Introduction
Since achieving independence in the
aftermath of World War II, most countries in the Middle East and other parts
developing world experienced disappointing levels of economic development in
terms of G.D.P. per capita, life expectancy, and literacy rates, as well as
difficulties with industrialization.[1] Of course, there has been progress, but to
the disappointment of many in the developing world, their countries have fallen
behind the West instead of catching up.
The only exceptions are the following states in East Asia: Japan, South
Korea, Taiwan, Hong Kong, and Singapore.
Even though most of the nations in the Middle East and East Asia started
off with relatively similar levels of economic development in 1950, one region
witnessed rapid levels of growth and the others did not. Why did this happen?
We must resist the urge to look for
cultural explanations. Not all East
Asian nations have had similar success.
Despite impressive growth rates in the last three decades, China’s 2013 G.D.P.
per capita of $7,418 is typical of most of the developing world. South East Asian nations like Vietnam and
Cambodia, which share some cultural similarities to their neighbors in the
north, have also struggled economically.
Furthermore, Turkey represents an outlier in the Middle East. Although its GDP per capita is approximately
half of Japan and South Korea, it is nearly twice as high as China and better
than many Eastern European nations. Culture
has helped shape the histories of each region, but it is not that important of
a variable for explaining the current economic disparity between most of the
Middle East and specific countries in East Asia. In fact, seventy years ago, Turkey and
Morocco had a higher G.D.P. per capita than South Korea and Taiwan.[2]
It is also tempting but wrong to
blame social cleavages in the Middle East to explain the gap in
development. Syria, Lebanon, Yemen and
Iraq have suffered from high levels of political violence, which is in part
driven by religious diversity and the manner in which ethnic groups are
distributed across these countries.[3] Forging national identities in states that
were artificially created by European powers at the end of World War I has not
come easy for many countries in the Middle East. However, social cleavages do not explain why
relatively homogeneous countries with very longer histories of political unity like
Egypt, Tunisia, and Morocco have also experienced problems with economic
growth. South Korea experienced a devastating civil war
from 1950 to 1953 as well as a coup d’état in 1960 and a democratic revolution
in 1987; and Turkey has witnessed a violent conflict between the Turkish
majority and the Kurdish minority in the eastern part of the country over the
last three decades along with four separate coup d’états from 1960 to 1997. Yet, both countries have managed to
experience significantly greater economic growth than Egypt. Social cleavages can affect economic growth,
but they do not play an important role in explaining the current disparity
between the Middle East and East Asia.
I have used the theories developed
by David Waldner, Bruce Cummings, Atul Kohli, and Chalmers Johnson to develop a
different hypothesis to explain the disparity between the two regions as well
as an explanation for outliers like Turkey and China.[4] The two independent variables that explain
the dependent variable, economic development, are as follows: (1) the level of
conflict between political elites following World War II, which determined
whether state expenditures would be spent on creating larger regime coalitions
to insure short term political stability or invested in long term economic
development; and (2) whether a country had closer ties to the United States or
the Soviet Union throughout the Cold War.
Countries with less intense conflicts amongst the elites and closer ties
to the United States were more likely to have greater political stability
without having to spend as much on their military. They had greater access to new technology, consumer
markets for their industrial exports, and foreign direct investment. Furthermore, they had more capital to invest
in education, the infrastructure, health care, and emerging industries as money
was not tied up in social welfare, subsidies for the poor, and over bloated bureaucracies. Lastly, bureaucrats were hired more for their
merit than their loyalty to the regime. Developmental regimes in Japan and South Korea
successfully redistributed capital to fledgling industries to promote their
growth, and when those businesses were efficient enough to compete with those
in the developed world, tariffs were removed, forcing them to compete in the
international market place. These
developmental states rewarded industries that showed signs of progress with
greater access to loans and subsidies, and they were less likely to prop up
industries that showed signs of failing.
The end results were rapid industrialization and economic development.
The two independent variables are
interconnected as countries with higher levels of elite conflict in newly
independent countries after World War II often experienced the overthrow of
older agrarian elites with ties to the West and their replacement with young, urban
military officers and bureaucrats who resented European colonialism and leaned
towards an alliance with the Soviet Union.
The instability of these regimes prompted leaders to use the resources
of the state to buy off allies through land redistribution, subsidies, jobs in the
bureaucracy, cheap housing, tax exemptions for business owners, and financial
perks for military officers. The
enormous cost of these rents and a lack of Western capital cost the state
resources that could have otherwise been used to invest in education, the
infrastructure, and industrial development.
Regimes justified these redistribution and anti-Western policies with
different ideologies like Communism and Arab Nationalism, but the end result
was similar: disappointing levels of economic development.
I chose four case studies to test
this hypothesis: South Korea, China, Turkey, and Egypt. Below is a table that shows a line of
causation between the independent, intervening and dependent variables:
|
Country
|
Independent
Variables
|
Intervening
Variables
|
Dependent
Variables
|
|
South
Korea
|
Low level of elite conflict
and strong ties to the West
|
A strong state in
alliance with business leaders create polices of long term growth (industrial
deepening and educational investment)
|
High rates of
growth and development
|
|
Turkey
|
Moderate Level of
elite conflict and ties to the West
|
Levels of elite
conflict were moderate and the state was semi-democratic; ruling coalitions
used populist policies at the expense of long term growth; however, ties to the West and structural reforms in
the 1980’s led to moderate growth
|
Moderate rates of
growth and development
|
|
Egypt and China
|
High level of elite
conflict and weak ties to the West
|
Authoritarian
leaders create populist coalitions using side payments, sacrificing long term
growth for short term stability; import substation policies fail to create
high quality goods
|
Low rates of growth
and development in the first decades after independence
|
There are other variables that helped shape the economies
of these nations over the last century, but the two independent variables above
best explain the general differences in economic development.
