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Journal of Democracy 11.4 (2000) 80-94

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Comparing East Asia and Latin America

Dimensions of Development

Francis Fukuyama and Sanjay Marwah

It is of course very difficult to compare two regions as large, varied, and complex as East Asia and Latin America. Each region contains within it as much variation as exists between the regions as a whole; Burma and Japan are as dissimilar as Haiti and Argentina. Nonetheless, regions do matter, and it is possible to make certain broad generalizations about the patterns of economic and political development within each.

Broadly speaking, East Asia has achieved higher and more sustained rates of economic growth throughout the postwar period, while Latin America has been more democratic. These general differences narrowed somewhat during the 1990s, particularly during the Asian economic crisis, when Asia became more democratic while stumbling economically relative to Latin America.

In order to make meaningful comparisons, one must start by imposing certain limitations on the regions in question. We will concentrate on the larger and more successful societies and make some possibly arbitrary exclusions. In the case of Latin America, we will exclude communist Cuba and the other states of the Caribbean, while including the relatively poor countries of Central America. In East Asia, we will exclude communist North Korea and authoritarian Burma but will include communist China and Vietnam, which have opened their economies to market forces in recent years.

Per-capita GNP rankings in 1998 for the 12 East Asian and 17 Latin American countries considered here reveal that East Asia is ahead of Latin America (see the Table on the following page). Japan, Singapore, [End Page 80] Hong Kong, and Taiwan are the clear leaders in East Asia, and Argentina, Uruguay, and Chile are the leaders in Latin America.

If income is measured in terms of purchasing-power parity rather than nominal dollars, some of the rankings at the top change dramatically: Japan, whose nominal per-capita income is distorted by wide fluctuations in the yen-dollar exchange rate, falls below Singapore, while China rises quite substantially; in Latin America, Chile moves ahead of Argentina. In purchasing-power terms, incomes in East Asia as a whole are still greater than those in Latin America, but the median per-capita GNP levels are close for the two regions. Obviously, however, the East Asian average is weighed down significantly by China.

With respect to growth rates rather than per-capita GNP, East Asia consistently outperformed Latin America. East Asia as a whole started from a much lower base, yet it has achieved much higher and more sustained levels of growth. Until 1995, annual growth rates of per-capita GNP in East Asia averaged around 5 percent. In contrast, Latin America has seen growth rates of around 1 percent. The variance in growth rates among East Asian countries, however, has generally been greater than in Latin America.

The 1997 Asian economic crisis pushed East Asia's rankings down somewhat with respect to Latin America, since East Asia experienced a decline of 3.65 percent for 1997-98, compared to positive growth of 1.9 percent for Latin America. The variance for this period was much greater in East Asia, ranging from Singapore, which saw only a minor drop in per-capita income, to Indonesia, which encountered economic disaster. In 1999, however, much of East Asia (outside of Japan) returned [End Page 81] to positive growth, while much of Latin America fell into recession following the Brazilian devaluation of early 1999.

Indicators for 1998 and 1999 show that, overall, there is more economic freedom in East Asia than in Latin America. What is striking, however, is how close the regional averages have become. Given Latin America's history of economic nationalism, the fact that it has pulled so close is testimony to the impact of its economic reforms over the past decade. World Bank figures confirm another common perception: There is more economic inequality in Latin America than in East Asia. Data on the share of national income of the top 10 percent of the income distribution in each country show...