Resilience to economic shrinking: A social capability approach to processes of catching up in the developing world since the 1950s
Since the 1950s economic catching-up processes in the developing world have, with the exception of East Asia, been largely erratic and unsustained. To understand why, development research has focused on the sources and causes economic growth. This is too narrow and risks neglecting an important component in the development experience: the role of economic shrinking. Our estimates show that the countries that have successfully caught up have only shown marginally higher growth rates compared to less successful countries during growing years. More important seems to be an significantly stronger resilience to shrinking. The aim of this project is to include economic shrinking in the analysis of the economic development process to better understand why some countries are more resilient to shrinking than others.
To this aim, a deeper empirical and theoretical understanding of the nature of catching up must be developed. We pose two major research questions. First, if resilience to shrinking is relatively more important than the magnitude of growth, by identifying patterns of shrinking and determine the relative contribution of magnitude and frequency of shrinking. We assess different dynamics of shrinking by analyzing the patterns of economic shrinking over time. Second, we analyse whether resilience to shrinking is conditioned by the endowment of a country s social capabilities, something we investigate among both successful and less successful developing countries.
Final report
The project's purpose and development
The principal aim was to understand, with a focus on the last seventy years, the significance of economic shrinking for lagging economies’ opportunity of catching up. The second aim was to better understand why some countries shrink more often than others and which factors play the most significant role in building resilience to shrinkage. Accordingly, the power of association was tested for five different capabilities that were identified on both theoretical and empirical grounds. Then we tested whether, how and why these potentially explanatory factors play different roles in different contexts.
Implementation of the project
The work initially consisted of inventorying existing data on the measures and indicators we wanted to use to advance an empirical understanding of patterns of growth and shrinking over time as well as of the selected social capabilities. This was to enable us to get as comprehensive a picture of as many developing countries as possible. We aimed to find data that spanned as long a time period as possible, and that the data series were continuous and internationally comparable. From this, we compiled and built a database tailored to the project's research questions. For part of this work, a number of master's students were hired as research assistants. This generated a good overall understanding of developing countries' shrinking patterns and whether resilience to shrinking was associated with the indicators of social capabilities that we had selected on the theoretical-analytical level. This work contributed to a number of publications (and future ditto) as well as a good source for presentations and teaching sessions. During the latter phases of the project, more detailed case studies have been carried out to better determine what mechanisms played a role in individual cases, for example in Indonesia, Brazil, Colombia, Vietnam and Malaysia.
During the course of the project, project-participating researchers approached questions about the implications of the project's results for related issues in development research. Some temporal deep dives were made for such purposes, such as the possible historical and colonial origins of resilience; the transformation of the agricultural sector's political economy and interaction with other sectors of the economy; as well as the role of political leadership which rendered in a number of publications and new research ideas. Also, in-depth study of arrangements for social stability and conflict management and its connection to shrinking patterns is under development. An offshoot of the project that received funding from elsewhere is to specifically study the development of the financial sector and the importance of central bank autonomy to reduce the risk of volatility and shrinking tendencies. Here we look more in detail at for example Tanzania and Kenya, two countries with similar colonial origins but with very different outcomes in terms of shrinking.
The project's three most important results
First, the project shows that the capacity of developing countries to create prosperity is based more on their ability to limit the shrinking tendencies of the economy than the ability to generate growth per se. Among other things, the research project argues and shows that the Asian economic miracle is not primarily a growth miracle but a resilience to shrinking miracle. This has opened up possibilities for a more complete understanding of the transformation that many countries in East and Southeast Asia underwent during the post-war period and which continues to constitute the most significant, and inspiring, field of research for improved understanding of economies' opportunities for catching up.
Another significant research result is that the capabilities (transformation, inclusion, autonomy, accountability and social stability) that the project initially focused on were also found to be clearly associated with resilience to shrinking. Reality turned out to reflect the theoretical reasoning well, but the project also shows that the explanatory power varies between countries and over time – the dynamics are elusive at the aggregate level. As data were acquired and analyzed, complex interactions between social capabilities and shrinkage resilience emerged. Examples of such interactions are that increasing economic complexity strengthens resilience at the beginning of the development process, while at the same time it can increase inequality, which in turn can weaken resilience. A subsequent consequence consists in the fact that the dynamics of the interaction between the social capabilities and resilience against shrinking can only be understood by more in-depth case studies. This paves the way for new studies on which policy choices have the best chance of creating prosperity and which look beyond the traditional mechanisms of growth. Overall, this shows that the basic analytical model is reasonable, but that deeper understanding of the development process over time requires supplementary studies and methods.
