Post-high performance in the East
Asian Economies. A look to new
challenges.
Victor Lopez Villafañe
UAZ, october 15, 2012
Key Features
• High growth first in Japan (1955-1973) then in
South Korea (1965-1989), finally in China
(1992-2007).
• Why? Possible connection between local and
international conditions
• Large volumes of investment/technology
• Cheap labour/currency
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Industrial Policy (Developmental State)
US policies/market
“Regional productive environment”
Cheap capital (Banking system)
High rate of GDP and relative equal income
distribution in Japan/South Korea. China in
the opposite situation, Gini, 0.474
New challenges
• Japan’s long deflation. Public debt : 230%/GDP
• Profesor Motoshigue Itoh says, “There has been a
supply-demand gap since 1992. A deflationary gap
means that the economy has an excessive supply
(demand shortage)”
• Profesor Chalmers Johnson: This gap is the result of
investments on plants and equipment instead of
hospitals, housing, transportation and urban planning.
• Yen defeated as leading world currency
• Role of demography: Japan’s aging population and
declining fertility rate.
• Declining wages and labour fragmentation:
permanent, dispatched and contract workers.
• Professor Noriko Hama says “ What Japan should
do in 2013 is raise wages, raise interest rates —
and cut the crap.”
• In South Korea post-high GDP period (and crisis)
has left a big economic concentration in Chaebols
with sales representing 75% of GDP.
• Increasing inequality. Declining middle class and
Gini from 0.306 in 2006 to 0.314 in 2009.
• Increasing temporary workers (33% of total)
• Current debate in South Korea is about
“economic democratization”
• Professor Byun Hyung-yoon emphasized “that
chaebol reform is at the center of economic
democracy” and “Justice and distribution,
balanced development and self-supporting
economy is the core of his belief in economic
democratization”
• China with 3 main challenges:
• A) social inequality and social conflict. Gini,
0.474. Rampant corruption/millionaries
• B) ecological disaster
• C) Demographic change. Working population
(15-59 years old) declining since 2010. 30
million less between 2010/2020. Fertility rate
declining too and gap gender (Male
population larger than female)
• In the words of Professor Ligang Song,
“unfinished reform treathens Chinese growth.
Vested interests, informational asymmetry,
abuse of power and disrespect for laws and
regulations are still endemic in the Chinese
market and have serious effects on the way
the market works as well as government
decision-making and expenditure”.