Rethinking Asian Drama

About: The article was published on 2018-12-01 and is currently open access. It has received 6 citations till now. The article focuses on the topics: Drama.

Summary

3 Rationale and objective

• The reality of development that has unfolded in Asia since then has belied such pessimism about its prospects.
• Streeten continues this story to write, perhaps tongue in cheek, that for Myrdal ‘In fact, the Americans came almost as high in the rank order of creation as the Swedes.
• The share of Asia in world exports of manufactured goods almost doubled in just two decades, from 21 per cent in 1995 to 39 per cent in 2016.
• This book uses bold strokes on a wide canvas to sketch a picture of the economic transformation of Asia during the past 50 15 For a detailed discussion on this sequence of developments, and on the factors underlying the decline and fall of Asia in the world economy, see Nayyar (2013).

4 Themes, stylized facts, and lessons

• This paper does not even attempt a summary or a synthesis of the UNU-WIDER study (Nayyar 2019a).
• Given the space constraint, it would be an exceedingly difficult task.
• It would also serve little purpose as it might detract from the richness and depth of the analysis.
• In any case, the companion volume (Nayyar 2019b) seeks to provide a cohesive analytical narrative.
• This is, at best, selective and illustrative.

4.1 Diversity in development

• The diversity of Asia is a recurring theme.
• The reliance on markets and the degree of openness in economies varied greatly across space and over time.
• Outcomes in development were also diverse, ranging from success at one end, interspersed with mixed performances or muddling through, to failure at the other, which differed not only between countries at any point in time but also within countries over time.
• There were different paths to development, simply because there were no unique solutions or magic wands, as one size does not fit all.
• 20 Obviously, generalizations are difficult if not perilous.

4.2 History, context, and conjuncture

• It is clear that development trajectories of countries in Asia were shaped, in part, by their histories, while the context and the conjuncture at the outset made a difference.
• The legacy of Japanese colonialism in South 19 Lee (1981) was among the first to emphasize the limitations of export-led industrialization.
• Soon after, the geopolitics of the Cold War era in Asia brought about a dramatic change in the state of affairs, transforming this into an unequal relationship of dependence on the United States for military and economic support.
• Of course, the USSR also provided military and economic support, but communist governments in China and Viet Nam were acutely conscious of their geopolitical vulnerabilities which, together with political ideology, motivated them to address problems in their legacy of initial conditions.

4.3 Economic growth and structural change

• The transformation of Asia was driven by rapid economic growth.
• Over a period that spanned almost five decades, 1970–2016, the GDP growth rate in Asia was more than double that in industrialized countries and almost twice that in the world economy.
• This was associated with a dramatic change in the composition of output and employment.
• 23 21 Manchuria in northern China, or Manchukuo as the Japanese described it, experienced the same colonial legacy.
• For an analysis of structural change in Asia compared with Latin America and Africa, see McMillan and Rodrik (2011) and Nayyar (2013).

4.4 Wellbeing of people

• The rapid economic growth led to a sharp reduction in absolute poverty in Asia, but not as much as it could have, partly because the initial income distribution was unequal and partly because of rising income inequality.
• And inequality rose almost everywhere in Asia from the 1990s.
• The wellbeing of people was also dependent on the social infrastructure that supported social consumption.
• But education and health were also drivers of economic growth in so far as they increased the productivity of the most abundant resource in Asian economies— labour—and were thus instrumental in development.
• In contrast, countries that witnessed slow employment creation or jobless growth, with inadequate or poor public provision of education and healthcare, were laggards in Asian development.

4.5 States, markets, and governments

• The development experience of Asia during the past 50 years shows that the role of governments was critical everywhere, although this role differed significantly across countries.
• Even the ‘soft states’ in Southeast Asia managed to reach some understanding with business elites in the pursuit of national objectives.

4.6 Economic openness

• Economic openness also played an important role in Asian development,30 the possibilities of which had not been recognized by Myrdal.
• The usual characterization of openness is in terms of international trade, international investment, and international finance.
• There were significant differences between Asian countries,31 most of which were restrictive in terms of openness until around 1970.
• Calibrated openness was asymmetries in openness by design manifest in strategic trade policy that was open for the export sector, but restrictive for other sectors, with limits on openness to foreign capital and tight curbs on foreign brand names.
• China, India, and Viet Nam, for quite some time, relied mostly on domestic markets, domestic resources, and domestic technologies, but subsequently these countries joined the quest for external markets with a more open, yet selective, approach to foreign capital and foreign technology.

