The remarkable economic rise of the East Asian countries between the 1960s and the
The 1990s has been the subject of debates by economists and policymakers worldwide. Indeed, it
has impressed the global community to the extent that the World Bank carried out an analysis
of the real factors that led to this tremendous growth in the region. Theories have been
propounded as to what caused the miracle, but all observers agree that it did not take place
overnight, and it did not apply a uniform set of factors in achieving growth. Further, there has
been controversy about whether the governments of the day in the countries involved
intervened in the change, and if so, to what extent and with what effects to the free market
theory (Chang, 2006).
It must also be understood that the East Asian Miracle occurred in three phases as
opposed to one uniform stage which the name might mistakenly suggest. The first phase
includes the development of Hong Kong, South Korea, Taiwan, and Singapore which took
place in the 1960s. This first phase saw the pioneers of the East Asian Miracle into the realm
of the world’s fastest-growing economies in what is commonly referred to as the Four Asian
Tigers. The second phase occurring in the 70s and 80s comprises Malaysia, the Philippines,
Thailand and Indonesia, while the third and final phase involves the latest group of countries
Vietnam and Burma in the 1990s (Ikeo, 1997). The above-mentioned countries are to form
the scope of this study concerning the East Asian growth out of the developing countries
niche.
The study will therefore cover the major factors that are attributed to the economic
growth of the mentioned countries, including the degree and manner of government
interventions if any. Also, it covers the issue of whether these factors were uniformly
experienced by these countries or whether each country had a different approach to solving
their economic problem. In addition, it discusses the differences between the three waves of
countries in the three phases of growth, effectively demonstrating through examples what
aspects of their development were similar or different.
The study intentionally excludes China and Japan because they do not
form part of the 1960-1990 periods under the scope of the study involving the region. Japan’s
major economic changes were experienced in the more in the 1950s. Further, Japan
underwent a decade-long recession and hence does not convey a gradual model of the growth
exhibited by the East Asian countries (Adams, 1998). This would not help us in determining
whether the East Asian Miracle was affected by public policies introduced by the
governments of the day; our interest here is to establish the reasons for consistent
development.
The major factors attributing to the rapid and sustainable growth in East Asian
Economies are their capability to facilitate high domestic saving, their ingenious utilization of
the vast physical and human resources, appropriate macroeconomic management strategies,
maintaining moderate price distortions, policy interventions that helped accelerate and
government intervention in some industries (Ikeo, 1997).
The study now explains each of these factors and examines whether they all applied similarly to all the countries
under observation, as well as to what extent public policies influenced their application. It
goes further to evaluate the modes of governance in the region, to determine whether
there was some authoritarian rule which characterized the economic boom in the
region, and also whether some of the claims by economic theorists and policymakers around
the world is genuine (Adams, 1998).
In analyzing these factors, one might appreciate that the most prominent model used
in attaining East Asian growth is the neoclassical model. This applies sets of policies that
lead to the promotion of free trade, foreign direct investment, and expansion of exports,
Elimination of price distortions in products and in the market as well as some degree of
privatization of state corporations. This model is highly recommended by the Breton Woods
institutions as it exemplifies the positive economic effects of liberalization (Yuen, 2012). Its
alternative is the revisionist model which supports changing of incentives through state
intervention to boost deteriorating industries.
Firstly, financial factors through the implementation of better banking systems for the
local markets led to the banks’ ability to attract more customers. The political leaders were
able to persuade the lower-income groups that the banks were a secure way to save their
money. Those who were previously considered to be non-savers began to access the banks
and thus could now save more money. They also assisted in this by giving higher interest for
deposits and reducing the cost of transactions (Chang, 2006).
The Four Asian Tigers focused on the facilitation of foreign investment and increasing
the productivity of the existing labor force, while countries in the second phase such as
Thailand came up with a development strategy that concentrated on fostering private
entrepreneurship. However, Thailand also had policies that encouraged foreign trade through
increased exports and imports. Hence, while Singapore, for instance, had state-directed
initiatives to industrialize the economy, Thailand had one that prioritized agricultural
production as one of its goals.
Realizing they did not have a strong financial domestic base, these countries adopted
strategies that either brought into the country foreign currencies to inject more money into
the economy or applied stimulant policies to encourage a more vibrant domestic market. But
to show that they did not all come from the same background, some of the countries in the
region developed somewhat different stages of strategies. For example, while both Taiwan
and South Korea had relatively higher equal income distribution than their counterparts, and
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hence focused on housing, Thailand, Malaysia, and Indonesia in the second group of countries
had a different perspective of targeting agriculture and businesses for their populations.
The development plans for the respective economies did not remain unchanged in all
situations. Every several years, there evolved different plans to counter the strategies
that had been implemented but had not resulted in the desired goals. For example, second-
phase Malaysia switched from agricultural production to manufacturing to seek real growth.
Secondly, the East Asian countries had a huge human resource base in them and did
not fail to take advantage of it. They all had policies that improved the level of literacy
and general education for their populations through implementing universal primary and
secondary education policies. Hence, they now had large populations that were better
equipped with basic education skills to raise the level of knowledge in the various industries
that they planned on improving (Adams, 1998).
