GDP discrepancies across the world, especially in the post economic meltdown period, sum up the changing growth paradigms across regions and economies. A growing GDP is an indicator of societies getting their act together by becoming more organised and interwoven.
Interrupted by the slump of the 1930’s and the two great wars, the world we now collectively refer to as the global economy witnessed its expansion in fits and starts. Following the great recession, seeds were sown for setting up institutional foundations of today’s international economy.
Countries that have evolved prudent policies in the face of a fast globalised world have made clever use of the renaissance of the world economy in the aftermath of depression. With greater integration amongst economies it has become easier for poor countries to assimilate innovative techniques in their policy making to allow them to come at par with richer ones.
The best example that comes to mind when one analyses these changing growth patterns amongst countries are the thirteen success cases from the post-war period. These include Botswana, Brazil, China, Hong Kong, Indonesia, Japan, Korea, Malaysia, Malta, Oman, Singapore, Taiwan and Thailand. The success stories of these economies highlight the fact that achieving sustainable growth is quite possible, 13 economies of the world have achieved it. On the other hand, it highlights that achieving sustained growth is not an easy task since only 13 countries have done it. While certain economists and people tend to refer to these cases as ‘economic miracles’ I tend to disagree with that perception.
Six of the 13 economies continued their path to become high income countries, while others lost their momentum long before they could catch the leading economies in the developed world. A striking example that stands out amongst these countries is that of Brazil, where economic growth fizzled out at the time of the second oil shock of 1979.
Intriguingly Brazil was one of the first countries that achieved sustained growth, which began from the 1950’s, and perhaps the first among the 13 to lose its momentum sometime in the early 80’s. Brazil advocated a policy of “import substitution” by protecting the domestic industry, so they would be able to compete against foreign rivals in the indigenous market. While the country had employed a policy of protecting its domestic industry, at the same time, it was highly successful in diversifying its exports by branching out from coffee to areas of manufacturing with the help mainly of increased foreign investment. As a result of such policies, exports of Brazil multiplied from five per cent to 12 per cent in the early 80’s. The causes of a slow down of the Brazilian economy are hard to disentangle. Following the oil shock, Brazilian policy makers turned inwards. Instead of incorporating the trends of increased globalisation, instead of integrating its economy with that of the rest of the world, Brazil went further inwards after the first oil shock in 1973.
The causes of a slowdown in some of the economies from the 13 success cases in the post war era are hard to point out individually, but it can be understood that while it is easy to identify the fundamental characteristics of high growth cases, it is somewhat hard when it comes to replicating them. Some growth cases are the result of evolution and not intelligent design. I will discuss this in detail next week.
The writer is News Editor, Profit