Maintaining Speed, Avoiding Dependence

Csaba Moldicz ()
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Csaba Moldicz: Mathias Corvinus Collegium

Chapter Chapter 2 in Indonesia’s Economy After Joko Widodo, 2025, pp 17-42 from Springer

Abstract: Abstract The process of economic catch-up requires two essential elements: speed and quality. The term “speed” refers to the growth rate that a country can maintain for at least a few decades. The term “quality” provides insight into the structural changes that an economy must undergo on a permanent basis in order to successfully maintain the aforementioned growth rate. Both characteristics necessitate a significant allocation of capital, which can be derived from domestic savings or external financing. The fundamental challenge facing any economy engaged in a process of catch-up growth is the sourcing of the requisite capital and technology to facilitate the structural changes outlined above. In an ideal scenario, the requisite capital would be sourced from domestic savings, with technological progress also generated domestically. However, this is rarely the case in our interconnected global economy, where the majority of growth is derived from technological advancement. Furthermore, the reliance on rapid growth through domestic savings was an uncommon occurrence in previous historical periods. Even Asian developmental states (Japan, South Korea, Singapore, and Taiwan) and China have been compelled to rely on external sources and imported technology during their catch-up phases. In contrast to numerous developing countries, China, due to its considerable size and savings, as well as Japan, South Korea, and Taiwan, due to their elevated domestic savings rates, was able to circumvent the predicament of excessive reliance on external capital and technology.

Date: 2025
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DOI: 10.1007/978-3-031-87120-7_2

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