Democracy, Market Economics, and Development: An Asian Perspective

202 Pages·2001·1.16 MB·English

by  Farrukh Iqbal

Democracy, Market
Economics, and Development
An Asian Perspective
Farrukh Iqbal and Jong-Il You
Editors
The World Bank
Washington, D.C.
Copyright © 2001 The International Bank for Reconstruction
and Development / THE WORLD BANK
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Manufactured in the United States of America
First printing May 2001
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Cover design by UltraDesigns
Library of Congress Cataloging-in-Publication Data
Democracy, market economics, and development / edited by Farrukh Iqbal, Jong-Il You.
p. cm.
Includes bibliographical references.
ISBN 0-8213-4862-0
1. Capitalism. 2. Democracy. 3. Economic development. I. Iqbal, Farrukh. II. You,
Jong-Il, 1958-
HB501 .D423 2001
338.9—dc21 2001017950
C
ONTENTS
Foreword.............................................................................................................v
Contributors ...................................................................................................vii
Overview ..........................................................................................................ix
Farrukh Iqbal and Jong-Il You
Chapter 1
Democracy and the Market Economy: Two Wheels of a Cart.................1
Kim Dae-jung
Chapter 2
Democracy and Social Justice .......................................................................7
Amartya Sen
Chapter 3
Political Institutions, Democracy, and Development .............................25
Minxin Pei
Chapter 4
Participation and Development: Perspectives from the
Comprehensive Development Paradigm ..................................................49
Joseph Stiglitz
Chapter 5
Corporate Governance and Economic Development:
The Korean Experience .................................................................................73
Ha-sung Jang
Chapter 6
Economic Adjustment, Equity, and Workers’Support ..........................95
William A. Douglas
iii
iv DEMOCRACY, MARKET ECONOMICS, AND DEVELOPMENT
Chapter 7
Political Economy of Reform: The Characteristics of Japanese
Institutions ....................................................................................................119
Kuniko Inoguchi
Chapter 8
The Politics of Governance: Lessons from the East Asian Crisis ......127
Stephan Haggard
Chapter 9
Asian Values in the Wake of the Asian Crisis .......................................149
Francis Fukuyama
Chapter 10
Values, Culture, and Democracy: AKorean Perspective .....................169
Jong-keun You
F
OREWORD
This book contains a selection of papers which were originally presented
at a conference held in Seoul, Korea in February 1999. The idea for the
conference arose the year before in a meeting between Mr. Kim Dae-jung,
President of the Republic of Korea and Mr. James Wolfensohn, President
of the World Bank Group. Recognizing that the recent travails of the East
Asian region provided an opportunity to review the links between styles
of political governance, economic strategies and development, they
agreed to sponsor a conference at which these issues could be discussed
among development practitioners, political leaders, and members of civil
society. This book is being published to bring some of this thinking to a
larger audience.
The conference revealed some common patterns in views and experi-
ences. There was broad agreement on the need to conceive of develop-
ment as a multi-faceted objective rather than one comprising solely of
changes in income per capita. Regarding governance, it was noted that
civil and political liberties were important in their own right as well as
effective instruments with which to attack corruption and poverty. The
need to achieve social consensus and support through participatory
means was highlighted in discussions about the design and implementa-
tion of market-oriented economic reforms. Good corporate governance,
supported by sound and prudential regulations, was also thought neces-
sary for markets to operate in the public interest. Finally, there was a
broad consensus that developments in Asia reveal complex links running
from values and culture through institutions to economic performance
which suggest that it is inappropriate to ascribe the 1997-98 crisis in East
Asia to a simple-minded conception of so-called Asian values. These
ideas and others are discussed at length in the papers that have been
selected for this book.
The perspectives discussed in these papers were shaped in part by the
comments and suggestions of several persons who served as moderators,
discussants and panelists at the conference. In this connection, we grate-
fully acknowledge the contributions of Sri-Ram Aiyer, Walden Bello,
