Cambodia– Responding to Rising Voter Expectations


October 16, 2017

Cambodia– Responding to Rising  Voter Expectations 

by Kongkea Chhoeun, Australian National University

http://www.eastasiaforum.org

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As long as the Cambodian government manages to maintain satisfactory economic performance, continues its piecemeal reforms benefitting the majority of the population, and promotes some appearance of democracy in the country, it will continue to demand difficult value judgments on the part of Cambodian citizens as to whether the CPP’s actions against the media and civil society are worth fighting back against.– Kongkea Chhoeun

 

It might be easy to forget given the events of August–September 2017, but Cambodian democracy had until a few years ago been making progress. Many key indicators of democratic quality had continued to improve since the 1998 national elections, which followed the near collapse of the system in the aftermath of the July 1997 internal fighting between armed forces loyal to Prime Minister Hun Sen and Prince Norodom Rannariddh.

 

Competition among political parties increased, thanks to the unification of the opposition parties in 2012 ahead of the 2013 national election. The economy also continued to grow extraordinarily well. Growth has averaged 7 per cent per year since 1993, and poverty has fallen more than 1 per cent per year on average since 2003. Inequality has also declined. Vertical political accountability has been strengthened markedly, thanks to decentralisation and deconcentration. Cambodians are increasingly able to hold local leaders to account through local democratic processes.

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Sanderson Park, at Wat Phnom, Phnom Penh  has a sculpture of a dove with an olive branch in its beak. It is made up entirely from parts of AK-47 rifles.

But the 2013 polls were a turning point. Although they won the election, the ruling Cambodian People’s Party (CPP) lost the popular vote for the first time since 1998, seeing its popular vote plummet by more than 20 per cent. To its credit, the CPP-led government subsequently implemented various reforms aimed at winning the hearts and minds of Cambodian voters. The CPP has permitted moderate reforms, restructured the National Electoral Committee and increased public servants pay. And in August 2017, Hun Sen also promised a slew of new benefits for garment workers, including a big increase in their monthly minimum wage.

But with the carrots have come sticks.Indicators of horizontal accountability have either stalled or are in decline. Local and international NGOs and media operated with comparatively little constraint from the state before the 2013 national election period. Since then, the government has made disturbing moves that wipe out progress made in terms of political openness. Among a range of actions is the passage of legislation governing NGOs.

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Despite a boycott by the opposition, the Parliament passed the Law on Associations and Non-Governmental Organisations, which requires the nearly 5000 domestic and international NGOs that work in the country to register with the government and report their activities and finances or risk fines, criminal prosecution and being shut down. In August 2017, the government used this law to order the National Democratic Institute (NDI) to shut down its operations and repatriate its foreign staff, accusing the NDI of illegally operating in the country.

The Cambodian government has also targeted foreign and foreign-linked media. In August 2017, the government accused the Cambodia Daily of failing to pay more than US$6 million in taxes, giving the paper one month to resolve the issue or risk being shut down. The Daily is a US-owned outlet credited for its reports critical of the government. In addition, the government instructed more than a dozen radio stations across the country to cease operations, accusing them of failing to report how much and to whom they sell their airtime.

Two major factors — one internal and one external — may explain the government’s recent measures against international NGOs and media. Internally, these measures were escalated as a result of the June 2017 local government elections, the result of which represented a big boost for the opposition Cambodian National Rescue Party and a serious blow to the CPP. After the June 2017 local government elections, the CPP still controlled the majority of local governments — 1156 or 70 per cent of communes. But the opposition party’s share of local governments increased about 12 fold in comparison with the last local elections held in 2012.

The external factor is the declining role of the United States as a champion of democracy. The drastic moves targeting US-based NGOs and media occurred in the aftermath of the election of Donald Trump. His election and subsequent attacks on mainstream media have disconcerted democrats at home and abroad and certainly delegitimised US efforts to promote liberal democratic principles internationally.

Furthermore, the failure of the United States to pre-empt and manage democratic breakdown in Thailand, and to promote democracy in Laos and Vietnam, only serves to diminish the US role in promoting democracy in Cambodia, and potentially gives the Cambodian government an excuse to maintain the status quo.

