Role of government in East Asian miracle - Research Paper Example

? Role of Government in East Asian Miracle The last 50 years have seen many divergent changes in the political and economic areas around the globe. Some counties have gone to the lowest ebb of economic and political disaster while many countries have come ahead challenging the global economic status quo and making a place for themselves. The East Asian countries also happen to be in the same lineage. While some of the countries are leading the global economics and trade by touching new frontiers of technology and business with an innovation, other are becoming global leaders in producing consumer products that have international outreach. Still, a few East Asian countries still need a long way to go before they finally reach the levels as mot of their neighbors. Thought it may seem that these countries have taken the greatest advantage of rapid globalization, leading to massive economic growth, the major role-played in the entire development planning and implementation were the states themselves. The formation of regional blocs for cooperative growth has brought ahead this region as one of the fastest growth regions in the world. is would not be odd in saying that state and inter-state level macro and micro economic policy formulation, massive structural and systematic integration of the financial, corporate and industrial sectors within the region and internationally has changed the entire phenomenon of economic progress. The economic boom which we see in East Asian countries, despite a few ups and downs close to the end of the century, is an example of regional development beyond anything. The rapid and well paced development that came in the last 40 years started off largely based on development and manufacturing of simple products like toys and apparel but then keeping up the pace of development reached to the development of automobiles and robots. With mass production and integration of technology and the products marketed towards the major European and American markets, the principal factors that have proven to be the major advantages are low cost of labor, growth in production quality and experience, competitive currency exchange rates in the region and compared to other global currencies and integration of latest technology in the production processes. A clear example of such development is clearly evident from the progress of china which became one of the leading producers of products that are completing with some of the most popular brands in the world. Japan which was entirely devastated due to the second world war did not come out of its chaotic situation automatically, instead, the entire fabric of the country was integrated into one agenda that was of massive development. Unlike most of the westerns countries, the major player in the development of most of the East Asian countries remains the government. Each government played a pivotal role in the formulation of policy and national agenda of economic development that resulted in the miracle to happen. The fact cannot be denied that the global economic changes also played their role in the rapid progress of this region but not completely responsible for it. An independent study conducted by the World Bank on the progress of East Asian tigers, the “The East Asian Miracle” remarks that: Fundamentally sound development policy was a major ingredient in achieving rapid growth: macro management, saving promotion policies, education, agricultural productivity, . . . But these fundamental policies do not tell the whole story. Government intervened, targeting selected industries, promoting exports, low interest rates, protecting certain industries, . . . rapid growth has at times benefited from careful policy intervention. (1996: 5) The governments have the control and the ability or forming broad based policies that can be applied on a vast scale with a mission of developing standard policies and delivery of the services. With rapidly changing and uncertain global economics, the macroeconomics of the regions is drastically affecting the global trade scenario with can have vast implications. The capitalistic elements though may be the major role player in the global economics but still are unable to put an evident impression on various other global segments like the economic protection, increasing the quality of life, providing quality health and educational services that helps is broad based development. The fact cannot be denied that the capitalism does exist in the East Asian countries but this sort of capitalism is completely indigenous and unlike anything in the rest of the world. the East Asian capitalism is primarily the off shoot of regional industrial and economic policy formulation that has resulted in the government to play the role of the mentor in the entire process of manufacturing. This enables the government and the private investors to work along resulting in the growth of this region as a major role player in global economics. The role of the governments and the leaders in the development of East Asian regions is simply undeniable. The leaders of these states did not only see the dream of a progressive nation but also worked out as primary catalysts of change that facilitated the rapid regional growth. The governments changed the way they used to manage the public enterprises to make them more of international market oriented rather than being government services, which resulted in the “East Asian Miracle” to happen. The impact that came was that most of the East Asian countries had a 2-digit growth for not a few years but for three consecutive decades. The government monitored economic system took the countries like Japan, Indonesia, Malaysia, Thailand to the unprecedented levels of rapid growth making the East Asian region to come ahead as the world’s highest economic growth region in the second half of the 20th century. Intelligently the governments of the region had analyze the it is not just the control and management of their material resources that will enable them to achieve rapid growth, but they have to manage almost every aspect of the industrial resource that is why it is commented in the “East Asian Miracle” About two-thirds of East Asia's extraordinary growth is attributable to rapid accumulation; that is, to unusually rapid growth in physical and human capital. The remaining third of its growth cannot be explained by accumulation and is therefore attributable to increased efficiency or TFP. This is large relative to other economies, both absolutely and as a share of output growth, and therefore partly explains why these economies have been catching up with the industrial economies, while most other developing economies have not. (page 48) The impact of the East Asian Miracle led