East Asian Tigers

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The East Asian Tigers, also known as Asia's Four Little Dragons (Simplified Chinese: 亚洲四小龙, Traditional Chinese: 亞洲四小龍) ("dragon" being a reference to China in Chinese culture), refers to the economies of Hong Kong, Singapore, South Korea and Taiwan. These territories and nations were noted for maintaining high growth rates and rapid industrialization between the early 1960s and 1990s.

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Background

The four Tigers share a range of characteristics with other Asian economies, such as Japan and China, and pioneered what has come to be seen as a particularly "Asian" approach to economic development. Some of these countries were in the 1960s at similar levels of wealth as African countries which since then have largely stagnated; key differences include initial levels of education and physical access to world markets (in terms of transport infrastructure and access to coasts and navigable rivers, which are essential for cheap shipping).

Over time, the term Tiger has become synonymous with nations that achieve high growth by pursuing an export-driven trade strategy. More recently, the Southeast Asian nations of Indonesia, Malaysia, Philippines and Thailand have often been considered Tigers. The term is not limited to Asian nations; In Europe, the Republic of Ireland has been called the Celtic Tiger for its rapid growth in the 1990s, while Estonia is known as the Baltic Tiger for its presently high growth rates while Chile has also been referred to as the Latin American Tiger for its solid economic policies and rapid export-led growth since the 1980s.

Characteristics of the Tiger economies

The East Asian Tigers pursued an export-driven model of economic development; these territories and nations focused on developing goods for export to highly-industrialized nations. Domestic consumption was discouraged through government policies such as high tariffs.

The East Asian Tigers singled out education as a means of improving productivity; these nations focused on improving the education system at all levels; heavy emphasis was placed on ensuring that all children attended elementary education and compulsory high school education. Money was also spent on improving the college and university system.

Since the East Asian Tigers were relatively poor during the 1960s, these nations had an abundance of cheap labor. Coupled with educational reform, they were able to leverage this combination into a cheap, yet productive workforce.

The East Asian Tigers committed to egalitarianism in the form of land reform, to promote property rights and to ensure that agricultural workers would not become disgruntled. Also, policies of agricultural subsidies and tariffs on agricultural products were implemented as well.

The common characteristics of the East Asian Tigers are:

  • Focused on exports to richer industrialized nations
  • Trade surplus with aforementioned countries
  • Sustained rate of double-digit growth for decades
  • Non-democratic and relatively authoritarian political systems during the early years
  • High tariffs on imports
  • Undervalued currencies
  • High level of U.S. treasury bond holdings
  • High savings rate

Criticism of the export-driven trade model

The East Asian Tigers were strongly affected by the 1997 Asian financial crisis, which impacted each Tiger to varying degrees. While Taiwan was not as strongly affected, South Korea was badly battered by the crisis. Because of the focus on export-driven growth, many of the Tigers became caught up in a game of currency devaluation.

The current criticism of the East Asian Tigers is that these economies focus exclusively on export-demand, at the cost of import-demand. Thus, these economies are heavily reliant on the economic health of their targeted export nations.

In addition, these nations have met difficulties after they lost their initial competitive edge, cheap productive labor. India and China have now emerged as fast-growing economies based on cheap labor, largely replacing the Tigers.

Comparisons

Mainland China

Comparison between mainland China and the Tigers can be divided between the Maoist era and the era of reform starting with Deng Xiaoping. The main question that has been raised with respect to the Maoist era is to what extent the economic performance of the Tigers was reproducible in Mainland China in the 1960s. The main question that has been raised with respect to the post-Maoist era is to what extent the development of the PRC is sustainable.

An important question is the relevance of the experience of the Tigers to current economic growth in Mainland China. In the 1980s it was common to argue that the export-centered growth of the Tigers was of limited relevance to Mainland China because the Tigers were small and any effort to mimic them would result in more exports than the developed world could handle. This objection was later less often raised since the pattern of economic growth has been for exports to trigger economic growth in the coastal regions, and for these coastal regions to serve as markets and triggers for growth in the interior.

Since the late 1990s, some of the heat has dissipated from this debate, in part because its become of more historical than current interest: as a result of the Deng Xiaoping reforms, the PRC has one of the world's highest rates of per capita GDP growth. Furthermore, the Communist Party of China and Kuomintang today both view Taiwan independence as a common adversary and are much less likely to assert superiority over the other.