New research questions
The most pressing new research question that the project led to is how to transfer what we know about the significance of resilience to shrinking into concrete development strategy and influence policy choices. Furthermore, how can the knowledge generated by the project improve development and aid policy, which has seen relatively limited success since the beginning of development economics just after the Second World War? The concrete research task will then be to follow the policy process in countries that have strengthened their resilience against shrinking and what lessons can then be learned from this. In order to thoroughly illuminate these questions and find plausible answers, it is necessary to systematically go in depth in several individual cases. Additional research questions that await answers are the questions of causality, especially cumulative causality over time, between the different social capabilities and the interaction with shrinkage frequency. Likewise, the role of different types of political regimes in shrinkage patterns requires new research. Also, what implications the research results have for the discussion of sustainable development and prosperity – if resilience to shrinking and environmental resilience are mutually reinforcing is also a question for future research. Other new research questions that are based on the project's discussion of resilience in a broader sense are about whether it is possible to find that a society's resilience at the macro level is also reflected at the household or individual level. Such a research project is already underway.
Collaboration and dissemination of research
Dissemination and collaboration have been carried out in many different ways and in different forums and have intensified over the course of the project. Among other things, this has taken place through presentations of the research at seminars and workshops. Some examples of such invitations are the research seminar arranged by the Center for Environmental and Climate Research on the concept of "Resilience" (Pufendorf Institute 2020) and the webinar Social Resilience Beyond the West for the School of Social Work (2022) as well as annual presentations for nanotechnologists at the Department of Physics at LU in a course on Sustainability.
The collaboration has been substantial with WINIR (World Interdisciplinary Network for Institutional Research) and the project and its members have in various contexts interacted with related research and researchers within institutional analysis. A project member (Axelsson) has also acted as a member of the WINIR council. Other collaboration of a multidisciplinary nature has arisen via Lund University's profile area initiative 2022-2030 around Human Rights, where the project's focus on various aspects of social capabilities has proven to be relevant (Andersson is part of its steering group as a coordinator). The research has also been disseminated through collaboration with GReCEST when meeting at its annual conferences, such as at Peking University in 2019 and the web-based conference in 2022. http://www.grecest.org
.
In November 2023, the project and its results were presented at the Global Development Institute at Manchester University with whose research group future collaborations on economic shrinkage are planned, see https://events.manchester.ac.uk/event/event:f28g-loipoh6p-wns12h/resilience-to-economic-shrinking-as-a-development-strategy-for-the-21st-century
The project was granted to organize a session (Economic Shrinking, Social Capabilities and long-term Economic Development) at the World Congress of Economic History in Paris 2022. In the field of economic history, this meeting, held every four years, is the most significant and well attended economic-historical meeting and constitutes a forum for the research that is considered to be at the forefront of the discipline (see https://www.wehc2022.org/program-details/resilience-to-economic-shrinking-and-long-term-economic-development)
With regard to diffusion within the field of education and for younger and future researchers, discussions of social capabilities and economic shrinking have so far been a central theme in dozens of master's theses, explicitly related to the project and its research findings (according to the essay database LUP Student papers). Research results from the project and the shrinking perspective in general are now (and as a direct result of the project) treated in the majority of bachelor's and master's courses in economic history and development studies at Lund University and at the University of St Andrews. A former student at the Department of Economic History and later co-author of one of the project's publications, was accepted as a doctoral student at Stockholm University in 2023. This thesis project has the working title Resilience to Economic Shrinking. Andersson is also the assistant external supervisor for this doctoral project. An additional doctoral student at LUSEM, Lund University, writes parts of his thesis on structural transformation and shrinkage patterns in colonial Africa with reference to the project's research results.
During the final phase of the project and as new research questions arose of a policy-relevant nature, collaboration was initiated with, among others, the Stockholm Resilience Center on how both ecological and economic resilience can conceivably interact in order to better understand processes that lead to sustainable development.
