LSE Asia Forum 2014 – Prof. Tim Besley: Leveraging Asia's Success

London School of Economics and Political Science – LSE Asia Forum 2014 (12:30 Session)
Date: April 3, 2014
Speaker: Professor Tim Besley
Summary prepared for listeners interested in economic development, institutional theory, and Asia’s role in global economic thought.

Overview: Main Theme and Purpose

Professor Tim Besley’s lunchtime address at the LSE Asia Forum 2014 examines the intellectual lessons and implications of Asia’s economic rise, focusing not only on financial leverage but, critically, on the “intellectual leverage” that Asia offers to the world. Besley explores the central debates in development economics about what drives sustained growth, assessing whether Asia provides a definitive model and what lessons other world regions might draw from its experience. The session captures an evolving interdisciplinary approach, blending economics, political science, history, and culture in the study of development.

Key Discussion Points and Insights

1. The Magnitude of Asia’s Economic Success

• Sustained Growth Premium:
  • Over the last 50 years, Asia has experienced approximately 1.5% per year more growth than other emerging markets.
  • The compounding effect over this period means Asia's GDP is now around 225% higher than it would have been without the premium, distinguishing its record from Latin America and Africa.
  • Quote [03:00]:

    "One and a half percent growth actually over 50 years amounts to about 225% higher GDP at the end of a 50 year period. It’s one of these wondrous features of compounding."

• Poverty Reduction:
  • Asia, due to significant strides in India and China, has been a primary global contributor to achieving the Millennium Development Goals, especially in absolute poverty reduction.

2. Heterogeneity within Asia and the “Middle Income Trap”

• Internal Variation:
  • While sometimes viewed as a monolith, Asia encompasses considerable diversity in development trajectories and institutional arrangements.
  • There is discussion in the field regarding the “middle income trap”—the challenge many countries face in transitioning from middle to high income status.
  • Quote [05:30]:

    "Within Asia there’s plenty of variation... But by and large people look to Asia from the outside as a place which has delivered a certain level of economic success."

  • Besley raises the question: Is the “trap” concept really useful for understanding Asia’s future prospects?

3. Shifts in Economic Thought: The Rise of Political Economy

• Old and New Approaches:
  • Past economic development theory focused on technical solutions, underestimating political problems. Now, political economy—the intersection of politics and economics—dominates development thinking.
  • Memorable Anecdote [08:40]:

    "I was at Princeton... and spoke to one of my senior colleagues... I said, I’m interested in economic development. He said, 'I used to be interested in economic development, but I decided all the problems of development were political. Therefore I decided as an economist, I had nothing to contribute.'"

• “Total Social Science” Approach:
  • Besley advocates for blending disciplines—akin to “total football”—to solve social problems, not restricting insights to one field.

4. The “IGC” Framework: Institutions, Geography, Culture

• Triple Meaning of IGC [17:30]:

  • Institution: Role of rules, governance, accountability.
  • Geography: Physical and locational factors.
  • Culture: Norms, behavioral patterns, and values.

• Institutional Theories and Debate:

  • References Acemoglu & Robinson’s “Why Nations Fail”—viewing institutions as fundamental drivers.

  • Within Asia, wide variety exists in institutional forms accompanying economic success (e.g., China doesn’t fit Western models of “good” institutions).

  • Institutional thinkers predict China’s growth is at risk without deeper reforms.

  • Quote [21:50]:

    "You’d be hard pressed, for example, to look at China and believe that China conformed to some standardized notion of what you might say are good institutions... Acemoglu and Robinson... are actually China pessimists."

• Historical Analogy [22:30]:

  • Samuelson’s textbook and the moving target of Soviet economic catching-up with the U.S. as a warning about simple projections without institutional context.

• Volatility vs. Growth [25:05]:

  • Weak institutional structures don’t necessarily lower growth on average, but they increase volatility—examples span both high-growth (China) and crisis-prone (Zimbabwe) countries:

    "The really distinguishing factor... between countries that have a certain level of institutional development... is not so much the level of growth, but actually the volatility…"

5. State Effectiveness and Accountability

• The Asian State:

  • Besley credits Asia’s rise to effective states, often with unique modes of accountability—even within non-democratic structures (e.g., China’s system of rewarding provincial leaders by performance).
  • Quote [28:25]:

    "If you look at what’s gone on in China, it’s remarkable how much accountability there is in the system… people are held to account for good or bad performance.”

