RIGHT LESSONS OF ECONOMIC DEVELOPMENT

Chinawillsurpassthemiddle-incometrapbyfocusingoneconomicdevelopmentandcontinuingtoimplementstructural

TO determine income groups around the world, the World - come per capita in US dollars, which are then converted to reduce the impact of exchange rates in crosscountry comparisons. In this view, high-income economies ($12,236 or more) include the US, Western Europe and Japan, while uppermiddle-income economies ($3,956 -$12,235) feature Turkey, Russia,

In the past, many countries have attained moderate living standards, yet failed to graduate to the next level. China entered the ranks of the “uppermiddle-income” countries in the early 2010s, whereas the Philippines is likely to graduate to the uppermiddle-income category in the near future. Unlike its predecessors, the Duterte administration has a relatively clear view about what’s needed for such catch-up growth.

As the Chinese example suggests, structural reforms are a must, but so is the ability to shun growth experiences that once worked for advanced economies but today represent more self-serving agendas.

Economic development is the priority

In the 19th National Congress of the Chinese Communist Party (CPC), President Xi Jinping stressed that “development is the foundation and key to addressing all problems.”

China’s medium-term policies must cope with these challenges in the “new normal” of the international environment, even as the country’s “uneven and inadequate development” is at odds with “people’s ever-growing demand for a better life.”

As such, structural economic reforms have not resolved the challenges of income polarization. While such reforms are promoted in the advanced West to “open markets” for its products and services, they do not ensure greater equity and inclusion.

Achieving these objectives requires less uneven coverage of pension and health care insurance nationwide; basic public services; rejuvenation of reforms; appropriate scaling of farming operations; increased spending on high school education and vocational training; more affordable housing; and extended rural land leases.

Structural economic reforms are central to the rebalancing, which could lift the remaining 70 million people from poverty by 2020, just as China is turning into the leading actor in global efforts to combat climate change through innovation.

Not all Western lessons work in emerging world

To avoid the middle-income trap, the ability to distinguish between appropriate policies and misguided prescriptions is pressing for several reasons. First, there are the historical lessons. It took advanced economies decades, even centuries, to advance from low-income to high-income economies. Yet, today many of them demand that current emerging economies should do the same in a matter of years. When Latin American countries have tried to adjust to such prescriptions, they have been penalized by “lost decades.”

Second, there is the matter of size. Advanced economies like to tout the as a blueprint to emerging countries. Yet, - trialization, the former had barely 30 million people and the latter around 40 million (about the same as in Shanghai and Guangzhou alone).

Laissez-faire doctrines fare particularly poorly in emerging economies, which are larger by magnitudes and which begin their catch-up growth from a far lower starting point. In the postwar era, the most impressive growth performances in Japan, Singapore and Hong Kong, South Korea and Taiwan have been fueled by governments’ purposeful growth strategies – not by pin factories’ visions.

Then, there are the regional realities. At the regional level, some areas of China’s wealthier coastal megacities have already graduated into the highincome category, but the national economy is still in transition. So, the real question is not to compare China but to ask, “How long has it taken for industrial centers in the UK to rural Romania?” In the latter, more than 25 percent of people are still employed in agriculture.

So, if after more than two centuries, industrialization is still not completed in peripheral Europe (in which population is only half of that in China), then why is China expected to complete it in three decades?

The wealth difference

Third, there is the issue of wealth. Advanced economies were pretty prosperous even before they industrialized. In the mid- 19th America, per capita incomes were China in the early 1990s and India just a decade ago.

The different starting point of the advanced economies was not the result of democracies and free markets, but mainly imperial regimes that grew wealthy on the back of infant-industry protection and protectionism, brutal colonialism, or both.

In contemporary emerging economies, the trick to avoid the middleincome trap is to avoid those develop - ested doctrines in the advanced West.

The real task is to concentrate on economic development that supports progressive increases in living standards of ordinary people in emerging economies.