The Emerging Markets and Higher Education

Development and Sustainability

Matthew S. McMullen, James E. Mauch, Bob Donnorummo

• Publisher: Routledge
• Year: 2002
• eBook ISBN: 9781135578350
• Topic: Didattica
• Subtopic: Didattica generale

Using an interdisciplinary approach, this book analyzes the relationship between higher education, the economy and government in the development of a democratic and market economy society in emerging market countries. (Poland, Czech Republic, Hungary, China, Hong Kong, Korea, Mexico, Chile and Brazil).

PART I
Background

CHAPTER I
The Emerging Markets and the Process of Globalization

BOB DONNORUMMO

DEFINING EMERGING MARKETS

The goal of this volume is to present a conceptually comprehensive but countryspecific study of the role of higher education in emerging markets. The authors justifiably maintain an important connection between an emerging market country’s system of higher education and how it affects and is affected by the transforming nature of these countries as a function of an increasingly global economy. In this chapter, I first define the term emerging markets and then describe and analyze the atmosphere in which emerging markets countries and their institutions of higher education must operate.

The countries discussed in this volume are considered emerging markets, a concept which includes numerous broad and diverse characteristics, often causing the category to lack clarity. Since wide economic and political differences exist among emerging markets, a precise definition is not possible. It is, however, important to attempt a definition in order to establish a framework for the chapters that follow.

Emerging markets are countries that are on a continuum between advanced or underdeveloped economies. They possess viable financial, communication, technological, and legal infrastructures, and are active participants in the global economy. Emerging markets have the potential to reach sustainable economic development. They also have open, or at least opening, political systems, the presence of a viable middle class, and a culture that accepts change and innovation.

As this definition suggests, I am attempting a broad and multifaceted approach to the study of emerging markets. This approach is necessary to avoid the shortcomings inherent in research that does not holistically define and then analyze the interlinking component parts of emerging markets.

In terms of economic criteria, emerging markets are sometimes incorrectly classified as any country that is not one of the large, mature, industrial, and wealthy countries comprising the economic elite in the G-7 or a smaller but equally wealthy and mature industrial economy of western Europe. This characterization is inaccurate, because it lumps emerging market countries together with developing market countries. Emerging markets fall somewhere in between advanced and developing economies. Although they do not have advanced economies, they have significant industrial output and services, income per capita, and financial, technological, and legal infrastructures—characteristics not common in developing countries.

Defining an emerging market country based on the size of its economy is of little help. China’s economy, if computed in terms of Purchasing Price Parity, is the world’s second largest, yet it is not an advanced economy. Luxembourg, Norway, and Switzerland are smaller economies that are correctly considered advanced because of their high per capita wealth and active involvement in the global economy. On the other hand, one is justified in classifying some highly populated countries with low gross domestic product (GDP) per capita, such as India or China, as emerging market countries because their large size causes their economies to be globally active in terms of trade and investments. Hence, the classification of some large but relatively poor countries as emerging market economies creates a wide GDP per capita gap between wealthier and poorer emerging market countries. For example, Taiwan and South Korea are much wealthier than China or India. Furthermore, the level of international economic activity also varies considerably among emerging markets. Taiwan and South Korea are more active than Poland or the Czech Republic in the global economy. In fact, South Korean firms invest in eastern Europe as a way to expand their markets and enhance profits. The superior size of the South Korean chaebols allows them to play a relatively active role in the global economy. It does not mean, however, that chaebols are more efficient.

While emerging markets lack the wealth, maturity, and global involvement of industrially advanced G-7 countries, they are also not underdeveloped economies with limited industrial production and weak infrastructures operating in the relative isolation of the global economy. While international trade is an important vehicle for growth in emerging markets, some are overly dependent on the export of a few natural resources, such a copper for Chile or oil for Russia and Mexico. Nonetheless, emerging market countries have a level of production, and a combination of global economic activity and natural resources, that has created the potential for continued economic expansion.

Sustainable growth is an important part of the definition of emerging markets. Emerging markets must be self-improving and not dependent only on capital inflows from advanced countries for growth. This is a serious challenge for many emerging markets, such as those of Latin America, which have low savings rates and are often dependent on capital inflows for growth (Kim, 1998). Emerging markets are not embryonic economies, and are capable of growth from within. It would make little sense to classify very poor countries like Rwanda, Ethiopia, North Korea, and Sudan as emerging markets, since they lack most of the characteristics associated with emerging markets as noted above.

The emerging market umbrella also covers an exceptionally broad range of economies which have undergone radically different experiences in the second half of the 20th century. Poland and the Czech Republic were relatively poor socialist, command economies until 1989, and thus were not able to advance along the same path as South Korea, the eleventh largest economy in the world, or Brazil, the world’s ninth largest economy. Comparisons of these eastern European countries with less than a decade of experience with open markets and global economic activity to other emerging markets can only be done with an understanding of their communist past and the experiences of their decade-long transformation. While few would deny that Poland’s economic growth was severely stunted by almost half a century of communism, it is still much wealthier on a per capita basis than an existing communist country which is also classified as an emerging market—China. The reasons for China’s emerging market status are twofold: its very large economy offsets its poverty on a per capita basis, and since 1978 it has radically opened its political and economic system. Countries labeled “emerging” vary widely in their past and present political and economic structures, and the range of per capita wealth stretches from very wealthy Hong Kong or Singapore, to moderately wealthy South Korea and Taiwan, to Latin America and eastern Europe, down to the poverty of China and India.

