Democratization and Economic Development-An East Asian Persp

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Democratization and Economic Development-An East Asian Perspective

Fidel Valdez Ramos
Former President Republic of the Philippnes


Introductory-the Challenges of Globalization and Democratization

Even as we approach the close of this century, the challenge of the next one is already clear:.
How are we to respond to the demands of globalization and democratization?
Our world is marked no longer by the superpower division of the clod war. It is now defined by economic integration-and by popular demands for people empowerment and more accountable governments.
The government of the Republic of Korea and the World Bank are to be commended for organizing this international conference-which brings together distinguished people who work on various aspects of development, to learn from each other's experiences and insights.
My assignment here is to survey the market economy, democratization, and development form the East Asian viewpoint.
In my view, the three reinforce and strengthen each other. Having said that, I am further convinced. On the basis of our own national experience in the Philippines, that none of these three aspirations could be achieved unless all these three elements are present.
While economic growth may begin without democracy, democracy is possible only under the market economy, which helps create the private realm-called civil society-that enables political and social freedom to flourish.
In turn, democracy, as it develops, consolidates development. The sense of self-worth that democracy nurtures in ordinary people sustains civil society and liberates the entrepreneurial spirit-which is likely to lift development to peaks of innovation and creativity.
Let me begin with a quick survey of developments in East Asia so far.

I. East Asian Authoritarianism and Its Achievements

The agrarian countries which industrialized successfully in our time did so by learning from those countries which had preceded them. They chose the industries in which they could compete in world markets-and exported their way to astounding economic growth.
In East Asia, this learning, borrowing and choosing was organized by authoritarian states. All of which were spurred-by threats to their survival-to seek military strength to insure the delivery of development to their people.
For decades, East Asian authoritarianism justified itself by imposing stability and predictability on the political system-stability and predictability which investor prize.
We all remember when the conventional wisdom was that Asia was not going to be modernized by way of the methods of the West-that Asians could tolerate an authoritarian system that would improve their living standards-i.e. on the basis of "Asian Values."
But I myself believe (with Francis Fukuyama, who is here with us) that, as people everywhere become richer and more secure, they become more free and more inclined. To speak about political participation and recognition of their status.
I can never forget that, in many places in East Asia (my own country included), ordinary people have staked their liberty-and sometimes their very lives-in the belief that there is something more to life than an unending spiral of material gratification.
The concept of people empowerment, as a requisite for democratic governance, has been highlighted these past few days in the Philippines with the celebration of the 13the anniversary this week of our peaceful people power revolution which threw out strongman rule on the 25the of February 1986.

What Authoritarian Governments Accomplished in East Asia

Most of East Asia's authoritarian regimes may have already been consigned to the dustbin of history. But I think it is only fair that we should acknowledge what some of them were able to do.
First, they brought about a dramatic decline in poverty.
Between 1970 and 1990-according to World Bank estimates-the incidence of absolute poverty in Malaysia declined from 18% to only 2%--in Korea from 23% to only 5%--and in Thailand from 25% to 16%.
In Indonesia, thanks to rural development programs that brought high-value crops, fertilizer subsidies, supplementary incomes to peasant families, and even outright doleouts to backward communities, poverty declined the most-from 60% to down to 15%.
Together with higher incomes has come a tremendous improvement in income equality.
In Korea and Taiwan (stimulated initially by land reform), income equality already approximated West European standards.
Now, consider regional stability.
Just as the market-opening reforms the authoritarian regimes carried out have made their national societies less poor, so has the market system brought them together-despite their differing political systems and cultural diversity.
Today, we have an alphabet soup of regional aggrupations-ASEAN, AFTA, ARF, APEC, and ASEM, etc. etc,. (backed up by a multitude of non-governmental institutions)-working to ease bilateral and regional conflicts.
"Anticommunist" ASEAN has been able to accommodate and incorporate "communist" Vietnam and Laos, and China sits at the same table with its once-deadly enemies-Japan and the United States.
And just as early capitalism brought down feudalism in Western Europe, so does the commercial way of life continue to erode the authoritarian regimes that remain in Asia, in Europe, Latin America and elsewhere.
Even once-totalitarian China is changing-irreversibly. I think-under the impact of economic reforms these past 20 years. And as the Chinese economy continues to modernize. Note how the political institutions that regulate it are also being forced to modernize themselves.
I regard pluralism as unavoidable in China's future. And I believe Beijing's rulers realize this themselves-this is why they are treating individual dissidence so sensitively.

