By Min Jae Kim
Background
Since the end of the Second World War, the international spotlight has shined on developments and reforms among “Third World” nations. As Third World nations that were not aligned with either NATO or the Communist Bloc, the regions of East Asia and Latin America drew scholarly interest due to their comparative successes with rapid industrialization. According to Duke University Professor Gary Gereffi, Latin America as a region “found it difficult to maintain their previous levels of growth”.[1] On the other hand, East Asia exceled in “almost all indicators of economic and social development”.[2] Although Latin America began industrializing many decades before the newly industrializing countries (NICs) in East Asia, the economic growth rate of Latin American nations was quickly overtaken by their Asian counterparts.[3] Through this literature review, I intend to focus on the comparative economic developments in these two regions. Significant academic discussion has been devoted to understanding how East Asia was able to sustain its economic growth throughout the twentieth century while Latin America showed clear signs of mitigated progress and stagnation. In attempts to explain this discrepancy, scholars have pointed to different theoretical perspectives and varying socioeconomic factors.
Two Main Theories
Two main economic theories seek to explain the varying paths of development in East Asia and Latin America: neoclassical economic theory and world-systems/dependency theory. These perspectives reflect the ideas of “the new comparative political economy,” which examines the relationship between government policies, international relations, and the economy.[4] On one hand, neoclassical economic theory claims that economic openness was the key. Its framework supports “laissez-faire trade policies, a free labor market … and a limited, non-interventionist role for the government in the economy”.[5] Thus, the theory states that East Asian nations maintained an “environment conducive to high rate of savings and investment” and kept their economies open to foreign technology and capital.[6] On the other hand, world-systems theory postulates “a hierarchy of core, semi peripheral, and peripheral nations” in which development of peripheral and less powerful nations is restricted by its relative resources and obstacles.[7] According to this model, Latin America had trouble sustaining growth because it could not become “fully modernized as long as they remain[ed] in the capitalist world system” dominated by the core nations” such as the United States.[8]
Factor of Development (1): “Statecraft”
Although these two major perspectives provide general insights and an introduction to the available literature, they fail to explain specific factors that account for the divergent paths of growth between East Asia and Latin America. In addition to these grand theories, scholars such as José Luis León have emphasized the concept of “statecraft”, or the role of the state in national development.[9] In his article, León conducts a comparative case study to comment on the relative growth between Mexico and South Korea from 1950 to 1999. During that time frame, the percent growth of GDP in Korea rose from 4.33% to 7.00 % while that of Mexico fell from 6.31% to 4.80%. León concludes that the different level of “state autonomy” in Mexico and Korea was the decisive variable. Here, the concept of state autonomy is loosely defined as the degree of state involvement and influence in shaping national economic policies. For example, the Korean state had a high level of autonomy since the rule of President Park Chung Hee in 1961, who nationalized banks and worked together with “chaebols” or the Korean economic conglomerates.[10] As a result, the Korean government maintained close ties to the business sector and directed economic policies “committed to export-led industrialization” that led to the “Miracle of the Han River”.[11] However, this was not the case for Mexico. The authority of the state was called into question after the Mexican Revolution where the conflict between the Mexican state and the private sector further heightened during the administration of Luis Echeverría in the 1970’s.[12] Rather than the Mexican state leading the economic reforms, “state actors relied on new conglomerates [who] took advantage of privatization, financial liberalization, deregulation … in efforts to dwarf their competition”.[13] As these private business groups pursued their own interests, a national-scale reform became difficult to institutionalize. Simply put, “the high degree of relative autonomy of the state” in South Korea played a major role in directing investments and efforts into national long-term development goals.[14]
Data from the World Bank
Factor of Development (2): Short/Long Term Development
A second key difference between East Asia and Latin America arises from their varying emphasis on the short/long term economic plans. Analyzing the previous development strategies of East Asia and Brazil, Gilmar Masiero finds that the economic success of East Asian states “has derived primarily from their long-term strategies”.[15] Many Latin American countries adhered to the Washington Consensus, a neo-liberal economic policy that encompasses macroeconomic stabilization, expansion of the domestic market and openness in trade relations. Although Latin America “made major progress in establishing conditions of macroeconomic stability” through various applications of the Consensus[16], it suffered from the “stabilization fatigue”.[17] For example, there was initially a substantial GDP surge in Brazil through the Metas and PND II Plans in the early 70s. However, Brazil’s external debt was around $50 billion and inflation soared to 77% in 1979.[18] This suggests that the real economic growth did not materialize even though Brazil had followed the necessary policies recommended by the Consensus. Since the Consensus emphasizes short-term development through market reforms alone, Masiero argues that other important factors necessary for long-term reforms such as institutional building and education were largely ignored in Latin America.