But these countries did not have the same population numbers, therefore not all can be
said to have had an advantage similar to the other. South Korea can be said to have had one
of the greatest human capital among the first group, and thus it capitalized on labor-intensive
production of goods in its manufacturing industry. In the following decade after the South
During the Korean economic boom, Malaysia had less human capital. In fact, at some point their
growth which resulted from the transition from agricultural production to manufacturing,
became unsustainable, and alternative labor from foreign countries had to be sought.
The last set of Asian countries participating in the ‘miracle’ also made use of the large
populations they had. Vietnam, for example, had a huge population. Being the world’s third-largest communist country in the 80s (about 60 million people in 1985), it had one of the
most rapidly increasing populations in the world. Their advantages went a notch higher because 71 % of this population was 30 years and below, so the labor force was much
more available to the country, accounting for about 31.2 million workers countrywide
(Chang, H. 2006). This utilization of human capital was and still is a major resource base in
the continuing growth of East Asian countries.
Thirdly, the East Asian economies made several different policy interventions in
the pursuit of the development of their industries. For instance, they adopted educational policies
that emphasized universal primary and secondary skills, and the effect of the efficient
implementation of these policies was that they in turn improved their labor force in a manner
that would prove useful to the growth of their industries. The East Asian economies
nevertheless invested heavily in imported education especially when it came to the technical
areas of higher education. This investment in education has proved fruitful ever since because it helped reduce inequalities as well as raise the economic development in the
countries.
Agricultural policies also helped increase the stability of these countries, through
emphasis on productivity rather than subsistence production and the reduction of tax on
agricultural materials and chemicals. But most of all, the trade policies that were adopted
probably played the biggest role in the rapid development (Kenichi, 2004). They opened their
markets to the international arena, but carefully also put up policies that would protect their
local markets from supranational industries that were bound to cause heavy competition.
Indonesia introduced rice into their agricultural sector and capitalized in its
facilitation until it became vital to the country’s growth. It also introduced similar a similar
policy in the distribution of fertilizer to make it accessible to the upcountry folks. Malaysia
on the other hand brought about direct intervention policies that ended up in equitable
distribution of wealth to curb the previous differences that existed. Others such as Singapore
and Hong Kong were keen on developing the housing sector and implemented policies and
systems that established proper housing for the lower income class, by facilitating such
programs for bodies that were organized into groups such as co-operatives. The trade policies
that were instituted by the legislature encouraged investment by all classes of the populations
through participation of all relevant stakeholders in each industry. Third-phase Burma
(Myanmar) in the 1990s adopted liberalization in their economic plan to also allow a free
trade economy like Hong Kong before going back to the stricter regime after the decade
(Yuen, 2012).
A fourth factor that should be considered is the influence, if any, of foreign economies
such as the United States and Japan in the East Asian countries (Huntington & Nelson, 1976).
In the global market, it is inevitable that any country that seeks to assert its position must
demonstrate a substantial level of economic dominance in line with the existing economic
powers such as the United States. During the 1960s, 70s and 80s, the United States wielded
(as it still does) great influence in the political and economic ideologies in countries around
the world, especially those that seemed to take a position in the international arena (Hirst &
Thompson, 1999). The East Asian economies had begun to assert such a position as
demanded the attention of the U.S. due to its economic diversity, since the end of the Second
World War.
The United States had institutionalized its intention to regulate the international
economy through the Breton Woods Institutions. Since the East Asian economies had had
come into a recognizable level of influence to the international market by the 1970s, it was in
the interest of the United States to be concerned and identify itself with the East Asian
countries (Jones, Lawrence & Smith, 2006). With an eye for maintaining political and
economic supremacy, the United States effectively placed Japan under its hand after the
defeat in World War Two.
The influence can best be demonstrated by the formation of the Association of South
East Asian Nations, a byproduct of the prevailing Cold War at the time of the East Asian
economic boom. However, it should be emphasized that the role played by the United States
and Japan in the East Asian Miracle was indirect and not quite conspicuous and immediate.
Most of the policies that helped bring about the boom were self-induced by the countries
themselves through a conscious decision o radically change their macroeconomic strategies
(Ikeo, 1997).
The fifth and probably the most influential factor to consider in this study is the role
of the respective governments in intervening in the economies, and the extent of the same, if
it indeed existed in all the countries in question. In all the countries in the region, the
economic rise involved government initiatives to improve a few or as many sectors and
industries as possible. Only, this did not happen at the same level, or in the same industries
for that matter. State-driven or facilitated programs were implemented to guide the
economies to what they steadily became (Huntington & Nelson, 1976).
Authoritarian regimes were introduced at the beginning of each country’s strategic
plans, though they later died down after the development goals were achieved. The reason for
the need for such regimes was mainly the security concerns of some of the countries. For
example, North Korea was, and has been for a long time, a threat to South Korea’s peace.
Taiwan was under constant disturbance from the mainland China which wanted to regain
control of it. Vietnam in the third ‘trimester’ of the East Asian miracle also had security
concerns. Thus, under such circumstances, democratic governance would have destabilized
the thriving economies at that time. It would have been impossible to harmonize democracy
with economic growth where a country had to mobilize a huge population out of conditions
of poverty and inequality (Ikeo, 1997).
