IndCoup noted an article last week by ex-World Bank chief economist Joseph Stiglitz praising Chinese planning. Sarapan Ekonomi, an Indonesian economics blog, .
IndCoup ponders Joseph Stiglitz’s praise on China’s miraculous economic development, on which Greenstump speculates that IndCoup “believes China is a model Indonesia should follow”.
Regardless, in terms of economic growth, poverty reduction, and population control, Indonesia is every bit as “miraculous” as China.
Since the late 1960s, both Indonesia and China has been growing fast. Moreover, as shown in the graph above, average Indonesians had been always richer than people of China. Until the 1998 financial crises, that is, when the Indonesia’s economy shrank by 13 percent and has been growing slower since.
Still, Indonesia’s poverty today is in no way worse than China’s; For example, China’s poverty gap at $1 a day (a measure of incidence and depth of poverty) is 4 percent, while Indonesia’s is less than 1 percent.
AsiaPundit also took exception with the Stiglitz article which starts out with this premise.:
Part of the key to China’s long-run success has been its almost unique combination of pragmatism and vision. While much of the rest of the developing world, following the Washington consensus, has been directed at a quixotic quest for higher GDP, China has again made clear that it seeks sustainable and more equitable increases in real living standards.
It surprises AP that Stiglitz, after three years of working with the World Bank, would feign such ignorance. Since the Deng Xiaoping-era China has consistently put emphasis on GDP growth over income equality or social welfare. The shift he is now praising is largely a creation of the newest five-year plan.
That said, AP agrees that much of the five-year plan is reasonable. It’s largely agreed that more even income distribution and stronger domestic consumption are needed. The fallen tigers of ‘97, generally, did not consider the importance of domestic demand until after their export-driven economies collapsed. China is wise to do so now.
The respective rebounds of the victims of ‘97, in part, were based upon how quickly they shifted to policies that stoked domestic demand.
South Korea quickly cleared bad loans and, in a rather insane manner, promoted consumption through personal debt (creating a new credit crisis in the process), Thailand did less but it did extend rural credit and ran a moderately successful asset management program for debt. Indonesia struggled with political turmoil and indecision for most of the post-1997 years. AP will not speculate on how China will fare.
That China is preemptively addressing issues that the rest of Asia did after 1997, and after Japan’s bubble burst, is welcome. However, AP is not confident that the country will do so successfully before its own imminent correction.
China’s miracle is impressive. So too were Korea’s, Thailand’s and Indonesia’s. AP will withhold judgement on how China’s overall economic management rates until after he sees how the country responds to a deep recession. He will give the state some credit, for instance, this is far more sensible than anything he was hearing from the pre-1997 Bank of Korea. But broader comparisons of China and Indonesia will be withheld until the former has its crisis.
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