In 2010, the World Bank published a book that shed light on a new framework for world development: New Structural Economics. Authored by the Bank’s Chief Economist Justin Yifu Lin, this book aims to combine old neoclassical economics with the tradition of structuralism in political economy.
This attempt was resulted in what Lin called as “new structural economics” (NSE).
Basically, this idea is not necessarily new. During 2000s, some idea of ‘neostructuralism’ has also been developed by Latin American economists to refer to the economic strategies undertaken by extractive-rich countries, which did not follow neoliberal prescription. The idea was soon dissolved after the low commodity price in 2010s, which leads the regional economy in crisis.
There are, of course, critiques and debates over NSE particularly among economists. From China itself, there is Weiying Zhang, who challenges Lin’s Keynesian prescription with his libertarian thinking. In the West, some leading political economists, such as Dani Rodrik or Ben Fine put forward some critical comments against this idea.
However, the most interesting point within international political economy (IPE) framework is not about the economic ideas that NSE offers. Rather, it was because NSE comes amid the concurrent global crisis, which makes global leaders to rethink the current political and economic framework that governs world politics.
I argue that NSE is important for two distinctive reasons. First, NSE offers a new theoretical framework to resolve the concurrent crisis in global political economy, which was marked by global financial crisis and low commodity price in stock market.
Second, NSE has recalled the ‘old’ debate in IPE whether the state should be given prominent rules in managing economy. NSE strongly called for strong state intervention in maintaining industrial policy, which goes side-by-side within its role providing good infrastructures for industrial purposes.
It is precisely the topic, in which Weiying Zhang, a prominent Chinese economist from Peking University, disagreed with Lin’s argument. A Hayek-inspired economist, Zhang demands for a bigger role for Chinese entrepreneurs in economy with minimal state intervention.
Whatever the result of the debate is, NSE seems to slightly put an alternative against the old-style neoliberal regimes in world politics, including ASEAN Economic Community.
For instance, Yifu Lin recently wrote for Project Syndicate over ‘African Industrial revolution’, in which he argues that Africa desperataly needs a significant industrial policy to catch-up with global economic development. He suggests that government needs to revitalise its role in spurring industrialisation based on state’s comparative advantages. Through this scheme, state-led industrialisation could lead African states to catch other regions in more developed countries.
On the other hand, the question over industrial policy should start with one key variable: how could the state finance the industries? The question is thus straight-forward: international cooperation. It is through cooperation with Multinational Companies (MNCs) and other governments, as Yifu Lin argues, that the ‘industrial revolution’ could be financed.
Yifu Lin’s illustration over Africa has raised another question on ASEAN: does ASEAN also pave its way for renewing industrial policy, which therefore abandons the ‘free-trade’ regime that was established through ASEAN Economic Community since 2003?
In 2015, ASEAN member states has agreed to renew their commitments over ‘ASEAN Economic Community’, which is centred over four key points: (1) a highly integrated and cohesive economy, (2) a competitive, dynamic, and innovative region, (3) enhanced connectivity and sectoral cooperation, and (4) a resilient, inclusive, people-oriented, and people-centred ASEAN.
These points shown that the idea of ASEAN Economic Community is still a continuation of integration commitment that was agreed in 2003 (Bali Concord II) and 2009 (the first blueprint of ASEAN Economic Community).
However, since 2011, ASEAN has also stepped forward a commitment for ‘industrial cooperation’, which was among others marked by the establishment of ASEAN Infrastructure Fund through partnership with Asian Development Bank (ADB). It is coincided with growing ‘infrastructure-related’ initiatives among ASEAN member states, including Indonesia.
Since the reign of Jokowi, for example, Indonesia has put forward some commitments to improve infrastructures and build national industries in many areas, particularly in Java Island.
It is of course not without cost. Several international cooperation schemes, as well as maximising tax revenues, have been set out by the Government to finance infrastructures and industries. It is in this context the intellectual leadership of Sri Mulyani, Jokowi’s Finance Minister and former World Bank’s Managing Director, plays significant role.
This new trends are also initiated by some other Southeast Asian states, including Malaysia, Thailand, and Indochinese states. In four Indochinese states (Cambodia, Myanmar, Lao PDR, and Vietnam), some cooperation schemes to boost infrastructures have resulted in the fast growth and modernisation in those countries.
So, will ASEAN undergo some shifts from neo-liberalism to the new trend of ‘new structuralism’ in the future? Even though some integration agenda in ASEAN Economic Community still maintains some classic ‘neoliberal’ agenda, such as free trade or competitive economic region, the ‘new structural’ wave is also move slowly within the region. It takes place bilaterally, under Chinese leadership in providing infrastructures and supports for industrialisation, rather than through regional economic integration.
This wave needs to be taken seriously by everyone who concerns with ASEAN development. Will these new waves of ‘new structuralism’ provide a better chance to narr0w development gap in the region? Or, in contrast, is it only ‘the same old wine in a new bottle’?
Whilst the idea of ‘industrial cooperation’ is not new for ASEAN (similar initiatives have ever been initiated in the 1980s) we still need to rethink the future of economic integration. It is because what happen in the region will affect the future of our country—as the 1997 financial crisis taught us.
Ahmad Rizky M. Umar is the Executive Secretary of ASEAN Studies Center, Universitas Gadjah Mada