Social Welfare in East Asia and the Pacific (NONE)
They are the long-run structural effects of determined economic policies and thus one of the best illustrations of why it is important to distinguish analytically between structure and action as in proposition one stated above. Long-term development of the supply side was in the center of the preoccupations of the policy-makers from the end of the war until today.
Strategies of Economic Growth
On the other hand, the four economies took advantage of the external demand-pull that resulted from Keynesian demand management in their customers countries in the industrialized world. Although it requires day-to-day intervention and reaction to short-term movements in foreign exchange markets, exchange rate policy in the four NIEs up to the end of the s is best understood in the framework of long-term trade policy, as are the more microeconomic measures of infant industry protection mentioned earlier.
There is massive evidence of unorthodox policy-making, from Hong Kong's "Austrian" laissez-faire to Korea's state-guided build-up of the supply side. Its policy-makers have discovered that there are times when free enterprise can fail to produce Schumpeterian dynamism. The concern over Hong Kong's electronics industry loosing out against Korean and Taiwanese industries has pushed the government in to what officials call "a radical departure". The government is entering the business of what it calls "developmental support". It is setting up among others, a digital communications laboratory and a customized micro-chip design center.
It also reverts to a sort of "picking-up-the-winner" strategy by employing consultants to study promising new technologies with potential industrial applications, and to recommend whether support services should be provided to them. For example, the Taiwanese Industrial Technology Research Institute ITRI is developing a new motorcycle engine controlled by a microprocessor reducing fuel consumption and pollution. Korean government research institutions are cooperating with major corporate conglomerates such as Samsung, Goldstar and Hyundai to develop new turboblades for aircraft engines and the next generation of memory chips, the 4 Mega-byte DRAM Dynamic Random Access Memory.
The comparison is not quite complete though because of the more reduced number of big high technology firms Korea and Taiwan can boast. Post-research competition in the four NIEs can hardly be called polypolistic but oligopolistic at best. If there is one thing that is unique about Japan, it is the wealth and diversity of its corporate landscape in almost any industrial sector. I submit this is what endows Japan with the unmatched dynamism and competitivity of its industry and allows it to watch competition from the Asian NIEs with relative calm.
Thanks to its relative bigness and the high degree of competition in its own industries, Japan can face the so-called Boomerang Effect of its investments and trade with the Asian NIEs and still remain an unrivalled leader in technological innovation There is a great deal of variety among Asian economies in this area as well.
For one, none of the Four can boast such a superbly Colbertist or Prussian bureaucray as Japan. And Chalmers Johnson's formula of a "soft authoritarianism" as a common explanation of assured implementation of policies in the four cases is both oversimplified and outdated. Their conceptual sophistication may serve to feature what is special about Japan, but it is not very good at explaining comparative results in terms of policy implementation. That does not mean that the Japanese case cannot serve as an example.
But I argue that the case must be explained in categories easily applicable to other economies as well. These categories should be as close to generally used economic and legal theory as possible. In our work on Japan's strategic pragmatism, we have distinguished five models of integration, the absence or presence of which in other countries can suggest a great deal about why policy implementation has been effective or not They are:. Governments everywhere signal preferred courses of action to economic agents all over the world, only in a much less systematic fashion than in Japan, and only with bad conscience as it were.
Keynesian policy incentives, subsidies, tax breaks, and the like occur everywhere and are signals to the beneficiaries about how they should behave. As in Japan, such guidance is non-compulsory. Freedom of choice is maintained. Japan has managed to develop the instrument in systematic fashion as one that relies less on material incentives than on moral persuasion in explaining the stakes that are involved in solving problems confronting the government, households or firms.
A country that is both large and democratic like Japan requires an exceptionally qualified bureaucracy to operate such a system with success. The evidence of such guidance is massive in Korea, Taiwan and Singapore. Authoritarianism may have compensated any lack of legal sophistication before democratisation and liberalisation set in.