Choosing the Case Studies
Before
conceptualizing and quantifying the independent and dependent variables, it is
necessary to explain the choice of case studies. An astute observer might ask why Gulf
countries like Kuwait, Qatar, Bahrain, Saudi Arabia, Oman, and the United Arab
Emirates were not chosen. After all,
some of these countries have higher GDP per capita than South Korea and
Japan. Shouldn’t I have used one of
these states instead of Turkey as an outlier?
Furthermore, does the level of growth in terms of GDP per capita in
these countries contradict my hypothesis?
The short answer is no. The
wealth of the Gulf States is a consequence of their possession of enormous oil
and gas deposits combined with the fact that these countries have very tiny
populations. Economic growth, or the
rise in average income, was not a result of economic development.[5] Growth
and development are two very different concepts. Gulf countries did not have to create quality
educational systems and merit-based bureaucracies nor did they have to
encourage industrialization to increase their GDP per capita. The monarchs of these states have been able
to buy off almost all opposition to their rule with oil rents; as a result,
there is little need to democratize, reduce corruption, or establish political
rights and civil liberties. Most
countries do not have the luxury of having one easily exploitable resource that
can provide a good standard of living for their entire population. Also, oil is a finite resource. Rentier states in the Gulf do not have viable
long term plans in place to insure continued economic growth once the oil runs
out. Therefore, Gulf States are not developed
countries.
It
is obvious why rentier states weren’t chosen as case studies, but why did I not
choose countries like Iraq, Iran, Lebanon, Yemen, Palestine or Algeria? Like Egypt, they have also experienced
disappointing levels of economic development since the end of World War
II. However, unlike Egypt, these
countries have severe problems with political stability in comparison with most
East Asian nations over the last seventy years according to the Center for
Systematic Peace’s index for measuring levels of political violence[6]. Civil wars, international conflicts, economic
sanctions, coup d’états, and population migrations are often used as reasons
for problems with economic growth within these countries. By not choosing them as case studies, we can
eliminate this variable as a potential factor in explaining the disparity
between the Middle East and East Asia. Since
most of these countries and Egypt have similar levels of economic development
anyway, we can conclude that political violence is not a significant factor in
explaining the economic disparity between the Middle East and East Asia. In the end, I chose Egypt as a case study because
it is a much larger country than Tunisia or Morocco; it has a history of
experimentation with industrialization that predates the twentieth century; and
all social scientists agree that Egypt is a part of the Middle East.[7]
One
also might ask why I chose South Korea over Japan, Taiwan, Singapore, and Hong
Kong. The explanation is pretty
simple. Singapore and Hong Kong are city
states, so it is problematic to use them as case studies, and Taiwan is a much
smaller country than South Korea. Furthermore,
Japan has a longer history of industrialization than South Korea that dates
back to the Meiji Restoration in 1868.
By 1950, Japan had a GDP per capita that was four times that of
Egypt. South Korea’s GDP per capita, on
the other hand, was lower than Turkey’s and slightly higher than China and
Egypt in 1950. South Korea’s first
attempts at industrialization date back to the 1920’s under the rule of the
Japanese, which is around the same time when Turkey began to industrialize and
much later than Egypt’s first attempt. [8]
Lastly,
China was an obvious choice for my East Asian outlier. Up until the end of the nineteenth century,
Korea was often referred to as a mini-China as it shared many cultural and
political characteristics with its bigger neighbor. Both China and Korea have long histories of
using bureaucratic examinations to hire state personal. They were both occupied by the Japanese and destroyed
by wars in the middle of the twentieth century.
Lastly, they both share aspects of Confucian culture.
Conceptualizing the Dependent Variable: Economic
Development
Now
that we have four good case studies to compare and contrast, it is important to
clearly define and quantify economic development, which is the dependent variable. To do
this, I will use Paul Gregory and Robert Stuart’s method for measuring the
level of economic development in a country.[9] The following factors are critical for
determining whether or not a country is developed: (1) Economic Growth, (2)
Efficiency, (3) Income Distribution, (4) Stability, and (5) Viability. The
first factor, the level of economic growth, is measured by gross domestic
product per capita, or the amount of earnings per person. Development is partially dependent on
economic growth as a citizen can’t afford their basic needs without an adequate
yearly income.
However, GDP per capita by itself cannot
tell us whether a country’s economy is stable and viable in the long term
future. For example, dependence on a
single primary resource may bring temporary growth in terms of GDP per capita
as was the case in the Arab Gulf or recently in Russia, but this is terrible
for stability as radical swings in the global prices can play havoc with a country’s
average earnings. Furthermore,
dependence on a single resource means a country’s economy lacks viability in
the long term future. One day, oil will
either run out or will become obsolete if green technologies become a viable
alternative to the combustible engine.
To measure stability and viability, we can look at the percentage of a
country’s earnings from the primary, industrial, and service sectors. Developed countries are expected to have
diversity within their economy, meaning a high percentage of workers are
employed in the industrial and service sectors.
We can also use the Human Development Index—which is an aggregate
measure of average income, life expectancy, and levels of education—to measure
sustainability and viability. Countries
with higher levels of human development are better at adapting to changes in
the global market place and dealing with structural unemployment.
