Economic Success,Stability, and the "Old" International Order

Stability,and the “Old” International Order IT h e past decade has witnessed significantchanges in the international economy. Among the most visible of these are: a shift from fixed to flexible exchange rates; the formal ”demonetization” of gold, followed by an enormous increase in its dollar price; the continuing, and occasionally massive, Soviet purchases of grain in world markets. Two other events are even more significant:first, the dramatic increase in world oil prices, leading to a redistribution from the oil importing countries to the oil exporters of two or three percent of the world’s annual gross product; and second, the extraordinary success of a small number of developing countries in achieving sustained economic development. This pattern of sustained development is in sharp contrast to the lack of such success in the 120 or so remaining non-OPEC less-developed countries. The first of these two major changes has received, and is receiving, abundant -perhaps superabundant-attention, while the second has been relatively ignored. Though interesting, this imbalance of attention isn’t surprising . The rapidity, as well as the scale of the jump in oil prices, and the pervasiveness of its effects throughout the international economy, account for the widespread attention it has received. While much more remains to be said and done on this subject, that is not my concern here. Instead, it is the second issue that will be addressed here: the remarkable record of a small number of less-developed countries (the so-called NICs, or Newly Industrialized Countries-specially Korea, Brazil, Taiwan, and Singapore ) in realizing sustained economic development in the past decade. (“Sustained economic development” is defined here as the achievement of an annual rate of growth in real GNP of at least eight percent for the decade as a whole.) Charles Wolf is head of the Economics Department, the Rand Corporation, and Director of the Rand Graduate Institute. He is President of the Association for Public Policy Analysis and Management. An earlier version of this paper appeared in French translation in the journal Politique Internationale , Number 7 (1980). 1. Mexico is left out of this’discussion because of the special role of oil in its successful development record. The major OPEC countries are excluded for the same reason. InfemntionalSecurity, Summer 1981 (Vol. 6, No. 1) 0162-2889/81/010075-18 $02.50/0 @ 1981 by the President and Fellows of Harvard Collegeand the Massachusetts Institute of Technology. 75 International Security I 76 In comparison with the obvious significance for the international economy of the changes in oil supplies and prices, the major significance of the NICs’ development record warrants explanation and emphasis. Spirited advocacy of a “new international economic order” continues in such forums as the recent U.N. Conference on Science and Technology for Development, and the Havana conference of non-aligned countries. Yet the record of the NICs in the past decade plainly suggests that dramatic and sustained economic development can be accomplished in the ”old” international economicorder. Moreover, by examining this record, and by comparing it with the largely disappointing experience of most of the non-OPEC developing countries, perhaps some lessons can be learned that may assist these countries to improve their own performance in the future, if they are seriously motivated to do so. Three questions warrant attention: inferred from the experience of successful developing countries? -What recipes or principles for sustaining economic development can be -If there are such principles, why haven’t more of the LDCs adopted them? -And what are the prospects for their doing so in the future? I will concentrate on the first question, considering briefly the other two in conclusion. Recipes for Sustained Economic Deoelopment Generalizations are hard to maintain because special circumstances make each country an individual case. National histories, institutional structures, cultures, and traditions affect, sometimes powerfully, national economic development . Nevertheless, certain generalizations can be made drawing from both development experience, and from considerations of a more theoretical sort. These generalizations, or “recipes” for sustained national economic development , are supported by the few cases of successfulmodernizing countries over the past decade and, by counterexample, by the larger number of less successfulcountriesas well. I will cite examples to illustrate particular recipes...