v
vi DEMOCRACY, MARKET ECONOMICS, AND DEVELOPMENT
Mark Malloch Brown, Yung Hee Choi, Yul Choi, Soo Bok Chung, Peter
Geithner, Carolina Hernandez, Chul Kyu Kang, Moon Kyu Kang, Daniel
Kaufmann, Il Soo Kim, Choongsoo Kim, Keum Soo Kim, Robert Klit-
gaard, Duk Seung Lee, Jin Soon Lee, Gill-Chin Lim, Ronald Maclean-
Abaroa, Kamal Malhotra, Don Oberdorfer, Mari Pangestu, Funkoo Park,
Won Soon Park, Young Hye Park, Hak-Yong Rhee, Shaha Riza, Jean-
Michel Severino, Gunnar Stalsett, Laksamana Sukardi, Kari Tapiola,
Vinod Thomas, Lisa Veneklasen, Vivienne Wee, Lynn Williams, William
Witherell and Jung Sook Yoon. In addition, we would like to thank the
following persons who rendered invaluable help in making the confer-
ence a success: Byung-Goo Cho, Hun Choi, Kwang-Hai Choi, Ha-Won
Jang, Mun-Soo Kang, Choon-Sun Kim, Ho-Shik Kim, Jin-Pyo Kim, Tae-
Dong Kim, Joyce Rompass and Haruyuki Shimada. Migara de Silva ren-
dered able assistance in preparing the manuscript for publication.
Finally, we would like to acknowledge the financial support of the
Government of Japan, the Government of Korea and the World Bank, and
the organizational support of the Korea Development Institute and the
World Bank Institute which enabled the conference to be held.
Farrukh Iqbal
Jong-Il You
C
ONTRIBUTORS
William A. Douglas
Adjunct Professorial Lecturer, School of Advanced International Studies,
Johns Hopkins University, Washington, DC, USA
Francis Fukuyama
Omer L. and Nancy Hirst Professor of Public Policy, George Mason Uni-
versity, Virginia, USA
Stephan M. Haggard
Professor, Graduate School of International Relations & Pacific Studies,
University of California, San Diego, California, USA
Kuniko Inoguchi
Professor, Faculty of Law, Sophia University, Tokyo, Japan
Farrukh Iqbal
Lead Economist, World Bank Institute, The World Bank, Washington, DC,
USA
Ha-sung Jang
Professor, College of Business Administration, Korea University, Seoul,
Republic of Korea
Kim Dae-jung
Nobel Laureate and President, Republic of Korea
Minxin Pei
Senior Fellow, Carnegie Endowment for International Peace, Washing-
ton, DC, USA
Amartya Sen
Nobel Laureate and Master of Trinity College, University of Cambridge,
Cambridge, UK.
Joseph Stiglitz
Professor, Department of Economics, Stanford University, Palo Alto,
California, USA
vii
viii DEMOCRACY, MARKET ECONOMICS AND DEVELOPMENT
Jong-Il You
Professor, School of Public Policy and Management, Korean Develop-
ment Institute, Seoul, Republic of Korea
Jong-keun You
Governor, North Cholla Province, Republic of Korea
O
VERVIEW
Farrukh Iqbal and Jong-Il You
This book presents a selection from papers originally presented at a con-
ference entitled Democracy, Market Economy and Development that was
held in Seoul, Republic of Korea, in February 1999. The main objective of
the conference was to examine the extent to which democracy is impor-
tant to the achievement of sustainable development. While it is widely
accepted that economic freedom, as ensured broadly by the operation of
the economy according to market or laissez-faire principles, is a critical
determinant of development, the role of political freedom, as ensured
broadly by the practice of democracy, is less well understood. The scope
of this overview is limited to the ideas, references, and cases covered by
the selected papers. The papers focus largely on the experience of East
Asia in recent years. Thus, other experiences, such as those of Eastern
European countries and Russia, while certainly relevant to the under-
standing of the links between political governance and economic out-
comes, are not covered here.
Five common themes are prominent in the papers published here, as
encapsulated in the following propositions:
• Democracy and markets are “two wheels of a cart.” This metaphor is
offered by Kim Dae-jung, President of the Republic of Korea, to
emphasize that both democratic politics and market economics are
needed to improve the lives of citizens. This proposition is discussed
at length by several papers here.
• Democracy is intrinsic to development. This proposition is at the core
of the paper by Amartya Sen. Sen argues that development, by defini-
tion, should include a component of civil and human rights and liber-
ties, and that those rights and liberties are best conveyed by the
democratic system of governance.
• Participation is fundamental to democracy and development. Ademo-
cratic system is a necessary condition for sustainable development, but
not a sufficient one. Rather than its mere mechanics, it is the practice
of democracy, as demonstrated by the scope for voice and by the open-
ness and transparency of the system, that is most critical to the long-
term sustainability of development. This idea is most prominently
espoused in the paper by Joseph Stiglitz.
ix