How to be an Asian tiger
Abstract:
The high-profile launch of the ‘Make in India’ campaign today is a good occasion to remember the development experience of East Asian economies such as South Korea, Taiwan and Singapore in the 1960s and 1970s and China more recently. East Asian economies principally relied on growth in labour-intensive industry and accompanying expansion in jobs at ever rising wages, as the principal means of prosperity for the bottom half of the population. India focused more directly on social protection for workers through legislation, foregoing good jobs and to a great extent growth as well.
In the East Asian economies sustained rapid growth of labour-intensive manufacture created well paid jobs for the low skilled and paved the way for the migration of vast numbers of agricultural workers into manufac-turing. As a concrete example, South Korea grew at an average rate exceeding 8% between 1965 and 1985. During the same years, the employment share of agriculture fell from 59% to 25%. Industry and services absorbed the workers so released.
Alongside, average real wage rose more than 8% per year. Through much of this period, the Korean government remained focussed on sustained rapid growth. It provided at best nominal protection to industrial workers through social legislation.
In India, pursuit of social protection for organised sector workers has run well ahead of economic growth and job creation. This is an expected and broadly desirable outcome of democracy, which forces the government’s hand to protect the weak as industrialisation proceeds. But such protection can be pushed too far for the good of workers taken as a whole. Growth, especially of labour-intensive industry, may falter, good jobs may become a rarity and social protection offered through legislation may end up benefitting only a lucky few in the workforce.