But it is by no means a necessary condition. Hong Kong proves that administrative guidance can function in an ideal laissez-faire regime. The Governor has used this instrument sparingly, but there is no doubt that the small, though powerful, business community of the Colony would think twice before refusing, without a sensible reason, his moral persuasion.
They raise the level of administrative guidance from a unilateral to a bilateral one. Many Japanese believe that Japan has the monopoly of that instrument. Arguments reach from their cultural tradition of not putting contracts into writing, to their reluctance even to spell out commitments of loyalty, and to their highly developed sense of give-and-take.
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This instrument, however, is used for economic policy purposes in the West as well. The term "gentlemen's agreement", although of British origin, has entered global terminology and covers the same type of implicit commitments. One particularly striking non-Asian example are the gentlemen's agreements concluded by the German Bundesbank, known to be one of the most orthodox neoclassical institution of the world, with leading German banks in order to prevent capital movements running counter to the exchange rate of the deutsche mark prefered by the Bundesbank for reasons of domestic price stability.
As for Korea and Taiwan, the pattern is epitomized by the October stock market crash situation when banks, solicited by government, agreed in the true Japanese fashion to mobilize considerable funds in support of share prices in order to restore confidence.
Welfare vs. Productivity Strategies
The banks complied, and so did the public. Everyone benefited from the recovery made possible by this implicitly gregarious move. With authoritarian rule on the decline, the decision-making process is increasingly losing its top-down unilateral direction. To cite the Financial Times 28 , "governments have come to recognise their own weakness in assessing how market trends will move worldwide for different products, and to realise their administrations are overstrained". It is increasingly difficult to know where the center of decision lies, even in the most dirigist of the four, namely Korea.
Consensual modes of policy-making and implicit contracts have increasingly become the pattern of policy integration. Economic incentives, macro-and microeconomic ones are offered by governments everywhere on the basis of the theoretical assumption of the reaction of economic agents. Lowe calls these incentives "primary" controls of the economy. All too often, there are no "secondary" controls as to whether or not beneficiaries of the incentives performed in accordance with the assumption underlying the primary controls.
Considerations of fairness as well as of policy effectiveness call for "sanctions" in case of noncompliance. Such sanctions cannot be of a penal nature but merely consist of swift discontinuation of the incentives or the exclusion of non-complying beneficiaries. Thanks to their relatively small size and the corporatist virtue of their economies, the governments of Korea, Singapore, and Taiwan could easily manage a similar system.
Hong Kong's history of government incentives is extremely recent, as we have seen, but it evolves along the same lines.
Social Welfare in East Asia and the Pacific
The MAS had offered extremely favourable conditions to foreign banks for establishing themselves both in the domestic and off-shore markets. The off-shore facilities were the incentive provided for operating a domestic branch. The purpose was attraction of foreign capital. When Singapore was hit by a cyclical recession, the MAS attempted to reach with the major banks a gentlemen's agreement of the type just described in the case of the Bundesbank. The aim of the agreement was to offset a speculating run out of the Singapore dollar. The MAS argued that a cheaper dollar would increase the cost of imported components of manufactured goods and thus ruin Singapore's price competitivity as only 20 percent of export prices depended on wage and locally made components.
Facing the non-compliance with the gentlemen's agreement, the MAS was provoked into applying the secondary controls of revoking the primary incentive of freedom of transactions between domestic and off-shore markets For example, Taiwan subordinated industrial policy to neoclassical competition policy unequivocally, but did not reject industrial policy altogether, as West Germany still feels obliged to do. Korea and Singapore, just as unequivocally, subjected concerns of fair trade to those of industrial policy, while Hong Kong left it to its Schumpeterian entrepreneurs to fight among themselves over the concrete shape of market forms in the advanced sectors of the economy.
Small and medium-size enterprises were also left to their fate, not only in Hong Kong, but in Taiwan and Singapore, while they were mostly integrated in a conglomerate network in Korea as in Japan. Here, too, a clear hierarchy of policies was established. Fair trade policy would serve trade policy through legalisation of exporting cartels setting percentage shares of firms in total exports of designated goods to importing countries threatening protectionist action.