Another
important measure of development is efficiency, which takes into account how a
country uses its available material resources and labor. We expect states with high levels of
efficiency to have merit-based bureaucracies that can effectively collect and
redistribute taxes to other parts of the government like the educational system
in order to encourage long term growth. We can also expect merit-based bureaucracies
to enforce the law equally across society and create a level playing field
where businesses can compete. Bureaucracies that suffer from extensive problems
with clientelism and corruption will have problems enforcing the law, educating
students, building roads, and engaging in other duties expected of a strong
state.[10] A lack of rule of law will also discourage
economic investment domestically and internationally. Furthermore, a corrupt state will make it
easy for wealthy businessmen to use bribes and connections to influence the
legislative and executive process. One
of the best ways to measure economic efficiency is to use Transparency
International’s Corruption Perception Index (CPI), which makes use of thirteen
different surveys that analyze a country’s laws, institutions, and perceptions
of corruption within the population.
Gregory
and Stuart’s third indicator for measuring economic development—income
inequality as measured by the GINI index—is problematic in terms of using it to
rank a country’s level of development.
It is important that a country’s wealth is not concentrated too
extensively in the hands of a few individuals.
A vibrant economy requires a large middle class that operates small
businesses, runs the bureaucracy, and consumes goods. Furthermore, developed countries require social
mobility. People need incentives to work
hard. However, a country that has a
relatively high level of income inequality can still be well developed. The Ivory Coast and the United States have
similar levels of economic inequality, but America has a significantly larger
GDP per capita, which means the average person in the bottom twenty percent in the
United States has a much better standard of living than in the Ivory Coast. Gregory and Stuart acknowledge this point. Therefore, we would expect South Korea to
have a higher ranking in four of the five factors that determine economic
development and expect the possibility that its GINI index might not be higher
than the other case studies.
Lastly,
to fully conceptualize our dependent variable, we need to see how numbers
measuring economic development have changed from 1950 until 2013. 1950 is chosen as the starting date as the
United Nations and several other international organizations collected data on
GDP per capita, life expectancy, and literacy rates from my four case
studies. Unfortunately, there is no
measurement for the corruption perception index from that year as this
statistic was not developed until the 1990’s.
However, I do have numbers that measure GDP per capita and the HDI index
in 1950, which will have to serve as a suitable basis for determining the level
of development in that year. The table
below shows how levels of economic development changed over time:
|
Country
|
GDP per capita, 1950
|
HDI Index,
1950
|
GDP per capita, 2013
|
HDI Index,
2013
|
CPI Index,
2013
|
GINI index,
2013
|
|
South Korea
|
$876
|
.459
|
$27,541
|
.891
|
55
|
31.3
|
|
Turkey
|
$1,299
|
.382
|
$13,466
|
.759
|
50
|
39.0
|
|
China
|
$614
|
.225
|
$7,418
|
.699
|
45
|
47
|
|
Egypt
|
$517
|
.291
|
$5,417
|
.682
|
32
|
30.8
|
The
numbers indicate that all of the countries started off with relatively low standards
of living and have experienced significant growth in the last sixty years.[11] The rapid advance of technology and globalization
has benefited the great majority of the world’s population in terms of average
incomes, life expectancy, and levels of education. However, growth throughout the planet has not
been evenly distributed; some countries have grown faster than others as
indicated by the chart above, and only a few countries have caught up to the
West. In 1950, over 70 percent of South
Korea’s work force was engaged in agriculture; in Egypt, approximately 90
percent was employed in the same sector.
Today, only 6.6 percent of South Koreans are engaged in agriculture
whereas approximately 50 percent of Egyptians are still employed in this sector.[12] Most of Egypt’s farmers live below the
poverty line with a relatively low standard of living. South Korea’s industries are export-oriented
and produce complex technology likes automobiles and computers whereas Egypt’s
struggling industrial sector produces low quality goods in a very inefficient
manner. Few of their goods can be
exported to developed countries that have a competitive market place. As for the service sector, South Korea has
one of the best educational systems in the world, and its citizens have a
literacy rate over 99 percent. In Egypt,
educational institutions are more corrupt and fail to produce a significant
number of students that can produce quality research. Only 70 percent of Egyptians are literate,
and the average quality of college graduates is poor. How do we explain the disparity in levels of
development?
The Independent Variables: Explaining Economic
Development
To
explain the causal factors behind economic development, I will once again return
to Paul Gregory and Robert Stuart, who provide a framework for understanding
economic development in their book Comparing Economic Systems.[13] According to them, economic development will
occur when one of the following four things take place: (1) exploitation of
untapped land or resources; (2) opportunities to increase trade and access new
markets; (3) technological advancements; and (4) the improvement of economic
institutions. Since my four case
studies are neither resource poor nor resource rich, the first factor is not
that important. Egypt did gain some
significant benefits from the discovery and extraction of oil resources in the
early eighties, but the country now consumes most of its fossil fuels and it
will become an oil importer within the next few years.[14] Furthermore, money collected from the Suez
Canal only amounts to approximately 5 billion dollars a year, and despite being
an exporter of cotton and sugar, the country imports over 50 percent of its
food. China also has a significant
amount of natural resources, but due to the country’s enormous population,
which is over 1.3 billion people, they consume most of what is extracted from
the ground. Neither Turkey nor South
Korea is significantly rich or poor in terms of natural resources either. They depend on their industrial and service
sectors for most of their wealth today. Therefore,
these countries depend on factors two, three, and four to create economic
growth. Why was South Korea and to a
lesser extent Turkey able to gain access to new markets, resources, and
technology; and why did they have more efficient economic institutions than
China or Egypt? According to my hypothesis,
there are two major independent variables to explain this: (1) levels of elite
conflict following World War II, and (2) alliances during the Cold War.
My
first independent variable comes from David Waldner’s book State Building
and Late Development. [15] The
basis of his theory is that governments that experienced high levels of elite
conflict while in the process of state building after World War II used the
resources of their country to purchase allies at the expense of long term
development. States that did not have
high levels of elite conflict while building their states were more likely to
create merit based bureaucracies that were autonomous from the rest of society. With less corruption and clientalism, state
institutions could focus their efforts on long term economic development. We can measure this variable by looking at
factors like tax collection, investments in education, subsidies, and welfare
benefits to different social classes.