Likewise, Australia and European countries have been silent on these issues so far, showing a similar unwillingness to influence internal political decisions in Cambodia. The 2014 Australia–Cambodia refugee deal tainted Australia’s reputation as an altruistic donor to Cambodia, and has certainly undermined Australian leverage in promoting reforms in Cambodian domestic affairs. And European countries have been busy cleaning up the mess in their own backyard after the Brexit vote in 2016 and the rise of populist movements across the continent.

Meanwhile, Cambodia is increasingly dependent on China, and less and less so on Western countries. China is feeding the Cambodian economy, investing US$857 million (roughly 61 per cent of total FDI) and channelling US$320 million in aid (roughly 30 per cent of total aid) to the country in 2015. By contrast, investment and aid from Western countries is either modest or on the decline.

Whatever the mix of domestic and global political influences, the consequences of the CPP’s crackdown on Cambodia’s democracy are being felt. As long as the Cambodian government manages to maintain satisfactory economic performance, continues its piecemeal reforms benefitting the majority of the population, and promotes some appearance of democracy in the country, it will continue to demand difficult value judgments on the part of Cambodian citizens as to whether the CPP’s actions against the media and civil society are worth fighting back against.

Kongkea Chhoeun is a PhD Candidate at the Crawford School of Public Policy, The Australian National University.

This article was first published here on New Mandala.

 

Sustainable Development Goals Achievable?


September 28, 2017

Sustainable Development Goals Achievable?

by Andrew Sheng and Xiao Geng*

https://www.project-syndicate.org/commentary/sdgs-global-cooperation-trump-un-speech-by-andrew-sheng-and-xiao-geng-2017-09

The SDGs were always bound to meet strong headwinds, owing to technological disruption, geopolitical rivalry, and widening social inequality. But populist calls for nationalist policies, including trade protectionism, have intensified those headwinds considerably.

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US President Donald Trump’s recent speech at the United Nations has gotten a lot of attention for its bizarre and bellicose rhetoric, including threats to dismantle the Iran nuclear deal and “totally destroy” North Korea. Underlying his declarations was a clear message: the sovereign state still reigns supreme, with national interests overshadowing shared objectives. This does not bode well for the Sustainable Development Goals.

Adopted by the UN just a year before Trump’s election, the SDGs will require that countries cooperate on crucial global targets related to climate change, poverty, public health, and much else. In an age of contempt for international cooperation, not to mention entrenched climate-change denial in the Trump administration, is achieving the SDGs wishful thinking?

The SDGs were always bound to meet strong headwinds, owing to technological disruption, geopolitical rivalry, and widening social inequality. But populist calls for nationalist policies, including trade protectionism, have intensified those headwinds considerably. Simply put, populations are losing faith that the global development orthodoxy of good governance (including monetary and fiscal discipline) and free markets can benefit them.

With all of the advanced countries confronting serious fiscal constraints, and emerging markets weakened by lower commodity prices, paying for global public goods has become all the more unappealing. Budget cuts – together with accountability issues and new technological challenges – are also hurting those tasked with delivering good governance. And markets increasingly seem to be captured by vested interests.

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Economic outcomes often have their origins in politics. Harvard Law School’s Roberto Unger has argued that overcoming the challenges of knowledge-based development will demand “inclusive vanguardism.” The democratization of the market economy, he says, is possible only with “a corresponding deepening of democratic politics,” which implies “the institutional reconstruction of the market itself.”

Yet, in the US, the political system seems unlikely to produce such a reconstruction. Harvard Business School Professors Katherine Gehl and Michael Porter argue that America’s two-party system “has become the major barrier to solving nearly every important challenge” facing the country.

Political leaders, Gehl and Porter continue, “compete on ideology and unrealistic promises, not on action and results,” and “divide voters and serve special interests” – all while facing little accountability. A forthcoming book by University of San Francisco Professor Shalendra Sharma corroborates this view. Comparing economic inequality in China, India, and the US, Sharma argues that both democratic and authoritarian governance have failed to promote equitable development.

