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Peculiarities of economic development

Towards a Capitalist Manifesto

Sung-Hee Jwa

Chapter 2 provides a description of economic development and takes a closer look at the complexity nature of development, and deliberates on implications about what the necessary ingredients for the development of a General Theory of Economic Development would be. More specifically, it compares complexity economics with mainstream economics and discusses the emergence failure of evolution and the synergy market failure of emergent development, which is referred to as market failure. The chapter addresses in depth the idea of externalities in economic analysis, which are viewed as ubiquitous, and also highlights some important differences between markets and organizations.

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A General Theory of Economic Development

Towards a Capitalist Manifesto

Sung-Hee Jwa

Chapter 7 formalizes the new General Theory of Economic Development based on the concept of economic discrimination (ED). This is the central theory of the book in which the author argues that the ‘Holy Trinity’ of economic development _ consisting of markets, corporations and the government _ work together with ED as the most important institutions for economic development. The author also claims that the capitalist economy should in fact be called the corporate economy. ED by markets, corporations and government is the key to economic development. Implications of the General Theory of Economic Development are also discussed.

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A General Theory of Economic Development

Towards a Capitalist Manifesto

Sung-Hee Jwa

This book makes the bold attempt at proposing a new general theory of economic development. The main premise is that economic institutions and policies must embody ‘economic discrimination’ if there is to be any chance of real economic development. By economic discrimination, the author means ‘treating differences differently’ by selecting and supporting economic entities and behaviour that contribute positively to the economy. The book identifies markets, government and corporations as the ‘holy trinity of economic development’, that is, the three most important institutions that must work together via economic discrimination to steer the economy towards real transformative progress. The book also warns against the current trend of economic egalitarianism or ‘not treating differences differently’ because it destroys economic incentives and results in an array of economic problems including growth stagnation.
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Eastern condensed economic development

Towards a Capitalist Manifesto

Sung-Hee Jwa

This chapter discusses the condensed (or rapid) Eastern economic development experiences of Japan, Korea and China. It attempts to understand the common features of industrial policy of the three countries during their economic take-off, as well as the common features of policy failure that have contributed to growth stagnation in Japan and Korea in recent years. Essentially, during economic take-off, economic policy has been discriminatory, while economic egalitarianism has been responsible for the recent years of economic decline. This chapter also argues for the important role of corporations in the economic take-off of Japan and Korea as well as China.

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Critique of existing theories and a new beginning

Towards a Capitalist Manifesto

Sung-Hee Jwa

This chapter provides a critique of institution-free mainstream economics, including the important conditions such as private property rights and economic freedom. Despite the merits of private property rights and economic freedom for the efficient functioning of the market economy, the author provides reasons why these may not be sufficient for understanding economic development. The chapter also finds fault in the so-called Washington Consensus but looks favourably at New Institutional Economics as a new hope when looking at economic development. The purpose of this chapter is to show deficiencies in existing knowledge and tools for understanding economic development, and hence the need for a new approach

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Corporations in economic development

Towards a Capitalist Manifesto

Sung-Hee Jwa

This chapter discusses the important role of the corporate firm in capitalism and in economic development. Firms are seen as complementing markets, as a market expander by helping to overcome transaction costs in the overall economy by their command-and-control structures. The chapter also discusses how corporate growth incentives can be secured without necessarily encouraging monopoly power.

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Conclusion

Towards a Capitalist Manifesto

Sung-Hee Jwa

Chapter 9 concludes the book by dispelling the myths listed in Chapter 1, and ultimately making development economics face up squarely to the realities of economic development. It summarizes the debate raised in earlier chapters regarding the function of markets and the idea of market failure as evolutionary failure. Corporations are viewed as important for economic development, as market expanders into new areas. However, markets and corporations are not enough for economic development and require economically discriminating government to ignite and sustain economic development. The chapter further discusses the role of politics, economic inequality and democracy in economic development. The chapter ends by putting into perspective the General Theory of Economic Development in contemporary economic thought, and explains why it is indeed a general theory as well as the beginning of a capitalist manifesto.

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Satya R. Chakravarty, Nachiketa Chattopadhyay and Jacques Silber

This chapter estimates the number of poor in various countries in Asia by applying an ‘amalgam poverty line’, which is a weighted average of an absolute poverty line (such as $1.25 per day or $1.45 per day) and a reference income (such as the mean or the median income). The number of poor is computed under various values of the weight applied to the absolute poverty line, namely 100 percent, 90 percent, 66 percent and 50 percent. The chapter provides estimates of the headcount ratio and poverty gap ratio under the various scenarios for 25 different countries or regions examined.
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Hermann Waibel and Lena Hohfeld

In this chapter, we analyze the link between nutrition and poverty in two Asian countries where monetary-based poverty reduction was especially successful. Thailand and Viet Nam are two emerging market economies where poverty rates are now below 10 percent and are declining further. Despite this success, it is not clear to what extent this success has translated into similar improvements in the nutritional situation of the people and especially of children. We find that undernutrition continues to be a problem in Viet Nam with child underweight rates of 27 percent and therefore higher than headcount rates of the $1.25 poverty line. Also, Thailand, after the economic crisis, with 19 percent of children underweight, is still above the World Health Organization’s threshold. We investigate the factors that influence nutrition outcomes, measured as Z-scores of the weight-for-age indicator, by using Tobit regressions for four different groups of children, based on income (poor versus non-poor) and nutrition (underweight versus non-underweight). We find that poverty and income influence nutrition outcomes, but other factors such as mother’s height, education, migration and sanitation also affect nutrition. Coefficients of respective variables differ by poverty status. Our conclusion that non-monetary factors matter to reduce undernutrition, and, therefore, monetary poverty reduction is not a sufficient condition, is further underlined by a prediction of future undernutrition rates based on regressions. Also, we find that, even under the assumption of high growth, income growth alone will not be able to reduce undernutrition to a level of low severity until the year 2030.
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Carlos Gradín

This chapter compares the extent and the nature of the higher prevalence of poverty among disadvantaged ethnic groups in six Asian countries using demographic surveys. We first estimate a composite wealth index as a proxy for economic status, and analyze the magnitude of the ethnic gap in absolute and relative poverty levels across six countries and different ethnicities in those countries. Then, we use regression-based counterfactual analysis for explaining these ethnic differentials in poverty. We compare the actual differential in poverty with the gap that remains after disadvantaged ethnic groups are given the distribution of characteristics of the advantaged ethnic groups (by reweighting their densities using propensity scores). Our results show that there is a substantial cross-country variability in the extension, evolution, and nature of the ethnic poverty gap, which is as high as 50 percentage points or more in some specific cases in Nepal, Pakistan, or India. The gap in the latter country increased over the analyzed period, while it was reduced in the Philippines. Our analyses indicate that factors that contribute to ethnic disadvantaged groups being poorer are the strongly persistent high inequalities in education (for example, India, Nepal, and Pakistan), in regional development (for example, the Philippines) and the large urban–rural gap (for example, Pakistan).