One of the most significant collaborative processes within the framework of the project has been developed together with the African Union Development Organization, AUDA-NEPAD. As part of this organization's initiative to generate indicators for science, technology and innovation in Africa, Andersson developed a commissioned training course, for which he is the course manager. The course is aimed at African civil servants in politics and the public sector is held annually since 2022. The course content is to some extent a direct product of the research project. There is more to read about this here: https://www.lunduniversity.lu.se/admissions/professional-education/capacity-building-programmes/innovation-transformation-and-resilience-sustainable-development
The principal aim was to understand, with a focus on the last seventy years, the significance of economic shrinking for lagging economies’ opportunity of catching up. The second aim was to better understand why some countries shrink more often than others and which factors play the most significant role in building resilience to shrinkage. Accordingly, the power of association was tested for five different capabilities that were identified on both theoretical and empirical grounds. Then we tested whether, how and why these potentially explanatory factors play different roles in different contexts.
Implementation of the project
The work initially consisted of inventorying existing data on the measures and indicators we wanted to use to advance an empirical understanding of patterns of growth and shrinking over time as well as of the selected social capabilities. This was to enable us to get as comprehensive a picture of as many developing countries as possible. We aimed to find data that spanned as long a time period as possible, and that the data series were continuous and internationally comparable. From this, we compiled and built a database tailored to the project's research questions. For part of this work, a number of master's students were hired as research assistants. This generated a good overall understanding of developing countries' shrinking patterns and whether resilience to shrinking was associated with the indicators of social capabilities that we had selected on the theoretical-analytical level. This work contributed to a number of publications (and future ditto) as well as a good source for presentations and teaching sessions. During the latter phases of the project, more detailed case studies have been carried out to better determine what mechanisms played a role in individual cases, for example in Indonesia, Brazil, Colombia, Vietnam and Malaysia.
During the course of the project, project-participating researchers approached questions about the implications of the project's results for related issues in development research. Some temporal deep dives were made for such purposes, such as the possible historical and colonial origins of resilience; the transformation of the agricultural sector's political economy and interaction with other sectors of the economy; as well as the role of political leadership which rendered in a number of publications and new research ideas. Also, in-depth study of arrangements for social stability and conflict management and its connection to shrinking patterns is under development. An offshoot of the project that received funding from elsewhere is to specifically study the development of the financial sector and the importance of central bank autonomy to reduce the risk of volatility and shrinking tendencies. Here we look more in detail at for example Tanzania and Kenya, two countries with similar colonial origins but with very different outcomes in terms of shrinking.
The project's three most important results
First, the project shows that the capacity of developing countries to create prosperity is based more on their ability to limit the shrinking tendencies of the economy than the ability to generate growth per se. Among other things, the research project argues and shows that the Asian economic miracle is not primarily a growth miracle but a resilience to shrinking miracle. This has opened up possibilities for a more complete understanding of the transformation that many countries in East and Southeast Asia underwent during the post-war period and which continues to constitute the most significant, and inspiring, field of research for improved understanding of economies' opportunities for catching up.
Another significant research result is that the capabilities (transformation, inclusion, autonomy, accountability and social stability) that the project initially focused on were also found to be clearly associated with resilience to shrinking. Reality turned out to reflect the theoretical reasoning well, but the project also shows that the explanatory power varies between countries and over time – the dynamics are elusive at the aggregate level. As data were acquired and analyzed, complex interactions between social capabilities and shrinkage resilience emerged. Examples of such interactions are that increasing economic complexity strengthens resilience at the beginning of the development process, while at the same time it can increase inequality, which in turn can weaken resilience. A subsequent consequence consists in the fact that the dynamics of the interaction between the social capabilities and resilience against shrinking can only be understood by more in-depth case studies. This paves the way for new studies on which policy choices have the best chance of creating prosperity and which look beyond the traditional mechanisms of growth. Overall, this shows that the basic analytical model is reasonable, but that deeper understanding of the development process over time requires supplementary studies and methods.
