The Asian economic miracle

The role of governments

Economic openness has performed a critical supportive role in Asian development, wherever it was in the form of strategic integration with the world economy, rather than passive insertion into it. For example, trade policy was liberal for exports but restrictive for imports. Government policies towards foreign investment have been shaped by industrial policy in the pursuit of national development objectives. While openness was necessary for successful industrialisation, it was not sufficient and facilitated industrialisation only when combined with industrial policy.

In the half-century economic transformation of Asia, governments performed a vital role, ranging from leader to catalyst or supporter. Success at development in Asia was about managing this evolving relationship between states and markets, by finding the right balance in their respective roles that also changed over time.

The developmental states in South Korea, Taiwan and Singapore coordinated policies across sectors over time in pursuit of national development objectives, using carrot-and-stick policy to implement their agenda, and were able to become industrialised nations in just 50 years. China emulated these developmental states with much success, and Vietnam followed on the same path two decades later, as both countries have strong one-party communist governments that could coordinate and implement policies.

It is not possible to replicate these states elsewhere in Asia. But other countries, such as India, Indonesia, Malaysia, Thailand, Bangladesh and Turkey, did manage to evolve some institutional arrangements, even if less effective, that were conducive to industrialisation and development. In some of these countries, the checks and balances of political democracies were crucial to making governments more orientated towards development and people-friendly.

The rise of Asia represents the beginnings of a shift in the balance of economic power in the world and some erosion in the political dominance of the West. The future will be shaped partly by how Asia exploits the opportunities and meets the challenges and partly by how the difficult economic and political conjuncture in the world unfolds.

Yet it’s plausible to suggest that by around 2050, a century after the end of colonial rule, Asia will account for more than one-half of world income and will be home to more than half of the people on earth. It will have an economic and political significance in the world that would have been difficult to imagine 50 years ago, even if it was the reality in 1820.

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Source: theconversation