the path for most of the upcoming countries that leveled various standards of political and social collaboration for better prospects. Eventually every country in the world strived to make a viable development plan that would enable them to develop like what happened in the East Asia. The economy of Japan particularly has an important place in the development of this region. It not only was one of the leading members of the regional economic progress but also supported most the countries to analyze and design an economic plan that would lead to rapid progress. Japan was able to bride the gap between most of the European and East Asian countries by bring the both sides to the economic negotiation table. In addition, it gave a powerful impetus to the Asian market by making overseas investments in the bloc. The prime partners of the Japanese business ventures included Taiwan, Hong Kong and some sectors of China and Malaysia as well. with these ventures, the Japanese mobilized their development, production and human resource structure to lead the industrial transition in the region. However, unlike china, the Japanese did allow for private investments in the market for capitalistic growth in the region not feel alienated from the west. Nevertheless, the private institutions were kept in tight control by the government. The results were and still are massive growth with unprecedented social and political stability. Malaysia was also able to imitate the growth pattern that were being followed by the other leading economies like Taiwan and China. With Japanese investment and low cost human capital, Malaysia was able to convert its economy from rubber and tin raw material to heavily industrialized economy. The Malaysian government took over the industrial development and gave the first 5-year plan that targeted towards rapid industrialization and social prosperity by offering government jobs in the newly developed industries. What that in the prime economic policy, the Malaysian government was able to increase its GDP from 54,285 millions in the 80s to 765,966 millions as of 2010. The effects of economic freedom are most if the times are considered to have been more beneficial in the progress of a country as is evident in European and American countries. Nevertheless, the effects of the introduction of the financial freedom in the region brought about an economic shock in the region that was totally unexpected. In 1997, some of the major role economic role players in the region provided freedom of investment, which affected the role of the government therefore shaking the entire roots of economic development that had taken place in the region. The economies that were mostly reliant on each other for prosperity then sought to take refuge in the US$ which proved to be very fatal for the entire East Asia. The economic melt down started from Thailand and within no time; countries like Japan, Indonesia, Korea and the four tigers were badly shaken. The crises that took place though was not expected but brought the region in the main stream of global economics therefore making them compete collectively with the foreign markets and also within the region. The major setback in the economy also brought about many changes in the political leadership of many countries that marks sharp deviation from what had become the economic standards of most East Asian countries. Though, most of the East Asian countries have bounced back from the economic chaos but the ratio of progress and development does not remain the same in many countries. The government of India and China are considered to be the major role players in the economic progress of these countries. The major chips of Chinese development are in the court of the government that has controlled the major part of the economic development since it came into existence. Where china has adopted the economic policy of complete communism since its independence, its neighbor, India follows the policy of socialistic economy. Both the countries are the leading global trade partners in most economic transactions in the world, however that is more intriguing is that the world economic leader and giant still remains the USA which is a market led capitalist country. The government is the major role player in the macroeconomic development of the country, which not only creates global market possibilities for its products but also assists the government run organizations and private ventures in the development of quality and standardized products. After the independence, India took up the national economic policy of state owned enterprises which was the inspiration she received from its departing British rulers. However, after the 1980s, India started to open its gates for the open market to invest in the country. The impact was rather positive rather than what happened in South East Asia. The country progressed rapidly with the increase in the increase of foreign direct investments in the country. the annual growth remained very competitive to most of the East Asian countries, remaining about 7.5% to 10% per annum which is one of the highest in the world. China since 2010 remains to be the second largest economy in the world with the projection of crossing USA by 2030s with the same consistent development percentage of 10% per year. China remained as one of the most restrictive state capitalist countries since its independence up until the early 2000s. Afterwards it opened restricted access to capitalists to invest in limited ventures across china, which ultimately lead to more prosperity of the country in the recent years. With the GDP of 6.938 trillion as of 2010, and the annual growth ratio of over 11%, the main macroeconomic manager of china remains to be the government. References Francis Gerard Adams (2006). East Asia, globalization, and the new economy. London; New York: Routledge Peter J Katzenstein, Takashi Shiraishi (2006). Beyond Japan: the dynamics of East Asian regionalism. Ithaca: Cornell University Press Mark Beeson (2007). Regionalism and globalization in East Asia: politics, security and economic development. New York: Palgrave Macmillan Joseph E Stiglitz; Shahid Yusuf (2001). Rethinking the East Asian Miracle. World Bank; New York: Oxford University Press. Robert Wade (1990). Governing the market : economic theory and the role of government in East Asian industrialization. N.J: Princeton University Press World Bank (1993). The East Asian miracle: economic growth and public policy. New York, N.Y.: Oxford University Press Luigi Tomba; Fondazione Giangiacomo Feltrinelli (2002) East Asian capitalism: conflicts, growth and crisis. Milano: Feltrinelli ed. K.R. Gupta & J.R. Gupta (2008). Indian Economy. Atlantic Publishers Barry Naughton (2007). The Chinese economy: Transitions and Growth. MIT Press Read More