Everyone's miracle?

Brookings Papers on Economic Activity, 1996

THE IMPRESSIVE economic performance of many Asian economies during the past three decades is now an old story. The growth of per capita GDP averaged over 4 percent in China and the major East Asian economies (Indonesia, Korea, Malaysia, the Philippines, Singapore, Taiwan, and Thailand) between 1960 and 1994, compared with less than 2 percent in other developing economies and 2.6 percent among the industrial countries.' East Asia stands out as the only region where living standards are catching up to those in industrial countries, while other parts of the developing world seem to be struggling to either tread water or fall further and further behind (see table 1). The exemplary performance of many East Asian economies has been the basis for a large and varied literature, much of which explores reasons for the persistently high growth and draws lessons for other countries that would like to follow suit. A surprising aspect of this literature is the lack of agreement on fundamental aspects of the performance record that analysts seek to explain. Is the basis for East Aslihan Yildiz assisted in the preparation of the paper, and a special debt is owed to Yu-Chin Chen, who assisted with the construction of the data for the growth accounts. The views expressed are those of the authors and should not be interpreted as representative of the staff or trustees of the Brookings Institution. 1. East Asia, as a region, is defined to exclude China and Japan. Our somewhat unconventional group of East Asian economies is based on the availability of data to construct the growth accounts. We include all but two (China and Hong Kong) of the eight economies that were the focus of the World Bank study The East Asian Miracle (World Bank, 1993a) and add the Philippines. We include Japan with the industrial economies. 135 136 Brookings Papers on Economic Activity, 2:1996 Table 1. Basic Indicators of Economic Growth, by Region and Countrya Units as indicated Per capita incomec Growth rates, 1960-94d Region and Population country I990b 1960 1990 GDP Population Labor force China 1,134 0.6 Source: Population and GDP are the authors' calculations based on data from the World Bank's CD-ROM World Data 1995 (hereafter referred to by its title alone). Per capita income is calculated using data from the Penn-World Tables, mark 5.6 (accessed via the worldwide web page of the National Bureau of Economic Research). Labor force numbers are from unpublished data provided by the International Labour Organisation. a. Computed using the eighty-eight country sample. Regional averages are calculated by weighting each country by its average GDP over 1960-94, as measured in 1985 dollars. b. Millions. c. Thousands of 1985 dollars. d. Annual percentage rate. Asian growth the maintenance of high rates of physical and human capital accumulation over a number of decades-a willingness to make the sacrifices of current consumption necessary to invest for the future? Or has the key been the less costly approach of adopting existing technologies from more advanced economies, which may be associated with increased capital accumulation along the way? Establishing which of these characterizations is correct is a crucial first step in extracting appropriate lessons from East Asian growth experiences and is a primary motivation for this paper. If the accumulation view is correct, these experiences reinforce the lesson that to improve living standards requires investment, paid for in large part through forgone current consumption. The alternative assessment, which Paul Romer has referred to as narrowing the "idea gap," implies a much more optimistic message.2 No opportunity cost need be incurred to 2. Romer (1993). Susan M. Collins and Barry P. Bosworth 137 incorporate ideas. Instead, they could be transmitted to the mutual benefit of suppliers and recipients. Deciphering East Asia's rapid growth would thus hold forth the promise of a much less steep road to prosperity. A long list of authors implicitly or explicitly highlights productivity growth as the key to East Asian success. One strand of literature has engaged in a debate over the role of government policies (particularly microeconomic) in achieving productivity increases. In the early incarnation of this debate, some pointed to high-growth Asian economies as proof that "market friendly" approaches, including the maintenance of an open trading regime, promoted increased efficiency.3 Others characterized government strategies in the region as targeted intervention, not laissez-faire, arguing that the experiences showed how "getting prices wrong" and picking winners were the road to catching up with industrialized nations.4 Thus the same group of countries became poster children for conflicting policy advice. Views in this debate have moved somewhat closer over time. In particular, there is now broad recognition that the high-growth Asian economies exhibit a range of government strategies, from extreme laissez-faire to extensive intervention in some sectors. A growing number of analysts have also concluded that some interventions were beneficial.5 However, considerable disagreement remains over the importance and transferability of active intervention.6 This debate still centers on the role of the public sector versus the private sector in generating productivity growth. A second strand of literature stems from dissatisfaction with the ability of traditional growth models to explain observed features of economic growth.7 The result has been an exploration of alternative frameworks, known collectively as models of endogenous growth. Some of the underlying ideas can be found in the development literature of the 1950s and 1960s, but the associated explosion of attention to how rapid economic growth may be spurred by increases in efficiency is certainly new. In these models, while productivity gains may induce 3. See World Bank (1993a) and, more recently, Krueger (1995).

