COE Project and the Two Crossroads in the Economic Development Asian Economies

Juro Teranishi


It was in 1957 when professors Kazushi Ohkawa, Miyohei Shinohara, Mataji Umemura and others of the Institute of Economic Research here at Hitotsubashi University launched a monumental project to estimate a GDP series of Japan from the Meiji period on. The project was completed in 1988, when last volume in the series Long-term Economic Statistics of Japan was published.

In 1994, some 38 years after the first project, the next generation of professors at the Institute, such as Konosuke Odaka, Yukihiko Kiyokawa, and others, started an ambitious project to generate a historical GDP series for Asian economies. This is the Asian Historical Statistics Project (hereafter ASHSTAT), the final or semi-final product of which we will discuss over the following two days.

The project on Japan that was started in 1957 was mainly financed by the Rockefeller Foundation, most likely because Japan in the 1950s did not have adequate resources. The current project on Asia, in contrast, is financed completely by the Ministry of Education of Japan. The Ministry has been kind enough to endow ASHSTAT with generous research funds and other facilities, in spite of the relatively low ratio of scientific research expenditures to GDP in Japan among advanced economies. Here, I would like to emphasize that the value of this project more than justifies such generous assistance.

This is because Asian economies are now standing at a crucial historical crossroad, and our project makes major contributions to an improved understanding of the nature of the economic changes currently taking place in Asia.

Let me expand on this point some more. I see the process of modern economic development and growth in Asian countries occurring in threee phases: first, the colonial period before independence in the 1940s (and in some cases the 1950s); second, the period of growth based on national economies that lasted into the 1980s; and third, the period of globalization starting in the 1990s. This three-phase framework implies that there have been two crossroads or turning points in the process of Asian development. The first crossroad Asian economies encountered was a regime shift from colonial dependency to growth based on national economies. During the colonial period, Asian economies were generally obliged to serve as the supplies of natural resources for the colonial metropole. International division of labor of each colonay was split mainly with the colonial metropole. Many scholars have pointed out that even in such relationships, the colonized Asian economies were forced to accept unfair and exploitative terms of trade. After the independence, Asian economies obtained the freedom to construct their own modern national economies and to establish autonomous relationships with the rest of the world. Instead of serving the colonial metropole, Asian governments pursued growth within the framework of the national economy. During this process, governments balanced import substitution policies against export promotion policies in search of a better division of labor with the rest of the world. Governments also attempted to achieve an effective equilibrium between industrial policies and market-oriented approaches in their pursuit of opitmal industrial structures.

The second crossroad for the Asian economies was the regime shift from the development regime based on national economies to the development regime based on global free trade. This shift began in the 1980's when the tide of globalization began to overwhelm national economy building. These changes took place as multinational corporations contructed their own internationally-dispersed divisions of labor on the basis of profit-maximizing business decisions. Savings became increasingly allocated and investment projects are financed within global perspectives. The close correlation between saving and investment ratio in cross-country data found by Feldstein and Horioka may no longer be applicable in near future. The need and room for industrial policies might become negligible as the WTO negotiations currently proceed under the ruling doctrine of global free trade. One can also observe in Asia the emergence of several regional economic centers that wield their influence across national borders.

In this way, the national economies of Asian countries, which were formed in the aftermath of World War II, are now forced to undergo significant changes.

I think one of the keys to understanding the nature of current challenges faced by Asian economies lies in this three phases framework and the two crossroads within it in the modern economic history of Asia. To recap, the first crossroad was the shift from dependent colonial regimes to national economies with nation-level autonomy in building industrial structure and organizing international divisions of labor. This was followed by a second crossroad, the shift from national economies to economies subject to global market mechanisms.

The importance of our project, ASHSTAT, is related directly to these crossroads and regime shifts. The project aims to examine GDP growth through the colonial period to the 1990s, focusing on the growth process of national economies after World War II. This amounts to a historical examination of the achievements and failures of the regime of national economies in Asia: its successes and limitations, its freedoms and restrictions, and its idiosyncracies and inefficiences. Such analyses will allow us to compare the system of national economies against the costs and benefits of globalization and borderless economies.

Admittedly, much more research needs to be conducted to improve our understanding of the second crossraod, including institutional analysis based on microeconomic data. However, I have no doubt that the macro and sectoral data produced by ASHSTAT comprises a solid and essential starting point for such an endeavor.

(Institute of Economic Research, Hitotsubashi University)