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There are four potential combinations of outcomes for countries: (1) good governance and good economic policies; (2) good politics and bad economics; (3) bad politics and good economics; and (4) bad politics and bad economics. Other things being equal, there is only a one-in-four chance of arriving at a win-win situation of good governance and strong economic performance. That chance is diminished further by other disruptions, from natural disasters to external interference.

There are those who believe that technology will help to overcome such disruptions, by spurring enough growth to generate the resources needed to mitigate their impact. But while technology is consumer-friendly, it produces its own considerable costs.

Technology kills jobs in the short term and demands re-skilling of the labor force. Moreover, knowledge-intensive technology has a winner-take-all network effect, whereby hubs seize access to knowledge and power, leaving less-privileged groups, classes, sectors, and regions struggling to compete.

Thanks to social media, the resulting discontent now spreads faster than ever, leading to destructive politics. This can invite geopolitical interference, which quickly deteriorates into a lose-lose scenario, like that already apparent in water-stressed and conflict-affected countries, where governments are fragile or failing.

The combination of bad politics and economics in one country can easily produce contagion, as rising migration spreads political stress and instability to other countries. According to the UN High Commission for Refugees, there were 65 million refugees last year, compared to just 1.6 million in 1960. Given the endurance of geopolitical conflict, not to mention the rapidly growing impact of climate change, migration levels are not expected to decline anytime soon.

The SDGs aim to relieve these pressures, by protecting the environment and improving the lives of people within their home countries. But achieving them will require far more responsible politics and a much stronger social consensus. And that will require a fundamental shift in mindset, from one of competition to one that emphasizes cooperation.

Just as we have no global tax mechanism to ensure the provision of global public goods, we have no global monetary or welfare policies to maintain price stability and social peace. That is why multilateral institutions need to be upgraded and restructured, with effective decision-making and implementation mechanisms for managing global development challenges such as infrastructure gaps, migration, climate change, and financial instability. Such a system would go a long way toward supporting progress toward the SDGs.

Unger argues that all of today’s democracies “are flawed, low-energy democracies,” in which “no trauma” – in the form of economic ruin or military conflict – means “no transformation.” He is right. In this environment, reflected in Trump’s embrace of the antiquated Westphalian model of nation-states, achieving the SDGs will probably be impossible.

*Andrew Sheng, Distinguished Fellow of the Asia Global Institute at the University of Hong Kong and a member of the UNEP Advisory Council on Sustainable Finance, is a former chairman of the Hong Kong Securities and Futures Commission, and is currently an adjunct professor at Tsinghua University in Beijing. His latest book is From Asian to Global Financial Crisis.

*Xiao Geng, President of the Hong Kong Institution for International Finance, is a professor at the University of Hong Kong.

The Marshall Plan and “America First”


August 6, 2017

The Marshall Plan and “America First”

by Benn Steil

https://www.project-syndicate.org/onpoint/the-marshall-plan-and-america-first-by-benn-steil-2017-08

 

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General George C. Marshall–Secretary of State

 

Over the years 1948-1952, the US devoted the equivalent of $800 billion in today’s dollars to the reconstruction of western Europe. But whereas the Marshall Plan is widely regarded as the largest and most effective foreign-aid program in history, it is less widely appreciated for being the most successful example of an “America First” foreign policy.

Six months into Donald Trump’s presidency, the White House website still proudly proclaims his administration’s new “America First Foreign Policy.” No longer will the United States allow its physical and economic security to be undermined by what Trump calls “bad deals.” Alliances and trade pacts will all be revisited and, where necessary, renegotiated to ensure that “American interests” are paramount.

What is striking about this policy, however, is not that it places American interests first. It is the misguided way in which those interests are being defined.

In the immediate aftermath of World War II, the US established cooperative structures designed to address the catastrophic failure of international economic and security arrangements in the inter-war years. From 1945 to 1949, the administration of President Harry S. Truman propelled the establishment of the United Nations, the International Monetary Fund, the World Bank, the General Agreement on Tariffs and Trade (GATT), and the North Atlantic Treaty Organization. And the 1947 Marshall Plan created the institutional machinery that, over the subsequent decade, paved the path to European integration and the eventual creation of the European Union.

