Economic development concepts and frameworks

Economic Development

The failure of the World Bank to predict the NIC crisis of the late 1990's is mostly blamed upon a misperception advocated by economists and political scientists of the West. This misperception entails that the high growth rates experienced by Asian countries since the 1960's led to the assumption that the economy in these countries would not only remain stable, but would continue experience extreme growth far into the future. This is an assumption that was remarkable similar in all sectors of the academic world, although some held that the economic growth was related to free markets, while others held that the interventionist state should receive the honors for the phenomenon.

The infatuation of the Western world with the high growth of the Asian economy is evident in the numerous works written on the topic, and the popularity of these works with the public. Some saw the region and its economy as a positive supplement to the world economy, while others viewed it as a threat. The consensus is however that the economic growth and prosperity of the region was unlikely to diminish soon. This perpetuated the global perception of Asian prosperity, with very little consideration given to a possible collapse or crisis (Saker, 1996: 18).

The truth is however that there was significant stresses of the NIC growth model resulting from environmental devastation, the replacement of agriculture with industry, income disparities, and increasing dependency on technology, and the resulting structurally determined trade deficits. Those who pointed this out however were far in the minority in the economic world, and all parties, including the World Bank, considered only the majority view to be realistic.

Indeed, the World Bank found the arguments on both sides of the economic world to be valid in terms of predictions in the early 1990's. According to the Bank, and after viewing what it saw as all the evidence, a period of even greater prosperity was predicted for Asia, despite some minor deviations in the Asian markets. The Asian tigers were seen to have found the perfect formula for economic growth, as explicated in the World Bank book The East Asian Miracle. This approval from the Bank again led to huge amounts of speculative capital flowing into the Asian countries, which were seen to be the very symbol of prosperity. The influx of this capital was then largely the result of a general consensus relating to Asian prosperity rather than a true assessment of local conditions and borrowers. Indeed, when discrepancies were found as a result of investigation, this was ignored in favor of the general perception that Asian countries were to be the icon of prosperity in the future. This view was perpetuated by entities such as the business press, investment analysts and most academic specialists.

Thus the 8- 10 per cent growth rate, together with the World Bank and the opinions of economic leaders, had a somewhat blinding effect with regard to the true state of the Asian economy (Saker, 1996:14).

The above appears to be a self-perpetuating state of illusory views regarding the boom of the Asian economy, reinforced by growth rates, expectations, analysis, advice and reporting. Indeed, no room was allowed for alternative viewpoints regarding the situation. The crisis then occurred during July of 1997, when the Thai baht was floated. It is rather interesting that the very same players predicting continual prosperity, have moved to the exact opposite of their previous opinions, now profiting from the collapse and gloomy predictions for the future of the Asian economy.

The role of the World Bank was thus significant in the failure to predict that NIC crisis during the late 1990's. Its opinions were held in such high regard that little could be done to sway it. As seen above, however, the Bank was also caught up in the cycle of illusion perpetuated during the time by the various elements mentioned above. Respected economists, journalists and other influential entities served to sway the Bank's opinions and to make almost impossible any contradictions to the contrary (Saker, 1996: 5).

This is somewhat reminiscent of consensus opinions of human history, including the view that the world was flat or that the earth was the center of the universe. There was no proper analysis of the situation as it presented itself in truth, and those who called for such analyses were ostracized at worst and disregarded at best.

The many ordinary Asians that suffered as a result of the economic collapse have become a symbol of the negative effects of globalization on the lives of people who do not play powerful roles in the economic world. Such globalization has far reaching economic effects that also translate to culture and politics. Once again, the role of the World Bank and other influential institutions is disturbingly reminiscent of historical phenomena such as the cultural and political domination of the Church.