Global_Economy_-_the_Asian_Miracle

Question No. & Title: | 1. The ‘secret recipe’ for the ‘Asian Miracle’ was simply the systematic exploitation of workers by authoritarian governments. Discuss using country - examples | The ‘secret recipe’ for the ‘Asian Miracle’ was simply the systematic exploitation of workers by authoritarian governments. Discuss using country examples The most prominent word used by economists, to describe the significance of an economic growth of South-East Asian countries during the period (1965 – 1980) and (1980-1990) is a “miracle’’. Japan, Malaysia, South Korea, Indonesia, China and others from that region are delight in economic growth which is approximately 9 percent per annum or virtually several times greater beyond the average of Western economies and America. The Asian Economic Miracle seems to be an extraordinary achievement which reflects recent attention to its early origins. The rapid development of the Asian region was related by an extremely low level of unemployment and almost diminished in diversity social and financial status among population. The so called ‘’Four Tigers’’ – Hong Kong, the Republic of Korea, Singapore, and Taiwan, China industrialized in late 60’s and attract significant amount of international and foreign capitals; Later three newly industrialized economies appeared of South East Asia - Indonesia, Malaysia, and Thailand. Despite of their success, the first four countries overcome an economic crisis in 1997-1998, the reasons are mainly based on lack of full responsibility to meet service debts and the distribution of wealth. Nevertheless, nowadays the economic potential is in process of recovery and East Asian Tigers are again active participants in the Global market. This essay will explore the role of ‘’the Asian Miracle’’, its success and fundamental factors which play a major role on the Global Economy. [The World Bank, 1993; Stiglitz, J., 2002] Recent studies have shown that over the past decades dating since 1960 till 1990, the HPAEs were sustained by a high level of economic growth especially in the level of GDP per capita, technological development and better educated labour force and more effective system of public education. According to World Bank Report (1993), ‘’the relationship between the growth of gross domestic product (GDP) per capita between 1965 and 1990 and changes in the Gini coefficient, a statistical measure of the inequality of income distribution. The HPAEs enjoyed much higher per capita income growth at the same time that income distribution improved by as much or more than in other developing economies, with the exceptions of Korea and Taiwan, China, which began with highly equal income distributions. The HPAEs are the only economies that have high growth and declining inequality’’. By a contrast the East Asian Tigers are the most operated with equity. What is more, statistics have shown that by the rapid change in the economic growth life expectancy and living standard changed significantly particularly in Indonesia where there is a sharp decrease from 58 percent in 1960 to 17 percent in 1990, and from 35 percent by a less than 5 percent in Malaysia at the same stage. [The World Bank, 1993] The impressive growth of South Korea, Taiwan, Hong Kong, Singapore, Malaysia and Thailand establish a new kind of mythology that the capital economy of growth will prove lastly that can be universalized. Popular evidence in this field suggests that global wealth and manufacturing is oriented from the West to East Asia. The new mythology is based in the fact that the annual average level of GDP of the ‘Asian Tigers’ is significantly greater than those of capital developing countries. In fact, the average growth in the particular countries (excluding Taiwan) is almost 3 times higher than those of capital developing countries. So that in 1993 the GDP of South Korea is one third, in Malaysia – 1/7, in Thailand 1/10 from the GDP of capital developing countries which means that even though to keep these impressive results for future it will takes time the gap between East and West to be lived down. Recent studies have shown that, this growth is in consequence of mobilizing of unused human resources as well as tremendous foreign investments. [Hirst and Thompson; Carley. M., Christie, T.,1993; Leung, H., 2007] In other words, the growth of these countries is first of all by extensive rather than intensive character, something which is more related to the East European economies. The first depends on the increased usage of existent resources, whereas the latter depends on the increased level of productivity. It is not surprising that the policy of laissez-faire does not generate such impressive growth. Recent evidence suggests that the respectful success of the’ Asian Tigers’ is due to a large scale state intervention, which stimulates the exports of the trade policy, as well as strong protectionism. Furthermore, it reflects on shifting market prices by purpose in order to attract more investments and expand the level of commerce. [Hirst and Thompson; Leung, H., 2007] There is no doubt that Asia is a unique continent by its natural, demographic and economic scales. It comes out with a declaration of interests towards world leadership in a social-economic life on the planet. Various and versatile social-economical and cultural-political processes in the regional development of Asia provoke a phenomenal interest towards the continent. It has to be pointed out with regards to the most impetuous region – East Asia and South- East Asia. Its territory covers Japan, North and South Korea, China, Taiwan, Thailand, Vietnam, Malaysia, Indonesia, Philippines. Most common for those countries is the term Asian- Pacific region. The concept of East and South – East Asia has to be considered as a social-cultural and political- economic matter. The territory of the region covers 9.5 percent of the land. It is distinguished by a phenomenal on a large scale natural resource potential ( coal, oil, heavy and petrol chemicals, hydro-climate characteristics and a large hydro potential as well