Economic Development Strategy

Singh wrote diverse papers on agriculture, and in particular, its role in economic development for low-income nations. In a 1992 contribution, for example, he and Hamid Tabatabai criticize the ‘enormous prejudice among economic policy makers in the North and orthodox economists’ (Singh and Tabatabai 1992: 417) against active intervention in agricultural markets and in particular against international commodity price agreements. Reviewing the US experience during the Great Depression of the 1930s, the authors note that farm product prices dropped by more than half while, controlling for weather conditions, output rose. Manufacturing output and prices exhibited opposite tendencies. The authors could have strengthened their case by reviewing the record of actual government interventions in US agricultural markets during the 1930s, including destruction of surplus crops, mandated price floors, acreage limits, and purchasing surplus output for distribution to unemployed urban workers. In many of the prime US agricultural commodity markets, powerful interventions continue even now (see, for example, Scherer 1996: Chapter 2). The remarkable fact is that the US interventions (and also their European counterparts) work rather well, despite palpable inefficiencies, among other things preserving a prosperous agricultural workforce and keeping citizens well fed.

An earlier (Singh 1982) chapter addressed the specific problems of agriculture versus industry in Africa. Singh criticizes the view among Washington-based policy makers that stress merely ensuring that basic food needs are met, and only after that, fostering the shift of resources into industrial development. Singh highlights the interdependence between the agricultural and industrial sectors. For one, advanced industrial technology (along with better education) is essential for increasing the productivity of farmers. Such productivity gains in turn release resources that can be used to build the industrial sector. Advancing a theme that recurs in later works, Singh argues (ibid.: 31) that ‘in view of the far greater degree of.. .backwardness of the African countries today.. .the state, rather than the market, will necessarily have to play the central role in industrial development in these countries’.

In 1994, Singh addressed the central key of economic development even more squarely (Singh 1994). He criticized the earlier blindness (since then partly remedied) of World Bank economists to the role that state intervention played in the economic development of Japan, South Korea, and Taiwan— for example, through picking and supporting industrial ‘winners’, protecting them from import competition during their vulnerable early development stages, encouraging cross-border technology transfer, building educational systems that yield workers able to bring their employers up to the frontiers of technology, and structuring incentive mechanisms to stimulate vigorous and efficient industrial performance. My own opinion is that in these views, Singh was much more correct than those following the Washington consensus (see, for example, Freeman 1987; Amsden 1989).

My principal criticism of Singh’s analysis is that it fails to recognize important differences in diverse Asian nations’ successful development strategies. Japan and South Korea succeeded in joining the ranks of world leaders industrially (for Japan, at least into the early 1990s, after which problems emerged) through the kinds of policies Singh emphasizes, among other things actively fostering the growth of domestic enterprises and discouraging foreign direct investment (FDI). But other Asian tigers pursued strategies that differed in important ways, most notably, with respect to FDI. This is shown by Istiaq Mahmood’s analysis (1999: Table 2) of US patents granted to organizations located in diverse Asian tiger nations. Rapid growth in technological proficiency is shown by the increase in the total number of such patents received by organizations located in South Korea, Taiwan, Singapore, and Hong Kong: from 1,896 in the 1981-1986 period to 12,283 in 1987-1996. The fraction of US patents over the two periods assigned to indigenous, as compared to foreign transplant, organizations was 98% for South Korea and

99% for Taiwan, as compared to 5% for Singapore and 17% for Hong Kong. Similarly, for India, Indonesia, Malaysia, and Thailand, the fraction of patents going to indigenous concerns ranged between 6% and 13%. Clearly, FDI played a much less important role in the technological progress of South Korea and Taiwan (as well as Japan, not included in Mahmood’s tabulation) than it did for other Asian tigers.

To Singh’s important 1994 paper on economic development, I add only one minor quibble. He credits the German economist Friedrich List (1837) [1983] with conceiving the kinds of protectionist policies Japan adopted in supporting its great leap forward following the Second World War. Yes, the policies were Listian. But List was stimulated to his analysis when he resided in the USA in exile from his native Wurttemberg, Germany, between 1825 and 1837. He chanced then to read Alexander Hamilton’s Report on the Subject of Manufactures (1791), written when Hamilton was US Secretary of the Treasury. It advocated a set of policies that, successfully pursued, helped the USA advance from being the specialist in agriculture that Adam Smith advocated in Book II, Chapter V, of The Wealth of Nations, to becoming a diversified industrial powerhouse. In addition to restrictions on manufactured goods imports, Hamilton advocated vigorous technology transfer from abroad, and to enhance the one-way emphasis of that policy, the USA granted no patents on inventions by foreign applicants until 1836. It is largely true, as Singh says on page 1,814 of his 1994 paper, that more recently the USA has not had an explicit ‘industrial policy’. Rather, by intervening through ‘a variety of measures’ (ibid.), it lacks what could be called a coherent industrial policy. On that, I believe we agree fully.