By Adam Shedletzky, 2L and Bruce McRae, 2L
Adjunct professor and recent SJD graduate Mitchell Wigdor authored No Miracle: What Asia Can Teach All Countries About Growth. He spoke at a recent lunchtime session in the Solarium, Faculty of Law. The so-called Asian miracle identifies the period of dramatic growth that occurred in Asian economies between 1960-2010.
While Malaysia and Singapore saw their GDP per capita multiply more than 50 times during that period, countries like Ghana—one of the supposed success stories of Africa—and Columbia witnessed significantly slower per capita growth, at six times and 17 times respectively. And it’s not just economics. Indicators across society—in education, healthcare, housing, and employment—have improved. How did the Asian countries do it? What can others learn from it?
Wigdor argues Asia’s accomplishments are not a result of unique circumstances. Its remarkable economic growth is not a miracle. It can be replicated elsewhere. But it takes hard work, political will, and time.
Wigdor’s book, No Miracle, discusses how any country can build effective institutions and bridge the “digital divide” to give its citizens a better life. Crossing this digital divide represents an opportunity for a country to participate in an increasingly integrated global economy. Wigdor argues information and communications technology (ICT)—the application of computers and telecommunications equipment to store, retrieve, transmit and manipulate data—is essential to creating growth and lasting prosperity.
ICT is one of the very few technologies economists have identified as transforming economic structures, and peoples’ lives. Using it leads to productivity gains, and comparative advantages for countries. Yet, the effective use of ICT is complex, and several mediating factors must be considered, says Wigdor.
Wigdor gave several specific examples of how Asian countries have built successful institutions to enable economic prosperity. One such example is in Penang, Malaysia.
First, there must be a sufficient level of infrastructure and investment. If only a small percentage of the population owns a cell phone or has access to broadband Internet, the gains from information technology will be minimal.
Second, a country’s human capital must be adequately developed to support the effective use of ICT. Many forms of ICT—the computer, for example—are tools that were initially developed to make highly educated people more productive. Now that ICT is more ubiquitous, and its use is required to develop a 21st century economy, citizens need to be capable of effectively utilizing ICT. A primary education is not enough anymore, Wigdor argues. People need at least a partial, if not an entire, high school education. That is where you learn to learn – how to adapt and thrive in a rapidly changing world.
Third, building effective institutions is critical. As Dani Rodrik, professor of international relations at Harvard University, says: “The quality of institutions trumps everything else.” Institutions are government bodies that formulate, enact, implement, and enforce public policy and laws. Most institutions are primarily focused on implementation. They are concerned with how a government transforms its aspirational policy goals into reality on the ground.
It sounds simplistic, but a good institution is one that accomplishes the purpose for which it was created. Wigdor argues that, often, governments create institutions that try and do too much. And they are not sufficiently funded, or staffed by people with the appropriate expertise, to properly carry out their mission. So, they fail right off the bat. More effective, says Wigdor, is to initially focus on successfully executing the core requirements of the institution, guarding against overreaching. As the economy grows, the institutional roles and activities can be expanded.
To initially construct effective institutions, a government needs to be active, to get out there and engage with stakeholders before the institution is created in the first place. This consultation needs to be ongoing. A feedback loop is critical to ensure that institutions can keep up with a rapidly changing world. For that reason, institutions should ensure a diversity of viewpoints is represented on their boards and advisory panels. Plus, when you listen to stakeholders, you give people and organizations a vested interest in success.
In terms of creating an effective governance structure, institutions should be insulated, as much as possible, from political influence. While government oversight is required, they can’t be involved in day-to-day operations, as institutions are prime targets for interference in functions such as the granting of contracts and licenses. Ideally, there is a clear mandate that delineates powers clearly between various institutions and government ministries to prevent turf wars. Investors want to know the rules of the game, not be wary of complex and suddenly changing goalposts. Legislative guarantees, rather than just granting a reversible, permissive authority to act, can also encourage institutional independence and business confidence.
Wigdor gave several specific examples of how Asian countries have built successful institutions to enable economic prosperity. One such example is in Penang, Malaysia. The country hired American economists to write the Nathan Report, which set forth a vision for how Penang could seize upon opportunities unique to its circumstances (without mentioning any specific industry by name). Fast forward 40 years, and Penang has now developed one of the most dynamic electronic clusters in the region, including multinationals Bosch, Siemens, Dell and a variety of others. It has gone from very simple work to more sophisticated technological development, although it is not yet at the pinnacle of innovation. This, in contrast to the relatively slow-pace of development in the rest of Malaysia.
In the end, argues Wigdor, there is no secret recipe to building a thriving, prosperous economy. Yet Wigdor doesn’t buy the argument that governments can’t create the conditions for success. In any country, there will inevitably be some constraints, but he believes that, with hard work, coordination, and political will, any government can build effective institutions and improve the lives of their citizens. Asia provides many lessons of how to foster growth and should be seen as an inspiration for other states to embark on this long but critically important path.
