Policy prescriptions based on faulty premises

Harvard policy discussion paper ignores history and a few inconvenient truths.

A woman in her house built along a polluted stretch of Cau Kieu Canal in Ho Chi Minh City’s District ४

The policy paper – Fulbright Economics Teaching Program (FETP) 2008* – makes a distinction between the Southeast Asian (SEA) economic growth model and the East Asian (EA) one.
The paper’s authors state that economic growth of the former (mainly Malaysia, Thailand and Indonesia) is not sustainable unlike that of the latter (Japan, Taiwan, South Korea, Hong Kong and Singapore – FETP classifies Singapore as a country following East Asian model although the city-state is in SEA). They situate Vietnam and China somewhere in between.
According to the paper, East Asians are rich and healthy; environmental pollution is less in EA, and EA has world-class universities. In contrast, SEA’s growth is based on cheap labor and exploitation of natural resources. In SEA, social disturbances and corruption are prevalent. Finally, SEA people can’t get quality education and health services.
To summarize, according to FETP, SEA is characterized by political instability and social inequality.
I think only a few of FETP’s distinctions are correct; but it is surprising to see that these views are presented as ultimate truths in the name of science, as it is often the case for economic papers.
For one thing, a military coup had also taken place in South Korea. After the coup in 1961, Park Chung-Hee (1917-1979), the head of the coup governed the country with military rule. He was succeeded by another general, Chun Doo-hwan (b.1931) between 1980-1988 who was notorious for the Guangju Massacre (1980). Chun was also succeeded by another general, Roh Tae-woo (b.1932) between 1988-1993. In other words, South Korea does not fit FETP’s distinction as a country following the EA growth model.
As for corruption, Japan and Taiwan are in the top ranks. Let’s not forget that Taiwan’s ex-top leader has been sentenced to life imprisonment for corruption. That means, in Taiwan, even the top leader can be corrupt, but he can’t be prosecuted as an incumbent. Thus neither Japan nor Taiwan fit FETP’s distinction.
As for education, it is a fact that EA has world-class universities; we need to discuss how that dream came true in another article. But in access to education, Japan and South Korea produce and reproduce inequalities.
The majority of the schools are private in these two countries. “Pay the piper, call the tune” is the motto in Japanese and South Korean education systems.
Furthermore, income inequality is not endemic to SEA. South Korea and Japan are also ranked high on inequality indicators.
With regard to environmental pollution, FETP is right. Pollution is mostly controlled in EA and it is common in SEA. However, there are factors that can’t be explained by FETP’s distinctions.
For one thing, labor is cheap in SEA and environmental regulations are loose. Many labor-intensive companies are moving to SEA. At least some of the labor-intensive industries are the dirtiest ones. In other words, pollution can’t be explained without considering the dimension of global division of labor.
EA is keeping itself clean by moving its dirty industries to SEA, taking advantage of the loose regulations and cheap labor, whether it directly or through subcontracting or outsourcing. SEA countries who are willing to do anything to attract foreign capital turn a blind eye to pollution by foreign companies.
Besides industrial pollution, household pollution is also observed in SEA; urbanites are polluting the cities. This is because of unplanned and rapid urbanization and rural immigration common in transition countries.
Thus the question is: What did EA do to control rural immigration?” Lo and behold! Two of the five EA countries in FETP’s classification are city-states! They don’t have villages; rural immigration is not a problem for them and they don’t have the highly costly burden of providing education, health and municipal services for distant areas. Thus, FETP’s comparison does not make sense. Nevertheless what South Korea, Japan and Taiwan did to control rural immigration is worth further inquiry.
Finally, the Japanese economy advertised as a success story is in deep recession since 1990s. If it was a model economy, it wouldn’t have gone into such a long recession. The countries that have been the worst affected by the crisis are the ones most connected to the global markets.
It is time for advisors of Southeast Asian countries to stop and think about the solidity of their analysis and conclusions before offering sage advice.
By Dr. Ulas Basar Gezgin**
* FETP (2008) “Choosing success: The lessons of East and Southeast Asia and Vietnam’s future. A policy framework for Vietnam’s socioeconomic development, 2011- 2020.” Policy Discussion Paper No.1. Fulbright Economics Teaching Program, Harvard Vietnam Program.
** Dr. Gezgin is a columnist, fiction and non-fiction writer and macroeconomics lecturer at RMIT Vietnam. This critique is a self-translation of his regular column on Asian affairs for a Turkish newspaper.