Key Issues & Concepts Pertinent to Economic Growth & Development in the Asian Region
In 1993 the World Bank analyzed the causes of East Asia’s development and success in The East Asian Miracle—Economic Growth and Public Policy. It states: What caused East Asia’s success? In large measure the HPAES achieved high growth by getting the basics right, private domestic investment and rapidly growing human capital were the principal engines of economic growth.
Agriculture experienced rapid growth and productivity improvement. Population growth rates declined more rapidly in the HPAES than in other parts of the developing world. And some of these economies got a head start because they had a better educated labour force and a more effective system of public administration. In this sense there is little that is "miraculous" about the HPAES’ superior growth record;it is due to superior accumulation of physical and human capital (World Bank, 1993). East Asia’s economic success can be used by other developing countries in the current international environment. It can be explained by successful interventionist government policies, by their openness that is conducive to growth and development. (Glick and Moreno 1997)
For a long time East Asia was not distinguished by anything very special on the economic map of the world. But in 1960th the situation in East Asia start changing, and in the 1980th successes of "new industrial countries" of East Asia became the theme of scientific discussions and enthusiastic journalistic essays.
Swift economic growth in the countries of "Tigers" (Taiwan, Hong Kong, Singapore, Korea) began in 1960-1965. Changes came to their neighbor countries two decades later. Those were the countries of the "second wave" of development (Malaysia, Thailand, Indonesia). The leaders of "Tigers" chose the strategy according to geography, history, foreign policy and usual good sense. All countries of "Tigers" lacked supplies of minerals, but there were great "supplies" of cheap and disciplined labour force in their disposal. So the best decisions for these countries were the creation of economics oriented to the export, their transformation into "countries-factories", which would import raw material and exported the prepared products created by local workers. There is one more feature united all "tigers": active state interference in the economy. Besides the economic growth was accomplished under the authoritarian regimes. It created ideal base for a corruption.
Changes happened in East Asia in 1960-1990 indeed deserve to be called a "miracle". Average annual growth of GDP in 1960-1990 got around the European level, and sometimes surpassed it. According to Satoshi Ikeda, Taiwan, South Korea, Singapore and Hong Kong are the only Third World countries to have grown rapidly enough to close the relative income gap between themselves and the advanced capitalist economies. (S. Ikeda 1996) The development of the states of the "second wave" occurred under another circumstances. Their traditions were different from those of the "first echelon". They already had the example of "four tigers". Besides, foreign investors were assured the investments to East Asia should be advantageous. The international climate was friendly for realization of the most ambitious plans. The states of the West were ready to give considerable help to the programs of economic development in East Asia. Under those circumstances the realization of the economic programs for the "second echelon"(Thailand, Indonesia, Malaysia) began.
The relations between authorities and businessmen were out-of-date. A credit became the main source of financing of business-projects. It could be easily got if there were good relationships with authorities. There was a great increase of debts of firms. Moreover, not every project was justified from the economic point of view. Often they used to solve certain political task or for prestigious reasons. (Shiratori M., 1993). But nevertheless achievements of East Asia were impressive. It gave a hope that the countries of East Asia would succeed in repeating the success of "four tigers". However rejoicing was not very long. 1997 year became the year of financial catastrophe, "Asiatic crisis". After that all talks about the "Asiatic miracle" became quite inappropriate. The crisis began in Thailand. Soon the crisis appeared in other countries of East Asia. The situation was aggravated by the outflow of foreign capitals. Foreign investors were afraid and started rescuing their capitals. The crisis of 1997 resulted in talks about the "end of Asiatic miracle" economist P.Krugman said that the "East Asian miracle" was a short-term combination of historical circumstances (favorable international climate, possibility to adopt the technologies, cheapness and abundance of labour force). (P.Krugman 1994) After “Asiatic crisis” it was considered that reconstruction would last many years. But these prognoses did not justify themselves. Financial catastrophe of 1997 didn’t even touch "tigers". The reconstruction of economy was so quick, that it was talked about the "second Asiatic miracle". It concerned even the most suffered countries - Indonesia, Malaysia, Thailand.(Bhanoji R., 2001)
Key dynamics, strategies, and policies of Asian economies. Let’s summarize main economic politics that characterize East Asian economies. Asian politics are designed at providing stable macro-economy. It includes keeping inflation and deficits under control, maintaining stable interest rates, ensuring business legal environment. There are some other aspects of economic politics: the creation of effective and secure financial systems; limitation of price distortions to protect domestic, infant industries. East Asian policy is aimed at competing on the world market; providing openness to foreign technology. It helps to remain open to outside investments. It is essential for East Asia to develop agriculture, make it more productive. Selective interventions are of great importance. It means a reality-tested learning process concerning effective policy making.
Export push is also widely used in Asian economies. It presupposed the development of goods for export markets, to use the markets of big countries to earn money for own development. There are also important policies, namely: maintaining competitive discipline that presupposes government and business working together; high human capital policy that implies the necessity of investing in education; creation of high quality civil service; information exchange among government, business, workers to provide a collaborative development effort, high levels of savings and flexible labor markets. (Rowen, 1998)
A lot of features of East Asian trade and industrial policies are also worth to be mentioned. First, all import barriers, production only for domestic markets are inadmissible in this region. On the contrary, thanks to many preferential measures for exporters the export is promoted in Asian economies.
Second, government gives its support to firms according to their success in world markets. There is no possibility of supporting loss-making firms and of benefiting well-connected rent-seekers.
Third, free entry subsidies for imports provide inputs to the export sector. It opened the import sector significantly, and avoided any trade barriers. As the export sector broadened, the quantity of imported goods also increased. As a result GDP ratios in East Asian economies increased to much higher levels than in Latin America (Krueger, 1999).
In addition to afore-said strategies and policies it is necessary to distinguish some tendencies that can have influence on the new "Asiatic world". J. Naisbitt published his book "Asiatic megatrends", where he declared that economic, political and cultural center of world would relocate to Asia. John Naisbitt speaks about the following trends (J. Naisbitt 1996):
1. Sunset of idea of the national state and appearance of "ethnic network" conception. Japan already ceased to prevail in the world economic system, and the "Chinese network" assumes its role. But it doesn’t concern the concrete state, but the association of ethnic Chinese, lived both in Asia and beyond its limits.
2. The transition from the economy based on the export to the economy developing due to growth of consumption. Internal demand of middle class excludes the export.
3. This trend will show up in prevailing of the Asiatic model of "guardian's state", that is more viable and modernized than western one.
4. This trend consist in fading of state intervention, development of market economy, and also in regional collaboration of the states located in the district of the Pacific ocean.
5. It includes the lowering of role of rural locality in combination with simultaneous urbanization, development of information societies and universal computerizing.
7. Shows up in "asiasation" of world. The expansion of technologies will coexist with the Asiatic culture and public organization.
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