Japan and Korea illustrate that non-market variables are also crucial in promoting economic development and maintaining long-term growth. Their economic policies are labeled as “strategic pragmatism” since they are rational and market oriented. In ideology, this policy does not appear noticeably different from the Washington Consensus which also advocates for market transformations. However, East Asia also focused on human resources to ensure that development would be sustained even after the initial macroeconomic reforms within the market. For instance, Korea followed “a policy-focused human capital approach to development, incorporating industrial policy but stressing land reform, education, and labor-intensive production”.[19] Similarly, Joseph Stiglitz argues that “East Asia’s success was based on a combination of factors, particularly the high savings rates interacting with high levels of human capital accumulation”.[20] Hence, it appears the lack of adequate emphasis on human resources limited the long-term applications of initial economic successes in Latin American states like Brazil.
Cooperation between Latin America and East Asia?
Although many scholars agree that comparative analyses of “East Asian and Latin America provide a sharp contrast in economic development”[21], Shoji Nishijima and Akio Hosono argue there is room for cooperation between these two regions. The authors denote that patterns of trade and investment changed drastically in the 1990s. The countries of “Latin America and East Asia greatly increased their shares of trade within their own regions as a percentage of their total foreign trade”.[22] For example, Latin American countries (excluding Mexico) increased trade with their regional partners from 13.7% to 31.4% from 1990 to 1998. Similarly, East Asian intraregional trade increased from 35.7% to 43.4% during the same period. Such increases in regional trade were due to multilateral agreements and free trade agreements (FTAs) which led to strong intraregional integrations. Upon examining Japan, Mexico, and Chile, the authors claim there are new initiatives for “bi-regionalism” between East Asia and Latin America. For instance, the Japan-Mexico Economic Committee of Keidanren had advocated for an FTA between the two nations, which led to the recent Japan-Mexico Economic Partnership Agreement in 2012. Prospects for interregional integration appear mutually beneficial since Latin America is “an important source of commodities” for East Asia, and East Asia is Latin America’s “newest, and most promising” trade partner.[23] In addition to the Asia-Pacific Economic Cooperation (APEC) forum established in 1989, the Forum for East Asia-Latin America Cooperation (FEALAC) was conceived in 1999 to encourage further dialogue and harmony among the 36 member countries. Such forums and organizations have developed a common goal to mutually build and reinforce “the contributions of Pacific networks, interregional initiatives, and bilateral links”.[24]
Critique
Overall, there are two main problems with the available literature on the economic progresses of East Asia and Latin America from the mid to late twentieth century. First, the regional generalizations from the comparative case studies of merely a few countries are problematic. Laurence Whitehead rightly notes that cross-regional comparisons have “their limitations and are subject to misuse [since] particular care is needed to define the boundaries of the regions in questions and the issues to be addressed”.[25] This suggests that researchers can choose the countries that best fit their arguments and conduct a study to highlight certain points through either the critical or the least critical case designs. Thus, it becomes quite easy to present a misleading picture that may not accurately reflect the region of interest. For example, Rhys Jenkins generalizes that Latin America struggled with economic advancement due to its lack of strong state autonomy. Nonetheless, this generalization did not apply to all Latin American nations. Although the Mexican state had trouble controlling its divided political groups and businesses, the Chilean government enforced its proposed reforms through “free-market technocrats - the ‘Chicago Boys’” under the dictatorship of Augusto Pinochet.[26]
Second, researchers overplay the contrast between Latin America and East Asia. Since East Asia had a relatively successful economic development, the comparisons have been “always exaggerated and one-sided”.[27] Consequently, it became customary for scholars like Masiero to argue that East Asian nations were capable of designing and enforcing effective long run strategies. By contrast, Latin America was portrayed as “rickety and as being further weakened by anti-statist reforms”.[28] Whitehead remarks that the developmental strategies taken by Argentina in the 1990’s were “as long-run and transformative as those undertaken in East Asia”.[29] Nevertheless, such cases are often ignored because they do not fit into the typical literature of East Asian economic dominance over Latin America. For individual countries, a reasonable link can be drawn between the factors of growth and national economic success. There is a strong internal validity which explains the casual relationship between variables and the economic achievement. However, it is rather dangerous to assume that such findings can be externally applied to the region as a whole. Different contextual circumstances exist in the individual states of East Asia and Latin America, and generalizing them into two contrasting models of development ignores other relevant variables such as regional political structures, cultural developments, and regime types.
Min Jae Kim is a junior at the University of Pennsylvania, studying International Relations.
