Semiha TurgutFinal PaperAbstractThe purpose of this paper is to discuss Alice Amsden’s ‘Escape from Empire’. Amsden’s thesis is: a country needs to follow its own policies to develop. Her argument, which is based on development experiences of countries, concludes as developing countries should be free to choose their own model. Based on Amsden’s argument, the thesis of this paper is that Amsden fails to adequately support her thesis on the role of own policies in the development process. Furthermore, her conclusion is endorsed, indeed developing countries should be free to choose their own model, but in a different reasoning that Amsden uses.
In the first section, the subject, the problem and the thesis of this paper is introduced. As it is considered crucial in reasoning of this paper, several key notions are introduced and thesis of the paper is given in more detail. Second section aims to charitably reconstruct Amsden’s arguments with her assumptions, without any subjective ideas on the subject.
In the third section, the reasoning of this paper’s thesis, why Amsden’s conclusion endorsed but not her reasoning. Keywords: economic growth; economic development; Escape from Empire IntroductionAlice Amsden, a former professor in MIT, had influential studies on the topic of economic development. One of her latest publications, ‘Escape from Empire: A Developing World’s Journey Through Heaven and Hell’ published in 2007.
Discussing the topic of economic development, she presented a widely discussed issue as her thesis: “the more freedom it has to determine its own policies, the faster a developing country will grow” (p.153). The purpose of this paper is to criticize this publication. Thereby, the thesis of this paper is: Amsden fails to adequately support her thesis on the role of own policies in the development process. Accordingly, her conclusion is agreed but her arguments are not. Her main argument is based on two other arguments. Both of these arguments reach to the same sub-conclusion which is the premise of her main argument .
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In the first, two eras of economic development, from WWII to 1980s and after 1980s and are compared as economic development policies. In the second, development experiences on Asian countries, mainly China and India, are discussed. The sub-conclusion that both arguments reach is: more freedom in determining own development policies, the faster developing countries will grow. Often mixed, substituted or linked to each other, economic growth and economic development are notions that widely discussed since 1700s. While economic growth is usually measured and associated with indicators such as Gross National Product (GNP), Gross Domestic Product (GDP) and Gross Value Added (GVA), development is usually associated with the per capita added to these indicators. In other words, the notion of economic development contains human factor, meaning that development often refers to life quality and welfare (Akbulut, Adaman, & Madra, 2015; Bucknall, 2012). Both notions, related concepts and their theories have evolved in time within the circumstances of periods (Adelman, 2000). Main discussions on development includes the absence of no certain measurements, as well as the absence of predetermined road map.
Regarding nature of these notions, whether that growth leads to development (Bucknall, 2012) or as Akbulut et al. (2015) state: “so called development process itself creates so-called underdevelopment”, essential discussions still remains. After WWII, the atmosphere was briefly consisted of the need of reconstruction in Europe, the challenge of colonialism and the need of dealing with poor countries, integrating them into the political and economic system. In such circumstances, development was a strategy for dealing with such atmosphere, moreover, also a political strategy for ‘the potential spread of Soviet-style communism’ (Akbulut et al., 2015; Amsden, 2009). The reconstruction of developing countries mainly consisted of economic welfare, capital accumulation, industrialization, development planning and external aid. After 1980s, development was mainly about price stability, capital control and structural adjustments programs (Akbulut et al.
, 2015; Amsden, 2009). Amsden (2009) defines intergovernmental and international (financial) institutions (World Bank, IMF, GATT/WTO) as key actors of development. Within this framework, as Amsden’s first argument contains inductive fallacies. Her conclusion, developing countries should be free to follow their own policies, is endorsed because what ‘development’ means differs in each country. This meaning of development, not etymologically, defines the goals, the strategies and policies for development. Of course, there are several criterions of United Nations or other institutions to determine the development, but even a slight progress may mean development for an underdeveloped country regardless of universal criterions. On the other side, development policies should be adequate to a countries’ endogenous forces such as culture, human capital, structural conditions and history.
Next section reconstructs Amsden’s arguments, summarizes her premises and states her (hidden) assumptions. Reconstruction of the ArgumentAs briefly presented in the previous section, Amsden (2009) describes economic development in two eras. With an assumption that United States of America (US) and institutions lead development policies, these two eras are defined as the First and the Second American Empire (FAE & SAE) or heaven and hell. The definition of these two is accepted as Amsden’s first argument.
