East Asian Experience and its Relevance to Latin America and the Caribbean within the NAFTA Context
Economic development during the last thirty years provides a continuing experiment from which important lessons can be learned. These lessons are both positive and negative. One can learn from those that have succeeded as well as those that have failed. Among those that have succeeded, the East Asian countries provide valuable lessons that cannot be ignored by policy makers in other parts of the world. Of some twenty-three East Asian countries, eight stand out in terms of economic performance. They are Japan, the four original tigers - Hong Kong, Singapore, South Korea, Taiwan, China and Indonesia, Malaysia and Thailand. Japan could be left out for two reasons. Japan's high growth has been sustained over a fifty year period, and it is by no means a developing country. The success of the remaining seven countries pose two essential questions for the Caribbean countries (as well as others). First, what were the policies that led to the recorded and undisputed success of these seven developing countries, in East Asia? Second, how relevant is that experience to the Caribbean countries not only in terms of their domestic policy environments and but also their external environment such as the prospects posed by the presence of the North American Free Trade Area (NAFTA)? In order to set the tone for the discussion, it is necessary to keep a few caveats in mind. First, the East Asian experience has been widely interpreted by different protagonists as confirming their special and own interpretation of the causes for success. And there is wide room for this. One can avoid the obvious obscuring of underlying forces at work if epithets such as neoclassical and revisionist are discarded and facts are examined objectively. Second, concentrating only on the successful countries in East Asia should not detract one from learning from at least one hundred other developing countries which were not as successful as the East Asian countries. Third, when one talks about the East Asian countries, it is important to note the diversity among them. For example, Hong Kong and Singapore are small countries wholly devoted to manufacturing with small populations and high population densities. But South Korea, Malaysia, Indonesia and Thailand are, relatively speaking, large countries not only in terms of their populations but also in terms of their natural resource endowments. Even the two small countries, (sometimes referred to as mere city states) have different characteristics. Hong Kong has a much less interventionist economy than Singapore. In fact many consider it a laissez faire economy despite the large public investment in housing to accommodate the ever- increasing immigrants from the mainland. Singapore, on the other hand, did intervene more in the economy, but did so outside of the production sector and in a manner that was based on both foreign and domestic competition. Finally, the lessons from the experience of one group of countries can be transplanted to another group only after careful consideration of their initial conditions, institutions and political economy.The plan of the paper is as follows. Section II gives an account of the facts of the seven East Asian countries that are relevant for the Caribbean context. Then the factors that are commonly assumed to have led to the success are examined. Recently, there has been a re-interpretation of the success of East Asian countries as resulting from a combination of fundamentals, such as stable macroeconomic policies and sound incentive policies as well as selective interventions. Mainstream economists would have little quarrel with the recent re- interpretation of the success as having been facilitated by the fundamentals. This re-interpretation which explicitly recognizes the institutional ethos of these countries renders at least a part of the East Asian experience irrelevant to many other developing countries, including those in the Caribbean with different institutional structures. Section III considers the Caribbean context, noting the similarities and the differences between the East Asian and the Caribbean countries. The Caribbean Group referred in the present paper are defined to include the members of the Caribbean Group for Cooperation in Economic Development other than Belize, the Dominican Republic, Guyana, Haiti and Suriname. The group of countries considered in the paper, therefore, are Antigua and Barbuda, The Bahamas, Barbados, Dominica, Grenada, Jamaica, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, and Trinidad and Tobago. Henceforth in the paper, the references to the Caribbean countries are only to this set of ten countries. They can be thought of as belonging to the same set not only in terms of resource endowments, but also because they have a common geographical, economic policy, and institutional context. The Caribbean countries are compared with the East Asian countries in terms of the factors that led to the success of the latter in order to infer the policy and institutional relevance for the development of Caribbean countries. Section IV examines the external environment for the Caribbean group with special reference to NAFTA. Section V draws the
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