Introduction

In 1988 the UNP – which in 1948 had taken away the civic rights of the Tamils of Indian origin – somewhat ironically pronounced that the remaining 94,000 stateless persons would be granted unconditional rights to citizenship and franchise. Therefore, although citizenship is used as an inclusive and exclusive organizing principle in societies, Sri Lanka's experience illustrates the point that citizenship can also be a dynamic concept that with the appropriate action and given a suitable climate can include those whom it had excluded. Or in Lister's (1997, 5–6) conceptualization, the idea of human agency comes into the understanding of citizenship. Citizenship is not only an evolutionary process, as maintained by Marshall, in which the circle of those who received rights expanded historically, but also is a process that involves the struggle to gain new rights and to add meaning to existing ones. On November 9, 1988, when the Grant of Citizenship to the Stateless Bill was debated in parliament, the government proposed granting Sri Lankan citizenship to the shortfall of 94,000 persons who had not applied for Indian citizenship when the agreement had expired in 1981 (Hansard, November 9, 1988, 2114).

However, there is considerable lack of clarity in published sources on the actual number who would have been categorized as “stateless” and become eligible for Sri Lankan citizenship under this proposed bill, which was later made into an act of parliament (Sahadevan 1995, 229; Nadesan, 1993, 329).

Introduction

The economic collapse in 1983–1985 and periodic slowdowns and recessions thereafter led to the sharp decline in Philippine industry's share of gross domestic product (GDP) as well as that of investment from the early 1980s. The premature halt in the growth of the industrial and capital formation sector reduced the country's capacity to improve its technology and to scale up production, which would have brought the economy to much higher growth and development. As industry's share declined, services took over as the lead growth sector. This is unlike the experience of more developed countries such as Taipei, China, where the service sector and consumption share of GDP rose only after the highly industrialized stage and where industrial and manufacturing activities have reached maturity. Figure 5.1 shows the Philippines' drop and stagnation in the share of industry compared with that of its more successful East Asian neighbors.

Except for Taipei, China and the Philippines, all East Asian high-growth performers had increased their investment–GDP ratio until the 1997 Asian financial crisis (Figure 5.2). In fact, other Asian countries' investment–GDP ratios continued to exceed that of the Philippines by 2006 notwithstanding the decline in their investment–GDP ratios during the 1997 Asian financial crisis and thereafter. Investments in all countries in the figure, except Malaysia and the Philippines, had a mild recovery during 2000–2006.

While Philippine export and import shares in GDP rose sharply since the 1990s, the same was true for all countries due to globalization and the institution of World Trade Organization (WTO) and regional and bilateral trade agreements in the 1990s and 2000s.

Introduction

In his Introduction to Equilibrium and Growth in the World Economy: Economic Essays by Ragnar Nurkse, Gottfried Haberler concluded that:

We will never know how Nurkse's views of trade and development would have evolved, had he been able to observe the contrasting experiences of developing countries over subsequent years. However, with the benefit of hindsight, we can ask how well the policies and the performances of developing countries corresponded to the expectations that Nurkse laid out in his essay.

The Conflict Between “Balanced Growth” and International Specialization

The idea of balanced growth is playing a prominent role in both the theory and policy of economic development. My purpose here is to consider whether this idea is compatible with the principle of international specialization or whether, on the contrary, it means throwing away the benefits which can be obtained through specialization. The dominant practical question in some of the less-developed countries is whether the available means, limited as they are, should be used to promote activities (a) specialized along lines of comparative advantage internationally or (b) diversified so as to provide markets for each other locally. In Western eyes the pursuit of balanced growth is causing only too often a pathetic misdirection of scarce resources. Some of the underdeveloped countries, on the other hand, feel that they cannot rely on an external demand for their primary products, a demand which is usually inelastic with respect to price. Is there any guarantee, they ask, that the overspill of prosperity from the advanced countries, through changes in the volume and terms of trade and possibly, in response thereto, through private foreign investment in primary production for export, will induce a satisfactory rate of development—satisfactory in relation, for instance, to population change? The clash of prescriptions on the policy plane reflects what looks like a deadlock on the theoretical level also.