Amsden’s second argument is based on development experiences of Asian countries, mainly China and India. It is important to state another assumption: the shift in the 1980s was an ideological shift .As Amsden’s division of two eras, that can be summarized as after WWII developing countries were allowed to follow their own development policies but after 1980s, they were not. After WWII, they grew fast and after 1980s they grew very slowly (p.135). These are considered as the premises of the first argument.
There are several steps in her reasoning and these steps includes different factors . Since Amsden handles each factor with the comparison between two eras, it is important to reconstruct these factors: trade and monetary policies, decolonization, development institutions and aid. Amsden explains as after WWII, developing countries were allowed to follow their own plans as long as they avoid communism.
Bretton Woods institutions were the agents of development, offering capital through loans within the condition of free trade and these institutions mainly led by US (because US was either the largest donor or appointing presidents of institutions). Free trade was offered within capitalist boundaries (p.43). For example, developing country members of General Agreement on Tariffs and Trade (GATT) were not required to follow all GATT protocols and they could choose the ones that they were able to follow. This ‘freedom of choice’ made development easier.
Comparing to World Trade Organization (WTO), GATT was more ‘gentle and generous’ by their policies for developing countries (p.49). Developing countries were able to access the markets while keeping their markets closed, so they were able to industrialize and trade. This also let developing countries to protect their industries (p.
52). After 1980s, US requested developing countries to open their markets, the idea was based on deregulation. Deregulation of markets in developing countries put them in debt, unless they had institutions to support the changes in market supply and demand of capital (p.128). Decolonization after WWII, created new opportunities for developing countries. It triggered national ownership of resources, firms etc.
and kicked out foreign firms (p.145). After 1980s American policy imposed the idea of Foreign Direct investments (FDI) as a solution for debt crisis, but FDI didn’t choose the countries that needed them and privatization was highly selective: foreign investors chose the successful state-owned or national firms (p.121).
Development institutions, were also one of the agents that supported their own development policies. Their purpose was to establish ground to modernize their industries and guide state interventions (p.86). FAE’s idea of institutions was they may become the growth engines in developing countries, rather than markets, considering the positive outcomes of decolonization. Instead of one policy for all, US introduced Marshall Plan to Europe and developing countries that enables them to design and execute their own development plans (p.
152).Aid was as ‘experimental approach to economic development’ of FAE and was accepted as a new way of finance through soft loans or grants and it was ‘humane’ in providing necessary infrastructure but aid was a fish, not the know-how of catching a fish, so it turned out to be an ‘addiction’ without the complimentary capital: ‘aid lacked supporting and coordinating investment’ (p.55). Aid was distributed mainly through the Marshall Plan but the successful outcomes performed by European Countries were not observed in any other countries (p.
56). In addition to this factor based restructuring, it would be beneficial to state a premise of Amsden, that can be accepted as the summary of given premises above: “.. under statist policies, on average, developing countries grew very fast, and under free-market policies, on average, it grew very slowly.” (p.135).
Amsden’s second argument is about the fastest growing late developers which are China and India, as Amsdens call them ‘the Great Balls of Fire’. She explains that after WWII, these countries grew relatively slow due to central planning. China had the foundations of modern industry, proper infrastructure, education and institutions for R&D which supported human capital. India grew slowly due to its choice becoming self-sufficient in food industry over industrialization as whole, as a result after 1980s, its growth rate was faster than other developing countries. Furthermore, Asian countries never experienced a major economic failure because they were following a model which was a combination of market and state including subsidies and performance standards (p.8). Regional (support) dynamics within Asia such as trade, investment, manufacturing and exchange of ideas, knowledge and soft power formed an ‘Asian bloc’ which provided success (p.
15).1980s shift didn’t effect Asian countries and moreover they never suffered a debt crisis because they never fully deregulated their financial markets (p.116). One reason of their behavior of not-deregulating their financial markets is that this type of experiment was too risky with their size of population (p.150).
Not-deregulating their financial markets and their flexibility (combination of market and state) contributed their development, by performance standards based on exports and creating jobs in 1960s, even though some industries of these countries was financed by American aid (Korea and Taiwan) (p.133). Asian countries were slow in restructuring until (alternative) jobs created (p.134). Particular Asian countries, India and China, have low wages, huge population, skilled labor, investments in technological education and research, their success also underlies in the way that how they combine these elements (p.149).
Regarding these arguments, Amsden presents her conclusion (p.163):”.. developing countries must again be free to choose their own model.” DiscussionThis section discusses the logical connection between premises and conclusion. Furthermore, the inductive fallacies that Amsden’s argument contains revealed.
