Prof. Sam's Corner

Home-Grown Economics: The Asian Example (Part III)

Recognize Ideology but Manage Pragmatically

By Professor Sam Amadi
Faculty of Law, Baze University, Abuja
East Asian economies succeeded not because they embraced the whole doctrine of free market. They succeeded because they avoided ideology and embraced pragmatism. China has a long history of false steps, even up to the period of Mao Zedong and the cultural revolution. The Great Leap Forward set China back, especially with the collectivization of agriculture, resulting in mass death and failed industrialization. Deng Xiaoping changed the game. He initiated a gradual, programmatic and sensible reform that started with returning the land to dispossessed peasants with guaranteed tenure to encourage irrigation, higher seedlings and extension services. Xiaoping tracked the benefit of increased productivity in agriculture into gradual industrialization. At a point he started to open China to western technology and capital, but in a controlled and strategic manner using special economic zones.

China abhorred the rigid ideologies of communism and the laissez faire theory of neo-liberalism and embraced pragmatism. This approach is exemplified by the famous saying of Deng Xiaoping that it does not matter whether my cat is red or white if it catches a rat. China followed the example of Japan and South Korea where pragmatic leaders like General Park wisely implemented transformative reform of agriculture and deliberate but systematic protection and nurturing of infant industry to transition their countries to industrial economies. In these countries, pragmatic leaders enhanced efficiency not by surrendering to free trade, but rather using export discipline to improve productivity. The secret of the success of the East Asian countries is the pragmatic insight that what will ensure industrialization is to protect and nurture infant industry through export discipline. Export promotion worked where import substitution failed in Africa.

China and the rest recognized the pitfall of crony capitalism. When they raised tariffs to protect infant industries, they forced those industries to perform according to export benchmarks. Those who failed lost the fiscal and policy support. By doing so, they chose winners and losses, not through political patronage, but through the discipline of international trade. This is the model of a development state; a government, as Stephen Cohen and J Bradford DeLong in their book, Concrete Economics: The Hamilton Approach to Economic Growth and Policy, “that signaled the direction, cleared the way, set up the path, and – when needed- provided the means.”

Authored by Professor Sam Amadi, former Chairman of the Nigerian Electricity Regulatory Commission (NERC). Prof. Sam teaches at Baze University, Abuja; and coordinates The Abuja School of Economy and Regulation

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