This is a syndrome list of characteristics and not meant to be a precise definition. If some lists exclude Singapore and Hong Kong because they are too wealthy, or include Pakistan and Vietnam because they are poor but large countries, one should be willing to accept these arguments and not attempt to dogmatically construct a rigid list of emerging market countries.

In summary, emerging markets are large and/or relatively wealthy compared to poorer developing economies, are active in the global arena, and have infrastructures adequate for sustained growth. They are also societies that are politically open, or are at least in the process of opening, since this is seen as a condition for sustained growth. Needless to say, the definition of “open” is vague and inexact, and will be applied only in a broad and inclusive manner. Yet this inclusive approach is not the same as accepting countries which are only formally politically open, that is, they have multiparty elections but little else. Active citizen participation in decision making is required. There is also the need for cultural openness, reflected in educational systems that must not only produce a technically skilled workforce, but also graduates who are not restricted by an excessively antichange mentality.

In this chapter I attempt to walk a fine line between extolling the virtues of openness and the acceptance of change, while avoiding criticisms of cultures that uphold traditional values, often related to the dominant religion, as more important than the willingness to accept change at all costs. Nonetheless, it is held that economic progress is beneficial to the general population and that a few universal principles do apply to human activity in the area of politics and economics. Thus when the views presented in this chapter slip off that fine line, they fall onto the side of openness and the acceptance of change as prerequisites for emerging market societies to obtain sustainable economic growth, thereby bringing material benefits to the majority of the population. It is a truism that the particular cultural values of all societies are to be respected. The purpose of this discussion is only to note that some extremely orthodox and intolerant variants of specific religious-cultural traditions have negative economic consequences.

However, one value system is rejected and viewed as incompatible with the definition of emerging markets: the ideology held by the communist leadership in the countries of the former Soviet Union and eastern Europe before the 1990s. Given the dismal economic performance of these countries from the late 1970s until the termination of communism, rejection is not a difficult decision in terms of their poor economic performance and relative isolation from the global economy. However, rejection is also based on the fact that these were politically and culturally closed societies where the leadership— and its control of the media and educational systems—promoted an orthodox view of the populace’s behavior and norms (Glenn, 1995). Change and innovation were not priorities, and this negatively impacted those economies that were not able to take advantage of advanced technologies or the skills of their highly educated labor force.

Rejection or acceptance of the emerging market label is also complicated by the fact that some closed societies have generated short-term growth, while some open societies have stagnated and damaged their economies with policies that have promoted political instability and sometimes explosive centrifugal forces. The closed economies of eastern Europe grew rapidly in the 1950s and 1960s, yet their political and economic policies were not conducive to sustainable longer-term growth. Conversely, until recently Hong Kong and Taiwan were politically closed countries but their economies were open and their educational systems provided advanced skills and a sense of inquiry, albeit not oppositional, for example, Taiwan’s pre-1986 authoritarian government. Taiwan is a country that made the transition from an agricultural, to consumer-industrial, to high technology economy in fifty years, and it has enjoyed excellent growth since the 1960s. Once again, distinctions are sometimes blurred.

Latin American countries present a different set of definitional problems. Many of these societies had formally open political systems at the macro level, yet the bulk of the population was caught in a web of poverty that prevented meaningful participation in the country’s economic growth. Upward social mobility was beyond the reach of the vast majority of the population which failed to obtain the skills needed to advance in a successful emerging market, or to accept risk-taking entrepreneurial attitudes as virtuous or even possible. As anthropologists have demonstrated, people living subsistence lives cannot be expected to embrace risk taking because a failed experiment may result in consequences much more serious than bankruptcy. Since the 1980s there have been important changes in the economic policies of Latin American countries, as well as improvement in the quality and openness of many educational systems, although much more remains to be done (Lapper & Dyer, 1998).

The potential for sustained economic growth and political openness are related, although it is not always an easily identifiable connection, and the linkages between the two have time lags, which cause some to deny this connection. This denial often comes from those who stress that stability, not openness, is the key to sustained economic growth. Others have noted that the liberal concept of openness is virtuous but highly rarefied, and the causal ties drawn between political openness and growth are too simplistic. These analysts often note the need for significant state intervention in the economy, and focus on the mixed economies of economically advanced western Europe, which they view as preferred alternatives to economies with little state intervention and ownership (Freeman, 1989). These mixed economies are open and democratic societies, and effective state intervention in the economy can result in positive developments. The connection between capitalism, market relationships, and democracy is complicated. The liberal perspective presented in this chapter does not categorically reject alternative approaches such as mixed economies, but strongly posits that there is a correlation between political openness and sustainable economic growth, and that this positive relationship is reinforced by educational systems that advance skill levels and extol the virtues of inquiry.

