The poorest continent in the world barely a half century ago, Asia is set to regain its dominant position in the global architecture, both financially and politically, and could account for more than one-half of world income and more than half of the people on Earth, according to a new book by eminent economist Deepak Nayyar.
This will complete the circle for Asia, which in 1820 also accounted for more than one-half of the world income and two-thirds of world population before waves of European colonialism ravaged the continent, sucking out its wealth with exploitative rule that left millions impoverished.
In the book titled 'Resurgent Asia: Diversity in Development', Nayyar writes that despite wide diversity among Asian countries, there are common discernible patterns.
Chief among them was the fact that economic growth drove development; rising investment and savings rates combined with the spread of education were the underlying factors; and growth was driven by rapid industrialisation, often export-led, associated with structural changes in the composition of output and employment. It was supported by coordinated economic policies, heterodox or unorthodox wherever and whenever necessary, across sectors, and over time.
"The rise of Asia represents the beginnings of a shift in the balance of economic power in the world and some erosion in the political hegemony of the West. The future will be shaped partly by how Asia exploits the opportunities and meets the challenges and partly by how the difficult economic and political conjuncture in the world unfolds," says a policy brief on the book published by United Nations University World Institute for Development Economics Research (UNU-WIDER).
"Yet, it is plausible to suggest that circa 2050, a century after the end of colonial rule, Asia will account for more than one-half of world income and will be home to more than one-half the people on Earth. It will thus have an economic and political significance in the world that would have been difficult to imagine fifty years ago, even if it was the reality in 1820," says the policy brief.
Nayyar is a former vice-chancellor of Delhi University and Emeritus Professor of economics at Jawaharlal Nehru University. He is also a former Distinguished University Professor of Economics, New School for Social Research, New York and is currently serving as an independent director on the Board of Directors of Press Trust of India.
The deep pessimism about Asia's economic prospects, voiced by Nobel laureate Gunnar Myrdal in his book 'Asian Drama', was widespread in 1970 when its demographic and social indicators of development, among the worst anywhere, epitomised its underdevelopment.
In the half century since then, Asia has witnessed a profound transformation in terms of economic progress of nations and living conditions of people. By 2016, it accounted for 30 per cent of world income, 40 per cent of world manufacturing, and over one-third of world trade, while its income per capita converged towards the world average.
This transformation was unequal across countries and between people. Still, Asia's economic transformation in this short time-span is almost unprecedented in history.
'Resurgent Asia' analyses the phenomenal transformation. In doing so, it provides an analytical narrative of this remarkable story of economic development, situated in historical perspective, and an economic analysis of the underlying factors, with a focus on critical issues in the process of, and outcomes in, development, says the UN policy brief in its analysis of Nayyar's book.
'Resurgent Asia' considers differences in initial conditions, highlights turning points in economic performance, assesses how processes of change were managed or mismanaged, discusses the influence of development strategies and economic reforms, examines changes in engagement with the world economy, explores the role of governments and politics, and analyses the factors underlying successes, failures, or mixed-outcomes in development.
Given the size and the diversity of the Asian continent, the aggregate level is not always appropriate. Thus, the study disaggregates Asia into its four constituent sub-regions -- East, Southeast, South and West Asia -- and further into fourteen selected countries described as the Asian-14: China, South Korea, and Taiwan in East Asia; Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam in Southeast Asia; Bangladesh, India, Pakistan, and Sri Lanka in South Asia; and Turkey in West Asia.
These countries account for more than four-fifths of the population and income of Asia.
It is essential to recognise the diversity of Asia. There are marked differences between countries in geographical size, embedded histories, colonial legacies, nationalist movements, initial conditions, natural resource endowments, population size, income levels and political systems.
The reliance on markets and degree of openness in economies varied greatly across countries and over time. The politics too ranged widely from authoritarian regimes or oligarchies to political democracies. So did ideologies, from communism to state capitalism and capitalism. Development outcomes differed across space and over time. There were different paths to development, because there were no universal solutions, magic wands, or silver bullets.
There was also a massive reduction in absolute poverty. But the scale of absolute poverty that persists, despite unprecedented growth, is just as striking as the sharp reduction therein.
The poverty reduction could have been much greater but for the rising inequality. Inequality between people within countries rose almost everywhere, and the gap between the richest and poorest countries in Asia remains awesome, says the policy brief.
Economic openness performed a critical supportive role in Asian development, wherever it has been in the form of strategic integration with, rather than passive insertion into, the world economy. While openness was necessary for successful industrialisation, it was not sufficient. Openness facilitated industrialisation only when combined with industrial policy.
Clearly, success at industrialisation in Asia was driven by sensible industrial policy that was implemented by effective governments.
Governments performed a critical role, ranging from leader to catalyst or supporter, in the half-century of economic transformation of Asia. Success at development in Asia was about managing this evolving relationship between states and markets, complements rather than substitutes, by finding the right balance in their respective roles that also changed over time.
The developmental states in South Korea, Taiwan and Singapore coordinated policies across sectors over time in pursuit of national development objectives, using carrot-and-stick to implement their agenda, and were able to become industrialised nations in just 50 years. China emulated these developmental states with much success, and Vietnam followed on the same path two decades later, as both countries have strong one-party communist governments that could coordinate and implement policies.
It is not possible to replicate these states elsewhere in Asia. But other countries did manage to evolve some institutional arrangements, even if less effective, that were conducive to industrialisation and development. In some of these countries, the institutionalised checks-and-balances of political democracies were crucial to making governments more development-oriented and people-friendly.
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