Will Myanmar Embrace Market Reforms?

The economic growth in Myanmar is now among the highest in Asia, and it’s come a long way since the 1960’s when it was considered one of the world’s most impoverished countries. It’s instructive to understand how this change took place, what some of the current economic metrics indicate, and current pressures being placed on Myanmar from the outside.

For starters, the general history of Myanmar (also known as Burma, and the reason for the two names is interesting in itself) is long and fascinating. More recently, Myanmar was conquered by Great Britain (it was actually a part of British India, which was responsible for much of the administration) in 1855, and became relatively affluent in this part of the world, primarily due to the trade of rice and oil. 

However, even before British rule, Myanmar was already relatively well off due to its strategic location along important trade routes. Myanmar is located between India and China — Indian influence is still present, even today, and was resented, along with British control — and this trading activity helped offset a country based on self-sufficient agriculture and centralized control via a king. 

Britain ruled Myanmar until independence in 1948 when a series of nationalization and central planning efforts created a welfare state. The results were disastrous. Rice exports fell by two-thirds in the 1950’s, along with a 96% decline in mineral exports. In order to maintain central planning efforts, the government resorted to printing money, and runaway prices resulted from this inflation of the money supply.

As with many government failures, what the government does to “fix” the problems can be much worse, and this is exactly what happened in Myanmar. In 1962, the Burmese Way to Socialism was launched and lasted until the late 1980’s, when military rule resulted. Among its features, nationalism and isolation were predominant, ownership of property was nationalized, and price control boards were established. Private capital was not allowed to construct new factories, and the oil industry (largely foreign-owned) was curtailed. Rice production and exports declined further. Freedom of expression was limited, including the distribution of foreign newspapers, and all privately-owned newspapers were banned, along with anything deemed “false propaganda news”. Not surprisingly, the black market soon encompassed about 80% of all economic activity within Myanmar during this period.