CPE I Copenhagen Business School Nenad Krstevski

Regular exam Int. Business & Politics CPR: 131082-2945

June 2008 2nd semester

Question 1:

In the anthology States, Markets, and Just Growth Atul Kohli (2003, 2) defines “just
growth” as “growth with distribution and democracy”. Discuss whether, how and why the
goal of just growth is partly or fully attainable by developing countries or emerging
market economies in an era of economic globalization? Please, illustrate your arguments
with examples from Sub-Saharan Africa, The Middle-East, Asia, Latin America and/or
Eastern European and CIS countries.

Answer:

As the question that I need to answer already states that “just growth” as “growth with
distribution and democracy”, it is leading me to think in this way. Is development
bringing democracy? Higher growth of the economy, better conditions for the people
lining in the country, higher level of education, openness to the extern world, can lead
eventually to installment of democracy in the political system. Sometimes the growth is
attained if first the country democratizes itself and towards its own citizens, allocates
some power to its citizen and not only to a small leading class in the society and open up
to the rest of the world.

My short answer is that I agree. I have my own reasons and I will show later with
examples from some countries but this is not everywhere the case.
But first, let’s start with why I agree with Atul Kohli and his “just growth” as “growth
with distribution and democracy”.

Let’s take the former Yugoslav republics, Slovenia, Croatia, Macedonia, Bosna. All of
these countries were industrialized countries and before 1980’s (especially former

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CPE I Copenhagen Business School Nenad Krstevski
Regular exam Int. Business & Politics CPR: 131082-2945
June 2008 2nd semester

Yugoslav countries) were ranked very high on HDI and GDP per person. After some
domestic changes in the country (Tito’s death) there was a decade of extremely volatile
period with high inflation, political instability, loosing of the primate in the Third World
as the leading country, fights for power between the rival groups in the Communist Party,
bad management of the domestic economy. All in all, the country has became from
exporter of knowledge, economic development and stability to a place where was
dangerous to live, was difficult to provide for you and your family and a place where the
competition between the political elites in the Communist Party was bringing a
destruction of everything that was previous made with generations.
Those countries in the 1990’s started very fast to democratize and separate from each
other.

Great example where the democratization helped for the country to have growth in GDP
is Slovenia, now No. 7th in EU by GDP. Slovenia had a very fast transitional period from
communism to democracy and very efficient privatization. But still the government is
having the biggest companies in Slovenia, and the profit from them is returned to the
budget from where is invested in infrastructure of the country. I just want to mention here
one thing, and that is that in Slovenia 95% of the population is Slovenians and they are
Catholics.
Similar examples like Slovenia are the ex Warsaw pact countries, Poland, Czech
Republic, Slovakia..
Those examples can explain that growth comes together with democratization of the
countries and that is why I agree with Atul Kohli and his theory.
In this countries the democracy was strengthen with the growth of the economy, of the
higher HDI of the people.

Contrary of Slovenia, I want to show how a country in Europe, similar on developing

stage before democratization, did not manage to have same growth as Slovenia, Poland,
Czech Republic, Slovakia.. Even they are ex-Yugoslav republics, Macedonia and

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CPE I Copenhagen Business School Nenad Krstevski
Regular exam Int. Business & Politics CPR: 131082-2945
June 2008 2nd semester

especially Bosnia did not manage to have growth enough to level up with the rest of the
region. Why?
Bosnia had been less developed than Slovenia, but the difference was not so big. The
problems that Bosnia had were its own population. It is divided in three ethnic groups,
which all of them have between 25% and 45% of total population. And the handicap to
be even greater, they were all different religion too. As everybody knows Bosnia had a 5
years devastating ethnic war, and still 15 years after the war people are divided between
themselves with strict borders init the country. The economy looks like some North
African country with no developed inner market in the whole country, but only in the
ethnic parts. The rules are different for everybody. The transition is still in the beginning
and the privatization is only on the first phase, 20 years after official start. By all
standards it is already for 15 years counted as democratic country, but development is not
seen in near future, not as in the case of Slovenia at least.

