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91. Economic Crisis and Corporate Reform in East Asia

Author:
Meredith Woo-Cumings
Publication Date:
06-2000
Content Type:
Working Paper
Institution:
Council on Foreign Relations
Abstract:
The Asian financial crisis of 1997–98 involved, among other things, a failure of regulation. Some believe this failure is endemic to global capitalism, and others believe it was profoundly local and idiosyncratic, emanating from regulatory flaws in the affected countries, stretching an arc from Thailand and Indonesia to Korea and Japan. There is also a debate about the nature of the regulation that failed. Some argue that the crisis emanated from a surfeit of nettlesome regulations and endemic industrial policy; others claim it happened for want of effective regulations and (even) industrial policy. Across the hypotenuse of these disagreements, however, stretches a universal recognition that regulatory infrastructure and institutions do matter and that they must play a major role in the way we think about economic development. After the miracle years in East Asia, “good governance” has become the Spirit of the Age.
Topic:
Economics and Political Economy
Political Geography:
United States, Japan, Indonesia, Israel, East Asia, Asia, Korea, and Thailand

92. The Paradox of Free Market Democracy: Indonesia and the Problems Facing Neoliberal Reform

Author:
Amy L. Chua
Publication Date:
06-2000
Content Type:
Working Paper
Institution:
Council on Foreign Relations
Abstract:
This paper will situate the recent problems in Indonesia in a more general framework that I will call the paradox of free-market democracy. The basic thesis I will advance is as follows. In Indonesia, as in many developing countries, class and ethnicity overlap in a distinctive and potentially explosive way: namely, in the form of a starkly economically dominant ethnic minority—here, the Sino-Indonesians. In such circumstances, contrary to conventional wisdom, markets and democracy may not be mutually reinforcing. On the contrary, the combined pursuit of marketization and democratization in Indonesia may catalyze ethnic tensions in highly determinate and predictable ways, with potentially very serious consequences, including the subversion of markets and democracy themselves. The principal challenge for neoliberal reform in Indonesia will be to find institutions capable of grappling with the problems of rapid democratization in the face of pervasive poverty, ethnic division, and an historically resented, market-dominant “outsider” minority.
Topic:
Economics and Political Economy
Political Geography:
United States, Israel, and East Asia

93. Asia Pacific -- Reform Politics

Author:
Oxford Analytica
Publication Date:
03-2000
Content Type:
Policy Brief
Institution:
Oxford Analytica
Abstract:
While the region has now emerged from recession, economic reforms remain incomplete and politically contentious. There is a risk that complacency and intransigence will weaken the momentum behind reforms before their full benefits can be felt. For countries not immediately enveloped by it, the East Asian crisis laid bare the risks associated with postponing economic reform without necessarily producing change.
Topic:
Economics, Political Economy, and Politics
Political Geography:
East Asia

94. When Labour and Capital Collude: The Varieties of Welfare Capitalism and Early Retirement in Europe, Japan and the USA

Author:
Bernhard Ebbinghaus
Publication Date:
01-2000
Content Type:
Working Paper
Institution:
Minda de Gunzburg Center for European Studies, Harvard University
Abstract:
The institutionalisation of early retirement has become a universal feature of postwar industrial economies, though there are significant cross-national variations. This paper studies the impact of different types of welfare regimes, production systems and labour relations on early exit from work. After an analysis of the main trends, the paper discusses the costs and benefits of early retirement for the various actors — labour, capital and the state — at different levels. The paper outlines both the “pull” and “push” factors of early exit. It first compares the distinct welfare state regimes and private occupational pensions in their impact on early retirement. Then it looks at the labour-shedding strategies inherent to particular employment regimes, production systems and financial governance structures. Finally, the impact of particular industrial relations systems, and especially the role of unions is discussed. The paper finds intricate “institutional complementarities” between particular welfare states, production regimes and industrial relations systems, and these structure the incentives under which actors make decisions on work and retirement. The paper argues that the “collusion” between capital, labour and the state in pursuing early retirement is not merely following a labour-shedding strategy to ease mass unemployment, but also caused by the need for economic restructuration, the downsizing pressures from financial markets, the maintenance of peaceful labour relations, and the consequences of a seniority employment system.
Topic:
Economics
Political Geography:
United States, Japan, Europe, and East Asia