Whereas a developmental regime will invest more in education, industry,
and will collect more taxes, a regime trying to build a regime coalition will
invest in subsidies and welfare, and they will give more tax exemptions and
other perks to loyal regime supporters.
The second variable, which is
alliances in the Cold War, help us explain why certain countries had greater
access to markets, capital, and new technology.
Bruce Cummings, in an article entitled “Webs with no spiders, spiders
with no webs,” identifies the U.S. influence on Japan and Korea as an enormous factor
in explaining their growth.[16] We can say the same for Turkey, which became
a member of NATO after World War II. The
United States invested a lot of capital in allies that it saw as being on the
front lines of the Cold War. Countries
in Western Europe, Greece, Turkey, South Korea, and Japan were given extensive
amounts of aid, and merchants were given access to the United States’ consumer
market. We can analyze the influence of
America and the Soviet Union on their allies by comparing levels of economic
aid, trade and investment; we can also see how much their allies spent on the
military.
Setting the Stage: the Roots of Elite Conflict in
the Developing World
Throughout the last two centuries,
elites in the developing world were faced with a series of potential conflicts
created by the rapid economic and political expansion of Western Europe. Prior to the rise of modernity in the West,
governments throughout most of the Middle East and East Asia were controlled by
traditional monarchies who ruled their domains indirectly through an aristocracy. The power of these monarchs was relatively
weak compared with Western states as they did not have the technology, the
bureaucracy or the infrastructure to assert direct control over their
provinces. They were dependent on
powerful local elites to provide taxes and military support to the central
government. Furthermore, their economies
were based on agricultural production, which produced far less aggregate wealth
than the industrialized economies that emerged in the West during the
nineteenth century. Lastly, many
monarchies had their power limited by a socially powerful religious class that
enforced traditional norms and customs on society. These
general characteristics describe the Mamluk regime in Egypt, the Ottoman
Empire, the Qing Dynasty in China, and the Yi Dynasty in South Korea during the
eighteenth century, although the power of religious institutions was
significantly weaker in East Asia than the Middle East.[17] Growing Western influence disrupted the
equilibrium of political systems throughout the rest of the world.
Faced with the challenge of
encroaching Western powers, traditional monarchies could either reform to catch
up with the West or resist the influence of Europe through reactionary policies. Each decision was problematic. Those rulers who sided with the traditional
elites and resisted reforms became the victim of European imperialism since
traditional monarchies did not have the technology, infrastructure, or military
capacity to resist the West. This was the
case in China and Korea as they became victims of Western and Japanese aggression. China and Korea not only resisted reforms but
tried to close their doors to all foreign influence until they were forced to
open up in the nineteenth and early twentieth century. China was divided into spheres of influence
by European powers, and Korea was invaded by the Japanese in 1910.
With the exception of the Japanese,
things did not turn out well either for most rulers who tried to make Western political,
economic, and social reforms. Reformers
were often resisted by traditional elites within their own countries who were
worried about losing their power and prestige.
For example, the creation of a modern bureaucracy means that local
elites will have their power supplanted by bureaucrats loyal to the state. Western legal reforms means that social norms
like gender relations will be challenged.
This is why progress in many countries was too slow and uneven to prevent
Western domination. With the exception
of Japan, attempts at reform failed to stop the advance of Western imperialism
in the nineteenth and early twentieth century throughout the globe. This
was the case with Egypt and the Ottoman Empire.
In Egypt, after a brief period of
French occupation from 1798 to 1803, an Ottoman officer named Mohamed Ali
ruthlessly eliminated the old Mamluk aristocracy and engaged in agricultural,
military, and industrial reforms over the next four decades.[18] He sent students to study abroad in Europe
and imported Western teachers to train engineers and military officers. Despite his success at expanding the size of
the military, building irrigation canals, and growing cash crops for export to
Europe, his industrial projects failed to get off the ground due to a lack of
capital and technical experience, and his military ambitions were thwarted by
aggressive Western powers, who forced him to back tract on many of his
ambitious polices. After his death, a
series of weak rulers followed. His
grandson Ismail took on too much debt from European banks, and he spent
excessive amounts of money on extravagant building projects in Cairo and
Alexandria as well as on the Suez Canal.
The debt caused severe political instability in the country, which
eventually led to the British occupying the country in 1882.
The Ottoman Empire’s attempts at
reforms in the nineteenth century fared even worse.[19] Following a string of humiliating military
defeats and the loss of a lot of territory in Eastern Europe to European
armies, Ottoman Sultans in the middle of the nineteenth century tried to implement
political reforms under a program known as the Tanzimat. Their attempts to unite the empire and create
a single Western legal system with a strong bureaucracy and a modern
educational system were opposed by conservative political and religious elites,
who slowed down the pace of change. On
the other hand, Western educated bureaucrats and military officers were
constantly pushing the sultans to make more radical reforms. These divides among the elite created rifts
in the empire. To make matters worse,
the Ottoman Empire, unlike Japan or Egypt, never had the chance to industrialize
as the British and French forced the empire to keep their markets open to
Western goods free of tariffs. The slow
and uneven pace of reforms, Western political pressure, and the political
instability within the empire led to its downfall. At the end of World War One, the Ottoman
Empire collapsed, and only Turkey, under the rule of the energetic military
officer Mostafa Kamal, avoided European occupation.
