Economic Models
for New Industrializing Countries:
Experiences from Europe in Comparative Perspective
Prof. Dr. Ralph Wrobel
Research Questions
Which economic system is able to develop an
economic successful catching-up combined
with human development and poverty
reduction?
Does any “Single Peak Economy” exist which
can act as a role model for Transformation
Countries / New Industrializing Countries?
Structure
• Catching-up Strategies – An Overview
• European Role Models in Comparative
Perspective
– Common Experiences from Europe
– Different Models in Comparison
• Categorizing Economic Systems
• Concrete Role Models from Europe
• Conclusion
Catching-up Strategies – An Overview
LDCs
-
Socialism / Communism
growth strategy / trickle down
fight against mass poverty
Brundtland Report 1987
Large (and Small)
Asian Tigers
- export-oriented strategy
- „developmental dictatoirship“
- „quantitative growth“?
Western Reform
Packages
Washington Consensus
- neglection of institutions
CEEC
- integration into EU
- export oriented strat.
institutions
European Role Models in
Comparative Perspective
Common Experiences from Europe
Legatum Prosperity Index Rankings 2012 – TOP 30 Countries
Rank
1
2
3
4
5
6
7
8
9
Country
Norway
Denmark
Sweden
Australia
New Zealand
Canada
Finland
Netherlands
Switzerland
Rank
11
12
13
14
15
16
17
18
19
Country
Luxembourg
United States
United Kingdom
Germany
Iceland
Austria
Belgium
Hong Kong
Singapore
Rank
21
22
23
24
25
26
27
28
29
Country
France
Japan
Spain
Slovenia
Malta
Portugal
South Korea
Czech Republic
United Arab Em.
10
Ireland
20
Taiwan
30
Cyprus
Social Orders
by North/Wallis/Weingast (2009)
Limited Access Order
Open Access Order
Slow growing, vulnerable to shocks
Political and economic development
• politics without consent of
governed
• relatively small number of
organizations
• predominance of social
relationship organized along
personal lines
• privileges and social
hierarchies
• bigger, more decentralized
government
• rich civil society, lots of
organizations
• widespread impersonal
social relationships
– rule of law
– secure property rights
– fairness and equality
7
Doorstep Conditions for LDCs / NICs
1. rule of law for elites
– establishment of functioning juridical system
– successful anti-corruption measures
2. continuously lived forms of public and private
organizations
– civil society with lots of organizations
– promotion of organization building (parties, unions)
3. consolidated political control of the military
– ALL military forces under control of the state
8
Categorizing Economic Systems
Liberal Market
Economies
Market coordination
Anglo-Saxon Countries
Coordinated Market
Economies
Non-market institutions
Germany and Central
Europe, Japan
France, Italy etc. ambiguous
Peter Hall and David Soskice (2001): “Varieties of Capitalism:
the Institutional Foundations of Comparative Advantage”
5 Types of Market Economies
Market
based
Social
Continental
Democratic European
South
European
Asian
Coordination by
market-prices
price
coord.
non-price
coord.
non-price
coord.
low price
coord.
high nonprice coord.
Openess to FDI and
competition
open
open
low protectionist level
moderate
protect.
protectionist
Sophisticated
financial markets
sophisticated
not sophisticated
low sophisticated
not sophisticated
low sophisticated
Employment
protection
low
moderate
high
low
moderate
Social protection
weak
high
high
moderate
low
Public Expenditure
for education
low
high
high
low
low
(Amable 2003)
Nordic
Welfare
States
(SocialDemocratic
Economies)
Anglo-Saxon Free
Market Economy
(Market-Based
Economies)
Social Market
Economy
US, CAN, AUS, NZ
F
(Continental European Capitalism)
Mediterranean Economies
(South European Capitalism)
GeoCultural
Groups
Asian
Capitalism
J + RoK
+ HK
+ TAIWAN
+ SINGAPORE
Legatum Prosperity Index Rankings 2012
Selected Role Models 1
Anglo-Saxon Free
Market Economies
Australia
4
New Zealand
5
Nordic Welfare
States
Norway
1
Denmark
2
Canada
Ireland
USA
UK
6 Sweden
10 Finland
12
13
3
7
Average
8.3 Average
3.3
Social Market
Economies
Netherlands
Switzerland
8
9
Luxembourg
Germany
Austria
Belgium
11
14
16
17
Average
12.5
Legatum Prosperity Index Rankings 2012
Selected Role Models 2
Mediterranean Capitalism
Asian Capitalism
France
Spain
21
23
Hong Kong
Singapore
18
19
25
26
30
33
49
23.0
Taiwan
Japan
South Korea
20
22
27
Malta
Portugal
Cyprus
Italy
Greece
Average
Average
21.2
Transformation Countries and
New Industrialising Countries
R
EU10
I
B
S
C
Small
Tigers
Legatum Prosperity Index Rankings 2012:
Selected Transformation and New Industrializing Countries
EU 10
Slovenia
Czech Rep.
Poland
Estonia
Slovakia
Hungary
Lithuania
Latvia
Bulgaria
Romania
Average
Small Tigers
24 Malaysia
28 Vietnam
32
35
36
39
43
47
48
60
39.2
Thailand
Indonesia
Philippines
Average
BRICS
45 Brazil
53 China
44
55
56 Russia
63 South Africa
67 India
66
74
101
56.8 Average
68.0
Role Models from Europe
Nordic
Welfare
State
Social
Market
Economy
Anglo-Saxon
Free Market
Economy
Nordic Welfare State
Advantages
Disadvantages
• high degree of social
security and welfare
• very expensive for
citizens (taxes, debts)
• reduced incentives for
all economic actors
• very sensitive to
economic action
17
Sweden – Nordic Welfare State
Free Market Economy
Advantages
Disadvantages
• no state coordination
necessary
• simple to implement
• high incentives, high
efficiency
• rising social inequality
• Monopolization
• negative externalities
• Failure of Washington
Consensus
• Financial Crisis
19
Great Britain – Free Market Economy
Social Market Economy
Advantages
Disadvantages
• adequate rules and
regulations
• NO neglecting of social
aspects
• “welfare for everyone”,
less social differences
• sophisticated economic system with
strong but subsidiary
state
• relatively difficult to
implement
• depending on rule of
law
21
Germany – Social Market Economy
Strong but subsidiary state necessary
Conclusion
• No „Single Peak Economy“
• 3 remaining European Models
– Anglo-Saxon Free Market Economy
– Central European Social Market Economy
– Nordic Welfare State
• Institutional Competition
– Institutional imitation and adaptation
– New competitors from East Asia (?)