2002

This paper provides an extensive review of growth, inequality and poverty reduction in the East Asian miracle economies. This review suggests that the basic impetus for poverty reduction was robust economic growth, which was fostered by a conducive policy and institutional framework. This framework--which helped to create a "level playing field"-encouraged high investment, production over diversion, and efficient use of investible resources.

World Development, 1999

The paper argues that the economies of East and South East Asia are a very diverse group, only some of which have grown rapidly over the past three decades. The fast growing economies of South East Asia, especially Indonesia, Thailand and Malaysia are in a number of important respects different from the fast growing economies of North East Asia, Japan, Taiwan and South Korea. The different colonial legacies have had important consequences for educational progress and the distribution of income and wealth. Government intervention has tended to be less growth-promoting and more oriented to goals such as inter-ethnic redistribution of wealth. The implications of these differences for future economic growth in South East Asia are discussed.

1992

By almost any standard, the countries of East Asia have outperformed other developing countries over the past three decades. While there is no "Asian Model" of development, there are some common threads that run through the development experiences of East Asian countries. These include an outward-looking strategy, intrusive but market-oriented government policies, macroeconomic policies that encourage savings and investment, and a social consensus for economic growth. The positive experience of East Asian countries has begun to influence policymakers in other developing regions.

The East Asian Miracle, A World Bank Policy Report , 1993

Southeast Asian Economies, 2014

Journal of Policy Modeling, 2011

This paper identifies emerging trends in the world economy during the next decade. The first is that China will overtake the U.S. in terms of gross domestic product (GDP), ending more than a century of U.S. leadership as the world's largest economy. The second is that Developing Asia, excluding Japan, will overtake the G7, a group of the seven largest industrialized economies established in 1975-6. Finally, India will overtake Japan, Russia will overtake Germany, and Brazil will overtake the U.K., leading to a New World Economic Order: China, the U.S.

Studies in Family Planning, 1997

For more information visit our website: www.iadb.org/pub hForeword Each region has a unique social, cultural, and political heritage, which influences its institutions, political processes, economic structures, social challenges, and responses to new events, be they favorable or adverse. Latin America and the Caribbean and East Asia are no exception: within these regions, development will always be based upon each nation's unique history. Nevertheless, the design of public policies and the response of economic agents to policy changes are also key factors that shape a country's development. In debates over development policy, therefore, it is the responsibility of scholars and policymakers to examine the evidence of policies that have achieved particular development objectives, why they have worked, and what initial conditions are required for success in the context of changing social, political, and economic conditions. Since its inception, the Inter-American Development Bank has contributed to effective development policies and supported efforts by individual countries to adapt such policies to their particular circumstances. The Bank has also actively shared the development experience of Latin America and the Caribbean with the international development community and encouraged efforts by the region's scholars and policymakers to examine the experience of other countries. In this spirit the Bank sponsored a conference in 1994 to compare the development experience of Latin America and the Caribbean with that of East Asia. The conference, held in Chile, was attended by a diverse group of scholars and policymakers from both regions, as w r ell as from North America and Europe.

Australian Economic History Review, 1991

ANNE BOOTH This article provides some quantitative comparative indicators of economic performance in Southeast Asia over the last century and attempts to explain the very different pace of economic growth and structural change in the different countries of the region. Estimates are provided of the growth of output, population and foreign trade, and of the role of the government sector. It is argued that, although all the Southeast Asian economies responded positively to the opportunities offered by the rapid growth of world trade in the latter part of the nineteenth century, there were a number of factors which prevented them from embarking on a process of sustained economic development. These factors included deteriorating commodity terms of trade, large export surpluses sustained over long periods of time and trade policies which discriminated in favour of imports from the metropolitan power and retarded the growth of domestic industry Although all countries in the region had gained political independence by the 1960s, their very different colonial legacies and the reaction to them on the part of successive post-independence governments have greatly influenced economic performance. See Falkus, 'Thailand'. Booth, 'Southeast Asia', Table 4. Migration from China also played an important part in accelerating population growth in Thailand and in parts of Indonesia in the late 19th and early 20th centuries. See Sompop, 'Economic development', pp. 32-3.

International Economic Journal, 2001

This paper analyzes Asia' s growth experience in a broad historical and international context. East Asian countries grew faster than the rest of the world for four key reasons: they had substantial potential for catching up, their geography and structural characteristics were by-and-large favorable, demographic changes worked in favor of more rapid growth, and their economic policies and strategy were conducive to sustained growth. Although the financial crisis of 1997 abruptly brought a halt to Asia's period of robust growth, there was little in Asia's fundamental growth strategy that inevitably l ed to the crisis. The key to the crisis was too much short-term capital flowing into weak and under-supervised financial systems. This suggests that with better financial management and a return to the core policies that resulted in rapid growth, the East Asian economies can again return to sustained growth. [O11, O40, O53] * This paper was written while Steven Radelet was at Harvard University and before he joined the U.S. Treasury. Part of this work is based on our earlier paper "Economic Growth in Asia." We received helpful comments and insights from David Bloom,

World Economics, 2006

In the middle of the twentieth century (1950), Latin America was the most developed region outside the industrial countries, with an average level of real GDP per capita more than 2½ times that of East Asia (excluding China and Japan), 1 and around one-fourth that of the US (Table 1). At the beginning of the current century (2001), however, this relative position had been reversed: real GDP per capita of the East Asian region had more than doubled, while that of Latin America had actually declined, in relation to the United States. What can account for this big reversal of fortune? And what are some of the lessons from this experience for development policy? These are the questions that this article seeks to shed light on.