• Key Metrics Where Asia Excels:

  • Human capital and education
  • Infrastructure
  • Lower levels of corruption (though not without challenges)

• Challenge for Others:

  • Many regions are still in denial over corruption and have struggled to replicate state effectiveness.

6. Geography as an Explanation—Challenged

• Geography’s Limits:

  • Besley disputes that physical geography alone accounts for development differences.
  • North vs. South Korea Night Lights Analogy [31:38]:

    "Look at North and South Korea at night… South Korea is incredibly intense, and North Korea is basically dark. It cannot be a geographical difference."

• Importance of Neighborhoods:

  • Regions like Africa face “bad neighborhood” effects; Asia, by contrast, has largely avoided this, facilitating smoother regional trade.

7. Culture: The Next Big Topic in Economics

• Economists and Culture:
  • Renewed interest in how norms, beliefs, and social practices influence economic outcomes.
  • George Akerlof’s innovations—studying caste, efficiency wages, and norms—cited as early forays.
  • Akerlof & Shiller’s “Animal Spirits”—cultural explanations for recessions—show economics increasingly incorporates culture.
• Institutional Transplants and Culture [35:29]:
  • Besley shares his experience on the Bank of England’s Monetary Policy Committee:

    "I realized that there’s a set of rules and then there are the cultural and social norms by which the institution really works..."

  • Successful institutions depend not just on design but also on embedded norms.

Notable Quotes & Memorable Moments

• On Compounding Growth [03:00]:

  "One and a half percent growth actually over 50 years amounts to about 225% higher GDP at the end of a 50 year period. It’s one of these wondrous features of compounding."

• On Lessons of Political Economy [08:40]:

  "If you said to me now, what's the bigger problem of development? Is it that we don't know what to do, or we can't get the things that we know what to do to happen? I would say it's very much the latter."

• On Disciplinary Borders [10:40]:

  "I have this sort of dream of what I call total social science, which is the idea that we don't need to confine ourselves to any particular field."

• On China's Institutional Paradox [21:50]:

  "You’d be hard pressed, for example, to look at China and believe that China conformed to some standardized notion of what you might say are good institutions..."

• On State Effectiveness [28:25]:

  "It’s remarkable how much accountability there is in the system, in spite of the fact that the formal political institutions do not resemble classical democratic accountability."

• On the Korea Example [31:38]:

  "Look at North and South Korea at night… It cannot be a geographical difference. They share almost in every sense the same geographical attributes."

Important Timestamps

• 00:00 – 01:22
  Introduction by Craig; Prof. Tim Besley introduced.

• 01:22 – 06:45
  Besley sets the intellectual agenda, summarizes Asia’s growth story.

• 08:00 – 13:40
  Reflection on economics’ evolution and rise of political economy.

• 17:30 – 27:00
  “IGC” lens; institutions, geography, and culture as central axes for development debate.

• 28:25 – 31:38
  Evidence on Asian state effectiveness and accountability.

• 31:38 – 34:30
  Critique of geography-focused views; the case of Koreas.

• 34:30 – 38:30
  Exploration of culture in economics; importance of norms for institutions.

• End (~40:00)
  Conclusion: institutional frameworks and the Asia model; promoting state effectiveness worldwide.

Conclusion: Takeaways for Listeners

• Asia’s economic rise provides intellectual leverage for rethinking global development, emphasizing sustained growth from compounding improvement, effective (if varied) institutions, and interactions with culture and geography.
• The debate over what drives long-run development is increasingly interdisciplinary, with strong arguments for institutions but a rising acknowledgment of culture’s impact.
• Effective states—more than specific political forms—underpin Asia’s achievements.
• Caution is urged against simplistic models: institutional, cultural, and geographical factors interact in complex, context-dependent ways.
• Asia’s story offers lessons for both policy and theory, making a compelling case for learning—and for humility—in the social sciences.