Managing markets this way is wholely contested by economic theory because, preventing short-term market disruptions is not its only effect. In the long run, it is intended to guarantee all the more secure market penetration. In addition, it offers exporters that extra rent of scarcity resulting from reduced supply at higher prices example: Honda cars in Europe and America. Importing countries are not well advised to call for such export restraints, but they regularly do so nonetheless, when faced with overcompetitive supply from East Asia, most prominently the U.
Korea and Taiwan have imitated the Japanese example and have penetrated the U. While relegating such particular structural conditions to the periphery of theoretical interest in their characteristic ceteris paribus propositions, even general equilibrium theorists do recognize the impact of structure as axiomatic, i.
Regional Economic Outlook: Asia Pacific
Followers of this approach have the problem of explaining the People's Republic of China's lesser performance. There is a wide consensus that below the large official Marxist doctrine, Confucian values are still deeply rooted in Mainland China as well.
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What is needed, is a functional approach balancing adaptation, goal attainment, and integration with cultural values pattern maintenance. The functional approach helps focusing on adaptive dysfunctions of China's Marxist economy, especially in the area of price determination and production planning, which Deng's modernization program hopes to overcome.
It can lead to the comprehension of the practical problems of a less than perfect bureaucracy in a big country, in terms of the integrative function. It also invites increased attention to the potential of pragmatic action across the cleavages between centralized government policy and decentralized market decisions in China's future as a two-economic-orders-in-one-state case But in fact, it is less ambitious and conforms better to the scientific standard of critical rationalism than monocausal explanations in terms of only one of the disciplines it covers.
There is much diversity, but are also crucial similarities. In all the four cases, we have dualist economies as in Japan. There is the duality of traditional and advanced sectors, of the multitude of small enterprises and big conglomerates, of wages of temporary and permanent workers, of lifetime and temporary employment. To increase the appearance of direct rule, the Suzuki cabinet was replaced by that of Prince Higashikuni Naruhiko. Postwar investigators concluded that neither the atomic bombs nor the Soviet entry into the war was central to the decision to surrender, although they probably helped to advance the date.
Can Industry Survive the Welfare State?
Bombing brought the consciousness of defeat to the people. The destruction of the Japanese navy and air force jeopardized the home islands. The government stood without prestige or respect. An alarming shortage of food and rising inflation threatened what remained of national strength. Article Media. Info Print Print. Table Of Contents. Submit Feedback. Thank you for your feedback. Load Previous Page. Load Next Page. More About. Articles from Britannica Encyclopedias for elementary and high school students.
It has sometimes been argued that the Attlee government's main disadvantage was that Britain had been on the winning side in the war. British cities and industries had been bashed around by German air raids, but had not suffered the wholesale destruction which allowed the renascent German economy to start from a clean sheet. More importantly, British economic class structures - and bitter enmities - survived the war unscathed, in contrast to those countries which had been traumatised by invasion and occupation none more so than Germany into rethinking their economic cultures.
But there were other obstacles in the path of Labour's would-be revolutionaries. The country, to put it brutally, was broke. It had poured its wealth into the war effort and in was groaning under a mountain of debt. It had pawned many of its most valuable assets, including a huge slice of overseas investments, to service that debt. And even when the war was finally over, the victorious, impoverished British maintained vast numbers of men and resources tied up in an empire on which the sun was about to set.
In Europe, Britain paid for a huge army of occupation in Germany. The dawn of the nuclear age, and British pride, demanded handsome investment in the new terrible weapons which would keep us allegedly a first class power. The disarmament, which some in the Labour party craved, proved illusory as - in Churchill's words again - an iron curtain descended across Europe, and the cold war began.
