Growth Miracle Research Articles

Miraculous growth and stagnation in post‐war Japan – Edited by Koichi Hamada, Keijiro Otsuka, Gustav Ranis, and Ken Togo

Miraculous growth and stagnation in post‐war Japan – Edited by Koichi Hamada, Keijiro Otsuka, Gustav Ranis, and Ken Togo

The Polish Growth Miracle: Outcome of Persistent Reform Efforts

Since the beginning of transition in 1990 from a centrally planned to a market oriented economy, the performance of Poland’s economy has been outstanding if we take GDP growth as our measure. In our opinion it is not specific reforms that can explain this performance but the radical (“big bang”) reforms at the beginning of transition in conjunction with persistent efforts during the two decades by all governments, no matter what their political orientation, to keep on a reform path. Reforming a centrally planned economy that has very serious macroeconomic disequilibria implies reforms that can be done immediately but also structural or systemic reforms that require years to implement. Both types of reforms will be discussed. In a democratic context reforms can only be undertaken in a sustained way if a majority of voters favours such reform efforts. Even when reform-friendly governments were voted out of office in the Polish case, the new governments in Poland never reversed reforms undertaken by the previous government. This continuous reform stance over two decades is the main cause of the Polish growth miracle. The reasons for the ability of Polish policy makers to pursue economic and administrative reforms in spite of short-run costs to large sections of society will be discussed extensively

Re-Interpreting the “Chinese Miracle”: A Multi-Dimensional Framework / Re-Interpreting the “Chinese Miracle”: A Multi-Dimensional Framework

Summary The rapid economic development and transformation of the Chinese society over the past three decades has, by a large mass of analysts, been called a “Miracle”. This paper not only addresses the shortcomings of existing interpretations but also develops a new multi-dimensional framework based on North′s theory of institutional change and Hayek′s theory of institutional evolution to explain China′s miraculous growth. Our analysis shows that both Hayekian spontaneous order and Popper′s “piecemeal social engineering” played a major role in attaining China′s miraculous growth.

Has the Chinese Growth Model Changed? A View from the Credit Market

A cornerstone of the Chinese growth model has been the opening up of its economy to private competition. Some observers claim that China has changed course since joining the WTO by increasingly promoting ‘state capitalism’, the large State Owned Enterprises, thereby compromising a growth model that has served it well. Due to the opaqueness of the Chinese system, even such a major shift in policy has been difficult to verify. We are able to look inside the covert policy process by studying the credit supply to Chinese listed companies, the drivers of the growth miracle, of the past decade. The econometric analysis corroborates the policy shift: we find a significant improvement in credit supply conditions of government firms relative to other firms during the latter part of the decade. The estimations also provide evidence of other major trends in credit supply that reflect the Chinese government’s policy objectives.

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Trade, Urbanization, and Growth

This paper proposes a neoclassical growth model of a small open economy, connecting international trade to real GDP growth and structural transformation from agriculture to non-agriculture. The calibrated model generates 'growth miracles,' to which the contributors are learning by doing and accelerated structural transformation. Quantitative results show that effects from the latter with opening up international trade are quintessential in accounting for the explosive growth patterns observed in newly industrialized economies. Trade policies (such as tariffs), relative productivity between agriculture and non-agriculture, and the persistence of urbanization process jointly affect the growth after opening.

History’s a curse: leapfrogging, growth breaks and growth reversals under international borrowing without commitment

A simple open-economy AK model with collateral constraints accounts for growth breaks and growth-reversal episodes, during which countries face abrupt changes in their growth rate that may lead to either growth miracles or growth disasters. Absent commitment to investment by the borrowing country, imperfect contract enforcement leads to an informational lag such that the debt contracted upon today depends upon the past stock of capital. The no-commitment delay originates a history effect by which the richer a country has been in the past, the more it can borrow today. For (arbitrarily) small delays, the history effect offsets the growth benefits from international borrowing and dampens growth, and it leads to both leapfrogging in long-run levels and growth breaks. When large enough, the history effect originates growth reversals and we connect the latter to leapfrogging. Finally, we argue that the model accords with the reported evidence on changes in the growth rate at break dates. We also provide examples showing that leapfrogging and growth reversals may coexist, so that currently poor but fast-growing countries experiencing sharp growth reversals may end up, in the long-run, significantly richer than currently rich but declining countries.