On November 29, 1948, President Harry S Truman conferred with the top leaders of the Marshall Plan—(left to right) George C. Marshall, Paul G. Hoffman (1891–1974), and Averell Harriman (1891–1986).
On November 29, 1948, President Harry S Truman conferred with the top leaders of the Marshall Plan—(left to right) George C. Marshall, Paul G. Hoffman), and Averell Harriman

These ambitious undertakings were a conscious repudiation of George Washington’s admonition, delivered in his Farewell Address at the end of his presidency, that the US should avoid foreign entanglements, particularly with Europe. They were born not of charity or naiveté, but of a clear-eyed recognition that America’s role in the world had to change as its global connections, and therefore its vulnerabilities, expanded. As Senator Arthur Vandenberg, once a leading Republican isolationist, reflected: “My convictions regarding international cooperation and collective security for peace took firm form on the afternoon of the Pearl Harbor attack. That day ended isolationism for any realist.”

From Isolationism to Global America

Vandenberg became the Republican Party’s driving force in support of the legislation that financed the Marshall Plan, the 70th anniversary of which is being commemorated this summer. With Britain’s empire collapsing and Stalin’s ascendant, US officials under Secretary of State George C. Marshall set out to rebuild Western Europe as an integrated bulwark against communist authoritarianism. This massive, costly, and ambitious undertaking would confront Europeans and Americans alike with a vision at odds with their history and self-conceptions.

Over the years 1948-1952, the US devoted $130 billion in current dollars to the reconstruction of Western Europe. As a share of total US output over the period, this would be equivalent to $800 billion today. But whereas the Marshall Plan is widely regarded as the largest and most effective foreign-aid program in history, it is less widely appreciated as the most successful example of an “America First” foreign policy.

Of course, the humanitarian impulse underpinning the Marshall Plan remains at the heart of its enduring legacy worldwide. But the plan was, in fact, the first major component of the new Truman Doctrine, which pledged US support for “free peoples who are resisting attempted subjugation by armed minorities or by outside pressures,” and of George F. Kennan’s strategy to “contain” the Soviet Union. (Kennan’s famous “X” article in Foreign Affairs, “The Sources of Soviet Conduct,” also recently marked its 70th anniversary.)

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President Harry S. Truman

Marshall’s State Department believed that unless war-torn Western Europe could be quickly rebuilt, and confidence in liberal-democratic government restored, the European public would seek salvation in populism and authoritarianism. Such a shift among America’s most important trading partners would in turn undermine America’s own physical and economic security, necessitating a massive increase in defense expenditure and government economic control. Only by ensuring that the US had strong, independent allies and stable trade and security relationships, Truman and Marshall believed, could it hope to maintain its own freedoms and way of life.

Establishing a stable environment within the 16 Marshall Plan countries, and thereby enabling trust and cooperation to take hold among government, business, and workers, was vital to the reestablishment of a market economy in Europe. And across the participating countries, US security guarantees and financial support were indispensable to enabling reconstruction and integration to proceed without generating unmanageable domestic or foreign conflict.

Doing Well by Doing Good

Contrary to Soviet propaganda and revisionist Western accounts, America did not aid its allies by forcing its surplus production on them. Had that been the case, Europe’s balance-of-payments deficit (known then as “the dollar gap”) would have widened, which in turn would have frustrated America’s aim to foster European integration. Such a policy would also have exacerbated the postwar shortages that still affected the US economy.

Instead, the Truman administration, supported by a striking change in the priorities of American business lobbies, orchestrated a deft policy shift. Backed by a bipartisan consensus, Truman moved the US from protectionism toward encouragement of imports.

The Marshall Plan’s lead official in Europe, Ambassador Averell Harriman, was steadfast in insisting that “the purpose of [US aid] is to stimulate countries to help themselves,” and that, consistent with the legislation authorizing it, the funds could not be used “to buy surpluses” from “American industry.” In turn, the National Association of Manufacturers (NAM), America’s premier business lobbying organization at the time, warned its members that “efforts to direct [Marshall] funds to [exporting surpluses] must be firmly resisted.”

