1990. Governing the Market: Economic Theory and the Role of Government in East Asian Industrialization. Princeton UP.
Evans, Peter, Claudio Frischtak, and Paulo Basos Tigre, Eds. High Technology and Third World Industrialization: Brazilian Computer Policy in Comparative Perspective. University of California Press.
Adler, Emanuel. 1987. The Power of Ideology: The Quest for Technological Autonomy in Argentina and Brazil. University of California Press.
Schneider, Ben Ross. 1991. Politics within the State: Elite Bureaucrats & Industrial Policy in Authoritarian Brazil. U of Pittsburg Press.
Evans, Peter. 1979. Dependent Development: The Alliance of Multinational, State, and Local Capital in Brazil. Princeton UP.
Cardoso, Fernando Henrique and Enzo Faletto. 1979. Dependency and Development in Latin America. University of California Press.
A. Discussion Questions:
What are the determinants of economic development?
What factors most effect economic development?
Resources: Are natural resources fundamental to the development of these economies? How were East Asian countries able to develop considering their relative lack of natural resources? If natural resources include human capital, e.g. educated workers, do you consider East Asian economies resource rich?
Education: To nurture human capital, the government needs to educate the people. Almost all scholars agree on this issue. However, some East Asian governments put special emphasis on certain types of vocational education and special undergraduate and graduate schools focused on technology and engineering. Do you think these education programs helped their economic development? Also, there is a remarkable difference between East Asia and Latin America in terms of the quality of K-12 education. What are the key differences? How does the rate of literacy in a country effect its economic development? Why is K-12 education so important relative to higher education? Is basic education related to income distribution? Is it related to the quality of products produced by a given economy?
Development Strategy: What kind of role do you think government should play in economic development? Do you agree with neoliberal economists who would limit the role of government in order to promote the growth of a market economy? Or do you agree with the development state argument that emphasizes the role of government in selecting, nurturing, and encouraging particular industries? Are you convinced that some governments have displayed an ability to predict which industries will grow? Or do you think it was mere coincidence that East Asian governments seem to have chosen the “right” industries? Another relevant issue here is export. Do you think East Asia’s economic success is related to its focus on export? Was it a strategic choice for East Asian governments or did they have to focus on exports given their relatively small domestic markets? What kind of benefits have exports had? Does the focus on exports help improve the quality of products in foreign markets? How about the relationship between government intervention and export? Do export results provide a dependable gauge by which governments can judge economic performance?
Culture: Can the superior performance of East Asian economies to those of Latin America be solely attributed to the cultural differences? Do you think Confucianism and/or Buddhism are better suited to economic development than Christianity and Catholicism, which are predominant in Latin America? If so, why did it take East Asian economies centuries to become economic powers in the world?
International Environment: Would rapid economic development have been possible in East Asia without security and development assistance from the United States? Would East Asian governments have been so serious about economic development without the fear of Communism? Alternatively, in spite of the lack of damage caused by World War II, why did Latin American economies fail to continue develop at high rates? Why did the United States funnel its economic support to East Asia rather than Latin America?
Society and Government: What kind of social legacy affected economic development in East Asia and Latin America? Do you think the colonial legacy in Latin America hindered the long-term economic development in the region? In spite of devastating losses of life and property, do you think World War II contributed to post-war economic development in East Asia? How do you explain the relatively egalitarian income distribution in East Asia even under dictatorial regimes? Almost all countries in East Asia and Latin America achieved high-economic growth under authoritarian governments. Do you think it is necessary to have an authoritarian government to achieve rapid economic growth? Why or why not? If yes, why haven’t all dictatorships produced economic expansion?
B. Case Study Assignment
Students are expected to conduct a case study of a particular industry to understand the differences between East Asian and Latin American economies. Some of the possible cases are listed above in Student Readings, Section D.