What this lesson teaches
I can judge which factors, at home and abroad, did most to shape economic change in Southeast Asia.
Syllabus 9174, Paper 2, Theme II, Learning Outcomes. evaluate the factors shaping economic change in different contexts and over time
Make a guess
Singapore's government intervened heavily in its economy and grew fast. Do you think more intervention always meant faster growth?
- No, the kind of intervention mattered as much as the amount.
- No, intervention slowed growth down.
- Yes, the more a state did, the faster it grew.
Show the answer
No, the kind of intervention mattered as much as the amount.
Support for markets worked in Singapore and Malaysia. Crony control under Marcos and rigid state control in Burma did not.
The kind of intervention mattered as much as the amount. Intervention that supported markets worked; rigid state control or capture by cronies did not.
Thailand intervened lightly. Its central bank kept inflation low, and its Board of Investment offered incentives, but private firms led growth.
Singapore and Malaysia intervened heavily, but in ways that supported markets. They built infrastructure, trained workers and courted investors.
In the Philippines under Marcos, intervention served cronies. Friends of the president were given control of sugar, coconut and other industries. Foreign debt rose to about 26 billion dollars by 1985, and the economy shrank sharply in 1984-1985.
Indonesia mixed both. Technocrats ran sound policies on inflation and the budget, but Suharto's family and business allies won monopolies and contracts.
Vietnam showed how a change of strategy changed results. Rigid central planning failed, but the Doi Moi reforms from 1986 allowed markets and foreign investment, and growth took off.
- Light touch
- Thailand.
- Crony capitalism
- The Philippines under Marcos.
- Doi Moi
- Vietnam, 1986.
Real examples to use
Philippine collapse, 1984 to 1985
Under Marcos's crony system the economy shrank by about 7 per cent in 1984 and again in 1985, and foreign debt reached about 26 billion dollars by 1985.
Indonesia's flour monopoly
From 1969 the Salim Group's Bogasari mills held exclusive rights to mill the wheat that the state agency Bulog imported, and by the early 1980s controlled about 80 per cent of the flour market.
Indonesia's technocrats, 1986
When oil prices collapsed, the economists devalued the rupiah by 31 per cent on 12 September 1986 and opened up to manufactured exports.
Worked example: Judging intervention
What kind of intervention worked best?
- Supporting markets: Singapore, Malaysia, Thailand.
- Captured by cronies: the Philippines under Marcos.
- Rigid control: Burma, and Vietnam before 1986.
- Judgement: the kind of intervention mattered more than its amount.
Watch out for this
The Philippines grew slowly because its government did too little.
Under Marcos the government intervened a great deal, but mainly to benefit cronies. The problem was the purpose of intervention, not its amount.
Check your understanding
What did Vietnam's Doi Moi reforms of 1986 show?
- Changing strategy towards markets could quickly improve results.
- Central planning worked better than markets in poor countries.
- Foreign investment was harmful to growth.
Show the answer
Changing strategy towards markets could quickly improve results.
Right. Growth took off after reform.