The Chamber of Commerce, America’s other major business lobby, echoed NAM, stating that “US exports [must] be consistent with the ability of our customers abroad to pay for them by their own exports.” A State Department directive further stressed that whereas the US sought “non-discrimination in world trade, it is recognized that during the period in which Germany’s balance of payments is in substantial disequilibrium, [it] will, like other countries in the Organization for European Economic Cooperation, find it necessary to restrict imports.” The State Department insisted, therefore, that the US High Commission in Germany not interfere in German trade policy.

Germany First

American underwriting of the European Payments Union (EPU) from 1950 to 1958 deliberately redirected West European imports from the US to Germany. Western Europe’s large dollar deficits between 1945 and 1948 reflected Germany’s disappearance as its main capital goods supplier. The region’s massive reconstruction needs therefore had to be met by the US. But it was an important goal of the Marshall Plan to eliminate simultaneously Germany’s need for American aid and its neighbors’ need for dollar imports by restoring Germany to its traditional export role.

This effort was assisted by a relaxation of official US resistance to currency devaluation abroad. The US recognized, for example, that if Germany could not devalue the new Deutschmark it would simply “revert to [the] tactics of the 1930s” through which it “fostered … exports by dumping and other unethical methods.”

This represented a departure from the mindset of Harry Dexter White, the architect of the 1944 Bretton Woods conference under President Franklin D. Roosevelt. White’s approach was to support US exports by prodding indebted countries to keep their currencies overvalued and to finance trade deficits with more debt – that is, IMF loans. By contrast, under the Marshall Plan, greater US openness to imports and a stronger dollar helped smooth implementation of the GATT and spur a revival of international trade generally.

By recreating a European division of labor, with Germany importing raw materials and exporting capital goods, the Marshall Plan succeeded in cutting the transatlantic umbilical cord through which Western Europe was sucking in unaffordable dollar imports of coal and other industrial supplies. As Europe’s dollar balance strengthened under the EPU, doubling between 1950 and 1956, its governments’ incentives to discriminate against dollar imports weakened as well. The higher dollar balance thus enabled the Marshall Plan countries to begin restoring currency convertibility after the EPU wound down.

The financial assistance provided by the Marshall Plan was also organized in a way that departed from earlier, less successful American efforts. Instead of extending new loans to Europe and deepening its indebtedness, the US wiped out Germany’s debt and extended grants-in-aid to the participating countries. The grants provided a cushion with which the recipient governments alleviated the short-term hardships and insecurity that accompanied important homegrown economic initiatives. And, by severely denting popular support for Western Europe’s Communist parties, which wanted to reject the aid, the Marshall Plan helped America achieve a primary political objective.

The Aid that Ties

The Marshall Plan was, of course, only one component of America’s containment strategy in the early years of the Cold War. Yet economic rehabilitation became a primary tool of its so-called strongpoint defense of critical geostrategic regions, in Northeast Asia as well as in Europe, aimed at building up independent, self-confident, and energetic centers of power capable of resisting Soviet pressure.

“The recovery of Western Europe is a twenty-five to fifty-year proposition,” Republican Senator Henry Cabot Lodge, Jr. wrote to Vandenberg in October 1947, “and … the aid which we extend now and in the next three or four years will in the long future result in our having strong friends abroad.” How right he was. America’s containment doctrine successfully guided US foreign policy between appeasement and war for four decades, and the Marshall Plan played a principal role in binding the West together for the struggle.

When the Berlin Wall fell in 1989, so did the communist alliances, which had been built and maintained by Soviet domination and the Kremlin’s willingness – as demonstrated in Hungary in 1956 and Czechoslovakia in 1968 – to impose its will by force. By contrast, the alliances America built, having been forged on genuine partnership and enduring American allegiance, were as strong as ever.

But for how much longer will they remain so? Trump has already walked away from the Trans-Pacific Partnership and the Paris climate agreement. He has threatened to tear up the North American Free Trade Agreement and toyed with the sanctity of America’s commitment to the security of its NATO partners. In the name of “America First,” Trump risks transforming US allies into free agents – all of whom, like Trump, will go in search of a better deal. In an age in which America’s relative economic and military power is necessarily declining, this is foolhardy.

