India

India today is a changed country from what it was half a century ago, when Gunnar Myrdal published his Asian Drama in 1968. This chapter is a brief history of India’s economy since then. The stranglehold of low growth is broken, its population below the poverty line has fallen markedly, and India has joined the pantheon of major players globally. The chapter analyses the economic policies and also the politics behind this transformation, and uses that as a backdrop to take stock of the challenges that lie ahead. From the vantage point of hindsight, it seems quite remarkable that India did what no other newly independent developing country did. It chose to invest in politics first—establishing democracy, free speech, independent media, and citizens’ rights. This chapter celebrates Myrdal’s Asian Drama by critically examining the economic consequences of India’s choice

Poverty and Inequality

This chapter aims to depict the post-Second World War poverty and inequality trends in Asia, its sub-regions, and individual economies. In addition to the provision of poverty and inequality profiles, this chapter addresses three related issues: what were the impacts of growth and inequality on poverty reduction in Asia? What are the drivers of absolute poverty and inequality? And what is the relationship between economic growth and inequality? Efforts are made to explain these trends and explore their interrelationships. Analytical results confirm significant reductions in poverty across the board due to fast growth, although the benign effect of growth on poverty was offset by worsening distribution in many economies. Looking ahead, Asia is expected to eradicate poverty but likely to continue facing high inequality, particularly as major technology breakthroughs such as artificial intelligence and the internet of things replace more and more labour.

Vietnam

Gunnar Myrdal’s 1968 magnum opus, Asian Drama, pointed to the decisive nature of the Vietnamese people. Vietnam adopted a costly position on economic policy and management from 1976. When the approach taken did not produce the hoped-for results, an effective course correction was initiated in 1986. Since then, Vietnam has witnessed one of the world’s best performances in terms of economic growth and poverty reduction. Wide-ranging institutional reform has been introduced, including a greater reliance on market forces in the allocation of resources and the determination of prices. The shift from an economy completely dominated by the state and co-operative sectors, to one where the private sector and foreign investment both play key and dynamic roles, has been achieved without giving up strategic leadership and influence by the state.

Education and Health

This chapter analyses the dramatic spread of education and healthcare in Asia and the large variations therein across and within countries over the past fifty years. Apart from differences in initial conditions and income levels, the nature of the state has also been an important determinant of these variations since social development has typically been state-led. But in most countries public resource constraints led to growing dependence on private provision and private spending in education and healthcare. This in turn generated a pattern of nested disparities in the access to education and healthcare between rich and poor regions, between rural and urban areas within regions, and between rich and poor households. However, as the better-off regions, areas, and households approach the upper limits of achievable education and health standards, a process of convergence is also underway as those left behind begin to catch up.

Southeast Asia

This chapter examines the development experiences of six countries, Malaysia, Philippines, Thailand, Cambodia, Lao People’s Democratic Republic, and Myanmar—collectively ‘the Six’—fifty years after Gunnar Myrdal’s Asian Drama. Myrdal took an unambiguously pessimistic view of Asian prospects for development on the basis of obstacles to raising agricultural productivity, and the low perceived level of capability of governments to intervene effectively in favour of industrial development—the latter being a handicap that included extensive corruption at all levels of government. The record of the Six mostly defied Myrdal’s prognosis, raising agricultural productivity faster than population growth and displaying sufficient state capability to direct change towards a respectable level of industrial development. By using a more socially grounded analytical approach à la Myrdal, it is possible to understand how unorthodox economic policies have been effective in overcoming developmental disadvantages. However, shortfalls in social development could make future progress difficult.

East Asia

Few non-Western countries have reached the general prosperity of Western Europe and North America in the past two centuries. The core–periphery structure of the world economy, created in the early decades of the Industrial Revolution, has proved robust, even after seven decades of self-conscious ‘development’ following the Second World War. Just about all the countries in the periphery in 1960 remain in the periphery today. The clearest ‘escapees’ are in capitalist Northeast Asia. This chapter argues that the East Asian ‘developmental states’ were crucial for their rapid ascent up the world hierarchies of income and production capability. Today, capital is no longer scarce and flourishing democracies are in place, but their erstwhile developmental states have not given up a central ‘developmental mindset’. Rather than becoming approximations to neo-liberal states, they have moved from developmental states 1.0 to 2.0. Other countries can learn from their experience of how to institute developmental states 2.0.

South Asia

Soon after independence from British rule, the South Asia region seemed to have a much better prospect than many other parts of the developing world; the prospects soon dimmed, however, as South Asia crawled while East and Southeast Asia galloped away. But a large part of the region seems finally to have turned a corner and is looking forward to a much better future—in terms of growth, poverty reduction and human development. This chapter describes and explains this story in terms of economic strategies and the political economy of the region and also looks ahead to identify the major challenges that remain—focusing on Bangladesh, Bhutan, Nepal, Pakistan, and Sri Lanka.

China

Myrdal did not cover China in his Asian Drama. If he did, he would most likely have been pessimistic. However, China has achieved a miraculous growth since the transition from a planned economy to a market economy at the end 1978. Why was China trapped in poverty before 1978? Why was it possible for China to achieve an extraordinary performance during its transition? Why did most other transition economies fail to achieve a similar performance? What price did China pay for its success? Can China continue its dynamic growth in the coming decades? What lessons can we draw from China’s development experiences in view of the Asian Drama? If a developing country adopts a pragmatic approach to develop its economy along its comparative advantages and tap into the potential of latecomer advantages, the country can grow dynamically like China.

Institutions and Development

The role of institutions in Asian development has been intensely contested since Gunnar Myrdal’s Asian Drama, with later contributions from institutional economics and developmental state theory. Despite much progress, the dominant approaches do not agree about the institutions that matter, nor do they explain why similar institutions delivered such different results across countries. Cultural norms and informal institutions clearly matter but the appropriate norms did not already exist in successful countries; they evolved over time. The distribution of holding power across different types of organizations, the ‘political settlement’, can explain the diversity of experiences better and help to develop more effective policy. This chapter outlines Myrdal’s contribution to institutional analysis and how modern institutional analysis has built on his analysis, then, drawing on the experiences of Asian countries, sets out an alternative institutional analysis based on political settlements, and the implications for the analysis of the effectiveness of institutions.

Agriculture, the Rural Sector, and Development

Over the past sixty years, Asian countries have gone through rapid agricultural transformations helping to lift broader economic development. The change has differed in nature and speed across countries of the region. In much of East and Southeast Asia, agricultural productivity growth facilitated labour exit and savings transfers, which helped jump-start industrial growth and urbanization, which in turn induced deeper agrarian change and food system transformations. In South Asia, these transformative changes have lagged, in part because of structural hurdles to agrarian change. More recently, growth in South Asia has accelerated as many of those obstacles were overcome. Yet, challenges of widespread poverty and food insecurity remain in a context of advanced urbanization, changed dietary patterns, modernized agri-food systems, and environmental constraints. Consequently, the role and nature of agricultural transformations and structural change in forging growth and poverty reduction in still disadvantaged parts of Asia will need to be different.