Ironically, and to the chagrin of many Westerners, it is now common for the Communist Party of China to use the experience of the Asian Tigers as justification for its authoritarian rule. The argument by the Party is that at the current stage of economic development the PRC needs a non-democratic system similar to those that the Tigers had in the early years of growth.

India

Main article: Economy of India

India has not had a land reform as consistent and thorough as Korea's or Taiwan's.

India already has a large intellectual and educated class able to export services. This will assist the transition and evidence of it can already be seen with the growth of the software and call center industries. If the intellectual class can grow and create consumer demand for home produced items, as they appear to be doing, this will benefit skilled worker class and speed up the transition. India is on the path of continuous development, but its policy of development is not similar to the policies of the Tigers. The current flow of FDI stands at 50 billion dollars for the year 2003-2004. It currently is the fourth largest economy in the world (by PPP terms) and is expected to overtake Japan by 2020 making it the third largest economy in the world.

Some scholars maintain that the success of the four tigers is related to a Confucian ethos, and that India, with its largely Hindu religious/cultural background will have difficulties replicating their results. Others maintain that the development of India has refuted this claim.

Taiwan: A case study

Main article: Economy of Taiwan

The Asian Tigers’ spectacular ascent to economic prominence attracted much comment. Some Western economists, notably at the World Bank, depicted it as a vindication of free-market principles, and this interpretation of the Tigers' success formed large part of the Washington consensus.

This view is not without controversy. Many economists have pointed out that the governments of the tigers were quite active in their economies. East Asian Tigers all practiced aggressive land reform and made large investments in public health and elementary education. In addition, while the tigers relied on export markets to develop their economies, they also put in place high trade barriers which protected local industries from foreign competition.

Some Western observers have argued that Mainland China would have reached Taiwan's contemporary level of development if the Kuomintang had stayed in power. However, this claim has been discredited by those citing that Taiwan is by no means a microcosm of the Mainland.

First, two million Kuomintang supporters fled to the island in 1949, establishing the small island of less than 20 million as the seat of the Republic of China. Taiwan thus benefited from the flight of many well-educated, bourgeois Chinese. Furthermore, many in the ROC leadership accused of corruption and incompetence on the mainland were either exiled or purged from the Kuomintang following defeat in the civil war.

Second, Taiwan, and for that matter all four of the Tigers, benefitted economically from previous foreign rule or influence, whether it was British commerce in Hong Kong and Singapore, or Japanese industrialization and American land reform in Taiwan. In a sense, Taiwan benefited from Marx's export of the dialectic through imperialism. Furthermore, three of the Tigers were an artificial polities severed from larger neighbors—Mainland China in the case of Taiwan and Hong Kong, Malaysia in the case of Singapore (the latter two are also city-states). Likewise, South Korea was a product of postwar division and bloody civil war. Each therefore felt acute insecurity, which was translated into political structures that restricted civil liberties and subordinated short-term social well-being for economic growth.

Third and perhaps most important, Taiwan's economy could not, wrenched in quick succession from Japan's orbit and then mainland China's, have developed without direct American aid, which constituted more than 30 percent of domestic investment from 1951 to 1962. Land reform, government planning, U.S. aid and investment, and free universal education brought huge advancement in industry and agriculture, and in living standards.

In addition, land reform was an essential step in modernization. In conducting land reform on Taiwan, Chiang Kai-shek was aided by American encouragement in addition to the fact that many of the large landowners were Japanese who had fled there after World War II, and the remaining indigenous landowners had little voice in government. Most agree that it is extremely unlikely that Chiang Kai-shek would have revolutionized Mainland Chinese society to that extent if he had defeated the Communists led by Mao Zedong.

In summary, the transformation of Taiwan cannot be understood without reference to the larger geopolitical framework. Although aid was cut back in the 1970s, it was crucial in the formative years, spurring industrialization. In addition, even after the cutoff of aid, security and economic links were maintained. Uncertainty about the U.S. commitment accelerated the country’s shift from subsidized import-substitution in the 1950s to later export-led growth. Like South Korea, Taiwan moved from cheap, labor-intensive manufactures, such as textiles and toys, into an expansion of heavy industry and infrastructure in the 1970s, and then to advanced electronics in the subsequent decades.

In response, it has been argued that the role of United States aid and direct investment is overstated. In particular, it is pointed out that the capital for investment came largely from indigenous sources and that foreign aid had ended before the economy had taken off. Since a large number were poorly-educated soldiers, the wave of immigrants was not a reflection of Chinese society. However, indisputably, a disproportionately high share of the immigrants were governing elites, merchants, Chinese capitalists, and well-educated professionals.

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