Growth miracles and failures in a Markov switching classification model of growth

In this paper economic growth is interpreted as a sequence of transitions between distinct growth regimes that countries visit with different frequencies. Countries featuring similar growth dynamics are endogenously grouped into three different clusters. The first cluster comprises successful countries that are characterized by lengthy periods of high or very high growth. Moderately successful countries in the second cluster experience both periods of reasonable growth and periods of stagnation, whereas failing countries in the third cluster suffer from highly volatile growth rates with frequent episodes of crisis. Successful countries are characterized by better initial conditions, policies and institutions compared to the other countries. Neither initial conditions nor institutions distinguish moderately successful from failing countries; what makes them different is policy in the form of investments into infrastructure and human capital, trade liberalization and limited policy volatility.

Soaring Eagle, Crouching Dragon?

Over the last decade many analysts have forecast the relative decline of the US in the face of rapid economic growth and developmental success in China. There has also been concern that China's rise carries with it a risk of direct Sino-American military conflict over Taiwan, or even indirect war as the result of the US acting as a security guarantor for such east Asian allies as Japan and South Korea. Ou and gas resources under the disputed territorial waters of Japan, South Korea, Vietnam, the Philippines, Brunei, and Malaysia could become sources of conflict as Beijing tries to secure the energy it needs to keep its growth miracle on track while attempting to ease itself off a heavy dependence on dirty coal. Is China destined to replace the US as the world's leading hegemonic state? Is it likely to challenge the US as the most capable military power within the next 20 years? The answer to both questions is no.China has too many fundamental liabilities on its geostrategic balance sheet and its domestic political economy is too fraught with problems and major environmental strains for its elite to spend much time and expense in a bid for complete functional parity with the world's sole military superpower. The global military eagle will continue to soar, and the Chinese military dragon will mostly stay in a crouched posture, confined to its territorial base and the coastal regions of the western Pacific - except for troops in support of UN peacekeeping, a field in which Beijing has made modest strides.1 The Chinese military-industrial-scientific complex is still too smaU and too young to be able to challenge the American military developmental behemoth. The Chinese defence budget is too smaU, and successive Chinese governments have spent too long depending on a nuclear minimum deterrent that is highly vulnerable to preventive strikes with conventional weapons by American naval and air forces.2 Chinese leaders have not impressed their neighbours with their appeal for a harmonious region operating on China's terms. It has territorial disputes with Japan, South Korea, southeast Asian states, and India. Its economic rise has been impressive and Asian states' trade with China has grown impressively, but most fear China's rise even as they profit from it. And few want the Americans to go home. The great American empire still holds the most important political and diplomatic cards in any bilateral game of poker with Beijing, and will continue to do so for the foreseeable future.Over the past decade China became the greatest carbon emitter on the planet, surpassing the US, as well as the largest auto market in the world - again surpassing the US. In 2010 China's GDP overtook that of Japan to take the number two position in global economic production.3 In 2011 economists think Chinese overall research and development will surpass Japan's for the first time, again locking up the global number two spot after the US.4Not surprisingly, China's defence industries have grown apace as well. From fighter jets to ballistic missiles and from assault weapons to land mines and anti-ship cruise missiles, Chinese aerospace and defence industries have pushed the country up the rankings of international arms exporters. Chinese technologies are part of the reason for the success of Pakistan's nuclear weapons and ballistic missile capability, and they may be part of Iran's success in building its nuclear infrastructure too. In 2010 China leapfrogged up the international arms exporters list, just ahead of the UK and France, and just behind the US, Russia, and Germany, in that order.5 Chinese weapons exports were a little less than one quarter of Russia's and about one sixth of the Americans', but the rapid Chinese growth in this indicator became cause for further concern among threat analysts in Washington. Such concern is arguably misplaced but will not dissipate because Washington's security bureaucracy needs a Chinese threat to sustain the world's most voracious mnitary-industrial-scientific complex. …

THE EFFECT OF FINANCIAL ENFORCEMENT ON ENTREPRENEURSHIP AND DEVELOPMENT IN A ‘GROWTH MIRACLE’*

This paper uses a GE model of occupational choice with financial frictions to explain development in a ‘growth miracle’. We analyze two historical periods that correspond to different steady states, and find that Korea's development was largely due to human and physical capital deepening. Whilst this result is consistent with growth regressions, our alternative method shows how changes in enforcement, ability, bequest preferences and technology drive development. The model also provides quantitative measures of improvements in institutions and changes in the distribution of ability, magnitudes that are not directly observable in data.