Once in power, Western Imperialists,
concerned mainly with resource extraction, did not encourage industrialization
throughout their empires, and infrastructure was built usually for the purposes
of extracting primary goods. Although the
British invested heavily in agricultural production in Egypt, they invested
very little in educational institutions or in the creation of a modern
state. The British ruled indirectly through
Egypt’s monarchy and local elites, bestowing upon them benefits in exchange for
loyalty. When faced with opposition to
their rule, they preferred to use a mix of coercion and co-optation as
displayed with their response to the 1919 revolution led by the Wafd
party. The British responded to some of
the demands of the opposition by giving partial autonomy to Egypt’s government and
allowing elections for a stronger parliament, but they refused to give full
independence to the country. The
influence of the British over Egyptian politics created instability. Over the next three decades, various factions
in Egyptian society—including supporters of the King, the Wafd Party, the
Muslim Brotherhood, fascist movements like the Young Egyptians, and the British
military—destabilized the country politically with their infighting and failure
to implement economic reforms. On the
eve of independence in 1952, despite the opulence of Cairo and Alexandria,
Egypt was still a very poor country where ninety percent of the population worked
in agriculture and approximately ten percent of the population was literate. During a summer of protests in 1952, a group
of young army officers led by Gamal Abdel Nasser overthrew the monarchy.[20]
In Korea, their colonial experience was very
different. The Japanese, who had
successfully industrialized in the late nineteenth century, ruled Korea as if
it was a part of Japan.[21] They ruthlessly destroyed the Yi Dynasty’s institutions
of indirect rule and created a modern state with an autonomous bureaucracy that
dominated the entire country. Old elites
from the previous regime were co-opted into the new system. Their form of imperialism was more intensive
than France or Great Britain in terms of the number of bureaucrats and military
personal. At first, like the British in
Egypt, they were only interested in increasing agricultural production in Korea. However, due to the war with China from 1933
to 1945, Japan invested heavily in Korea’s industrial sector. They established banks, schools, factories,
and a state planning board that redirected state resources to develop new
industries. An export driven economy was
encouraged as goods were designed to be shipped back to Japan. To keep the price of goods low, the rights of
workers and peasants were brutally suppressed.
Although Japanese rule was exploitative, Koreans gained experience in
running industries, merit based bureaucracies, and a quality educational
system. Approximately one third of
Korea’s industry under Japanese rule was owned by Koreans. By the end of Japanese rule, approximately thirty
percent of the work force was employed in industry, and half the population was
literate. Even though Korea would be
invaded by the Soviet Union and the United States in the north and south
respectively at the end of World War II, and its economy subsequently destroyed
by a brutal civil war from 1950 to 153, what Japan left behind was a country
with knowledge of industry, merit-based institutions, and a developmental
mentality. It’s GDP per capita was
lower than Turkey’s, but its HDI index was significantly higher because of the
country’s level of education.
China’s initial experience with
modernity was far more destructive. The
humiliation of European domination and the instability created by the country’s
clash with modernity created severe political instability in the early
twentieth century. Following a
revolution in 1911 that witnessed the overthrow of the Qing dynasty, China’s
political system broke down and civil war devastated the country over the next
four decades.[22] By the 1920’s, the lines of the civil war
were drawn between supporters of the landed elite represented by the
Kuomintang, and supporters of the communist party led by Mao Ze Dong, who was
able to whip up support among the peasantry. The war temporarily stopped after the Japanese
invasion of the country in 1933, but it continued following the end of World
War II. In 1949, the Communist party succeeded in
defeating the Kuomintang, who fled to Taiwan.
Like Egypt in 1950, the grand majority of the Chinese population
consisted of peasants with only a tiny percentage of the population working in
industry.
Turkey’s history during the interwar
period was far more peaceful than China’s.
Following the end of World War One, Mostafa Kamal was able to unite what
remained of the Ottoman military and bureaucracy to defeat Greek military
forces and establish control over what is now today Turkey. During the 1920’s, Kamal’s economic policies
were relatively conservative given the tenuous position of the country, his own
position in power, and that of his political faction, the Republican People’s
Party (RPP).[23] He did successfully create an autonomous
bureaucracy relatively free of politicization, but he did not challenge the
power of the landed elites, who continued to pay low taxes. Only in the 1930’s did the power of the state
begin to increase. The RPP attempted to
move capital and labor from agricultural to the industrial sector, and they tried
to increase the control of the bureaucracy over the country. Although the increasing power of the state
was initially tolerated during the Great Depression and World War II, when the
war ended, local land owners and merchants began to resist growing state
encroachment and their developmental policies.
Mostafa Kamal’s regime wanted to keep workers wages low, increase taxes,
and invest state funds into new industries, which is how Japan created economic
development at the end of the nineteenth century.[24] Following Ataturk’s death in 1938, his
successors were not as politically adept or popular, and tensions increased by
the late 1940’s between the state and other social classes in society. Instead of resulting in political conflict,
the RPP agreed to allow their main political opposition, the Democratic Party
(DP), to run in free and fair elections in 1950. Political divides were not as intense in
Turkey as they were in Egypt as average land holdings were much smaller, economic
inequality was less intense, and political elites were not as divided over the
issue of Western influence since the country had never been directly controlled
by an imperial power. However, having to agree to elections harmed
the RPP’s developmental program. Kamal’s
political party only partially succeeded in their developmental reforms as the
countries industrial sector remained underdeveloped. In 1950, the RPP would lose an important
election to the Democratic Party.
The Affect of Elite Conflicts and the Cold War on
Development
Elites in the aftermath of World War
II were divided over the following issues: (1) the power of the state vs. the
power of local elites; (2) Westernization vs. conserving traditional religious norms;
(3) promoting industry vs. agriculture; (4) investing in long term development vs.
a welfare state; and (5) allying with the United States or the Soviet Union. These complex divides often led to
revolutions, coup d’états, and civil wars throughout the developing world. South
Korea, Egypt, China, and Turkey were influenced by these factors, but only in
South Korea were the elite able to overcome them to create a true developmental
state.