Article 5 of the North Atlantic Treaty – NATO’s mutual defense guarantee – has been invoked only once in the Alliance’s 68-year history. It was invoked not by the US, but by its allies, after New York and Washington, DC, were attacked on September 11, 2001. Could the Trump administration count on such solidarity today? If not, it should ask whether it really wants to allow China, Russia, and others to rewrite the global norms that formed the foundation of America’s post-war prosperity and security. 

 

A New Course for Economic Liberalism


July 17, 2017

A New Course for Economic Liberalism

by Sebastian Buckup

Sebastian Buckup is Head of Programming at the World Economic Forum.

How policymakers can manage the opposing forces of economic diffusion and concentration.

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The New Man in France–President Emmanuel Macron

Since the Agrarian Revolution, technological progress has always fueled opposing forces of diffusion and concentration. Diffusion occurs as old powers and privileges corrode; concentration occurs as the power and reach of those who control new capabilities expands. The so-called Fourth Industrial Revolution will be no exception in this regard.

Already, the tension between diffusion and concentration is intensifying at all levels of the economy. Throughout the 1990s and early 2000s, trade grew twice as fast as GDP, lifting hundreds of millions out of poverty. Thanks to the globalization of capital and knowledge, countries were able to shift resources to more productive and higher-paying sectors. All of this contributed to the diffusion of market power.

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But this diffusion occurred in parallel with an equally stark concentration. At the sectoral level, a couple of key industries – most notably, finance and information technology – secured a growing share of profits. In the United States, for example, the financial sector generates just 4% of employment, but accounts for more than 25% of corporate profits. And half of US companies that generate profits of 25% or more are tech firms.

The same has occurred at the organizational level. The most profitable 10% of US businesses are eight times more profitable than the average firm. In the 1990s, the multiple was only three.

Such concentration effects go a long way toward explaining rising economic inequality. Research by Cesar Hidalgo and his colleagues at MIT reveals that, in countries where sectoral concentration has declined in recent decades, such as South Korea, income inequality has fallen. In those where sectoral concentration has intensified, such as Norway, inequality has risen.

A similar trend can be seen at the organizational level. A recent study by Erling Bath, Alex Bryson, James Davis, and Richard Freeman showed that the diffusion of individual pay since the 1970s is associated with pay differences between, not within, companies. The Stanford economists Nicholas Bloom and David Price confirmed this finding, and argue that virtually the entire increase in income inequality in the US is rooted in the growing gap in average wages paid by firms.

Such outcomes are the result not just of inevitable structural shifts, but also of decisions about how to handle those shifts. In the late 1970s, as neoliberalism took hold, policymakers became less concerned about big firms converting profits into political influence, and instead worried that governments were protecting uncompetitive companies.

With this in mind, policymakers began to dismantle the economic rules and regulations that had been implemented after the Great Depression, and encouraged vertical and horizontal mergers. These decisions played a major role in enabling a new wave of globalization, which increasingly diffused growth and wealth across countries, but also laid the groundwork for the concentration of income and wealth within countries.

The growing “platform economy” is a case in point. In China, the e-commerce giant Alibaba is leading a massive effort to connect rural areas to national and global markets, including through its consumer-to-consumer platform Taobao. That effort entails substantial diffusion: in more than 1,000 rural Chinese communities – so-called “Taobao Villages” – over 10% of the population now makes a living by selling products on Taobao. But, as Alibaba helps to build an inclusive economy comprising millions of mini-multinationals, it is also expanding its own market power.

Policymakers now need a new approach that resists excessive concentration, which may create efficiency gains, but also allows firms to hoard profits and invest less. Of course, Joseph Schumpeter famously argued that one need not worry too much about monopoly rents, because competition would quickly erase the advantage. But corporate performance in recent decades paints a different picture: 80% of the firms that made a return of 25% or more in 2003 were still doing so ten years later. (In the 1990s, that share stood at about 50%.)

