East Asian Growth - Case Study Example

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Paul Krugman's (2000) study on the economy starts with the study on the Russian economic growth and the later incidents that led to the increase in the growth of East Asia and the Asian Tigers. The East Asian countries showed remarkable growth rates to catch up with the western nations that are far ahead, only to come down on their growth rate before slowly climbing back again to meet a steady state growth rate…
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East Asian Growth
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Download file to see previous pages We will also look at the slow down of the Japanese and the Russian economy. The growth in the East Asian economy has peaked after reaching specific levels; the reasoning behind this will be analysed and the oscillation of growth about this peak before settling down to a standard and uniform growth rate is suggested. While the countries try to reach the required GDP for a developed nation at the earliest, they also would like to take the shortest possible route to this rapid growth. Three basic factors have been identified by economists that influence economic growth. These are the capital, labour and the technological progress.
Capital infusion has been a major contributor to growth in industry and the overall economic growth of the country or society. This has happened in Europe during the industrial revolution as well as in US when it switched gears with massive investments to surpass the European nations in the first fifty years of the twentieth century. The capital investment that the countries could mobilise will become a necessity in the early stages of economic growth particularly, when the country is trying to reach the performance levels of the other developed countries. This is not a period of innovation but a period of emulating the other's efficiencies. This is necessary to ensure that the country does not lag behind the other too much.
Influence of capital is very well known in the economic growth of a country. This has been repeatedly proved by the Russians and by the Japanese and now by the Chinese. The Chinese tourism industry has taken in foreign investments and capital to such an extent that today China is in the top five tourist destinations in the world. This has been made possible mostly by the capital investments that have been pumped into the country both by Chinese entrepreneurs as well as by foreign direct investors. Similarly, capital investments from the US played a very important role in the initial growth in Japan. This was repeated in Singapore and in other Eastern economies as much as with the Russian and Eastern bloc countries in Europe. There was a large capital inflow into these countries which spearheaded the growth in these countries. This is in line with both Paul Krugman's view as well as that of the classical economists advocating Solow Model. In line with the model, the countries in the East Asia displayed rapid and more than normal growth in their economic structure due to the sudden influx of capital.
Labour
Labour is the other major contributor to production. Production or output per worker is enhanced by capital. But production itself is brought in by labour in association with capital. Labour has the role of increasing the production using the invested capital. This has happened in Russia as pointed out by Paul Krugman when large scale movement of labour was carried out from the villages to the production centres. This resulted in a massive growth rate that was misconstrued by the media as a continuing phenomenon. Labour would increase the production directly. However, unskilled or labour that does not maximise production ...Download file to see next pagesRead More
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