Based on these fallacies, the argument of this paper and conclusion is presented.As stated before, Amsden’s argument is (1) based on the comparison of two eras (P1) and (2) development experiences of Asian countries (P2). What comes out from Amsden’s these two arguments, is her sub-conclusion (SC) which is also another premise (P3). P1 – “.
.. under statist policies, on average, developing countries grew very fast, and under free-market policies, on average, it grew very slowly.” (p.135) P2 – Asian countries followed their own development model and they grew. SC – (Therefore,) “the more freedom it has to determine its own policies, the faster a developing country will grow” (p.
153)Therefore, “developing countries must again be free to choose their own model.” (p.163) The logical connection between P3 and conclusion is expressed incompletely and intuitively needs a second (implicit) premise . Then the argument can be restructured as follows:”the more freedom it has to determine its own policies, the faster a developing country will grow.”We want developing countries to grow. (IP)? Therefore, “developing countries must again be free to choose their own model.”If the first premise would be conditional proposition, this type of argument would be affirming the consequent, a formal fallacy. On the other hand, it is not clear that if determining own policies is a necessary or a sufficient condition for growth.
Only clear thing is that determining own policies is sufficient for ‘faster’ growth. In addition to the reconstructed argument, it is needed to return to the early reasoning of Amsden. In the reasoning of the first argument (P1), Amsden presents how developing world developed, when they were determined their own policies, and how they couldn’t when they didn’t. In her second argument (P2) she focuses on Asian countries, how they determined their own policies and developed. In fact, there are no counterexamples. Amsden’s fault on not providing a counterexample, intentionally or unintentionally, reveals that Amsden counts determining own policies as both necessary and sufficient condition for development . There isn’t any country that is developed by not determining its own policies and there isn’t any country that is not developed by determining its own policies, according to Amsden.
Amsden’s reasoning contains inductive fallacies in several ways. First, she oversimplifies some factors (given in section II) that are insufficient for development. One of them is the role of development institutions, how they were agents of developing countries to determine and implementation. One of the development institutions that Amsden presents as an example, DPT (Turkey’s development institution), was in fact tied to the global policies and implemented development policies originated by US and UN (global) policies. So, on the contrary of Amsden’s interpretation, not all of the development institutions were generating own development policies. Another error in her reasoning is overgeneralization of the impact of US policies, as it was equal for every country. There isn’t any particular definition of scope, where US intervenes, except communist countries (Brown, 2009).
When in fact, even in FAE, US intervention was more intense in some countries such as Korea, Taiwan, Brazil or Mexico (Schwartz, 2009). Even though she states that some industries of Asian countries were financed by American aid (Korea and Taiwan), she does not consider this as an intervention, like many other factors.These oversimplifications and overgeneralizations are varieties of false cause and it’s tricky to detect whether they rely under her ‘ignorance of counterevidence’ (or ‘suppressed evidence’ ) or the other way around. For further studies, it is crucial to investigate the analogy of economic development and growth in case of Amsden’s publication. As stated in the first section, it is a blurred distinction both in the field and in Amsden’s study.
Therefore, this paper neglects this issue since it is a topic of another discussion.After all, this paper only rejects Amsden’s argument. Furthermore, as explained above, her reasoning in her first argument and therefore her sub-conclusion (P3) is unjustified. There are several own policy led development experiences (Tanzania, North Korea, Zimbabwe), which are failed (Brown, 2009).
As explained before, development is a non-linear, dynamic and complex process and these varies in every country. The conclusion that developing countries must be free to choose their own model still stands. Development is a complex issue: there are no particular way to develop but sets or combinations of ways; it does not have a linear process, a policy that worked in the past doesn’t mean it will work in the future; it is a dynamic process, not only endogenous but external factors may effect (Adelman, 2000). Accepting Amsden’s assumption that intergovernmental and international institutions lead the development process, the requirements of determination of adequate development policies are labor and knowledge intensive. Reason behind is that determining development policies requires systematic and long-term labor force, that requires comprehensive knowledge on development models, on subject country and multidisciplinary examination of each dynamic. On the other side, US policies and institutions led by US impose ‘one size fits all’ policies.
Determination of development policies should be subjective, as done by Amsden’s example: China. Therefore, a sound argument in this position is:Development is a complex process that requires subjective/custom development policies for each developing country.US policies and US led institutions impose ‘one size fits all’ policies.? Therefore, developing countries must again be free to choose their own model.