To counter such concentration, policymakers should, first, implement smarter competition laws that focus not only on market share or pricing power, but also on the many forms of rent extraction, from copyright and patent rules that allow incumbents to cash in on old discoveries to the misuse of network centrality. The question is not “how big is too big,” but how to differentiate between “good” and “bad” bigness. The answer hinges on the balance businesses strike between value capture and creation.

Moreover, policymakers need to make it easier for startups to scale up. A vibrant entrepreneurial ecosystem remains the most effective antidote to rent extraction. Digital ledger technologies, for instance, have the potential to curb the power of large oligopolies more effectively than heavy-handed policy interventions. Yet economies must not rely on markets alone to bring about the “churn” that capitalism so badly needs. Indeed, even as policymakers pay lip service to entrepreneurship, the number of startups has declined in many advanced economies.

Finally, policymakers must move beyond the neoliberal conceit that those who work hard and play by the rules are those who will rise. After all, the flipside of that perspective, which rests on a fundamental belief in the equalizing effect of the market, is what Michael Sandel calls our “meritocratic hubris”: the misguided idea that success (and failure) is up to us alone.

This implies that investments in education and skills training, while necessary, will not be sufficient to reduce inequality. Policies that tackle structural biases head-on – from minimum wages to, potentially, universal basic income schemes – are also needed.

Neoliberal economics has reached a breaking point, causing the traditional left-right political divide to be replaced by a different split: between those seeking forms of growth that are less inclined toward extreme concentration and those who want to end concentration by closing open markets and societies. Both sides challenge the old orthodoxies; but while one seeks to remove the “neo” from neoliberalism, the other seeks to dismantle liberalism altogether.

The neoliberal age had its day. It is time to define what comes next.

 

Why South Korea eyes ASEAN


June 9, 2017

Speaking Of Asia

Why South Korea eyes ASEAN

 

Having vaulted itself in quick time into the ranks of advanced nations, South Korea is undeniably something of a modern miracle. Its success in riding on East Asia’s growth, combined with massive investments in education and innovation, has led to raised living standards and longevity, as well as given it a leading edge in a variety of fields from steel to consumer electronics and shipbuilding. A firm defence yoke to the United States lent it strategic cover as it focused its energies on growth.

That model has run its course in more ways than one. China is steadily lengthening its supply chain, buying less from its southern neighbour. Its strategic space has been crimped too by an assertive Beijing, despite a series of overtures to China from Seoul.

And the future is uncertain. There is no saying where US foreign and military policy might go. Economic growth has more than halved from the 1965-2005 period, requiring the manufacturing- and export- dependent nation to grow more of its domestic and services economy. As demographics go, at their current rates of reproduction, some fear that the South Korean, as a subspecies, may be significantly extinct by 2070. On top of it all, a generation of spoilt young Koreans has emerged, with outsize expectations for themselves but little of the work ethic of their forebears. Youth unemployment is rising, partly because the educated young are too picky to go where the jobs are. There are only so many prestigious openings at the headquarters of the giant chaebols, where they think they deserve to be. It is not unknown for a mother to call up managers to question why they gave her 23-year-old a bad time in the office, or factory.

In other words, Seoul is in a bit of a cabbage pickle.It’s time for creative thinking and fortunately for the nation of 51 million, there are some active minds at work. One train of thought that has been gaining momentum is a foreign and economic policy that eschews its reflexive North-east Asian orientation and looks southward towards the 10 nations of ASEAN, especially as they edge towards building an economic community that accounts for a market of more than 600 million people and an economy of US$2.5 trillion (S$3.5 trillion).

Last week, the South Korean scholar Shin Yoon Hwan of Sogang University, who is President of the Korean Association of South-east Asian Studies, even suggested at the annual Jeju Forum that ASEAN ought to widen its membership to include South Korea. After all, he argued, at its birth the grouping had offered Sri Lanka, a South Asian nation, a chair at the high table.

As Professor Shin sees it, the benefits of closer integration with ASEAN are mutual. For instance, the Japan-ASEAN technology gap may be too wide but the Korea-ASEAN gap is just enough for both to enjoy complementarity for their goods in world markets. The region is also now the top destination for South Korean tourists and ranks fifth in the South Korean foreign direct investment list. Besides, there is a shared colonial heritage from the days of the Japanese Occupation.