4.7 Institutions and policies

• In Asian Drama, Myrdal stressed the importance of an institutional approach, and he was perhaps the first to provide a systematic analysis of the role of institutions in development with reference to Asia.
• It is clear the institutions were among the important determinants of success, muddling through, or failure at development in Asia.
• This was also the reason why strategy-based reform with a long-term view of development objectives, emerging from experience or learning within countries rooted in social formations and political processes, did sustain and succeed.
• 37 Similarly, they used orthodox policies for heterodox or unorthodox objectives, such as interest rates to guide the allocation of scarce investible resources in a market economy, or exchange rates that were deliberately undervalued over long periods to break into the world market for manufactured goods.

5 Afterword

• The focus of the study is largely on the past 50 years.
• There are obvious challenges within Asian countries, such as rising economic inequalities between people, emerging divergences among countries, poor infrastructure, underdeveloped institutions, inadequate education, unstable politics, or unsustainable political systems.
• The response of Asian countries to these complex challenges will shape their future.
• Gunnar Myrdal described himself as a cheerful pessimist (Streeten 1998) who hoped that Asia might do better, but did not think that it was likely.
• In contrast, given the remarkable economic transformation of the continent over the past five decades, I could describe myself as a cautious optimist who believes that an even better world is possible for Asia.

Full text

Nayyar, Deepak
Working Paper
Rethinking Asian Drama
WIDER Working Paper, No. 2018/150
Provided in Cooperation with:
United Nations University (UNU), World Institute for Development Economics Research
(WIDER)
Suggested Citation: Nayyar, Deepak (2018) : Rethinking Asian Drama, WIDER Working Paper,
No. 2018/150, ISBN 978-92-9256-592-3, The United Nations University World Institute for
Development Economics Research (UNU-WIDER), Helsinki,
https://doi.org/10.35188/UNU-WIDER/2018/592-3
This Version is available at:
http://hdl.handle.net/10419/190197
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WIDER Working Paper 2018/150
Rethinking
Asian Drama
Deepak Nayyar*
December 2018

* Jawaharlal Nehru University, New Delhi, India, email: nayyar.deepak@gmail.com.
This study has been prepared within the UNU-WIDER project ‘Asian Transformations: An Inquiry into the Development of
Nations’.
Copyright © UNU-WIDER 2018
Information and requests: publications@wider.unu.edu
ISSN 1798-7237 ISBN 978-92-9256-592-3
Typescript prepared by Gary Smith.
The United Nations University World Institute for Development Economics Research provides economic analysis and policy
advice with the aim of promoting sustainable and equitable development. The Institute began operations in 1985 in Helsinki,
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Katajanokanlaituri 6 B, 00160 Helsinki, Finland
The views expressed in this paper are those of the author(s), and do not necessarily reflect the views of the Institute or the United
Nations University, nor the programme/project donors.
Abstract: Gunnar Myrdal published Asian Drama in 1968, a work which made important analytical
contributions to our understanding of development but was deeply pessimistic about Asia’s future
prospects. Since then, contrary to Myrdal’s expectations, Asia’s development has been remarkable,
although transformations have been uneven across countries and unequal between people. This
paper explains the conception and design of the UNU-WIDER study on Asian Transformations,
which seeks to analyse the amazing story of economic development in Asia over the past 50 years.
It begins with reflections on Gunnar Myrdal, the author, and rethinking Asian Drama, the book, in
retrospect 50 years later. It goes on to outline the rationale and objective of the study. It then
discusses some critical issues and lessons that emerge—diversity in development, history and
context, economic growth and structural change, wellbeing of people, markets and governments,
economic openness, and institutions and policies—to serve as a teaser. It concludes with some
brief reflections on Asia’s future prospects over the next 25 years.
Keywords: Asian Drama, development, governments, Gunnar Myrdal, history, industrialization,
institutions, markets, openness, transformations
JEL classification: B20, B31, B41, O10, O20, O53, O57, P50
Acknowledgements: I would like to thank Ronald Findlay, Rajeev Malhotra, Sudipto Mundle,
Frances Stewart, and Finn Tarp for helpful comments and suggestions on a preliminary draft of
this paper.

