The Economic Rise of Southeast Asia 101: Economic Growth Overview

Foreword


Between the years 1965 and 1990 the economic success of Korea, Hong Kong, Taiwan, and Singapore, known as The Four Asian Tigers in Southeast Asia, has raised questions about the sources of their growth. The aim of this 101 series is to review the growth and development of these countries analyzing the key elements that propitiated the “Asian Miracle”.



The Economic Rise of Southeast Asia 101 will be divided into the following chapters of content:

  1. The Economic Rise of Southeast Asia 101: Economic Growth Overview

  2. The Economic Rise of Southeast Asia 101: Taiwan study case

  3. The Economic Rise of Southeast Asia 101: South Korea study case

  4. The Economic Rise of Southeast Asia 101: Hong Kong study case

  5. The Economic Rise of Southeast Asia 101: Singapore study case

  6. The Economic Rise of Southeast Asia 101: Updates, Challenges, and Takeaways


The Economic Rise of Southeast Asia 101: Economic Growth Overview


During the second half of the 20th century, after the end of the Second World War, the region of East Asia counted among several of the poorest countries in the world. War, illiteracy, and poverty were spread across the territories and the future prospected by the experts was far from being a promising one (Mascelluti, 2015). Nevertheless, from 1965 until 1990, some of the economies of the region bloomed, growing at a fast pace, among these being the so-called Asian Tigers: Taiwan, South Korea, Hong Kong, and Singapore (Gulati, 1992). The high performance of these Asian economies has been a topic of great interest among experts, who highlight the unanticipated speed of growth, considering for instance that Taiwan’s GDP was the same as Zaire’s and that South Korea achieved in only 11 years what Great Britain and the United States accomplished in 58 and 47 years respectively (Mascelluti, 2015).



Marina Bay, Singapore. (n.d.). [Photograph]. Two For Flight

Before discovering what specialists identified as the major drivers of Asian economic success, it is first necessary to define and outline what is understood by economic growth and its main components. According to Roser (2013, p. 1) “economic growth describes an increase in the quantity and quality of the economic goods and services that a society produces and consumes”. Along these lines, it is an economic phenomenon that explains differences in income and living standards between countries. Economic growth is usually measured through the GDP, which is the value of all goods and services produced in a country in a year. Associated with the notion of economic growth, experts identify five major elements that influence the process: human capital, technology, government, geography, and cultural and historical factors.


Human capital refers to the level of workers' skills acquired through education and necessary for production activities. A country’s area of productive development relies heavily on the quality of education the population was exposed to, and determines differences in outputs and in income across various countries. Human capital is measured in average years of schooling, and, like physical capital, it needs to be developed through investments in educational systems that satisfy the economy’s necessities and that will pay off in the future (Liang, 2010). Education is perceived as the accumulation of human capital essential for economic growth: in the case of the Asian Tigers, before 1965 the average number of years of schooling was 1.5, a high number compared to other developing countries in Africa or Latin America. With educational reforms, primary school enrollment rates in the countries in question reached almost 100%, demonstrating that literacy has played a key role in the economic success of the Asian Tigers (Mascelluti, 2015).



Mascelluti, E. (2021). The Average Years of schooling in the Asian Tigers [Graph].

One of the most important components that boost economic growth is technology. Mascelluti (2015) explains that as matter of fact, technological advancements and improvements increase production output by combining the inputs in a more efficient way. Technology is thus an effective factor to achieve economic success, however, its adoption is costly, implying the purchase of machinery and the training of personnel. Furthermore, it also carries the high risk of obsolescence and the difficulty to keep up for poor countries. Private investments are a popular solution that was implemented by the Asian Tigers during the 70s decade, which registered them as the countries with higher foreign direct investment at that time (Gulati,1992).

