Catch-Up Problem in Developing Countries Essay Example | Topics and Well Written Essays - 2750 words

Catch-Up Problem in Developing Countries - Essay Example Those that had to depend on bailouts from the IMF were forced to accept a wide-ranging reform program as obligatory conditions for the rescue loans. The themes of this paper are (1) that the Asian crises were the inevitable outcomes of the dirigiste development policies the Asian economies pursued in their successful catch-up growth, (2) that such an institutional regime, however, finally met its match in the form of free-market global capitalism, especially in terms of unbridled capital flows, and (3) that East Asias present trend of deregulation and marketization is all the more pushed by the institutional requirements of the Internet revolution as the region struggles to catch up in the digital age. Any successfully developing economy climbs a ladder of growth. Until the arrival of a New Economy, all the advanced economies had, in the past, trodden a path of industrial structural transformation from the "Heckscher-Ohlin" labour-intensive industries (typified by textiles) to the "nondifferentiated Smithian" scale-driven industries (steel, basic chemicals, and heavy machinery), to the "differentiated Smithian" assembly-based in dustries (automobiles and electric/electronics goods), and finally to the "Schumpeterian" R&D-intensive industries (specialty chips, biotechnology, and new materials) (Ozawa 1992). This conceptualization of stage-based process of industrialization is in line with a "leading sector" theory of growth a la Joseph Schumpeter, which envisages a sequence of stages in each of which breakthrough innovations (new technologies) create a certain new dominant industry as the main engine of growth. This stage-demarcated sequence of growth can be clearly seen in the history of industrial capitalism. Great Britain was the first country that introduced the Industrial Revolution and quickly moved from textiles to steel and heavy machinery.