For example, Hong Kong allowed a free market economy which did not interfere
with the market more than was necessary to set ceilings of prices of products. In fact, Hong
Kong was the only East Asian country which adopted a complete laissez faire regime to
allow economic growth. Singapore developed a most business-friendly city-state where
foreign investment was higher encouraged in the country. Singapore and Taiwan had a
dominating level of very high domestic savings by the public. This was done through banking
institutions. Indonesia and Korea regulated credit facilities by commercial institutions (Jones,
Lawrence & Smith, 2006).
In the 70s, Malaysia adopted a similar strategy to convince people to maintain
savings, but this time it was the private sector which made the highest savings. Together with
Singapore, Malaysia put forward a mandatory fund in which people would save through
retirement benefits and similar saving schemes. South Korea and Taiwan then implemented
government policies which imposed heavy taxes on goods that were considered not to be
necessities. Nevertheless, the means used to develop a mode of saving achieved its purpose.
On the other hand, South Korea graduated out of the authoritarian regime after its
development and now operates of a democratic basis.
These East Asian countries applied the respective appropriate macro management
techniques to provide systems that encouraged growth through investment. They improved
their systems of banking as explained before, in a manner that encouraged the middle and
low-income earners in the economy to open accounts and make savings in banks. They did so
by putting in place prudent mechanisms of management strategies with additional supportive
but selected intervention methods. South Korea in the 1960s invested heavily in education to
bring about new industries such as the automobile industry, and Malaysia and Philippines in
the 1970s moved from agriculture as a core sector and developed their manufacturing
industries.
Also, the East Asian countries also brought rapid economic growth to themselves
through economic policies which did not interfere too much on the prices in the market. They
maintained price distortions that were appropriate and reasonably acceptable, were ready to
adopt the non-distortion policies of developed economies and utilized technological
advancement to better their adoptions (Chang, 2006).
In conclusion, it can be alluded that among the many reasons that have been attributed
to the drastic and yet sustainable economic growth of the East Asian economies, there are a
number that rank highly in the list. The efficient utilization of their human resources enabled
them to overcome the deficiency in availability of other resources. After recognizing this
strength in human capital, they then adopted trade policies which allowed an outward-
directed plan of financing, through developing export-oriented strategies. The prevailing
external forces are only to the extent that the United States had inevitable influence in some
of these countries as a result of the Cold War interests of the former (Jones, Lawrence &
Smith, 2006).
These countries experienced the change through fairly similar national plans, but not
exactly in the same manner. The similarity in their growth is to the extent that they all
developed strategic plans whose intention was to diversify their markets internationally by
mass producing goods for the international market (N. F. R. Crafts, 1998). Foreign direct
investment thus became core to the economies and the effort transformed them into newly
industrialized nations. But there exist distinct strategic plans among these countries in terms
of specificity in application and implementation of economic policies. The zenith of this
distinction lies on the assertion of different economic plans in terms of priority of
industrialization. But the deduction that these countries had demographic advantage and
utilized this properly is a factual statement (U.S. Library of Congress).
The respective governments of these countries had a hand in impacting the growth.
The contentious issue would be whether they intervened wholesomely or only to an
acceptable degree. Some adopted legislation which limited the extent to which the state could
interfere with the market though subsidies, deposit rates, borrowing rates, protecting the local
market and such other determinants of growth. Others invested directly in introducing trade,
and education policies which directly affected the market.
The experiences of each country’s strategies were different, as some were positively received while others proved
untenable or inconsistent with a particular country’s circumstances. As a result of these
different circumstances, the importance of these factors varied from one set of countries to
another. In one set, agricultural growth worked well in the development plan, while in
another, manufacturing became the core business (N. F. R. Crafts, 1998).
The method used by the East Asian governments cannot be said to have been strictly
authoritarian. Not all of these economies were authoritarian. Rather, they were either a
carefully articulated technocratic method where policies to utilize the populations in
providing labor were applied in such a manner as to achieve the intended results, but averting
discontent through skillful introduction of policies that satisfied the populations. The most
democratic of all was Hong Kong, which allowed a laissez-faire economic regime to
influence growth (Whitehead, 2002).
All the trade policies adopted by these countries led to economic growth which
resulted in new social complications, but these were held down through checked measures by
the political regimes, thus avoiding unrest and in the end, richer and politically stable nations.
Spanned together into a powerful economic region, the growing East Asian countries, each
with its own products, they became connected to each other in trade and investment. The
newly industrialized countries in the region formed the Association of South East Asian
Nations and joined the international market (Jones, Lawrence & Smith, 2006).
Reference list
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Hirst, P., Q. & Thompson, G. 1999. Globalization in question: the international economy and
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Huntington, S., P. & Nelson, J., M. 1976. No Easy Choice: Political Participation in
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Ikeo, A. 1997. Economic development in twentieth century East Asia: the international
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Jones, D., M., Lawrence, M. & Smith, R. 2006. ASEAN and East Asian international
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