The third factor for economic development, i. e. the key role of the government, also needs to be highlighted. Government has a key function in the delivery and distribution of factors of production. Indeed, a strategic political intervention guarantees public education, foreign and public investment, and protection for entrepreneurs. Mascelluti (2015, p. 15) explains that “It took centuries for developed countries to establish a good government able to promote economic growth. Thus, developing countries are still far from reaching the settlement of a good government. Indeed, being late is often associated with having a bad government”. The political experience of the four Asian Tigers registers high governmental intervention in the economic sphere that sustained export-oriented policies and promoted commercial openness to the European and North American markets and investments (Gulati, 1992).



The Average Years of schooling in the Asian Tigers
Borgen Magazine. (2021). The Development of the Four Asian Tigers [Photograph]. Borgen Magazine.


Despite several different theories and perspectives, experts agree about the importance of geography as a fourth element for economic development, due to its relationship with the level of income per capita. For instance, some theories relate richness and development to the coastal condition of territory as countries that are near the oceans are usually richer compared to landlock economies in which trade activities are more expensive (Mascelluti, 2015). This might be confirmed since Singapore, Korea, Taiwan, and Hong Kong are coastal countries that funded part of their success by becoming strategic ports for international commerce.


Finally, cultural and historical traits are fundamental to delineating the characteristics of political, social, and economic institutions that will determine the path of development. According to Liang (2010), professionals stress the link between the nature of institutions established in the past and the economic development of a country. In fact, all of the high-performing economies of Asia have a strong Confucian component inherited by colonial or migratory dynamics and that gives special importance to education, family, collectivism, and discipline. Moreover,


the Confucian values and tradition lead to a model of maximal government, with its myriad responsibilities, duties, and obligations. The State is not just supervisory and regulatory in function but to a very large extent developmental, educational, and mobilizational in emphasis. The bureaucracy is not just administrative and government functionaries but acts as guidance of national interests and is often perceived as leaders, intellectuals, and teachers (Wei-Ming, 2008 in Mascelluti, 2015, p. 27).



In short, by the end of the Second World War, the Southeast Asian economic conditions did not promise a bright future for the region. Nonetheless, in the decades from 1965 until 1995 Singapore, Taiwan, Hong Kong, and South Korea experienced a vertiginous economic growth that literature has denominated the Asian Miracle. This phenomenon has been said to have its roots in the emphasis on five main elements: an educated human capital, the investment in technology, an interventionist government that pushed exports, geographical proximity to oceans hence the facility of trade, and cultural and historical factors linked to Confucianism that catalyzed the economic success of the four Asian Tigers. The following chapters of the series will explore in more detail the process of economic development of each of the Four Tigers to better understand their differences, similarities, and key takeaway aspects.


 

Bibliographical references


Liang, M.-Y. (2010). Confucianism and the East Asian Miracle. American Economic Journal: Macroeconomics, 2(3), 206–234. http://www.jstor.org/stable/25760314


Gulati, U. C. (1992). The Foundations of Rapid Economic Growth: The Case of the Four Tigers. The American Journal of Economics and Sociology, 51(2), 161–172. http://www.jstor.org/stable/3487387


Mascelluti, E. (2015). The extraordinary growth of the Four Asian Tigers (Thesis). Luiss Guido Carli. https://tesi.luiss.it/15269/1/176201.pdf


Roser, M. (2013). Economic growth. Our World in Data. https://ourworldindata.org/economic-growth?#citation


Wei-Ming ,T. (2008), The Rise of Industrial East Asia: The Role of Confucian Values, The Copenhagen Journal of Asian Studies


Image Sources


Unknown. Marina Bay, Singapore. (n.d.). [Photograph]. Two For Flight. https://twoforflight.com/singapore/


Mascelluti, E. (2021). The Average Years of schooling in the Asian Tigers [Graph]. In The Extraordinary Growth of the Four Asian Tigers (Thesis, p. 26).


Borgen Magazine. (2021). The Development of the Four Asian Tigers [Photograph]. Borgen Magazine. https://www.borgenmagazine.com/development-of-the-four-asian-tigers/




Author Photo

Rachele Boada Isaja

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