Successful development strategies

European countries enjoyed a degree of sovereignty not available to current developing countries.


Asad Zaman November 02, 2010

History is the conquest song of the victors. Since ancient times, these songs have glorified victors and grossly exaggerated their virtues, while denigrating and vilifying the losers. From them, the defeated learn an extremely biased picture of the world which prevents access to the truths necessary for liberation.

In graduate school, we learnt about Rostow’s theory of the stages of economic development. This theory places all existing non-European civilisations at ground zero and argues that development will require them to imitate the path taken by England in the 18th century in the course of its rise to global world power. This idea is patently absurd. Current global conditions bear no resemblance to those faced earlier by European countries. Contrary to the idea of ground zero, India had advanced shipbuilding, glass, and textiles industries. De-industrialisation took place as many of these industries were deliberately destroyed during the process of colonisation. Economic theory was used as a weapon to argue that India’s comparative advantage lay in supplying raw materials to British industry.

Another reason the comparison is flawed is political realities; European countries enjoyed a degree of sovereignty not available to current developing countries. Weak and corrupt governments and massive debt burdens allow rich countries to set policy. How can one make effective development policy while paying billions in interest on non-productive loans? Rostow’s prescriptions for growth do not take current political circumstances into account and are uninformed by history.

Despite numerous flaws, Rostow’s ideas undergird modern economic growth theories. This is a testimonial to the power of victors to dominate discourse. The spectacular accomplishments of the losers of World War 2, Japan and Germany – who went on to become economic superpowers – receive no mention in economics courses. Similarly, very little attention has been paid to the experience of the East Asian tiger economies, which accomplished something unprecedented in history: sustained rates of growth of seven per cent per annum. The famous Industrial Revolution that we struggle to replicate à la Rostow had growth rates of only 1.5 per cent, tripling the previous historical average of 0.5 per cent. This seven per cent growth rate has been justly labelled the East Asian Miracle. Their experience is far more relevant to modern development strategies than the 18th century experiences of England.

Not a single Nobel Prize has been awarded to an East Asian economist. Instead, it is deeply ironic that Milton Friedman, the prophet of the free market, received the Nobel Prize. Policies designed and supported by him were implemented to the last detail over a period of 20 years by a group of economists known as the ‘Chicago boys’, under General Pinochet in Chile. Despite Friedman’s repeated assurances that these would bring about an economic miracle, Chile experienced high unemployment, a sharp increase in income inequalities and poverty and a highly erratic economic performance. The Economist, a magazine which ardently supports free market policies, had to confess that the “hair of the Chicago boys has gone grey, waiting for the free market to give results.” Pinochet eventually fired the Chicago boys.

A similar disaster occurred in Russia, as a result of the implementation of Friedman’s ideas. After the collapse of communism, there was widespread agreement on the need for a transition to free market policies. The debate was only between the gradualists and those in favor of a rapid transition. Supported by the IMF, the ‘shock treatment’ party implemented a sudden shift to free market policies. As a result, production in Russia fell by 50 per cent in one year. In an economy previously able to feed its population, extreme poverty and starvation occurred on a large scale, accompanied by the creation of a new small group of billionaires.

Instead of looking to those responsible for numerous crises, including the recent global financial crisis, wouldn’t we be better advised to consult those few countries, including China, that have been success stories of development over the past few decades?

Published in The Express Tribune, November 3rd, 2010.

COMMENTS (16)

Uzma Bashir Awan | 13 years ago | Reply Respected sirs', i am totally agreed with Dr. Asad Zaman. I just want to ask 1 question, What IMF has given to Pakistan, Just Debt Burden, Wrong Policies, increase in Electricity Prices, Poverty, Hunger, Frustration in Youth, Inflation, Heavy Taxes, Unemployment, and now we are moving in that age, when people are killing their own children just because of poverty & hunger..... Sir, Pakistan's situation becomes worsened after entering in to structural adjustment program. Critics say that these SAPs are a major cause of poverty all over the world (Shah 2007). I can't understand why some people favored IMF policies, when it is crystal clear...... The policies which are totally failed, why these are tried to implement in Pakistan and we are seeing its results. We know that why govt is doing this, but we should also know that who is behind all these, What are their motives....??? Ok its true that in Pakistan govt is corrupt. But besides corruption, impact of IMF policies are more dominant, we know that What Milton Friedman’s theories and policies have given to Chile, What Russia got.... And if we study the history of the developed countries then we know, what is the reality.. I thing all of you are intellectuals and know about it, But the main thing is to realize it, Colonial Age is in front of all of us,they extract raw material from the India and exploit Indians resources.... But sir we don't have any Colony... and neither the IMF suggest us to do this. The policies which West is pretending that these will benefit the developing countries, are actually also didn't implemented by them in their own countries.. then why they are forcing developing countries to follow these rubbish policies, just because they always want developing countries to looked towards them for Help... Sir We know the reality, thats why we never Favor IMF Policies. Numerous studies of successful models for development (post-war Germany, Japan, communist Russia, East Asian Tigers) show that the strategies used there were often in oppositions to those recommended by conventional economics. IMF, The great Which even can change results of the researches (conducted by them in favor of their own policies), this is the honesty, faithfulness with the developing countries. we must present a tribute to all the intellectuals of IMF.
Atiq Rehman | 13 years ago | Reply I think that Meekal's arguments are a little different to the ones that Dr. Zaman attributes to him. I do not hear "Everyone knows what needs to be done, but it is impossible to do". Instead I hear "Everyone knows what needs to be done, but the people and the rulers are not doing it", and I agree. Thousands of text books tell us what needs to be done, ask any economist around the world and they would list the same steps that we already know. Who doesn't know that we need to control our deficits, increase exports, increase the tax to gdp ratio, build infrastructure, provide security and energy, eliminate corruption, control inflation, avoid printing cash, provide economic and political stability, reduce capital market volatility, have 'equitable' growth, invest in education, health and job creation, increase FDI but on terms favorable to Pakistan, blah blah blah etc. You dont need a doctorate, only common sense to know what steps are to be taken to put Pakistan on the right track. The rulers are not taking these steps because it doesnt suit them and/or because they lack the common sense to do them. I am glad that discussions like these, with contributors like Meekal and Asad Zaman raise these issues. Maybe, an increase in social awareness might lead to change. Wishful thinking, but in the absence of other option to contribute, atleast the intellectuals play their part this way. @ ercelawn. Sir, Mr. Jinnah drove some really good cars when many others were travelling to donkeys. It's not good criticize someones monetary wealth just because we havent achieved it.
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