Social Cohesion, Economic Resilience, and Long-Term Growth in Southeast Asia and Developing Countries

Abstract

A vast array of economic literature examines the complex nature of growth: its stimulants as well as constraints. For instance, Easterly et al. (1993) argue that shocks, and to some extent luck, explain growth differential much better than the quality of policy or institutions. Development theory and the experiences of the past 50 years have demonstrated that structural change has been the main engine of long-term catching-up processes. In a review article, Syrquin (1988) noted that “economic development is seen as an interrelated set of long-run processes of structural transformation that accompany growth.” However, structural change, often accelerated by international trade and regional integration, increases the vulnerability of an economy. In addition, trade openness exposes countries to the spillovers of crises triggered elsewhere. Thus, at national level, the aptitude to adjust to shocks and to minimize growth losses is a major factor of development performance and economic growth sustainability. Economic resilience depends on domestic capabilities to design, implement, and support corrective and adaptive measures. Although shocks are crucial in determining growth path, the magnitude and the nature of their impact on catching-up processes and long-term growth vary among countries. As Berg and Ostry (2011, p. 6) put it, “Growth is easy to start, hard to keep going.”