Similar is the situation of Macedonia, even they are having some better results in the last
5-6 year. They ended the 15 years of transition just couple of years ago, fully open up the
market for the last 20 years, but again the have very low FDI and if we don’t count the
last 2 years extremely low GDP growth. In both of the countries the lack of stability and
the wars that they have has postponed the development even they had democracies and
had liberalized their markets according to the WTO standards.
In those two cases I wanted to present how the different religions between the population
directly effect the growth in some European counties, but also the managing of the people
in the country is very crucial. With managing I mean the leading elites and politician
should have authority to lead the country, something that was having ex-Yugoslavia
when Tito was alive before 1980’s, something that Slovenia, Poland and Czech Republic
had again from 1990’s, but thing that is missing in countries like Bosnia or now I can say
was missing in Macedonia. Leadership is very important for the development.

Now I want to answer the question of the exam directly through some contradictorily
examples from around the World.

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CPE I Copenhagen Business School Nenad Krstevski
Regular exam Int. Business & Politics CPR: 131082-2945
June 2008 2nd semester

I will start with one of the newest “democratized” countries in the World. Iraq is a newly
democratized country since it has all the processes for a democracy. People go to vote,
they have Parlament, President, Government, and “functioning” law system and the US
mission for democratization is over and now we just wait for the development of the
country. Are we? I don’t like to repeat myself (similar like the Bosnian example), but it is
necessary to do it. Iraq has three main minorities: Sunni, Shia, and Kurds, each of them
separated in differed parts of the country but heavily mixed in the biggest cities. All of
them have great amounts reserves of oil and gas, and of course all of them want equally
to be represented in all of the institutions. That is all great but, the only problem is that
since those minorities know for themselves they always have somebody who will show
their path, who will lead them (rule them). But then somebody comes and gives to them
the freedom, freedom that the majority of the population didn’t even think of at all. I will
just make an example when you free a lion, which was raised in a ZOO and lived the
whole time there, in the nature. What do we expect to happen? Of course, the lion is
doomed to die very soon. The lion had lost his instincts of hunting, leading, surviving. It
was feed in the ZOO with already killed animal. Now it needs to do it by him self.
My point is that this case of Iraq is very interesting how democratization is not attaining
any developing or growth in that country. You need a long transition time to bring
democracy to a country that was closed for external influence since its existence. Iraq
was always lead by sultans, some kind of monarchs or dictators. They (the people) need
to learn first or even better feel some progress in their standard of living, to have growth
in GDP by opening their borders and liberalizing the trade in longer period and after that
gradually to start changing the whole political system. They need to know for what they
can use democracy with.
Nobody thinks of democracy if they have empty stomachs.

By my opinion, great example for developing before democratization is China. They are
still not democracy and I don’t think that they should become one in near future (I’ll say
why later) but..

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CPE I Copenhagen Business School Nenad Krstevski
Regular exam Int. Business & Politics CPR: 131082-2945
June 2008 2nd semester

There are a lot of confronting opinions about human rights and development in all of
China. Some are saying that China is not doing much for the human rights of the
Tibetans, but in the same time the poor population in China has lowered for hundreds of
millions only in the last decade. The development of the country was problematized a lot.
Before 4-5 years main investments were in East China, but now the far Wets parts are the
main investors target. Especially the Government invests in roads, hospitals, public
services.. China choose to go by the way of gradually opening to FDI and gradually
changing the political system, that maybe some day when the people in China will feel
that they need to interfere more in the politics, after they had satisfied their basic needs,
will become democratic society with all his indicators. All the economic growth that is
happening now is going to lead in one day China to change its political system to more
and more democratic society.
Until then I believe that all transitions, especially in multicultural and multiracial
societies should be made very patiently and in a longer period.

At last I want to conclude that “just growth” can be and will be attained by developed
countries and emerging market economies, because of the societies itself. When people
satisfy basic needs they continue to satisfy other needs, in this countries I can say that
those needs are luxurious needs. The main reason why somewhere is happening faster or
slower is the culture (traditions, religion, and mentality) and of course the surrounding
(external factors that in some cases are key for smaller economies like the European or
the Asian tigers) of the nations concerned.