Persistent inequality, in addition to being ethically wrong, is politically risky and is likely to arrest development gains. In a continent that is now largely democratic, issues of equity will shape the future of governments. Rising levels of inequality across Asia underscore the regional dimension of the problem. Although currently lacking, a coherent regional response to address this issue is desperately needed for Asian countries to make a smooth development transition. If the transition from developing to developed is to be achieved by the least developed countries in Asia while keeping inequality in check, then the transition from rural to urban needs to be managed carefully. The policy focus needs to shift from pursuing merely growth to developing a more inclusive form of growth. This requires that the distribution of, as well as the contribution to growth be critically questioned.

Series is a forum for stimulating discussion and eliciting feedback on ongoing and recently completed research and policy studies undertaken by the Asian Development Bank (ADB) staff, consultants, or resource persons. The series deals with key economic and development problems, particularly those facing the Asia and Pacific region; as well as conceptual, analytical, or methodological issues relating to project/program economic analysis, and statistical data and measurement. The series aims to enhance the knowledge on Asia's development and policy challenges; strengthen analytical rigor and quality of ADB's country partnership strategies, and its subregional and country operations; and improve the quality and availability of statistical data and development indicators for monitoring development effectiveness.

Brookings Papers on Economic Activity. Microeconomics, 1998

nomic reform to resume a path of strong economic growth? This vital question, posed in the wake of the economic crisis of 1997, has divided both economists and policymakers. The case against major structural reform begins with the dramatic growth of these economies over the past twenty years. For example, Korea, the focus of this paper, has transformed itself into a major economic power, exporting cars and semiconductors to the world and quintupling its GDP per capita between 1970 and 1995. East Asia's achievement is all the more remarkable given that most developing countries have achieved very little development and have fallen further behind the advanced economies. Indeed, East Asia has been used as an example to understand how other countries could achieve more rapid economic development and convergence. I According to those who contend that major reform is unnecessary, the crisis of 1997 was the result of macroeconomic (notably currency) mismanagement and the effects of economic crises in Thailand that created a temporary liquidity shortage. For example, Steven Radelet and Jeffrey Sachs characterize the crisis as a financial panic that shifted the countries involved from a high-investment to a low-investment equilibrium. They argue that "much of the economic activity supported by The authors would like to thank the participants of the June 1998 meeting for their many helpful comments, and also Jim Bemowski, Cuong Do, Bob Felton, Ted Hall, and Bill Lewis. 1. See, for example, World Bank (1993). 249 6. Mass Participatory Economy: Korea's Road to World Economic Power was first published in 1985 (Kim Dae Jung, 1996, rev. ed.). This book was written while President Kim was in exile in the United States; Kim was aided by You Jong Keun, then a professor of economics at Rutgers and now governor of Chollabuk-do Province and a principal adviser to the president. 7. The appropriateness of macroeconomic policy in East Asia is an important part of the debate that we will not engage here. The International Monetary Fund argues that high interest rates are essential to restore stability to the currency markets, while critics argue that such high rates are unnecessary and result in severe recession. 8. An exception to this statement is The East Asian Miracle (World Bank, 1993), which does review some industry data and draws on industry case studies by, for example, Pack (1993). 9. This report (McKinsey Global Institute, 1998a) is the source of most of the information in this paper and will not be cited with each statement of fact. The core project team that prepared the report included Taejoon Chin, Dongchun Choi,

CEPR Discussion Paper Series, 2015

Except for the Philippines between 1896 and 1939, Southeast Asia was never part of the century-long East Asian industrial catching up until after World War II. Before the 1950s, Southeast Asian manufacturing hardly grew at all: while commodity export processing did grow fast, import-competing manufacturing and manufacturing for local consumption did not. Singapore and Thailand started recording catching up growth rates on the western leaders only from the 1950s onwards, and Indonesia and Malaysia joined the club only after 1973. Even then, Southeast Asia did not record catching up growth rates on Japan or Taiwan until after 1973 and 1990, respectively. The only Southeast Asian country that appeared to have joined the fast industrial growth club before World War II – the Philippines -- had its industrial growth collapse after the ISI years. What explains this dismal industrial performance before the 1960s? Why did Southeast Asia become a rapid export-led manufacturing growth success ...