East Asian Economic Miracle: Some Lessons

Modern Economic growth

• Global poverty for thousands of years.• Two centuries of modern economic growth

divided the almost homogeneous global economy into the developed and the developing world.

• Some of the developing economies have also become developed in the second half of the twentieth century, especially in East Asia.

East Asian Economic Miracle

• East Asia comprises 23 countries

• All these economies grew faster than all other regions from mid-1960.

• This growth has been unprecedented in eight of these countries.

• These are clubbed under two heads: “Four Tigers” and the “ Newly Industrializing Economies (NIE’s)

East Asian Economic Miracle

• Four Tigers: Hong Kong, the Republic of Korea, Singapore and Taiwan (China).

• NIE’s: Indonesia, Malaysia and Thailand• Growth Performance: Some highlightsi) Between 1960 and 1985 Japan and the

Four Tigers recorded over 4-fold increase in their real per capita income.

ii) This increase was more than two-fold in the three NIE’s .

East Asian Economic Miracle

iii) GNP average annual growth rates ranged from 4 in Japan to 7.1% in Korea during 1965- 1990.

iv) Since 1960, these economies have grown more than twice as fast as the rest of the East Asia, roughly three times as fast as Latin America and south Asia, five times faster than Sub-Saharan Africa

v) They also outperformed significantly the industrialized and the oil-rich Middle East- North African region.

Growth performance continued..

• Most of these economies ranked higher even in respect of leveling income inequalities.

• Their growth has been inclusive as gender inequalities have also come to be smoothed to a good extent.

• Life expectancy in the region increased from 56 to 71 years between 1960 and 1985.

East Asian Economic Miracle…

• The %age of people living in absolute poverty declined from 58 to 17 in Indonesia, from 37 to under 5 in Malaysia, 31 to 10 in Singapore( 1972-82) during the period.

• As poverty declined ownership of consumers durables spread far and wide.

• Perhaps, the most impressive achievement of the region has been in controlling the growing population, rather the demographic transition.

Causes of the miracle and lessons for South Asia

• Lord Keynes had identified lack of technical innovations and the ability of capital to accumulate for the long economic stagnation of mankind.

• What caused faster economic growth in our neighborhood?

• An in-depth analysis of this growth can be of considerable help to larger South Asian

Causes of the miracle and lessons for South Asia

• Human capital: the engine of growth• It accounted for three-fifths of economic growth,

the share of primary education alone works out to be larger than that of the physical capital.

• It has been the decisive factor in faster as well as the equitable growth.

• The scope of this paper is restricted to the role of human capital in East Asia and lessons following from it.

Causes and the lessons of the miracle

• Economic growth of the miracle countries was export driven, especially to the advanced countries

• Since competition levels were very tough, human capabilities had to raised to meet and surpass these standards.

• Enhancing levels of literacy and quality of basic education was the dominant strategy for human capital development

Causes of the miracle and lessons for South Asia

• Initial emphasis was in improving lower grades of school education

• Followed by significant improvements in the secondary education

• Beyond this government role was restricted to some extent to technical education only

• Since training is industry specific, it was left essentially to industry, rather to firms

Causes of the miracle and lessons for South Asia

• Some of these countries did not hesitate to import educational services especially in vocationally and technologically sophisticated disciplines.

• Consequently, primary education came to be universalized in record time

• Hong Kong, Korea and Singapore attained this distinction by 1965

• Even Indonesia had 70% enrolment here in 1965.

Causes of the miracle and lessons for South Asia

• By 1987 half of these fast growing countries had universalized primary education for the female children.

• Quality of education was top priority, realized through continuous rise in real per capita expenditure while holding teachers salaries stable.

• Korea, the leader here, recorded 355% increase in this expenditure between 1970- 1989, comparative figures for Mexico, Kenya and Pakistan were 64; 38 and 13 respectively.

Causes of the miracle and lessons for South Asia

• The role of female education: Gender inequality is a serious problem in rest of

Asia todayBy according high priority to female education, the

miracle countries realized the following advantages:

i) Faster control of population ii) Better public health through control on hygiene, disease and death of children, iii) Atmosphere for quality education when mothers are literate

Causes of the miracle and lessons for South Asia

• Tertiary education and training:

i) Left to self financing and private initiative primarily

ii) Some vocational education in IT and Communications areas was made an exception here

iii) It helped in promoting quality basic education

iv) Trainings were also left to the initiative of industrial organizations, as it is firm specific.

Human capital and economic growth

• Human capital has not been a peculiar growth factor in East Asia only, but every where,

• The sustenance level stagnation of the global economy for thousand of years before the industrial revolution had also been an outcome of human capital primarily.

• Unprecedented inventions and innovations during 1760 and 1820 had broken the long cycle of stagnation.

Human capital and economic growth

• Currently human capital has assumed greater significance and role in economic transformation.

• This is because of information revolution.

• It has made human capital more important than physical capital.