WT07 Dirigisme Compared Latin America vs East Asia (1)

Question 1

What is the primary focus of the post-war period in economic development?

Answer 1

The post-war period is key for record economic growth, particularly in Europe and East Asia

This period is often referred to as the Golden Age of capitalism under dirigisme.

Question 2

What economic models are applied in the post-war world?

Answer 2

Dirigisme and Keynesian models

These models emphasize state-led development.

Question 3

Which regions are compared in the study of economic development?

Answer 3

East Asia and Latin America

The comparison highlights divergent economic outcomes despite similar initial conditions.

Question 4

What was the effect of dirigisme on inequality in Europe and East Asia?

Answer 4

Succeed in lowering inequality

In contrast, Latin America did not achieve similar results.

Question 5

What is the significance of the ‘golden age’ of growth?

Answer 5

It represents a period of record economic growth and inclusive growth where inequality fell sharply

This period spans from the 1930s to the 1980s.

Question 6

What does the term ‘dirigisme’ refer to?

Answer 6

A model of state-led economic development

It involves government intervention to coordinate and direct economic activity.

Question 7

Fill in the blank: The Asian model owes its success to complementing and governing markets through _______.

Answer 7

directing its forces and coordinating its agents

This concept emphasizes cooperation between capital and labor.

Question 8

True or False: The Asian success story is primarily attributed to free market principles.

Answer 8

False

Wade challenges this view, asserting that dirigisme is key to understanding Asia’s economic success.

Question 9

What was the economic performance of Latin America compared to East Asia from 1950 to 2018?

Answer 9

Latin America went from being 200% richer to only 30% of East Asia’s GDP per capita

This highlights significant economic divergence.

Question 10

What are the key components of Asian developmental policies?

Answer 10

Targeting and subsidising industries, creating export markets, and developing export promotion institutions

These strategies were essential for economic growth in East Asia.

Question 11

What is the significance of the term ‘NICs’ in the context of East Asia?

Answer 11

Newly Industrialized Countries

These countries experienced a technology boom and strong public and private investment in innovation.

Question 12

What was the employment trend in Korea from the early 1960s to the late 1980s?

Answer 12

Employment in manufacturing increased from less than 10% to 30%

Agriculture’s share of employment dropped from 60% to less than 20%.

Question 13

What does TFP stand for in economic terms?

Answer 13

Total Factor Productivity

TFP growth is a key indicator of economic performance and innovation.

Question 14

What was a major reason for the divergence in economic outcomes between East Asia and Latin America?

Answer 14

Differences in the implementation of dirigisme and industrialization policies

East Asia built competitive industries with dynamism in innovation.

Question 15

Fill in the blank: The post-war economic growth favored _______.

Answer 15

workers

This led to a period of inclusive growth where inequality fell sharply.

Question 16

What happened to Chile’s relative wealth compared to Taiwan from 1950 to today?

Answer 16

Chile was 4 times richer than Taiwan in 1950, now it is more than 2 times poorer

Both countries had similar populations around 20 million.

Question 17

What does the term ‘failed dirigisme’ refer to in the context of Latin America?

Answer 17

The ineffective implementation of state-led industrialization policies

This contrasts with the success seen in East Asia.

Question 18

List the factors that contributed to the Asian model’s success.

Answer 18

• Systematic government intervention
• Targeted credit subsidies
• Creation of specific export markets
• Development of export promotion institutions

These factors were essential for fostering economic growth.

Question 19

What key period is characterized by dirigisme in Korea?

Answer 19

1960s-1990s

Question 20

What is TFP growth?

Answer 20

Growth not explained by physical and human capital

Question 21

Which country had the highest productivity growth in the 1990s?

Answer 21

Argentina (2.5%)

Question 22

What does the Polity2 index measure?

Answer 22

Democratic quality

Question 23

Fill in the blank: Despite systematic state intervention, the NICs achieved record ‘_______’ economic growth.

Answer 23

inclusive

Question 24

What are the average years of education in Argentina during the 1980s?

Answer 24

7.5

Question 25

True or False: Mexico and Brazil were more stable than Korea.

Answer 25

True

Question 26

What does the term 'premature de-industrialization' refer to?

Answer 26

Latin America de-industrializing after opening up in the 1990s

Question 27

List the countries included in the NICs.

Answer 27

* Korea * Taiwan * Singapore * Hong Kong

Question 28

What role did the state play in the new 'social contract'?

Answer 28

Implemented a system of incentives to encourage compliance

Question 29

In which decade did Korea experience significant productivity growth?

Answer 29

1980s

Question 30

What was the average democratic quality score for Chile in the 1990s?

Answer 30

8.4

Question 31

Fill in the blank: Latin America manages to reach industrial levels on par with Western Europe, but fails to converge in GDP per _______.

Answer 31

capita

Question 32

What was the average years of education in Korea during the 1990s?

Answer 32

10.5

Question 33

What key factor does not solely explain the divergence between Latin America and NICs?

Answer 33

Stability

Question 34

What does the term 'dirigisme' refer to?

Answer 34

State-directed economic policy

Question 35

What economic outcome was observed in Latin America post-1990s?

Answer 35

De-industrialization

Question 36

List the factors that contributed to the 'social contract' in NICs.

Answer 36

* Moderate demands from workers * Reinvestment of profits by capital

Question 37

True or False: Japan had a lower average productivity growth than Brazil in the 1980s.

Answer 37

False

Question 38

Fill in the blank: Latin America reached industrialization levels on par with Western Europe, but 'something smells _______' in LA's industries.