95. The New Asian Challenge

Author:
C. Fred Bergsten
Publication Date:
03-2000
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
The initial postwar challenge from East Asia was economic. Japan crashed back into global markets in the 1960s, became the largest surplus and creditor country in the 1980s, and was viewed by many as the world's dominant economy by 1990. The newly industrialized countries (Korea, Taiwan, Hong Kong, Singapore) followed suit on a smaller but still substantial scale shortly thereafter. China only re-entered world commerce in the 1980s but has now become the second largest economy (in purchasing power terms), the second largest recipient of foreign direct investment inflows, and the second largest holder of monetary reserves. Indonesia and most of Southeast Asia grew at 7 percent for two or more decades. The oil crises of the 1970s and the financial crises of the late 1990s injected temporary setbacks but East Asia has clearly become a third major pole of the world economy, along with North America and Western Europe.
Topic:
Economics, International Trade and Finance, and Political Economy
Political Geography:
Japan, China, Europe, Israel, Taiwan, East Asia, Asia, North America, Korea, Singapore, and Hong Kong

96. The Crisis in Asia: An Empirical Assessment

Author:
Warwick McKibbin
Publication Date:
12-1999
Content Type:
Working Paper
Institution:
The Brookings Institution
Abstract:
The economies of South East Asia and Korea have been shaken by a financial and economic crisis that has enveloped the region since mid 1997. There are competing explanations for the cause of the crisis however most commentators would agree that a major shock that impacted on the countries has been a dramatic increase in the perceived risks of investing in these economies. This paper explores the impact of a re-evaluation of the risk in the Asian economies focussing on the differential real consequences of a temporary versus more permanent rise in risk. It contributes to our understanding of the possible consequences of the Asia crisis by applying a global simulation model that captures both the flow of goods as well as international capital flows between countries. The real impacts on the Asian economies of a rise in risk perceptions in the model are large and consistent with observed adjustment. However the spillovers to the rest of the world are relatively small because the loss in export demand that accompanies the crisis in Asia is offset by a fall in long term interest rates as capital flows out of Asia into the non-Asian OECD economies. Thus strong domestic demand in economies such as the US induced by the general equilibrium effects of the reallocation of financial capital can more than offset the consequences of lower export growth. The analysis also highlights the impacts on global trade balances reflecting the movements of global capital and points to both potential problems and lesson for policymakers over the coming years.
Topic:
Economics, Emerging Markets, and Globalization
Political Geography:
China, Israel, East Asia, and Asia

97. The Global Economic Impacts of Trade and Financial Reform in China

Author:
Warwick McKibbin and KK Tang
Publication Date:
12-1999
Content Type:
Working Paper
Institution:
The Brookings Institution
Abstract:
Despite the setbacks from the recent Asian currency crisis, the ascendancy of Asia as an economic centre of world economic activity is likely to continue into the 21st century. A key issue that will shape the role of Asia, and indeed the shape of the world economy in the 21st century, is the economic development of China. To date China has successfully weathered the currency storm in Asia and continues on a program of economic reform. If anything, the problems of Japan and Korea provide powerful lessons for other countries undergoing rapid economic growth and structural change. These lessons include the importance of a well developed financial sector with lending and investment decisions based on market signals rather than government directives. Whether China can further integrate smoothly into global markets and sustain the fast growth of the last few decades will be a crucial development in the world economy. In this paper, we explore the impacts of continued Chinese economic reform with a focus on the role of international financial flows both in the adjustment within China as well as in the transmission of Chinese reforms to the rest of the world.
Topic:
Economics, Emerging Markets, and Globalization
Political Geography:
China, Israel, East Asia, and Asia