as a forestry and agricultural enterprise). Fundamentally sound development policy was a major ingredient in terms of a rapid growth and geopolitical matter. Considerable issue is the trade policy and relatively high level of industrialization and infrastructural welfare. Not only but also the extremely high dynamic of political processes after the Second World War such as decolonization, the opposition between East and West and the transitional period towards liberal-democratic model of development in most countries during the last decades. [Amsden, A. H., 1998,]; [Dicken, P., 2005; Stiglitz, J., 2002; Leung, H., 2007] The question is how the Asian Miracle gained success' In a large measure those countries which provide a growing live standards over the past decades, and those which did not succeed differ in their origins of development. The economies of the Eastern bloc show emphasized implementation of centralized state of control and government. On the other hand, even those countries with compound interests from South – East Asia put the economic growth as unconditional political issue. By a contrast, those countries which did not progress are characterized by economic policy which is oriented towards redistribution of income and industrialization. Leaders in HPAEs also admit that the stability of a Macroeconomic policy plays a crucial role. Moreover, the control over the public budget and non – inflation monetary policy is precondition for Growth. Beyond this the HPAEs not only acknowledged the balancing of budgets but also orientated to the policy of taxation. Drawing on the strength of their institutions, low rates of taxation are considered as a major issue of successful economies. Typical examples indicate Hong Kong, Taiwan, South Korea. Such countries realized that high level of taxation would discourage savings. Thus investments and human capital would lead to nondescript economic growth and lower than expected revenue. [The World Bank, 1993; Leung, H., 2007] In addition to the law taxation, the Macroeconomic stability requires from the Government to obstacle the existence of a non-balanced stake of GDP. Furthermore, the East Asian Economies gain success by fully financial repression so they did not establish state corporations and only subsidized privileged groups or industries by providing state services in a way which provides reestablishing costs. Moreover such countries were total against the World Bank and the US advice. For instance,’’ Japan, Korea and Taiwan, China do not show a negative relationship between interest rates and growth’’ [The World Bank, 1993] Taking the examples of Taiwan and South Korea there is a level of comparison to their development, the channels of credits towards privileged sectors leads to boosting major, based on debts companies, to the detriment of small firms and to the poor. The constrained low interest rates can be an obstacle, rather than helping the poor, so they stimulate capital intensive manufacturing methods which lead to lack of new labour force. In terms of Savings, the high level of savings in Asia, providing a massive by volume local capital, presumably keep up the economic development of the region. At the same time, state politics of Asia penalize savers (as to hold low interest rates on consignation and pay off insignificant restitution of management) and reward producers as subsidizing the capital (low interest rates on credits). [The World Bank, 1993; Stiglitz, 2002] Asian central banks invest most of their export excess in low income, most often dollar assets, which will lose their value because of long term inflation pressure, generated by US financial and monetary policy.[Dicken, P., 2005] In terms of Trade Policy, empirical evidence shows that the external method of approach (open door policy) towards trade industry is an absolute compulsory for the Growth. In 1987 The World Bank research explored the relationship between trade policy and the economic growth and conclude that countries with ‘external ‘ ideology(open door policy) are not restricted to the national market and are measured with good economy. For instance, Singapore model which promotes a constant improvement in infrastructure and communication. The external orientation enables countries to use their benefits, as it pointed above the developing countries and those from the Eastern bloc with problematic manufactures. On the other hand, the protectionism gives priority to the capital manufactures. And lastly, the protectionism to a large extend increase the monopoly power to the national manufacturers in prejudice of the consumers. In addition to this, currencies are undervalued to promote exports. [The World Bank, 1993; Beeson, M. & Islam, I,2003; Chang. H., 2006] The external orientation does not mean only a free trade. As it can be seen, one of the countries with great success is South Korea which is a typical example of an intellectual mixture. Although, in its early origins the government constantly liberalized the economy in a way it has an approximate low average level of internal secure. Even though the Asian economies (except Japan) are one of the most increasing in the world nowadays, a few evidence show that such dynamic is based on some mysterious successful Asian model of capitalism. The truth is more simplistic than it seems, the dynamic of the region is based on a large scale of strong foundations (high levels of savings, urbanization and demographics) in combination with the benefits of World Trade, marketing issues and economic integration. [Beeson, M. and Islam, I, 2003; Stiglitz, 2002] The Asian capitalism belongs on three unique features which are not necessary a competitive advantage. Firstly, the Asian countries are more involved in the economy by specialized policy, infrastructure investment and urge forward exports. For instance, Singapore and China (which combine all three models of utilizing market trade: state-owned enterprises; township enterprises; and open door policy). Secondly, the business landscape of the continent is dominated by two types of company – large family controlled conglomerates and giant state enterprises. For example, Korea (which produce goods with global distribution has conglomerates as Samsung, Daewoo, Hyundai) .