Time Series Stochastic Properties Of Growth Miracles And Growth Disasters

Preliminary findings of this research suggest significant stochastic properties differences between growth miracles and growth disasters. Miracles real GDP per capita exhibit at least one unit root whereas disasters is either stationary or has a negative unit root. Average growth rates appear to be significantly different. Average population growth rate is stationary for disasters, for miracles the existence of a negative unit root cannot be rejected. Consumption for miracles is either stationary or tends to decline, for disasters is stationary or tends to increase. Investment average and volatility are apparently significantly greater for miracles. Government expenditures for disasters are non stationary, for miracles are stationary with an incipient tendency to decline. Moreover, average government expenditures apparently are greater and more volatile for disasters. Finally, openness is stationary for disasters and for miracles it has at least one unit root.

The origins of Japanese technological modernization

Explanations of Japanese technological modernization from the late nineteenth to the mid-twentieth century have increasingly focused on domestic capabilities as opposed to the traditional emphasis on knowledge transfers from the West. Yet, the literature is mostly qualitative and it lacks a comparative context. This article presents quantitative metrics derived from patent data covering Japan, the United States, Britain and Germany and it also exploits non-patent based sources. The evidence shows that Japanese domestic inventive activity exhibited a pattern of rapid modernization to the technology frontier in terms of its level, sectoral distribution and quality. Domestic capabilities were much stronger than is often supposed in accounts that stress the prevalence of Western technology diffusion. A long run expansion in indigenous development set a favorable foundation for the economic growth miracle Japan experienced after the Second World War.

Overvalued: Swedish Monetary Policy in the 1930s

This paper reconsiders the role of monetary policy in Sweden’s strong recovery from the Great Depression. The Riksbank in the 1930s is sometimes seen as an example of a central bank that was relatively innovative in terms of the conduct of monetary policy. To consider this analytically, we estimate a small-scale, structural general equilibrium model of a small open economy using Bayesian methods. We find that the model captures the key dynamics of the period surprisingly well. Importantly, our findings suggest that Sweden avoided the worst excesses of the depression by conducting conservative rather than innovative monetary policy. We find that, by keeping the Swedish krona undervalued to replenish foreign reserves, Sweden’s exchange rate policy unintentionally contributed to the Swedish growth miracle of the 1930s, avoiding a major slump in 1932 and enabling the country to benefit quickly from the eventual recovery of world demand.

Autocracies and Development in a Global Economy: A Tale of Two Elites

Data on the growth performances of countries with similar comparative (dis)advantage and political institutions reveal a striking variation across world regions. While some former autocracies such as the East Asian growth miracles have done remarkably well, others such as the Latin American economies have grown at much lower rates. In this paper, we propose a political economy explanation of these diverging paths of development by addressing the preferences of the country's political elite. We build a theoretical framework where factors of production owned by the political elites differ across countries. In each country, the incumbent autocrat will cater to the preferences of the elites when setting trade policy and the property rights regime. We show how stronger property rights may lead to capital accumulation and labor reallocation to the manufacturing sector. This, in turn, can lead to a shift in the comparative advantage, a decision to open up to trade and an inflow of more productive foreign capital. Consistent with a set of stylised facts on East Asia and Latin America, we argue that strong property rights are crucial for success upon globalization.

Overvalued: Swedish Monetary Policy in the 1930s

This paper reconsiders the role of monetary policy in Sweden’s strong recovery from the Great Depression. The Riksbank in the 1930s is sometimes seen as an example of a central bank that was relatively innovative in terms of the conduct of monetary policy. To consider this analytically, we estimate a small-scale, structural general equilibrium model of a small open economy using Bayesian methods. We find that the model captures the key dynamics of the period surprisingly well. Importantly, our findings suggest that Sweden avoided the worst excesses of the depression by conducting conservative rather than innovative monetary policy. We find that, by keeping the Swedish krona undervalued to replenish foreign reserves, Sweden’s exchange rate policy unintentionally contributed to the Swedish growth miracle of the 1930s, avoiding a major slump in 1932 and enabling the country to benefit quickly from the eventual recovery of world demand.