II. The Tasks for Democratic Governments in Our Time

Let me now turn to the tasks of East Asia's democratic governments in our time.
The first and most urgent of these tasks is to complete freeing the market and to strengthen the competitiveness of East Asian economies.
Authoritarianism may have been appropriate for East Asia's period of cheap-labor industrialization and culture of centralist benevolence. But today, democracy is far more suitable to East Asia's increasingly sophisticated market economies. Industry itself is less and less susceptible to command and centralizaiton-as production becomes more complicated, more scientific, and more flexible.
East Asia's authoritarian governments may have accomplished a great deal-much more than similar regimes have ever done in Latin America, Eastern Europe, Africa and other parts of Asia. But they have not been paragons of virtue. They have been just as susceptible to corruption as all other holders of absolute or near-absolute power.
They have nurtured crony capitalism-which has spawned cartels, monopolies, and other imaginative forms of rent-seeking behavior.
We need strong and effective states to impose higher standards of transparency on our financial and banking system-and higher standards of accountability and responsibility on our administrative bureaucracies.
And we need effective states to balance and "reconcile" the priorities of global markets with society's needs to care for those whom development leaves behind.

The State Should Influence The Climate and Not the Weather

But the East Asian states must avoid committing the policy mistakes that young Europeans now accuse their elders of having done-of erecting regulatory structures of social protection which work to prevent European companies from meeting the standards of competitiveness and flexibility required by free trade and open Economics: which promote habits of laziness and complacency: and which discourage the entrepreneurial daring and creative energy which the young Europeans see as so abundant in the United States.
East Asians must always have an acute sense of the limits of what the governments can do. They must realize that. Once government disengages from large-scale economic regulation, it is much better to have non-political and impartial administrators, and that it is more cost-effective to leave private initiative to operate the day-to-day workings of the market economy.
In their activism, governments should using Peter Drucker's appropriate phase. Try and influence the climate-and not the weather.
Would say the softer East Asian states (such as the Philippines and Thailand) are well-advised to give the market system a looser rein than their stronger counterparts (such as South Korea and Singapore).
The Ebb and Flow of the Tide of Public Affairs
The state and civil society (of which the free market is, I think, the key institution) are not meant to be antagonists - where each one is perpetually trying to overwhelm the other.
A western scholar offers what I regard as an apt metaphor for their long-term relationship. The relationship (he wrote) is like the ebb and flow of the tide on every shore.
In the course of this long-term relationship, first one side and then the other side tends to dominate.
At critical junctures in the life of the national community - during wars or revolutions or financial crises - the state may grow in power and prestige.
But, during periods of stability and peace, markets and the institutions of civil society may contain the state more easily.
In our time, East Asia certainly needs more open markets than it now has. But East Asia also needs stronger states - to carry out the tasks that the voluntary institutions of civil society cannot carry out by themselves.

IV. The Future of the Market Economy and of Democracy in East Asia

Now to conclude - How are we to respond to the demands of globalization and democratization - to the imperatives of economic integration and to popular demands for people empowerment and more accountable governments?
Globalization offers all our countries not only immense opportunities to share capital, technology, and knowledge on a global scale.
Globalization also opens up tremendous possibilities for the expansion of human freedom as about modernization and development are spread when national align with international no9rms and practices - as for instance, in civil liberties human rights.
Democracy: a Life-and-Death Necessity for Ordinary People Cynics used to say democracy is a luxury poor countries cannot afford. But now we know that, to the contrary, democracy can sometimes spell the difficult between life and death for ordinary people.
Dr. Amartya Sen's study of the famines in India, Bangladesh, Ethiopia, and the Saharan states which recently won him the Nobel Prize led him to believe that mass-starvation can occur - even when there is enough food - if unaccountable rules are indifferent to their people's distress.
This distinguished scholar (who is also with us here) concluded that, in all these famines, "It was the lack of democracy, not the lack of food, that leave millions dead."
In many parts of East Asia, replacing authoritarian regimes with democratic ones has been the relatively easy part of the political transition. The harder task is to make democracy work for ordinary people.
While the trappings of democracy - such as regular elections, representative parliaments, mass media, and independent judiciaries - are easy to assemble. Making them work properly requires a long learning process. For which people often have little patience.
In fact, democratic expectations in a state like Indonesia might yet be frustrated - because the impatience of riotous students is complicating the already-huge problems of the democratic transition - which prevents a national society rooted in a patrimonial culture from readily transforming from an 'electoral' democracy into a genuine, full-fledged, 'liberal' democracy.
Summing up Finally - what is the challenge globalization poses for us in East Asia?
The challenge is for us to correct the growing mismatch between global capital markets and the increasingly inadequate national institutions that support and regulate them.
The challenge is for us to grasp the opportunities globalization presents - while minimizing our shared vulnerability to its risks.
The challenge is for us to reconcile market forces with social justice - to ensure that development and democracy always go together - to balance the market economy with social equity, and to give development a human face.
This kind of compassion - of empathy and fellow-feeling - is the ideal we Asians must strive for in building our nation communities. This spirit, I have on numerous occasions, called our caring, sharing and daring for each other in the Asia-Pacific region and in the global economy.
To actualize such caring, sharing and daring is the longer-term challenge for us all!
Thank you and mabuhay!!!