According to David Waldner, elite
conflict forced some governments to sacrifice long term economic development
for the sake of building stable regime coalitions; since elite conflict emerged
before a strong state with an autonomous bureaucracy was created, this left new
bureaucracies vulnerable to politicization.[25] This was the case in Egypt and China. When Abdel Nasser and the Young Officers came
into power in Egypt, they faced challenges from political Islamists, the
aristocracy, capitalists who supported open trade with the West, communists,
and the British, who still occupied the Suez Canal. The military was more concerned with securing
its position of power than long term development in the 1950’s. China’s communist government was in a similar
situation in 1949. They faced potential
resistance from a powerful aristocracy that controlled a significant amount of
resources, and they were ruling over a country that had been devastated by
decades of warfare. Building a regime
coalition was a top priority for the communist party to survive their early
years in power. It was not possible to throw all political opposition jail. In both Egypt and China, developmental goals
were sacrificed for political stability.
Instead of creating bureaucracies
that were efficient and autonomous, ruling elites used their political power to
give out jobs to loyal clients who were not necessarily qualified. Bureaucracies became overstaffed with overpaid
and undertrained workers.[26] Many businesses, especially those of
foreigners, were nationalized and overstaffed with loyal workers as well. When bureaucracies become an instrument for
doing favors for loyal clients instead of an institution to enforce the will of
the executive, they become over bloated, inefficient, and corrupt. Tax resources were wasted to keep
unaccountable and inefficient bureaucracies afloat. Once
they were created, it is very difficult to get rid of them. These policies lead to inefficient economic
institutions as a result. Despite the
tremendous size of authoritarian states in the region and their ability to
repress political opposition, they are incredibly weak in most areas of
governance.
Regimes in these circumstances have
other ways of purchasing allies.
Governments can win over the support of peasants by redistributing some
land from the poor to the rich and subsidizing the cost of fertilizer. In the case of China, hundreds of thousands
of wealthy land owners were executed and their lands distributed to the
peasantry. In Egypt, a series of land
reform laws in 1952 and 1961 saw a massive redistribution from large land
owners to medium sized ones.[27] This broke the power of the aristocracy and
expanded Nasser’s base of support. Egypt’s
government also won allies by purchasing agricultural produce at above the
market price and redistributing it to the urban poor at a subsidized
price. Once subsidies are established,
they are also difficult to remove. In
Egypt today, the government spends nearly ten percent of its budget on bread
and energy subsidies. Elites can also
win support among industrial labor by providing some workers with job security,
a minimum wage, subsidized housing, pensions, and cheap public transportation
in exchange for loyalty. Governments
also can prevent the importing of new technology to protect the jobs of workers
in industry or the bureaucracy. This
creates severe inefficiency and explains why countries like Egypt have fallen
further behind the West. Egypt’s
agriculture industry remains unproductive as half of the countries food is
imported. These populist policies might
win over the support of the rural and urban poor in the short term, but it
comes at an enormous expense of paying for those subsidies over the long term
and creating inefficiencies in agricultural, industry, and governance. The famines that hit China in late 1950’s
and 1960’s, which killed millions of people, is one of the most horrific
examples created by collective action problems.[28] These challenges only grew worse in Egypt and
China as population growth strained the resources of states.
Since these policies make the cost
of running businesses inefficient as workers are overpaid, governments are than
forced to step in and protect local industries from outside competition by
placing high tariffs on imports. This
policy is known as import-substitution.
The idea behind this economic philosophy is that by protecting local
industry, domestic businesses would eventually improve and become more
productive over time. However, due to
the lack of worker accountability, the lack of money spent on education, and
the poor quality of the infrastructure, import substitution failed to create
substantial growth in many developing countries throughout the globe. The problem was even worse in communist
countries like China, where the government owned and operated almost all of the
country’s farms and businesses by the late 1950’s. This
destroyed all competition and took away any incentive for hard work.
One of the biggest problems in both
Egypt and China was the creation of a premature welfare state before they had
an industrialized economy.[29] Although
Western countries did expand their welfare states in the first half of the
twentieth century, they already had the industrial economy that provided the
resources to pay for it and still leave plenty of money left over to continue
investing in education and the infrastructure.
South Korea paid its workers abysmally low wages until the late
1970’s. The country only democratized
and expanded the welfare state after a democratic revolution in 1987. By that time, the country already had an
industrial economy and a bureaucracy that was effective at collecting taxes. Countries like Egypt and China created
enormous welfare states before they had the capital to pay for it. Due to the high cost of social welfare and the
small amount of taxes being collected, these weak regimes could not raise
enough capital to pay for these programs over the long term nor could they
invest adequately in long term development.
Whereas South Korea today spends over nine percent of its GDP on
education, Egypt spends only approximately three percent. David Waldner calls this precocious
Keynesianism.
China and Egypt’s super power ally,
the Soviet Union, provided little in the way of economic support as well, at
least in comparison with the United States.
Although the Soviet Union did provide China and Egypt with some military
aid, advisors, and engineers in the 1950’s, this support paled in comparison to
the United States’ Marshal Plan and the Truman doctrine, which provided
billions of dollars in aid to their allies.