New research questions
The most pressing new research question that the project led to is how to transfer what we know about the significance of resilience to shrinking into concrete development strategy and influence policy choices. Furthermore, how can the knowledge generated by the project improve development and aid policy, which has seen relatively limited success since the beginning of development economics just after the Second World War? The concrete research task will then be to follow the policy process in countries that have strengthened their resilience against shrinking and what lessons can then be learned from this. In order to thoroughly illuminate these questions and find plausible answers, it is necessary to systematically go in depth in several individual cases. Additional research questions that await answers are the questions of causality, especially cumulative causality over time, between the different social capabilities and the interaction with shrinkage frequency. Likewise, the role of different types of political regimes in shrinkage patterns requires new research. Also, what implications the research results have for the discussion of sustainable development and prosperity – if resilience to shrinking and environmental resilience are mutually reinforcing is also a question for future research. Other new research questions that are based on the project's discussion of resilience in a broader sense are about whether it is possible to find that a society's resilience at the macro level is also reflected at the household or individual level. Such a research project is already underway.
Collaboration and dissemination of research
Dissemination and collaboration have been carried out in many different ways and in different forums and have intensified over the course of the project. Among other things, this has taken place through presentations of the research at seminars and workshops. Some examples of such invitations are the research seminar arranged by the Center for Environmental and Climate Research on the concept of "Resilience" (Pufendorf Institute 2020) and the webinar Social Resilience Beyond the West for the School of Social Work (2022) as well as annual presentations for nanotechnologists at the Department of Physics at LU in a course on Sustainability.
The collaboration has been substantial with WINIR (World Interdisciplinary Network for Institutional Research) and the project and its members have in various contexts interacted with related research and researchers within institutional analysis. A project member (Axelsson) has also acted as a member of the WINIR council. Other collaboration of a multidisciplinary nature has arisen via Lund University's profile area initiative 2022-2030 around Human Rights, where the project's focus on various aspects of social capabilities has proven to be relevant (Andersson is part of its steering group as a coordinator). The research has also been disseminated through collaboration with GReCEST when meeting at its annual conferences, such as at Peking University in 2019 and the web-based conference in 2022. http://www.grecest.org
.
In November 2023, the project and its results were presented at the Global Development Institute at Manchester University with whose research group future collaborations on economic shrinkage are planned, see https://events.manchester.ac.uk/event/event:f28g-loipoh6p-wns12h/resilience-to-economic-shrinking-as-a-development-strategy-for-the-21st-century
The project was granted to organize a session (Economic Shrinking, Social Capabilities and long-term Economic Development) at the World Congress of Economic History in Paris 2022. In the field of economic history, this meeting, held every four years, is the most significant and well attended economic-historical meeting and constitutes a forum for the research that is considered to be at the forefront of the discipline (see https://www.wehc2022.org/program-details/resilience-to-economic-shrinking-and-long-term-economic-development)
With regard to diffusion within the field of education and for younger and future researchers, discussions of social capabilities and economic shrinking have so far been a central theme in dozens of master's theses, explicitly related to the project and its research findings (according to the essay database LUP Student papers). Research results from the project and the shrinking perspective in general are now (and as a direct result of the project) treated in the majority of bachelor's and master's courses in economic history and development studies at Lund University and at the University of St Andrews. A former student at the Department of Economic History and later co-author of one of the project's publications, was accepted as a doctoral student at Stockholm University in 2023. This thesis project has the working title Resilience to Economic Shrinking. Andersson is also the assistant external supervisor for this doctoral project. An additional doctoral student at LUSEM, Lund University, writes parts of his thesis on structural transformation and shrinkage patterns in colonial Africa with reference to the project's research results.
During the final phase of the project and as new research questions arose of a policy-relevant nature, collaboration was initiated with, among others, the Stockholm Resilience Center on how both ecological and economic resilience can conceivably interact in order to better understand processes that lead to sustainable development.
One of the most significant collaborative processes within the framework of the project has been developed together with the African Union Development Organization, AUDA-NEPAD. As part of this organization's initiative to generate indicators for science, technology and innovation in Africa, Andersson developed a commissioned training course, for which he is the course manager. The course is aimed at African civil servants in politics and the public sector is held annually since 2022. The course content is to some extent a direct product of the research project. There is more to read about this here: https://www.lunduniversity.lu.se/admissions/professional-education/capacity-building-programmes/innovation-transformation-and-resilience-sustainable-development