This volume is one of two publications that celebrate the centenary of Ragnar Nurkse's birth. The other volume, also published by Anthem and titled Ragnar Nurkse (1907–2007): Classical Development Economics and its Relevance for Today, prints the result of a conference commemorating Nurkse.

Ragnar Nurkse was born in Estonia in 1907; he died unexpectedly in Geneva, Switzerland, in 1959. He is known today as a pioneer among early development economists, his works are as relevant today as they where during his lifetime.

This volume reprints all the key works of Ragnar Nurkse.

We would like to thank the Estonian Science Foundation (grant no 6703) for financial support in publishing the two volumes; and Bonn Juego and Ingbert Edenhofer for their editorial help.

The editors.

Introduction

Carlota Perez has reflected broadly about the diffusion of technological revolutions, the way in which technologies and technological capabilities determine the growth potential of countries, and the way in which the global technological context shifts windows of opportunity for the development of countries and regions. In this direction, the document titled ‘A vision for Latin America: a resource-based strategy for technological dynamism and social inclusion’, elaborated for CEPAL, reflects about Latin America's opportunities during the deployment stage of the Information and Communications Technology (ICT) paradigm, and the installation stage of a new paradigm, which seems to be oriented towards biotechnology, nanotechnology, new materials and new energy sources. It presents a proposal that suggests a dual development strategy for Latin American countries – ‘dual integrated model’ – based on science, technology and innovation (STI) for building robust resource based-processing industries and specializing on high-added-value products. Such a model integrates a top-down strategy of development, which aims at achieving competitiveness on world markets for specialized natural resources, with a bottom-up strategy, which seeks to identify and promote wealth-creation activities amongst localities.

As it has been broadly discussed in her work (Perez 1985, 2002 and 2008), each paradigm implies not only technological change but also new ways of thinking or a new common sense towards efficiency and innovation, new ways of acting and new institutions. In this sense, in order to establish a strategy that benefits from the deployment of a paradigm or takes advantage of the installation stage, it requires the emergence of new social norms and new forms of agents' behaviour.

Some International Aspects of the Problem of Economic Development

“A country is poor because it is poor.” This seems a trite proposition, but it does express the circular relationships that afflict both the demand and the supply side of the problem of capital formation in economically backward areas. This paper will discuss some international aspects of the difficulties on both sides. It will take up only a few points and cannot even attempt to give anything like a balanced picture.

The inducement to invest is limited by the size of the market. That is essentially what Allyn Young brought out in his reinterpretation of Adam Smith's famous thesis. What determines the size of the market? Not simply money demand, nor mere numbers of people, nor physical area. Transport facilities, which Adam Smith singled out for special emphasis, are important; reductions in transport costs (artificial as well as natural) do enlarge the market in the economic as well as the geographical sense. But reductions in any cost of production tend to have that effect. So the size of the market is determined by the general level of productivity. Capacity to buy means capacity to produce. In its turn, the level of productivity depends—not entirely by any means, but largely—on the use of capital in production. But the use of capital is inhibited, to start with, by the small size of the market.

Introduction

Though Rosenstein-Rodan's (1943) ‘Problems of Industrialisation of Eastern and South-Eastern Europe’ is often attributed as being the work that initiated the birth of development economics as a field, as argued by Chakravarty (1983), a broader reading of the relevant literature shows that the theoretical formation of development economics and the discussion on the pertinent ideas began much earlier as a thorough theoretical and history of thought analysis of Allyn Young's classical endogenous growth vision shows (see Perälä 2002, 2006). Interestingly, there are other earlier contributions in the field of economic development consistent with the classical endogenous growth process, most notably a number of contributions by Sun Yat-sen: San Min Chu I: The Three Principles of the People (1953a), The International Development of China (1922), and Fundamentals of National Reconstruction (1953b), some written over four decades and published nearly two decades before the heralded work by Rosenstein-Rodan, to which a mere mention or limited recognition exists in the contemporary economics literature. Given the breadth of his development analysis and writings, Sun Yat-sen, though largely neglected by the profession, can be considered to be one of the earliest pioneers of economic development.