Two percent of Turkey’s GDP was based on U.S. aid alone in the 1950’s
and over twenty percent of Turkish exports went to America. The United States occupied South Korea in the
1950’s and helped the country engage in land reform. Billions were invested in South Korea’s
economy. On the other hand, Westerners
that could have provided expertise, capital, and technology were purposely
driven out of both Egypt and China during the 1950’s. Anger over European imperialism and enthusiasm
for the communist alternative pushed many regime elites to shift their allegiances
to the Soviet Union. This was a bad bet
as communist regimes throughout the globe would stagnate and decline throughout
the 1960’s and 1970’s. With Soviet
financial support waning, Mao Zedong denounced Khrushchev in 1958 and both
countries went on their separate paths.
On the other hand, military relations between the United States and
their allies in South Korea and Turkey only grew stronger in ensuing decades.
Egypt and China began to have
problems with out of control debt and stagnation by the end of the 1960’s.[30] As the
problems became worse throughout the 1960’s and 1970’s, these governments were
forced to turn to the United States and international institutions like the
International Monetary Fund and the World Bank for loans and aid. After Egypt’s disastrous defeat by Israel in
1967 and Nasser’s death three years later, his successor Anwar Sadat engineered
a “corrective revolution,” shifting his country towards capitalist policies,
hoping the West would provide support for the regime. After Sadat signed a peace treaty with Israel
in 1979, Egypt began receiving approximately two billion in aid from the United
States a year. China also shifted its
foreign policy towards the United States.
A few years after Mao’s death, Deng Xiaoping established controlled of
the country in 1979 and began opening up the country to capitalism.
International Organizations often
require structural readjustment programs before giving out loans, which means
cutting subsidies and welfare benefits; privatizing various industries; and
downsizing the bureaucracy.[31] Egypt and China have responded with reforms,
but the results have been mixed. As these
regimes tried to reform their systems, they were met with substantial political
opposition. Authoritarian regimes in
particular had a difficult time with reform since the legitimacy of their rule
was solidified on the back of subsidies and import-substitution policies. This creates one large collective action problem. Taking
away bread subsidies might cause the poor to riot for example. This happened in Egypt in 1977 when Sadat
tried to eliminate bread subsidies.[32] Opening up a countries system also brings
political risk. Deng Xiaoping’s open
door policy brought rapid economic growth in the eighties, but it also led to
the rise of political opposition as exemplified by the Tiananmen Square
protests in 1989. It is tough improving
educational systems when information from the outside world has to be filtered
constantly. The political risks to
reform mean that a lot of developing countries have problems getting rid of
bloated bureaucracies, inefficient industries, and massive debt even when the
ruling elite are aware of the problem and want to reform the system. China and Egypt still struggle with reform to
this very day.
On the other hand, countries in East
Asia that did not have substantial elite conflict were able to create what
Meredith Woo Cummings and Chalmers Johnson call the developmental state.[33] Not worried about the political stability of
the regime, these states were able to invest their money in long term
industrial and educational development. Following
a decade of rebuilding and a coup d’état in 1960 led by Park Chung Hee, South
Korea would follow a path of rapid economic development with the help of a
professional bureaucracy and access to American markets abroad. His regime placed tariffs on various foreign
products to protect local industry from Western competition. Although many of South Korea’s industries
were initially inefficient, the government spent years importing new
technology, educating students, and giving loans to companies that were making
significant progress. Patience was the
key. Furthermore, the government suppressed
wages and labor movements to help companies become profitable. Eventually, high tech industries in sectors
such as automobiles and computer technology were established, and they found
markets in the West to sell their products.
After several decades of economic development, wages for workers
eventually increased. If Park Chung Hee
did not a strong alliance with the other elites of South Korea elite, a
merit-based bureaucracy, or the political support of the United States, his
reforms would not have been possible.
Turkey represents a mixed case with
some success and failure. When the
Democratic Party came into power in 1950 following an electoral victory, they
eventually used state resources to buy allies within the agricultural and
industrial sector to win succeeding elections. Welfare programs were expanded, wages were increased
for workers, and over seventy percent of the population was exempted from taxes. This created severe problems with debt. In all but four years from 1950 to 1980,
Turkey had budget deficits.
Approximately every ten years, the deficits became so excessive that
they caused political instability, which led to coup d’états in 1960, 1971,
1981, and 1997. This led to
disappointing levels of growth. However,
the bureaucracy was able to maintain a high degree of autonomy and avoid
significant politicization. Furthermore,
the military, even after each coup, remained committed to a limited democracy. Starting in the 1980’s, democratic
governments were able to implement structural economic reforms, which
eventually led to significant debt reduction by the early 2000’s. More money was available to invest in the
infrastructure, education, and industry.
Today, Turkey exports many of its industrial products, including
electronics, to the European Union.
Moderate levels of elite conflict and ties to the United States have led
to moderate levels of economic development in the country.
Conclusion
It
is important to note that Egypt and China have experienced growth over the last
sixty years. Furthermore, South Korea
has not been a perfect state and its economy has had periods of stagnation,
especially in recent years. The term
developed country may be a misnomer as it implies that reforms are no longer
necessary or further development is no longer required; this is far from the
truth. However, we cannot ignore South
Korea’s rapid level of economic development in the second half of the twentieth
century. Political scientists like David
Waldner, Atul Kohli, Bruce Cummings, and Chalmers Johnson have provided complex
explanations for why South Korea became a developmental state and other
countries did not.
Of
course, there are some potential flaws with the argument I have made. For one, it leaves little room for the power
and influence of ideas and culture. What
role did ideas like communism, Arab Nationalism, Islamism, or capitalism play
in influencing these different countries?
Although China and Egypt both had problems with precocious Keynesianism,
communist ideology gave China’s regime a very different character than
Egypt. Furthermore, would my explanation
of economic development apply to other regions of the world like Latin
America? It would be useful to analyze
other countries throughout the developing world to see if the complex model
provided in this paper applies to other states.
