4
For further details, see Evans 1995; Stiglitz 1996; Chang and Cheema 2002).
5
One plausible argument is provided by O’Rourke 2000, pp. 474-5. He cites some studies by Jeffrey Williamson and his associates which argue that, in the nineteenth century, tariff protection raised investment by reducing the relative price of capital goods, given that capital goods were rarely traded at the time. Then he goes on to argue that in the twentieth century, capital goods are more widely traded, and that there is evidence that protection increases the relative price of capital goods and thus slows down investment. However, he admits that the result for the nineteenth century is very sensitive to the sample and is associated with a completely implausible correlation that investment share is negatively related to growth in an augmented Solow model. The argument, he admits, remains at best inconclusive.
6
Weisbrot et al. 2000 do not define ‘developing countries’ as a category, but I (somewhat arbitrarily) define them as countries with less than $10,000 per capita income in 1999 US dollars. This means that countries like Cyprus, Taiwan, Greece, Portugal and Malta (rankings 24th to 28th) are included in the developed countries category, while countries like Barbados, Korea, Argentina, Seychelles, and Saudi Arabia (rankings 29th to 33rd) are classified as developing countries.
7
The only two developed countries where growth accelerated between the two periods are Luxembourg and Ireland. The 13 developing countries where growth accelerated were Chile, Mauritius, Thailand, Sri Lanka, China, India, Bangladesh, Mauritania, Uganda, Mozambique, Chad, Burkina Faso, and Burundi. However, in the case of Burundi, what happened was a deceleration in income shrinkage rather than any real growth acceleration (25 per cent shrinkage vs. 7 per cent shrinkage). Also, growth acceleration in at least three countries – Uganda, Mozambique, and Chad – can be largely explained by the end to (or at least a significant scaling-down of) a civil war, rather than by policy changes. In this context, there were really only nine developing countries where there was a growth acceleration that can in theory be attributed to a shift to ‘good policies’. Of course, even then, we should not forget that improved performance in the two biggest of these nine economies, that is, China (from 2.7 per cent p.a. to 8.2 per cent p.a.) and India (from 0.7 per cent p.a. to 3.7 per cent p.a.) cannot be attributed to ‘good policies’ as defined by the Washington Consensus.
8
Stiglitz 2001b. In the ascending order in terms of growth rate (or rather the rate of contraction, in all cases but Poland), they are Georgia, Azerbaijan, Moldova, Ukraine, Latvia, Kazakhstan, Russia, Kyrgyzstan, Bulgaria,Lithuania, Belarus, Estonia, Albania, Romania, Uzbekistan, Czech Republic, Hungary, Slovakia, and Poland.
9
The 16 countries are Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Italy, Japan, the Netherlands, Norway, Sweden, Switzerland, the UK and the USA.
10
Marglin and Schor 1990; Armstrong et al. 1991; Cairncross and Cairncross 1992.
11
Another reason behind this faster growth is that the world economy as a whole was growing faster thanks to the rapid growth in the developed countries, which account for the bulk of the world economy. I thank John Grieve Smith for raising this point. It should, however, be noted that, as pointed out above, this rapid growth in the developed economies also owed to the improvements in their institutions. On the role of world demand in the growth of developing countries during the 1960s and the 1970s, see Kravis 1970; Lewis 1980.
12
The figures in the two tables are not strictly comparable, as the category of ‘developing countries’ is comprised of slightly different sets of countries in each table.
13
This will be a growth rate that is more similar to those in the NDCs in the early-to mid-nineteenth century (when they had very few of the institutions recommended by the IDPE these days) than the ones in the late nineteenth and early-twentieth centuries (when they had seen major improvements in the quality of their institutions).
14
Another piece of evidence that ‘good institutions’ are not enough to generate growth is the fact that the major Asian developing economies remained virtually stagnant during the first half of the twentieth century, despite the fact that many modern institutions were introduced under (formal or informal) colonial rule. According to the estimate by Maddison 1989, the average per capita GDP growth rate for the nine largest Asian developing countries (Bangladesh, China, India, Indonesia, Pakistan, the Philippines, South Korea, Taiwan, and Thailand) during 1900-50 was 0 per cent p.a .. During this period, Taiwan and the Philippines grew at 0.4 per cent p.a., Korea and Thailand at 0.1 per cent p.a .. China grew at -0.3 per cent p.a., the South Asian countries and Indonesia at -0.1 per cent. These countries were, however, able to generate much faster growth after the end of colonial rule. The average per capita GDP growth rate for the 1950-87 period for these countries was 3.1 per cent p.a .. Part of this was, of course, due to improvements in the quality of their institutions, but the more important change was that they were able to pursue the ‘right’ policies, that is, activist ITT policies. See Amsden 2001 for a further exposition on this point.
15
A rather sad anecdote that supports my point here is that, right after the collapse of socialism in Mongolia, the US government provided a large sum of money to Harvard University to train dozens of bright young Mongolians as stockbrokers money that could have been used for a lot of useful developmental purposes.
16
Chang 1998a.