Given that Sun Yat-sen was much more of a development practitioner than an academic economist, interesting aspects in his development perspective are apparent. Most notably, his analysis is not limited by the theoretical body of thought or motivated by the shortfalls of the neoclassical economics analysis that was gaining prominence within the academic economic circles at the time and has become dominant especially during the latter half of the twentieth century.

Objectives

The Philippines' economic growth during the past five decades has not been impressive compared with that of many of its neighbors; in per capita terms, the growth was even less favorable. As a result, the pace of poverty reduction has been slow, and income inequality remains high. In 2006, about one in four Philippine families and 32.9% of the population were deemed poor, and the Gini coefficient of per capita income was slightly over 45%, among the highest in Southeast Asia.

The Philippine Government is committed to sustained growth, the rewards from which are within reach of every Filipino. The commitment is spelled out in the current Medium-Term Philippine Development Plan.

This book presents the work undertaken for the Philippine country diagnostic study under the Asian Development Bank regional technical assistance project, Strengthening Country Diagnosis and Analysis of Binding Development Constraints in Selected Developing Member Countries. A summary of the findings was published in Philippines: Critical Development Constraints (ADB 2008). This book presents more in-depth work on the various aspects of the Philippine economy and the constraints that curtail its effort to grow and tackle poverty. The discussions in the book will help improve the understanding of the Philippine economy and the challenges that the policy makers face. It will be of value to people who have been following the developments in the region and the Philippines.

Methodology

The study adopts a diagnostic approach and broadly follows growth diagnostics developed by Hausmann, Rodrik, and Velasco (2005).

This volume is one of two publications that celebrate the centenary of Ragnar Nurkse's birth. The other volume, also published by Anthem and titled Trade and Development, reprints the key works of Nurkse.

Ragnar Nurkse was born in Estonia in 1907; he died unexpectedly in Geneva, Switzerland, in 1959. He is one of the early pioneers of development economics, whose works are as relevant today as they were during his lifetime.

This volume is based on a conference that took place in the capital of Estonia, Tallinn (where Nurkse went to school) on 31 August and 1 September 2007.

We would like to thank all the contributors to the volume for the lively discussions during the conference; the Estonian Science Foundation (grant no. 6703), The Other Canon Foundation, Norway and PRAXIS Center for Policy Studies, Estonia, for financial support in organizing the conference; and Ingbert Edenhofer for his editorial help.

Introduction

The Philippines has performed poorly against the major economies of East Asia and Latin America (Table 4.1). It had the lowest average annual growth rate in the last half century, next only to Argentina. Even during growth periods (1960–1980, 1993–1997, and 2003–2005), the Philippines did not grow as fast as the more successful countries. Its best years equal only those of Brazil and Mexico in the dismal decade of the 1980s. And the Philippines suffered major recessions due to balance-of-payments (BOP) and financial crises, yielding negative average annual growth in the periods 1980–1991 and 1997–1999.

This puts the Philippines in a league with the major Latin American economies—Argentina, Brazil, and Mexico—which suffered recessions or stagnation, with almost zero growth of gross domestic product (GDP) per capita in the 1980s and 1990s. In recent years, however, Argentina has done very well (next only to the People's Republic of China), and the Philippines has not been doing too badly either. The Philippines has been growing at a better pace than have Brazil and Mexico, and at par with the Republic of Korea. In 2007, the Philippines' growth rate was 7.3%.

What explains the rather poor performance during most years?

This chapter starts with a restatement of the importance of macroeconomic stability for growth and investments and discusses how inefficient macroeconomic management is a major reason for the poor performance of the Philippines vis-à-vis other East Asian and Latin American countries.