Work Cited Page
1. Bellin, Eva Rana.
"Contingent Democrats: Industrialists, Labor, and Democratization
in Late-Developing Countries," World Politics, Vol 52, No. 2,
January 2000, pg. 175-205.
2. Cook, Steven. The
Struggle for Egypt: From Nasser to Tahrir Square. Oxford University Press: Oxford, 2012.
3. “Corruption Perceptions Index: 2013,” Transparency
International www.transparency.org/cpi2013/results, 2013.
4. Crafts, Nicholas.
“The Human Development Index, 1870-1999: Some Revised Estimates,”
European Review of Economic History, Vol. 6, 2002: 395-405.
5. Evans, Peter, Dietrich Rueschemeyer, and Theda Skocpol,
eds. Bringing the State Back In. Cambridge University Press: Cambridge, 1985.
6. Gregory, Paul and Robert Stuart. Comparing Economic Systems in the Twenty
First Century. Houghton Mifflin
Company: New York, 2000.
7. “Human Development Report, 2013: The Rise of the South,
Human Progress in a Diverse World,” United Nations Development Program:
New York, 2013.
8. Mansfield, Peter. A
History of the Middle East, 4th edition. Penguin Books: New York, 2013.
9. Marshall, Monty.
“Major Episodes of Political Violence: 1946-2013,” Center for
Systematic Peace, March 2014.
10. Migdal, Joel, Atul Kohli and Vivienne Shue, eds. State Power and Social Forces. Cambridge University Press: Cambridge, 1994.
11. Owen, Roger. State,
Power, and Politics in the Making of the Modern Middle East. Routledge:
London, 2004.
12. Priestland, David.
The Red Flag: Communism and the Making of the Modern World. Penguin Books: New York, 2009.
13. Schwedler, Jillian and Deborah Gerner. Understanding the Contemporary Middle East. Lynne Rienner Publishers: Boulder, 2008.
14. Waldner,
David. State Building and Late
Development. Cornell University
Press: New York, 1999.
15. Waterbury, John. The
Egypt of Nasser and Sadat: The Political Economy of Two Regimes. Princeton University Press: New Jersey, 1983.
16. Woo-Cumings,
Meredith, ed. The Developmental State. Cornell University Press: Ithaca, 1999.
[1]
“Human Development Report, 2013: The Rise of the South, Human Progress in a
Diverse World,” United Nations Development Program: New York, 2013.
[2]
Crafts, Nicholas. “The Human Development
Index, 1870-1999: Some Revised Estimates,” European Review of Economic History,
Vol. 6, 2002: 395-405.
[3]
Marshall, Monty. “Major Episodes of
Political Violence: 1946-2013,” Center for Systematic Peace, March
2014.
[4]
Waldner, David. State Building and
Late Development. Cornell University
Press: New York, 1999, and Woo-Cumings, Meredith, ed. The Developmental State. Cornell University Press: Ithaca, 1999.
[5]
Schwedler, Jillian and Deborah Gerner. Understanding
the Contemporary Middle East. Lynne
Rienner Publishers: Boulder, 2008.
[6]
Monty, Marshal. Ibid.
[7] Mansfield, Peter.
A History of the Middle East, 4th edition. Penguin Books: New York, 2013, pg. 52-70.
[8] Kuhli, Atul.
“Where Do Developmental Economies Come from,” The Developmental State.
Ibid, pg 93-136.
[9] Gregory, Paul and Robert Stuart. Comparing Economic Systems in the Twenty
First Century. Houghton Mifflin
Company: New York, 2000.
[10]
Waldner, Ibid.
[11] Crafts, Nicholas.
“The Human Development Index, 1870-1999: Some Revised Estimates,”
European Review of Economic History, Vol. 6, 2002: 395-405; “Corruption
Perceptions Index: 2013,” Transparency International www.transparency.org/cpi2013/results, 2013; and “Human Development Report, 2013: The Rise
of the South, Human Progress in a Diverse World,” United Nations Development
Program: New York, 2013.
[12]
Waldner, Ibid, and Cook, Ibid.
[13]
Gregory and Stuart, Ibid.
[14]
Cook, Steven. The Struggle for Egypt:
From Nasser to Tahrir Square. Oxford
University Press: Oxford, 2012.
[15]
Waldner, Ibid.
[16]
Cummings, Bruce. “Webs with no spiders,
spiders with no webs,” The Developmental State, Ibid. Pgs 61-92.
[17]
Kuhli, Ibid, and Mansfield, Ibid.
[18]
Cook, Ibid.
[19] Mansfield, Peter, Ibid.
[20]
Cook, Ibid.
[21]
Kohli, Atol. “Where Do High-Growth
Political Economies Come From? The
Japanese Lineage of Korea’s Developmental State,” The Developmental State,
Ibid, pg 93-136.
[22]
Priestland, David. The Red Flag:
Communism and the Making of the Modern World. Penguin Books: New York, 2009.
[23]
Waldner, Ibid, Pg 53-73.
[24]
Johnson, Chalmers, Ibid.
[25]
Waldner, Ibid.
[26] Owen,
Roger. State, Power, and Politics in
the Making of the Modern Middle East. Routledge: London, 2004, pgs 19-29.
[27]
Waterbury, John. The Egypt of Nasser
and Sadat: The Political Economy of Two Regimes. Princeton University Press: New Jersey, 1983.
[28]
Priestland, Ibid.
[29]
Waldner, Ibid, pg
[30]
Waterbury, Ibid.
[31]
Waldner, Ibid.
[32]
Bellin, Eva Rana. "Contingent
Democrats: Industrialists, Labor, and Democratization in Late-Developing
Countries," World Politics, Vol 52, No. 2, January 2000, pg.
175-205.
[33]
Johnson, Ibid.
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