Speaking of cold, even the weather seemed at times to conspire against Labour. The winter of was one of the most severe ever recorded, causing widespread misery and disruption. One of the few truly cheering aspects of life was the imminent arrival of the Beveridge reforms. The Attlee government is rightly seen as one of the great reformist administrations of the 20th century. It is a pleasant irony that the impetus for the more durable reforms came from outside the party.
The Education Act, which had introduced the concept of selection at 11 and compulsory free secondary education for all, was based on the work of a Tory, Richard Austin 'Rab' Butler , who went on to conquer all but the tallest peak of British politics. The introduction of the welfare state rested very largely on the work of two Liberal economists: John Maynard Keynes , who argued the virtues of full employment and state stimulation of the economy, and William Beveridge.
Beveridge's ideas were culled from every nook and cranny of Whitehall. His formidable task was to put together a coherent plan for postwar social reconstruction. What he came up with extended hugely the framework of national insurance first put in place before the first world war by David Lloyd George. Every British citizen would be covered, regardless of income or lack of it. Those who lacked jobs and homes would be helped. Those who were sick, would be cured. It was achieved only after two years of bitter resistance by the medical establishment, with consultants threatening strike action and the British Medical Association pouring out gloomy warnings about bureaucracy and expense.
Alas, those warnings proved to have more than a grain of truth, and the government was forced to retreat from its first grand vision of free, comprehensive health care for all. In the beginning, everything was provided: hospital accommodation, GP cover, medicine, dental care, and even spectacles. But with Britain showing few signs of economic take off, the budgetary burden was enormous. In , chancellor of the exchequer Hugh Gaitskell was obliged to reintroduce charges for NHS false teeth and glasses. Aneurin Bevan, Harold Wilson and junior minister John Freeman stormed out of government, and Attlee's goose was cooked.
Attlee's government took office in a world changing at bewildering speed. The war had forged new alliances, the greatest and most nebulous of all the United Nations. In the far east, the embers of nationalism had been stirred into flame by the brutal advance and subsequent stubborn retreat of Japan.
Britain's ignominious surrender of Singapore in had sent a clear signal to Asia that the daysof European imperialism were numbered. With hindsight it was a blessing for Britain, as well as for its vast numbers of subjects around the world, that Winston Churchill lost the election.
The old warrior was, at heart, a Victorian romantic, hopelessly in thrall to the so called romance of empire. His antipathy to India's independence struggle , in particular, was well established.
Attlee, on the other hand, recognised that the British Raj was doomed. He had been to Haileybury College, after all, and had paid an official visit to India in Even if the prime minister had harboured any illusions about Britain's duty to its m Indian subjects, he was constantly reminded by Washington that the US would not tolerate the continuance of empire.
Wisely, he bowed to the inevitable, and prepared for withdrawal. But even as it bade farewell, Britain was to visit two disasters on the subcontinent.
One was Attlee's appointment of Lord Mountbatten as the last Viceroy. Conceited, impatient, and breathtakingly arrogant, he took to the grandeur and the raw power of the job with unholy relish. Mountbatten decided that independence would come on August , on the second anniversary of the day he had accepted the surrender of the Japanese in south-east Asia.
Nothing was to stand in the way of this vainglory - not even the unresolved issue of Muslim demands for a separate state, and the gathering storm clouds of communal violence. In a few summer weeks, colonial servants scribbled lines across the map of the mighty subcontinent, carving East and West Pakistan out of Mother India, and sparking a bloodbath so frightful that no one to this day knows exactly how many millions died. The holocaust even consumed Mahatma Gandhi , the father of free India and of freedom movements everywhere, who was assassinated months after independence.
Thus ended years of history, and 90 years of Raj. There was another colonial retreat, in a way just as disgraceful, on the extreme west of Asia. For just over a quarter of a century British administrators had tried, and on the whole failed, to make sense of their League of Nations later United Nations mandate to rule Palestine. They tried partition, appeasement, manipulation and bald coercion. Nothing helped assuage the bloody friction between the rising tide of Jewish immigrants and the native Palestinians.