Asian Financial Development in Comparative Perspective

There is great disorder under the heavens in the field of development economics. Despite the exponential explosion of published work about the problems and issues of ‘Third World’ countries, there seems to be a diminution in useful knowledge about the process of economic progress. We know a good deal more about what we do not understand and what does not seem to work than about prescriptions for efficient and equitable growth. Certainly, one can conclude that there has been no shortage of ‘debunkers’ and ‘myth-shatterers’ in the field. A leading development economics text, written about ten years ago, warns the reader against believing in four exceedingly fundamentalist dogmas, for example: 1. Capital fundamentalism — associated with Harrod-Domar development models, as well as W. W. Rostow’s ‘take-off’ concept (when the ratio of investment to Gross National Product is greater than 10 per cent, growth becomes automatic), which show that a country’s growth rate is the product of the marginal propensity to save and a constant output-capital ratio; 2. Industrial and agricultural fundamentalism — usually focuses on the former, naively equating industrial growth with ‘true’ modernization; 3. Import-substitution fundamentalism — using controls, tariff, and quotas to promote self-sufficiency allows a developing country to escape dependence upon declining terms of trade and uncertain foreign markets; and, 4. Planning fundamentalism — the (unfounded) belief that ‘any planning is better than no planning at all; more planning is better than less planning’.1