Asian Century?

East Asia’s pre-1997 high growth

Overview of East Asia’s Growth

• Average growth rate higher than those of any other region in the world

• Superior performance of the eastern half of Asia– Japan, South Korea– China’s mainland, Hong Kong, Taiwan– Indonesia, Malaysia, the Philippines,

Singapore, and Thailand

Overview

• Large degree of variance between the individual economies

Geographical division

Growth in East Asia

• Japan’s economy took off in 1960s

• NIE’s (newly industrialized economies)– Hong Kong, Taiwan and Korea

• “very high” growth in the 1960-1975 period• “outstanding” growth in the 1975-1990 period

– Singapore: opposite pattern

• Irony of Myanmar and the Philippines

Growth in NIE’s

• NIE’s accumulated capital and increased labor participation at a much faster rate than other economies

• The increase in these two factors far from fully explains their exceptional growth rates

• productivity growth also accounts for a significant fraction

Growth in NIE’s: I

• Growth of labor participation

• “high” for the NIE’s in general

Growth in NIE’s: II

• Growth of capital

• Hong Kong: “high”

• Taiwan & Singapore: “very high”

• Korea: “outstanding”

• Public investment/GDP similar to other developing economies

• Private investment/GDP much higher

Growth in NIE’s: III

• Productivity growth

• Higher than that of United States

• Proportion of growth of GDP per person that is explained by productivity growth was not systematically different from those of Japan and the United States

Paper tigers?

• Soviet Union growth pattern– mobilization of resources

• Asia growth pattern– two-thirds of the growth is input-driven– the remaining third is attributable to increased

efficiency or total factor productivity (TFP)

The World Bank study

• To international technological progress

• South Korea was keeping pace

• Hong Kong, Japan, Taiwan and Thailand were catching up

• The investment-driven economies of Indonesia, Malaysia, and Singapore fell behind

Increase in Productivity

• Imports of foreign knowledge and technology

• Expanding education opportunities

• Better organization

• Improved work practices

Increase in Productivity

• Interlocking cooperation

• free enterprise

• government financial intervention

• guidance-minded technocratic bureaucracy

Korea’s growth path

• High rates of saving with funds channeled into the industrial sector

• Strong export orientation

• Strict limits on “non-essential” imports and direct foreign investment

• Strict zoning laws and other restrictions on the distribution system

Hong Kong

• Entry port to China

Singapore

State Intervention

Ability

Low High

High

India, Philippines Japan, Taiwan

Intent (weak) (strong)

U.S., U.K Hong Kong

Low (minimalist) (market driven)

Asian Values?

• commitment to hard work

• sense of thriftiness

• emphasis on education

• well-defined family structure

• filial piety

• respect for political authority

• society above self

Political stability

• Strongman rulers– North Korea, South Korea, Singapore,

Malaysia, the Philippines, Indonesia ...

• Single-party dominance– Japan, Taiwan, Malaysia, Singapore …

• Trading civil rights and freedoms for economic growth– presumption of basic material well-being