Sunday, August 14, 2011

Following the Tigers

What we can learn from Development
When it comes to development theories in international relations, there are basically two principle contesting schools of thought. The first, is the neoliberal one, its approaches undermine developing countries’ capacities for modernization, inhibits the development of infant industries, and makes developing countries vulnerable to outside shocks. The second embraces developmental state models, which focus on domestically-developed policies including infant industry protection. This approach has resulted in growth and prosperity in developing countries. Thus, domestically-developed Human Development and Economic Growth policies are needed for the sustainable development of a country. Hence, the EU needs to rethink its external development strategies

Between the 1960s and 1990s, East Asia saw exceptionally high growth rates and rapid industrialization.  Through a strategic approach to integration with the global economy these regions were the first newly industrialized countries. In the 21st century, all four regions have since graduated into advanced economies and high-income economies still being the world's fastest growing industrialized economies now. Korea’s economic growth and resulting social transformation are especially noteworthy. A country whose main exports were tungsten ore, fish and human-hair wigs has become a high tech powerhouse, exporting mobile phones and TVs all over the world. In terms of quality of life indicators Korea progress is equally impressive.

Innovation and technology and the investment in human capital, as in the promotion of universal education, are important to improve a country’s comparative advantage. Further, globalization has magnified the cost of bad, inconsistent policies and weak, inefficient institutions and has shown that it can become a danger to developing countries. The Asian crisis has shown the importance of effective state institutions and that a country should be careful not to open its economy too early.

In its relations with developing countries, the EU focuses almost solely on trade agreements. It acknowledges the importance of economic growth and poverty reduction.  It even addresses the  establishment of democratic institutions to promote governance and democratic standards. Further, the EU applies conditionality so that the democratization process and the advancement of good governance are conditions for receiving aid. The promotion of sustainability and simplification and coordination of aid programs should be addressed as well as the promotion of capacity building. The EU’s approach to development aid focuses on pressuring countries to open their markets, while granting their products preferential access to the European market. Further, it gives aid in conditionality linked with good governance, capacity building and respect for Human Rights.

The debate on whether internal or external factors where more important for development was spurred on by the rise of the Four Asian Tigers Singapore, Taiwan, South Korea and Hong Kong (also called  NICs – newly industrialized countries). Scholars argue whether export-oriented industrialization policies (neoliberal school) or successful state intervention policies (developmental state school) were the key to the success of the Tigers. Which type of policy should then serve as a model for other countries? What can the EU learn from the Asian Tigers, in terms of encouraging development?
S. Katarina Schmitz is a Brussels-based international trade expert who works with the German Ministry of Foreign Trade and specializes in EU external development cooperation relations.

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