1
1 Introduction
Gunnar Myrdal published his magnum opus, Asian Drama: An Inquiry into the Poverty of Nations, in
1968. The 50 years since then have witnessed a remarkable economic transformation in Asia—
even if it has been uneven across countries and unequal between people—that would have been
difficult to imagine, let alone predict, when Myrdal and his associates completed their work. The
UNU-WIDER study, in two volumes, analyses the story of economic development in Asia
spanning half a century (see Nayyar 2019a, 2019b). This paper explains the conception and design
of the study for the reader. It begins with a discussion on Gunnar Myrdal, the author, and Asian
Drama, the book, as a point of reference. It then sets out the rationale and the objective of the
study, to outline its structure and framework. This leads into a discussion, illustrative rather than
exhaustive, of some important ideas and lessons that emerge, which might serve as a teaser. A
short afterword on future prospects concludes.
2 Gunnar Myrdal and
Asian Drama
Gunnar Myrdal was a man of many parts. The word polymath is an apt description, which might
not suffice to describe a man who was a distinguished academic, policy practitioner, member of
parliament, cabinet minister, international civil servant, political actor, public intellectual, and
concerned citizen.
1
This diversity of experiences shaped his work and thinking.
In academia, Stockholm University was his institutional home (1933–50). He started as a brilliant
theorist, a brash young academic
2
who went on to question the methodological foundations and
ideological underpinnings of economics, returning to his ivory tower at Stockholm University
(1962–67) where he founded the Institute for International Economic Studies. He was awarded
the Nobel Prize in Economics in 1974. In professional life outside academia, he turned to political
economy and developed the idea of counter-cyclical macroeconomic policies in the early 1930s.
There was an interregnum of four years (1938–42) when he lived in the United States to study the
‘Negro Problem’. He returned home to political institutions in the 1940s when he chaired a
committee that outlined the elements of the post-war Swedish welfare state, to become a member
of parliament, Chairman of the Planning Commission in Sweden, and Minister for Trade and
Commerce. During the Cold War era, he was appointed Executive Secretary of the United Nations
Economic Commission in Europe, where he served from 1947 to 1957. The next 10 years were
devoted to his study of Asia, during which he spent four years in New Delhi, where his wife, Alva
Myrdal (sociologist, diplomat, and politician, who was awarded the Nobel Peace Prize in 1982),
served as Sweden’s Ambassador in India from 1955 to 1961.
There was also a remarkable intellectual journey that ran in parallel, with many milestones and
some landmarks. Three deserve mention for their common purpose—critique of systemic biases
and implicit values in economic thinking—and for their diversity of subjects: politics in economics,
1
For accounts of Gunnar Myrdal, the person and his life, see Streeten (1990, 1998), Bok (2005), Appelqvist and
Andersson (2005), Barber (2008), and Kanbur (2018).
2
Gustav Cassel, whom he succeeded as Chair in Political Economy at Stockholm University (1933–39), once warned
him against his brashness, ‘Gunnar, you should be more respectful to your elders, because it is we who will determine
your promotion.’ Yes, the young Myrdal replied, ‘but it is we who will write your obituaries.’ After Cassel’s death, he
did indeed write his obituary (Streeten 1990).

2
race in society, and poverty in the world. The Political Element in the Development of Economic Theory
was published in Swedish in 1930, in German in 1932, and in English, translated by Paul Streeten,
in 1953. An American Dilemma: The Negro Problem and Modern Democracy, for which he spent four
years in the United States, was published in 1944.
3
Asian Drama, on which he worked in India for
four years and in Sweden for six years, was published in 1968. Yet, the book was also influenced
by the evolution of Myrdal’s thinking in economics and the social sciences over a lifetime.
In this magnum opus, the fundamental point of departure from conventional thinking was the
conviction that ‘economic problems cannot be studied in isolation but only in their own
demographic, social and political setting’ (Myrdal 1968: ix). The book and its approach are best
described in the author’s words from the preface:
It is not an altogether pretentious metaphor when I describe my endeavour to
apply an institutional approach in this study as an attempt to analyze the
development problems of South Asia in a manner that Adam Smith studied
England’s development problems two hundred years ago… The length is
abominable. The question can, indeed, be raised why I did not break it up into five
or six books… But the central idea in the institutional approach is that history and
politics, theories and ideologies, economic structures and levels, social
stratification, agriculture and industry, population developments, health and
education, and so on, must be studied not in isolation but in their mutual
relationships. (Myrdal 1968: x)
The title, Asian Drama, was deceptive in terms of its country coverage. Its focus was on the
erstwhile British India, made up of India, Pakistan, and Ceylon, the sub-continent now described
as South Asia. Burma and Indonesia were paid some attention. But Malaysia, the Philippines, and
Thailand were grouped together as the rest of Southeast Asia, while Cambodia, Laos, and South
Viet Nam were touched upon when some information of interest was available. It is interesting,
although somewhat puzzling, to note that Myrdal described all of these countries broadly as South
Asia even if many of them are now seen as part of Southeast Asia.
4
However, Japan, Korea, China,
Formosa (Taiwan), Hong Kong, and Singapore were excluded. So was West Asia. And, it is no
surprise that the Central Asian economies, then part of the USSR, were also excluded.
Gunnar Myrdal set out a conceptual framework and an analytical approach to study the constraints
on, and possibilities of, development in Asia at an early stage of the post-colonial era, when
experience in terms of outcomes was limited. Some important points of departure from studies of
development at that time, which reflected his methodological concerns, are set out explicitly in the
prologue, titled ‘The Beam in Our Eyes’. It begins with a plea for the sociology of knowledge, to
emphasize the importance of a multidisciplinary approach in social sciences, the recognition of
many biases in the study of development, the critical role of institutions, and the necessity of
making assumptions, priors, and values explicit. The implicit critique of mainstream economics
had three dimensions. First, the essence of the institutional approach is to use all relevant
knowledge to analyse a problem, unconstrained by the boundaries of disciplines, because in an
interdependent social system there are only problems that are not simply economic, social, or
3
Economic Theory and Underdeveloped Regions, published in 1957, was early thinking about development, while Value in
Social Theory, critical essays on methodology written earlier, translated into English, and edited by Paul Streeten, was
published in 1958. For a more detailed discussion on Myrdal’s academic writings, see Kanbur (2018). See also Streeten
(1998) and Barber (2008).
4
This description is illustrated by a map of South Asia in Myrdal (1968), which includes all the selected countries
(volume 1, 4–5). The scope and coverage of the study is also set out in the text (volume 1, 39–41).