[Leung H., 2007] It applies an export oriented industry on high-tech sector (electronics) and heavy basic industries (petrochemical).Although, these forms of ownership give the biggest Asian companies opportunities to avoid short term mentality of the US firms and protect them from share capital and the market pressure, it makes them less responsible, less non-transparent and less innovative. [Dicken, P., 2005] According to World Bank Report (1993) ‘’ Each of the HPAEs made some attempts to direct credit to priority activities. All East Asian economies except Hong Kong give automatic access to credit for exporters. Housing was a priority in Singapore and Hong Kong, while agriculture and small and medium-size enterprises were targeted sectors in Indonesia, Malaysia, and Thailand. Taiwan, China, has recently targeted technological development. Japan and Korea have used credit as a tool of industrial policy, organizing contests through deliberative councils to promote at various times the shipbuilding, chemical, and automobile industries’’. [The World Bank, 1993] Nowadays countries from the region seek not to democratize models of their social-political systems, rather than to establish competitive local firms. It has to be considered that the economic prosperity of Asian – Pacific region over the last decades is based on relatively small tight state boundaries, in most cases – far away from the democratic strategies related to the Western world.[ Leung, H., 2007] The ground foundations of economic growth come from the countries of East and South East Asia where the Government use authoritarian administration. Typical examples are Japan, Taiwan, China, Indonesia, South Korea, Malaysia and Hong Kong. Solely exceptions are Japan and Singapore to some extend where their policies are based on US models of state organization. [The World Bank, 1993; Dicken, P. 2005; Leung, H., 2007] None of these developing countries can be classified as democratic in Western acceptation. For example, the government in Malaysia is probably the most accepted totalitarian regime nowadays because it can easily legitimate during the ’free’ elections. In Thailand almost since 1932 the regime is martial, whereas today only in Philippines and Singapore the elections are most common with guarantee. By a contrast in Malaysia the results are predicted because of conservative electoral system, while in Indonesia the opposition has constitutional duty to support the government. The classical view between political democracy and economic prosperity attain significance. Looking for the best optimal way to social-economic model of development, it seems that all these countries share the same balanced authoritative model- patriarchy (patherism). There is no doubt that, acknowledged authority helps the state to patronize all levels of society and prevent radical social collapses. [Stiglitz, J.2002] In terms of Social policy it has to be considered the educational level, building a human capital and healthy long life population. According to the World Bank Report (1993), ‘’Governments built on this base by focusing education spending on lower grades; first by providing universal primary education, later by increasing the availability of secondary education. Rapid demographic transitions facilitated these efforts by slowing the growth in the number of school-aged children and in some cases causing an absolute decline’’ and ’’…..some HPAEs imported educational services on a large scale, particularly in vocationally and technologically sophisticated disciplines. The result of these policies has been a broad, technically inclined human capital base well suited to rapid economic development’’. [The World Bank, 1993; Stiglitz ,2002, pp.92-93]That kind of strategy is crucial and probably the major one, because by building a human capital the labour force become more efficient, productive, skilled and well trained. So this will lead to decreased labour costs and people would easily operate with the new technology. Later on, with the usage of technology HPAEs can operate open direct foreign investment (DFI) more related to countries as Singapore, Hong Kong, Malaysia, Thailand, Indonesia, Korea and Japan. [Stiglitz, 2002; Dicken, P., 2005, Leung, H., 2007] In conclusion, the phenomenal progress of Asia is a foundation of more opportunities than threads. The economic development of the region did not only rescue thousands of people from poverty but also increase the demand of Western products. The dynamic of recent social- economic processes turns the Pacific geopolitical area in a place where many countries mixture their interests. The success of the ‘Asian miracle’ is hidden in the range of different interventionist policies which contribute to the rapid increase of Growth and development in technological, geopolitical and economic aspects. REFERENCES Journals Amsden, A. H. ‘’Asia’s Next Giant: South Korea and late Industrialization’, Oxford, Oxford University Press, 1989, ch. 6 Beeson, Mark and Islam, Iyanatul ‘Neo-liberalism and East Asia: Resisting the Washington Consensus’, The Journal of Development Studies, 2005, pp.198-206 Carley, M., Christie, T. ‘Managing Sustainable Development’, Mineapolis, University of Mineassota Press, 1993, p.50 Chang, Ha- Joon ‘The East Asia Development Experience: The Miracle, the Crisis and the Future’, London, 2006 Dicken, Peter Global Shift: Mapping the Changing Contours of the World Economy ‘State Economic Policies’: London, Paul Chapman, 2005, ch.6 Hirst and Thompson,’ The developing Economies and Globalization’ (course reading 3) Leung, Hing – Man, ‘The New Lessons from the Asian Miracles’, Journal of the Asia Pacific Economy, vol. 12. No 1, 1-16, February 2007 Stiglitz, Joseph, ‘The East asia Crisis: How IMF Policies Brought the World to the Verge of a Global Meltdown’, Globalization and its Discontents, London, Penguin, 2002 The World Bank, ‘Introduction’, ‘The East Asian Miracle’, 1993