Footnotes
[1] Gereffi, Gary. "Rethinking Development Theory: Insights from East Asia and Latin America.": 506
[2] Gereffi, Gary. "Regional Paths of Development.": 420
[3] Elson, Robert Anthony: 1073
[4] Regional Paths of Development: 422
[5] Regional Paths of Development: 422
[6] Birdsall, Nancy, and Frederick Z. Jaspersen: 58
[7] Regional Paths of Development: 423
[8] Hein, Simeon: 495
[9] León, José Luis: 130
[10] León, José Luis: 145
[11] Davis, Diane E: 64
[12] León, José Luis: 140
[13] Silva, Eduardo.: 88
[14] Jenkins, Rhys: 51
[15] Masiero, Gilmar: 127
[16] Elson, Robert Anthony: 29
[17] Gilmar: 126
[18] Gilmar: 123
[19] Mcguire, James W: 205
[20] Stiglitz, J. E: 151
[21] Lin, Ching-Yuan: S153
[22] Nishijima, Shoji, and Akio Hosono: 81
[23] Wilhemly, Manfred: 170
[24] Wilhemly, Manfred: 171
[25] Whitehead, Laurence: 193
[26] Lear, J., and J. Collins: 10
[27] Whitehead, Laurence: 199
[28] Whitehead, Laurence: 199
[29] Whitehead, Laurence: 199
Bibliography:
Birdsall, Nancy, and Frederick Z. Jaspersen. Pathways to Growth: Comparing East Asia and Latin America. Washington, D.C. Inter-American Development Bank, 1997. Print.
Davis, Diane E. Discipline and Development: Middle Classes and Prosperity in East Asia and Latin America. Cambridge, UK: Cambridge UP, 2004. Print.
Elson, Robert Anthony. Globalization and Development: Why East Asia Surged Ahead and Latin America Fell behind. New York: Palgrave Macmilan, 2013. Print.
Gereffi, Gary. "Regional Paths of Development." Annual Review of Sociology 18.No. (1992): 419-48. JSTOR.
Gereffi, Gary. "Rethinking Development Theory: Insights from East Asia and Latin America." Sociological Forum 4.4, Special Issue: Comparative National Development: Theory and Facts for the 1990s (1989): 505-33. JSTOR.
Hein, Simeon. "Trade Strategy and the Dependency Hypothesis: A Comparison of Policy, Foreign Investment, and Economic Growth in Latin America and East Asia." Economic Development and Cultural Change 40.3 (1992): 495-521. JSTOR.
Jenkins, Rhys. "Learning from the Gang: Are There Lessons for Latin America from East Asia?" Bulletin of Latin American Research 10.1 (1991): 37-54. JSTOR.
Kay, Cristóbal. "Why East Asia Overtook Latin America: Agrarian Reform, Industrialisation and Development." Third World Quarterly 23.6 (2002): 1073-102. JSTOR.
Lear, J., and J. Collins. "Working in Chile's Free Market." Latin American Perspectives 22.1 (1995): 10-29. Web.
León, José Luis. "The Role of the State in Economic Development: Korea and Mexico." East Asia and Latin America: The Unlikely Alliance. By Peter H. Smith, Kōtarō Horisaka, and Shōji Nishijima. Lanham: Rowman & Littlefield, 2003: 130-156. Print.
Lin, Ching-Yuan. "East Asia and Latin America as Contrasting Models." Economic Development and Cultural Change 36.3, Supplement: Why Does Overcrowded, Resource-Poor East Asia Succeed: Lessons for the LDCs? (1988): S153-197. JSTOR.
Mcguire, James W. "Development Policy and Its Determinants in East Asia and Latin America." J. Pub. Pol. Journal of Public Policy 14.02 (1994): 205. Web.
Masiero, Gilmar. "Pragmatism and Planning in East Asia and Brazil." East Asia and Latin America: The Unlikely Alliance. By Peter H. Smith, Kōtarō Horisaka, and Shōji Nishijima. Lanham: Rowman & Littlefield, 2003: 109-129. Print.
Nishijima, Shoji, and Akio Hosono. "Modes of Economic Integration between East Asia and Latin America." East Asia and Latin America: The Unlikely Alliance. By Peter H. Smith, Kōtarō Horisaka, and Shōji Nishijima. Lanham: Rowman & Littlefield, 2003: 72-93. Print.
Silva, Eduardo. "State-Business Relations in Latin America." Emerging Market Democracies: East Asia and Latin America. By Laurence Whitehead. Baltimore: Johns Hopkins UP, 2002: 63-102. Print.
Stiglitz, J. E. "Some Lessons From The East Asian Miracle." The World Bank Research Observer 11.2 (1996): 151-77. Web.
Wolff, Manfred Wilhelmy Von. "East Asia, the Pacific, and Latin America." Estudios Internacionales 38.151 (2011): 169-171. Web.
Whitehead, Laurence. "The Hazards of Convergence." Emerging Market Democracies: East Asia and Latin America. By Laurence Whitehead. Baltimore: Johns Hopkins UP, 2002: 182-209. Print.