Hukou Reform: An Urgent Requirement in China

China’s bounding exports and rising trade surpluses suggest the high level Chinese manufacturing is at. China also has made brisk advances technologically. In the last two decades, China has emerged as the fastest growing exporter of manufactured goods, and has exerted a downward pressure on prices, in relation to the exports of other goods and services. China definitely is the unquestionable center for the manufacture of consumer goods. Factories located in China make 70 per cent of the world’s toys, three fifths of its bicycles, half of its shoes and one third of its luggage. Investment levels are high in China because of elements like cheap labour, quality infrastructure and the huge size of the market. Because of the high levels of investment in the industry along with the tractability of the market and the growth generated by the industrial sector, half of the Chinese GDP is accounted for by the industrial sector. China’s cost advantage is increasingly attached to high productivity, economies of scale, supporting industries and advanced manufacturing technologies. Migrant labourers are the support base for ensuring high productivity, economies of scale, and advancing manufacturing technologies. However, after the financial crisis, more jobs were lost in China than in any other country. More than 20 million Chinese peasant workers were forced to return home from coastal factories due to reduced orders from overseas in late 2008, and in early 2009. During the recession, minimum wages were frozen, and 6,70,000 labour intensive factories shut down in the coastal cities of Guangzhou, Dongguan and Shenzhen. The slowdown hit the industrialised eastern zone more directly but even farmers in the western areas had to bear the brunt of adversity, with millions of unemployed workers returning from Chinese cities. According to a survey undertaken by the government in 15 provinces of China, 20 million workers which equals 15 per cent of the total migrant labour pool is now unemployed. However, after two years of the onset of the financial crisis, what is being witnessed is a labour shortage in several provinces. From an oversupply of labour which resulted in millions losing their jobs because of reduced demands for exports, what has emerged is a shortage of labour. This reflects the way in which the labour market has become segmented. A surplus of labour in the country side coexists with shortages on the coast. Thus coastal factories have to offer higher wages to migrants to ensure lucrative pull factors for migration. The Guangdong province in China which is one of the leaders driving economic growth in China is considering further raising the rate of minimum wages early in 2011 to help ease the labour shortage. Despite being one of the economic powerhouses in China the rate of minimum wages in Guangdong is not one of the highest in China. The minimum monthly salary is currently 1030 Yuan (USD 154), lower than that of Shanghai and other prosperous provinces and regions. As a result of the low wages, many migrant workers are choosing to leave Guangdong for the Yangtze River Delta and other areas. Migrant workers increasingly choose to stay in their places of origin where they earn a bit lower, but also spend less on living costs. This paper attempts to look at the various programmes being undertaken in certain provinces of China like Guangdong, Shanghai and Chengdu for example, in order to meet the challenges facing economic development and labour supply. Migration is the most important aspect of labour supply in China. However, the hukou or the Household Responsibility System (HRS) has caused several impediments to the movement of labour. Despite the fact that attempts have been made to loosen these strict controls, the exclusion towards migrant labour continues to exist. In order to understand the interplay of migration, urbanisation and development, the theory of mobility transition theory propounded by Wilbur Zelinsky is looked at to understand the levels of urbanisation of a developing society, leading to outline the level of urbanisation China currently stands at, and to further understand the impediments to attaining higher levels of urbanisation in China. The sources used to undertake research for this work are newspapers from China and secondary sources. China needs to move up the level of modernisation and urbanisation in order to maintain the sustainability of its economic growth miracle. This work is thus an attempt to explore and understand the way forward for the Chinese economy in the near future.

Unequal partners: the United States and Mexico

Since Mexico's defeat in the Mexican-American War of the 1840s, the United States has continued to dominate Mexico economically, militarily, and politically. This long history of asymmetry has created a Mexican distaste for 'American arrogance', and an American vision of Mexico as its 'backyard'. The imbalance has damaged political negotiations, trade pacts, and capital flows, as suspicions and protectionism have undermined diplomacy. Despite these events, the two nations remain joined at the hip: more than 80 percent of Mexico's exports are to the United States, and the majority of foreign investment in Mexico comes from America. In Unequal Partners, Sidney Weintraub examines the current relationship of Mexico and the United States as one of sustained dependence and dominance. The chapters examine the consequences of this imbalance in six major policy areas: trade; investment and finance; narcotics; energy; migration; and the border. The book begins in 1954 when the Mexican growth miracle was at its apex, and proceeds to the present. Special attention is paid to the post-1982 debt crisis era, when Mexico began a more outward-looking trade policy. As this study reveals, Mexico has often been its own worst enemy in foreign relations. Over the past thirty years, the country has been plagued by debt, currency fluctuations, tax collection problems, political corruption, and state-controlled business monopolies that block foreign investment and importation. These factors have created an environment of instability, damaged outside perceptions, and weakened Mexico's bargaining position. Weintraub considers future policy changes that would help Mexico to level the playing field. Improving the education system, he argues, will benefit nearly every other activity and institution, and opening the oil market to private investment and technology will help develop deep-water drilling and revitalize this significant export commodity. In foreign relations, Mexico must be assertive - as it has been in easing U.S. restrictions on goods traded through NAFTA, and demanding U.S. aid to fight drug cartels - not passive, as it currently is on U.S. anti-immigration policy and the proposed border wall. Perhaps most importantly, the study points to the deeper development of policies that are proactive and outward looking.

