East Asian Economic Miracle: Some Lessons

1
East Asian Economic Miracle Some Lessons

2
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.

3
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 (NIEs)

4
East Asian Economic Miracle

• Four Tigers Hong Kong, the Republic of Korea,
  Singapore and Taiwan (China).
• NIEs Indonesia, Malaysia and Thailand
• Growth Performance Some highlights
• i) 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 NIEs .

5
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.

6
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.

7
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.

8
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

9
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.

10
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

11
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

12
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.

13
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.

14
Causes of the miracle and lessons for South Asia

• The role of female education
• Gender inequality is a serious problem in rest of
  Asia today
• By 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
  

15
Causes of the miracle and lessons for South Asia

• Tertiary education and training
• Left to self financing and private initiative
  primarily
• Some vocational education in IT and
  Communications areas was made an exception here
• It helped in promoting quality basic education
• Trainings were also left to the initiative of
  industrial organizations, as it is firm specific.

16
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.

17
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.