98. Regional and Multilateral Trade Liberalization: The Effects on Trade, Investment and Welfare

Author:
Warwick McKibbin
Publication Date:
12-1999
Content Type:
Working Paper
Institution:
The Brookings Institution
Abstract:
This paper explores the impact on economies of trade liberalization under alternative regional and multilateral arrangements: unilateral liberalization; liberalization as part of the ASEAN regional grouping; liberalization as part of the APEC regional grouping; or liberalization as part of a multilateral trade liberalization regime. The paper is based on a Dynamic Intertemporal General Equilibrium model (DIGEM) called the Asia-Pacific G-Cubed Model. It is shown that the long run gains from a country's own liberalization tend to be large relative to the gains from other countries liberalizing although this varies across countries. It is also shown that there is a significant difference between the effects on GDP (production location) and the effects on consumption per capita of the alternative liberalization approaches across countries. The timing of liberalization is also shown to matter. With open capital markets the gains from credibly announced trade liberalization are realized before the reforms are put in place because there is a rise in global investment which raises the global capital stock. In addition there is a reallocation of capital via financial market adjustment. This paper also demonstrates that for some economies, there can be short run adjustment costs to trade liberalization because resources cannot be instantly reallocated across sectors in an economy. These adjustment costs from own liberalization can be reduced if more countries also liberalize. The nature of the dynamic adjustment suggests that other macroeconomic policies may play an important role during the early period of phased-in trade liberalization.
Topic:
Economics, Emerging Markets, and Globalization
Political Geography:
China, Israel, East Asia, and Asia

99. Rapid Economic Growth in China: Implications for the World Economy

Author:
Warwick McKibbin and Yiping Huang
Publication Date:
12-1999
Content Type:
Working Paper
Institution:
The Brookings Institution
Abstract:
Rapid growth of the Chinese economy in the past decade and its potential for strong growth into the foreseeable future have caused anxieties in the rest of the world. Some commentators see Chinese growth wholly in terms of competition for trade and investment opportunities with other developing economies and a major cause of structural adjustments in the advanced industrialized economies. In particular there have been warnings of severe consequences for international agricultural markets. In this paper we use a dynamic general equilibrium model called the G-CUBED model (developed by McKibbin and Wilcoxen) to explore possible future paths of the Chinese economy based on projections of population growth, sectoral productivity growth, energy efficiency and technical change in the Chinese economy. This model captures not only the composition of the direct trade impacts of developments in the Chinese economy but also the implications of the endogenous flows of financial capital on macroeconomic adjustment in the world economy. The study focuses on the period from 1990 to 2020. Rather than being a problem for the world economy, we find strong growth in China is beneficial for the world economy directly through raising world incomes.
Topic:
Economics, Emerging Markets, and Globalization
Political Geography:
China, Israel, East Asia, and Asia

100. The Transmission of Productivity and Investment Shocks in the Asia Pacific Region

Author:
Warwick McKibbin
Publication Date:
12-1999
Content Type:
Working Paper
Institution:
The Brookings Institution
Abstract:
An important aspect of macroeconomic interdependence in the Asia Pacific region is the adjustment of trade and current account balances in response to changes in saving and investment rates in individual economies. Greater trade flows, reliance on imported intermediate goods as well as more integrated capital markets imply that shifts in private or public saving and investment rates in an economy in the region can potentially have large impacts on other economies. This paper explores the quantitative nature of these linkages by focusing on a number of shocks within the context of a new dynamic multi-sector global model called the Asia-Pacific G-Cubed Model (AP-GCUBED). This model integrates sectoral adjustment with macroeconomic interdependence including explicit treatment of capital flows to explore the implications of a variety of productivity and investment shocks in the Asia Pacific Region. The first shock considered is a permanent decline in private investment in Japan. The second shock is a temporary rise in total factor productivity growth in China. The fall in Japanese investment is found to have a significant effect on trade flows and financial flows in the region whereas the rise in Chinese productivity has a quite different effect on the region.
Topic:
Economics, Emerging Markets, and Globalization
Political Geography:
China, Israel, East Asia, and Asia