While the positive relationship between openness and economic growth is not always readily apparent, the connection between the absence of economic growth and closed political systems has often been noted by scholars conducting research on eastern Europe or the former Soviet Union. Some have made the case for the poor economic performance of these countries based on communism’s stress on equality rather than efficiency (Hewett, 1988). Others have noted that the communist system was based on the “economies of shortages” and lacked rewards for risk taking, hard work, and innovation necessary to promote sustainable growth (Kornai, 1992). Still others located the problem in the flaws of the communist systems with its penchant for control in order to keep a politically illegitimate leadership in power, regardless of the detrimental impact on the economy (Brzezinski, 1990).

However, analysts who have focused on Asia or Latin America have not been provided with such clear and overt cases of politically closed countries whose economies have performed poorly. Asia, for example, contains countries that were, or in some ways remain, only partially open in political terms but have performed well in terms of GDP growth. In addition to the dramatic growth in the People’s Republic of China (Nolan, 1995), other Asian economies have grown by opening themselves to international trade and foreign investments, yet maintaining many features of a closed political system, for example, Taiwan before 1986, South Korea before 1997, Malaysia, or Indonesia. Since the failure of Thailand’s currency in 1997, there has been a great deal written about the economic problems associated with the relatively closed Asian model. The most notable victim of the “Asian crisis” is perhaps Indonesia, where rapid growth was not accompanied by political openness, and where in 1998 there was a severe economic collapse. The connection between political openness and economic growth is not absolute, and other factors play determining roles. Nonetheless, some Asian politicians themselves have made the connection between closed economic and political structures and declining economic indices (Burton, 1998). This is certainly a different attitude from the late 1980s or early 1990s when the semiclosed Asian political and economic model was placed on a pedestal and seen as the preferred model for promoting economic growth and political stability.

It is true that the relatively closed systems of many Asian countries do assist in fostering a certain amount of political stability, at least in the short term, and this has some positive implications, especially in the area of foreign portfolio and foreign direct investments (FDI). China’s stability is a positive factor contributing to its huge FDI inflows, while Russia’s instability is a negative factor. Stable governments are perceived (not always correctly) as more able to prevent or control internal conflicts, and hence reduce the risk involved in investing. Stable and strong governments are also viewed (again, not always correctly) as more effective in controlling inflation and directing expenditures (often public) to economically beneficial projects. While stability is important, and chaos is not a recipe for growth, this focus is rejected. Analysis should adopt a wider time frame and take into account that some forms of stability are not long-term solutions. Instead, it is held that successful emerging markets are economically and politically open and have educational systems that reflect that openness. Growth has come most often to those countries that have accepted risk, opened their economies to foreign investments, and increased the freedom and opportunities for their populaces; and not to those that have focused on political control.

As previously noted, the use of the word “open” implies more than the right to participate in multiparty elections. It has a cultural dimension in which the leadership and the general population perceive change as both acceptable and positive. This notion is not new (Millikan & Blackmer, 1961), but it is contentious and risks being viewed as culturally insensitive and as a tactic for eliminating the particularistic cultures of many emerging market societies. This is certainly not the intent, nor is it seen as an inevitable consequence of either economic growth or globalization. While growth and globalization almost inevitably include the...

Table of contents

• COVER PAGE
• TITLE PAGE
• COPYRIGHT PAGE
• ACKNOWLEDGMENTS
• TABLES AND FIGURES
• INTRODUCTION
• ROUTLEDGEFALMER STUDIES IN HIGHER EDUCATION
• SERIES EDITOR’s FOREWORD
• PART I BACKGROUND
• CHAPTER I THE EMERGING MARKETS AND THE PROCESS OF GLOBALIZATION
• CHAPTER 2 THE IMPACT OF HIGHER EDUCATION ON EMERGING MARKETS
• PART II CENTRAL EUROPE
• CHAPTER 3 THE CZECH REPUBLIC A COUNTRY INTRANSITION .. AGAIN
• CHAPTER 4 THE ROLE OF HIGHER EDUCATION IN THE DEVELOPMENT OF POLAND’S DEMOCRACY AND MARKET ECONOMY
• PART III ASIA
• CHAPTER 5 THE EMERGING MARKETS AND HIGHER EDUCATION EXPERIENCES FROM TAIWAN
• CHAPTER 6 HIGHER EDUCATION IN A RAPIDLY DEVELOPING COUNTRY THE CASE OF THE REPUBLIC OF KOREA
• PART IV LATIN AMERICA
• CHAPTER 7 FROM ENCIRCLEMENT TO GLOBALIZATION EVOLVING PATTERNS OF HIGHER EDUCATION IN BRAZIL
• CHAPTER 8 HIGHER EDUCATION AND THE EMERGING MARKETS THE CASE OF CHILE
• CHAPTER 9 HIGHER EDUCATION THE SOCIAL, POLITICAL, AND ECONOMIC DRIVER OF MEXICO’S FUTURE
• CONTRIBUTORS