Undoubtedly, there is merit in some of what he says. At a time when globalisation and open markets are under deep scrutiny, any joint effort to lift the game is welcome. Two-way trade between South Korea and ASEAN has been stagnating, and there simply is no chance of attaining the US$200 billion targeted by 2020.

And South Koreans do seem comfortable in ASEAN; one in nine travels to an ASEAN country every year, chiefly to Thailand and the Philippines. About 330,000 people from ASEAN states live and work in South Korea. And exclusionist and isocultural as they tend to be, a small but growing number of Koreans are marrying people from the region. South-east Asia is also in the thrall of hallyu, or Korean Wave, thanks to the popularity of its songs, drama and cuisine.

ST ILLUSTRATION : MANNY FRANCISCO

Still, good intentions aside, the question is how to get results. Hallyu’s soft power can prove fleeting if tastes change, as they are known to. For a more lasting glue, Seoul will need to work harder.

Time to open up

Eight years ago, President Lee Myung Bak announced his New Asia Initiative, which sought to widen his country’s focus from North-east Asia. It was a theme he reiterated at the following year’s Shangri La Dialogue. Seoul did appoint its first ambassador to ASEAN in 2012 but, beyond that, movement has been fitful, especially on security cooperation. South Korea did join ReCAAP, the Singapore-based body that fights piracy and armed robbery on the high seas, but has seemed hesitant about doing more. Certainly, compared with China and Japan, which actively woo the region with aid and defence equipment, its profile does not show up quite enough.

Granted this is not entirely its fault; every time Seoul looks to widen its aperture, its North Korean sibling has pulled its focus back into the neighbourhood either by an act of aggression, such as the sinking of a navy ship, or by conducting ballistic missile or nuclear weapon tests.

But those irritants will not go away. What then should South Korea do to maintain and build momentum?

First, it can contribute to globalisation by keeping its markets open and contributing to wider market opening. South Korea is a part of the RCEP process, the ASEAN-led initiative for a Regional Comprehensive Economic Partnership between ASEAN and the six states ( Australia, China, India, Japan, Korea, and New Zealand) with which it has free trade agreements. But it could go further perhaps by dropping its wariness of the Trans-Pacific Partnership (TPP) agreement, especially as the 11 parties to that arrangement desperately try to salvage the accord despite America’s withdrawal from it.

South Korean participation would be a boost for TPP in more ways than one, including widening its strategic options. Likewise, an early conclusion of an Open Skies Agreement with ASEAN would benefit its own tourism sector. Amazingly, there are virtually no direct flights linking ASEAN capitals to Jeju, South Korea’s beautiful resort island.

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South Korea also must seek to fully partner with ASEAN as the Fourth Industrial Revolution gathers momentum. The country has led the Bloomberg Innovation Index in recent years and has much to offer the region as it copes with change. The new landscape of automation and additive manufacturing offers Korean companies opportunities to look beyond traditional investment destinations based on market size and wage-competitiveness to a new climate where efficient logistics and expertise in high-tech manufacturing will be key.

A Korea technological university in an ASEAN country, backed by its engineering companies, that draws students from ASEAN as well as Korea would not only boost technical skills in the region but also build a slate of engineers familiar with Korean technology who would carry this knowledge and goodwill into their occupations. This will eventually help boost Korean companies’ chances of winning business in the region.

On the strategic side of the equation, Seoul has to show more than a transactional interest in defence arrangements with ASEAN. It should signal clearly that it, as much as any other nation, places value in keeping the sealanes of communication open, and will act to do so. One lesson it could draw from ASEAN is on how this region seeks to balance all major powers, and particularly how it deals with Japan.

South-east Asians, who have endured much pain at the hands of the Japanese in an earlier era, have learnt to forgive and move on, even as they will never forget Japanese excesses. South Korea, on this score, far too often shows up as a boat that, to borrow F. Scott Fitzgerald’s words, beats back against the current, ceaselessly borne into the past.

A version of this article appeared in the print edition of The Straits Times on June 09, 2017, with the headline ‘Why South Korea eyes ASEAN’. Print Edition | Subscribe
 

 

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