Economics in Asia

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Since the mid 1960s, Pacific Asia has had a remarkable rate of economic growth. This growth has been sustainable and faster than all other regions of the world (see fig. 1). This region consists of twenty-three economies but it was just eight who caused most of this amazing growth. The eight were Hong Kong, the Republic of Korea, Singapore, Taiwan, China, (the “Four Tigers”) Japan and the newly industrialised economies (NIEs) of south-east Asia, Indonesia, Malaysia, and Thailand. The eight high performing Asian economies (HPAEs) mentioned here will be the focus of this essay. What caused this success in Pacific Asia? What role did public policies play in engineering this rapid growth? How was the human and physical capital accumulated? Most of the high growth in the HPAEs was achieved by getting the basics right. Large human capital and private domestic investment largely powered the growth. High domestic savings levels meant HPAE investment levels remained high. Agriculture experienced rapid growth and improvement of its productivity. HPAEs population growth rate declined faster than in other parts of the developing world. HPAEs were also helped by their labour force being better-educated and having more effective public administration than other developing regions. Another cause of this success, was the development policy used. The policies were made to create a stable framework for private investment while increasing the integrity of the banking system, raising levels of financial savings. Education policies concentrated on primary and secondary schools to create a labour force with better skills. Policies on agriculture pushed productivity without pushing the rural economy. Government intervention was also essential to foster development. The growth of these HPAEs is highly unusual in the developing world. They are highly diverse in culture, resources and population yet they are banded together with some characteristics. They have all had rapid sustained growth with highly equal income distributions. Strong agriculture, rapid demographic changes and export booms. There are two main views of how the HPAEs were so successful. The first is the neo-classical, which stresses getting the basics right. This was providing a strong legal framework to promote competition (domestic and international), the absence of price distortions (e g price controls) and the investment in people, health and education. The second view is of the revisionist, where the government uses state-led development and intervention to achieve growth.
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