Answer 38

fishy

Question 39

What was the average democratic quality for Brazil in the 1980s?

Answer 39

0.1

Question 40

What was the democratic quality score for Argentina in the 1960s?

Answer 40

-0.3

Question 41

What was the average manufacturing employment peak percentage in East Asia?

Answer 41

37%

Question 42

What is the role of the state in solidifying the contract in economic systems?

Answer 42

The state played a key role in implementing a system of incentives to encourage compliance with the contract by labor and capital. ## Footnote This included mechanisms to steer economic agents into a virtuous circle of cooperation prioritizing shared, long-term gains.

Question 43

What is dirigisme?

Answer 43

Dirigisme is the guiding (coordinating) of economic agents and market forces towards a virtuous equilibrium to generate long-term development. ## Footnote It is a concept found in both Asian and European economic models.

Question 44

What limits and taxes are imposed on profit withdrawals in Europe?

Answer 44

Limits and taxes on profit withdrawals ensure that employers reinvest their surplus profits generated by reduced labor demands. ## Footnote This is to assure workers that extra profits go into long-term investments.

Question 45

What are some controls implemented in East Asia to encourage investment?

Answer 45

Controls on luxury consumption to encourage savings and investment, limit ostentation, and force profits to be reinvested. ## Footnote These measures also help generate a sense of community (equality).

Question 46

What is the significance of long-term employment in Japan?

Answer 46

Long-term employment, characterized by 'lifetime' employment and seniority rewards, provides incentives for sustained cooperation and security for both labor and capital. ## Footnote This system enhances cooperation and reduces the risk of social unrest.

Question 47

How does social security contribute to worker cooperation?

Answer 47

Social security protects workers, making them more willing to sacrifice part of their short-term demands and face foreign competition for long-term rewards. ## Footnote This includes benefits and pensions in Europe and North America.

Question 48

What trend did labor participation in strikes/lockouts show from the 1960s to the 1980s in Argentina?

Answer 48

Labor participation in strikes/lockouts increased significantly, from 1.5% in the 1960s to 33.1% in the 1980s. ## Footnote This indicates a rise in labor conflict during that period.

Question 49

What were the key components of state-led economic policies?

Answer 49

State-led industrial projects, infrastructure development, and investment policies led by technocrats rather than politicians. ## Footnote This includes a focus on exports and manufacturing diversification.

Question 50

What was the impact of controlled labor costs in military regimes?

Answer 50

Controlled labor costs and wage suppression led to low production costs, high business profit margins, and increased investment. ## Footnote Unions were curtailed, and wages often did not keep pace with inflation.

Question 51

What favorable international environment aided economic growth?

Answer 51

Access to foreign credit and loans fueled investment in industry and infrastructure, as rich nations favored capital outflows after the 1960s. ## Footnote Brazil's growing economy and state-backed projects made it an attractive investment destination.

Question 52

What distinguishes the 'populist' dirigisme in Latin America from the 'developmental' dirigisme in Asia and Europe?

Answer 52

'Populist' dirigisme in Latin America prioritizes short-term and political/clientelist goals, while 'developmental' dirigisme in Asia and Europe focuses on long-term cooperation and development. ## Footnote This results in social conflict in LA versus a virtuous equilibrium in Asia and Europe.

Question 53

What was the economic performance trend of East Asia compared to Latin America from the 1950s to the 1990s?

Answer 53

East Asia, despite starting poorer, achieved significant economic growth and became considerably richer than Latin America by the 1990s. ## Footnote This divergence began during the state-led industrialization model in Latin America.

Question 54

What is the significance of the Gini index in measuring income inequality?

Answer 54

The Gini index quantifies income inequality, with values ranging from 0 (perfect equality) to 1 (perfect inequality). ## Footnote It is commonly used to assess economic disparities within countries.

Question 55

Fill in the blank: The absence of an Asian-style 'objective' reward system in Latin America resulted in a lack of incentives indexed to _______.

Answer 55

merit.

Question 56

True or False: Latin America's dirigisme successfully promoted long-term development and cooperation.

Answer 56

False.

Question 57

What was a key result of the inward-looking dirigisme model in Latin America?

Answer 57

It closed itself off from fully capturing the benefits of trade and competition. ## Footnote This model redistributed rents from the export sector to the domestic market.

Question 58

What factors have contributed to Latin America's lagging development despite initial advantages?

Answer 58

Short-sightedness in response to macro shocks, lack of coherent long-term development strategy, and prioritization of short-term political goals over long-term objectives. ## Footnote This includes the undervaluation of risks by interventionist policies.

Question 59

What is the main issue with education and institutions in Latin America?

Answer 59

Lags significantly behind in development and inequality ## Footnote Dirigisme failed to deliver equality and growth in Latin America.

Question 60

What classic theories are mentioned as not sufficient to explain development differences?

Answer 60

Differences in political institutions, initial education, and political instability ## Footnote Low political instability in Mexico and Brazil; high in Korea.

Question 61

What does ISI stand for?

Answer 61

Import Substitution Industrialization ## Footnote Distortionary ISI policies were used in both Latin America and East Asia.

Question 62

What are the two types of Dirigisme interventions mentioned?

Answer 62

Export focus vs inward focus, picking winners vs losers ## Footnote Also includes political clientelism vs technocracy.

Question 63

What matters in the application of distortionary ISI policies?

Answer 63

The objective and implementation strategy of these policies ## Footnote Developmental vs populist goals.

Question 64

What does the summary of evidence regarding Dirigisme suggest?

Answer 64

Not provided ## Footnote The summary is a general overview of the evidence related to Dirigisme across the world.