Frequently asked questions

Q1. What are the contributions mentioned in the paper "Rethinking asian drama" ?

Nayyar et al. this paper presented the UNU-WIDER study of economic development in Asia spanning half a century. 

Q2. What was the role of the government in the earlier stages of development?

In the earlier stages, it was about reconstructing initial conditions through the creation of physical infrastructure, the spread of education in society, and institutional reform, particularly in the agricultural sector. 

Q3. What was the role of effective markets in the pursuit of development?

25 Ultimately, efficient markets needed effective governments, so that success in development was, in important part, attributable to the effectiveness of state interventions, which varied significantly across countries. 

Q4. What is the role of the state in the pursuit of industrialization and development?

In the pursuit of industrialization and development, the role of governments in evolving policies, nurturing institutions, and making strategic interventions, whether as a catalyst or a leader, was central to the process everywhere. 

Q5. What were the key factors in the success of Asian countries in development?

Asian countries that were success stories in development used heterodox or unorthodox polices for orthodox objectives, such as strategic trade, industrial, and technology policies in the pursuit of industrialization. 

Q6. What was the role of education and health in the development of Asia?

The spread of education in society and the delivery of health services to people contributed directly to the wellbeing of people and were thus constitutive of development. 

Q7. What was the impact of economic growth on living conditions of ordinary people?

Economic growth had a greater impact on living conditions of ordinary people where employment creation was rapid or where initial income distribution was less unequal. 

Q8. What is the purpose of the study?

The object of the study is to analyse the development experience of Asia and its associated transformations over the past 50 years. 

Q9. How did the population of Asia change in the last two decades?

In 1965, almost four-fifths of the total population of Asia lived in rural areas, whereas by 2016 this proportion was just over one-half, showing how rapid urbanization has been. 

Q10. Why did rapid growth in Asia not reduce absolute poverty?

But sustained rapid growth in Asia did not reduce absolute poverty as much as it could have, in part because the initial income distribution was unequal and in part because of rising income inequality. 

Q11. What was the role of education and health in the development of Asian economies?

But education and health were also drivers of economic growth in so far as they increased the productivity of the most abundant resource in Asian economies— labour—and were thus instrumental in development. 

Q12. What was the main reason for the rapid growth in Asia?

All the same, it is clear that Asian development in this era was driven by economic growth based on high investment, savings rates, and rapid industrialization, often export-led, associated with structural change in the composition of output and employment, which reinforced the process. 

Q13. How much did the ratio of Asia to GDP per capita in industrialized countries increase between 1970 and?

But the ratio of GDP per capita in Asia to GDP per capita in industrialized countries, in current prices at market exchange rates, increased far less from 1:20 in 1970 to 1:8 in 2016. 

Q14. How did the share of Asia in world exports of manufactured goods double in just two decades?

The share of Asia in world exports of manufactured goods almost doubled in just two decades, from 21 per cent in 1995 to 39 per cent in 2016. 

Q15. What was the impact of rapid economic growth on living conditions of ordinary people in Asia?

this rapid growth was not always transformed into meaningful development that improved the wellbeing of people, particularly in countries where employment creation was slow or where income inequality was high to start with.