East Asian Economic Growth - Essay Example

?East Asian Economic Growth Asian economies have been getting much attention as to its growth in the last fifty years. The High-performance Asian economies (HPAE) have been identified as Hong Kong, Indonesia, Japan, Malaysia, Singapore, South Korea, Taiwan and Thailand. These countries have different living standards but all share an outward orientation, which has defined their steady growth and declining poverty. Although they had setbacks in their economy, they have managed to spring back to their positive growth rates of 5 to 10 percent per year. The global recession of 2008 also affected their economies, but their experiences in international trade are all worth studying because they derived much success in it. With these HPAE are subgroups such as the Four Tigers, namely Hong Kong, Singapore, South Korea and Taiwan. Another group is the Newly Industrializing Economies (NIE) of Indonesia, Malaysia and Thailand. China has a category all its own due to its size and communism influence. The NIE followed suit after the Four Tigers’ economies took off. Experts have analyzed how the HPAE have sustained their economic success and found that these countries were careful in maintaining stable macroeconomics. They also prioritized sharing the benefits of their economic growth with their citizens by providing them access to health care, education and housing, so people were made to feel they were well taken care of. Such actions were successful in soliciting people’s support and confidence. In turn, the high rates of literacy produced in their people were attractive to foreign investors and multicultural firms. Another reason for their success is the promotion of their exported products while being open to imports. These countries believed that exportation provided the foreign exchange earnings they needed as well as encouraged businesses to be competitive in coming up with high quality products to export while importation brought about new technologies and novel products to update their knowledge in skills. Income rates in these Asian countries are much higher than their Latin American counterparts. As opposed to them, East Asian economy did not have high inequality in income and wealth at the beginning of their growth. The pattern followed what was known as “Kuznet’s curve”, which suggested equality first declines and then rises. The relative equality in these nations resulted from the characteristic sharing of wealth from economic success. Hence, the provision of basic needs as well as land reform, free public education, free basic health care and significant investments in rural infrastructure such as clean water systems, transportation and communication systems. The positive outcomes of such provision extends to the rise in business opportunities since the people have purchasing power to support small- and medium-scale entrepreneurs which are locally based. This contributes to political stability and sustains the interest of businesses in to invest in these countries on a long-term basis. The export push in the East Asian nations resulted in more than double their share in total world exports and total world manufactured exports. Such success was attributed to education policies favouring the advocacy of literacy spread in primary and secondary schooling. On top of that, HPAE nations endorsed export promotion plicies that created an impetus for export businesses. For example, export financing credit and tax benefits were readily available in Japan and the Four Tigers for businesses that reach their export targets. Tariff-free access to imports of capital equipment needed in manufacturing is also provided. Such practices of export promotion connected with high rates of growth may be considered controversial in economics as well as sharing such export promotion strategies with other nations as it is likely to create trade conflicts since it may go against the rules of fair trade agreed to by the members of the World Trade Organization. The stability maintained in macroeconomic environments in the HPAE countries has been enigmatic to other nations, as they kept inflation rates under control, there was good management of both internal government debt and externally owed foreign debt as well as the quick resolution of crises whenever these surfaced. These nations are not exempt from budget deficits and foreign debt, however, they managed to resolve such issues with the help of income derived from exportation. Their commitment to keeping inflation rates low also kept real interest rates stable and firms envisioned long-term investments in these countries. Exchange rates were also kept relatively stable, fostering greater security in investors. The need for fiscal discipline in maintaining the stability of macroeconomic environments is a given along with the acceptance of resource constraints. This meant that budget deficits and foreign debt are kept manageable while real exchange rates should be relatively stable. Accepting these limitations increase the government policy’s credibility, earning the confidence of the private sector. Since export promotion policies have been proven to work in East Asian nations, would they be good to emulate in other developing countries? It would depend on the developing countries’ native policies. Points to consider include an example of a developing country attempting to export products without buying a similar quantity of imports. What is expected here would be export surpluses matching deficits of other things in the system. In the long run, it is deemed not sustainable and in the short run, politically difficult to impossible to manifest. One thing that can keep developing countries in implementing export promotion policies is the General Agreement on Tariffs and Trade (GATT). It says developing countries must eliminate any subsidies contingent on export performance. Poor countries that do not export manufactured goods are included . Deliberation councils are consultative bodies that lend their expertise in certain issues of the business world. They are designed to include the private sector and government policy makers to exchange information and discuss policies. The HPAE has its own deliberation councils which help them resolve certain conflicts on trade among themselves. East Asian economic growth is remarkable for its growth in per capita income and labor productivity. Growth in labor productivity is correlated with the growth in income for each member of the population. Rate of such growth can be broken down into the share due to more capital and the share due to more skills or education, and this is known as growth accounting. Industrial policies targeting the development of particular industries has been followed by each or the HPAE except for Hong Kong. The policies referred to focused on the northern tier of Japan, Korea and Taiwan. East Asia may have a large population, but it is this rapid accumulation of physical capital that may contribute its to economic growth. It may seem as if the cycle of high birth rates to low birth rates and high death rates during the World War 2 to the eventual high birth and low death rates after the war have all resulted in positive outcomes for East Asian economy. Being the largest continent in the world, Asia is composed of several developing countries with varying economic profiles. However, those that stand out have indeed surpassed the economies of great countries which are not developing. Although considered developing countries, they cannot be underestimated as to their skill and knowledge in economics and trade policies. These countries have taken much risk in sustaining their economies, but such risks have been all worth it, because aside from the promotion of their exported goods, their trade practices have been admired by the world and emulated by some nations. Read More