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