Freedom as the Key to Prosperity: Lessons from the World's Growth Miracles and Economic Disasters

What do China, Estonia, Germany, India, Chile, South Korea and Slovakia all have in common? They have all enacted free-market reforms, and have seen their inhabitants’ living standards soar as a result. This essay describes how free-market policies have improved economic performance in these “growth miracles.” We will also draw contrasts with the policies adopted by governments in some “economic disasters” – countries that have failed to improve the economic well-being of their populations. The lessons we learn from these comparisons paint a clear picture: A country’s economy performs best when its policies lead to greater economic freedom, limit the role of government, and promote respect for the rule of law.

Beneath the Nimbus—The Hair of the Saints

From the beginning of civilization, man has placed importance on the appearance and symbolism of hair. The psychosocial significance and religious connotation of hair are well known. Hair has 2 perceived symbolic meanings in a spiritual context: shaven hair is a symbol of celibacy and chastity, while uncut hair is seen as withdrawal from worldly concerns and vanities. Religious tradition is a plentiful source of accounts of hopes and fears related to the human condition. These hopes and fears are reflected in Christian hagiography and iconography. While the former deals with the accounts of the saints’ lives, the latter relates to the saints’ depiction in art. Appreciation of religious art is deepened by a knowledge of what is depicted and why. Roman Catholic churches are replete with images of saints. Since saints are seldom labeled with their names, clues to their identity are given by their attributes, ie, by their appearance or what object they are holding. These attributes may be the instruments of martyrdom, representations of events in their lives, or symbols of their teachings. Peculiarities relating to the hair of saints (Table) are facial hirsutism (St Wilgefortis); generalized hypertrichosis (St Onuphrius); long, disheveled hair (St Mary of Egypt); long, beautiful hair (St Mary Magdalene); the miracle of hair growth (St Agnes of Rome); and overnight whitening of hair (St Thomas More). The role of hair during martyrdom is reflected by the accounts of St Perpetua, who asked for a pin to fasten her untidy hair in the hour of her martyrdom, lest she might seem to be mourning in her hour of triumph, and St Margaret of Antioch, who was allegedly tortured while being suspended by her hair. In studying the saints, the question arises, “Why saints?” Woodward states, “A saint is always someone through whom we catch a glimpse of what God is like—and of what we are called to be.” Ultimately, saints help us to believe in miracles and miraculous healings. Roman Catholic tradition has made saints protectors of various aspects of life who are invoked for particular reasons. The affiliation of a protector saint to a specific condition relates to the lives of the saints and their depiction in art; eg, St Bartholomew is invoked for skin diseases because images of his martyrdom depict him with his skin draped over his arm. Therefore, the saints whose attributes relate to the hair would seem suitable candidates for trichological issues. Finally, understanding how hair is used as a symbol in the lives of the saints reveals its spiritual connection; after all, it is our skin appendage that is closest to heaven.

Agricultural Development, Nutrition, and the Policies Behind China's Success

The emergence of China as an economic power is one of the miracle growth stories of the last part of the 20th century and the early part of the 21st century. Its economy has been the fastest growing compared with the economies of the world since 1980 (World Bank 2002). Growth has occurred in all sectors, including agriculture. Poverty has fallen. In the past 30 years, based on China's official poverty line, the absolute level of poverty fell from 260 million in 1978 to 14.8 million in 2007 (NSBC 2008). Moreover, the general welfare of most of the population has increased markedly. Many indicators of nutritional status have improved. For example, the number of children with low body weight fell by more than half (Turgis 2008). In fact, by the end of 2007 China had achieved many of its Millennium Development Goals (MDGs).