It is wide known that East Asian countries, after the Second World War, have contributed a remarkable development. Since 1960s, the first wave of Asian miraculous development had spread in Japan, Korea, Singapore and Hong Kong. These countries are named as “the four tigers” or “the four dragons”. Subsequently, Malaysia, Thailand and Indonesia, as the second group, had involved in the rapid development. After 1980s, China and Vietnam joined in the big party of East Asian development. The situation led to the debates about the replication of the development model in East Asian countries, with discussing the influence and importance of Asian values. Even though it seems that Asian Values, to some extent, have produced economic development in certain East Asian, the developmental model in certain Asian country is diverse. This essay will be argued that the contribution of Asian values on the rapid of economic performance is limit, through the discussion of the main factors of the East Asian Miracle and the analysis of the effects of the state leadership.
The success of the EAM
Get your grade or your money back
using our Essay Writing Service!
ESSAY WRITING SERVICE
As far as Neoliberailists are concerned, the success of the EAM is based on market-led model even though the Asian countries have not developed under the concept of “free market”, but Hong Kong and Singapore is exclusive. They also mentioned the model was “getting the fundamentals right” (World Bank, 1993:347).The measure includes the attraction of technological transmission, the creation of effective financial system, low inflation as well as the limitation of price distortions. The evidence shows that during the 1960s and 1990s, the policy makers were in favor of the more flexible regimes which are similar with the 10 principles of ‘Washington Consensus’ reform created by John Williamson. This can be exemplified by Indonesia, Korea and Thailand. These three countries have carried out currency appreciation rather than a fixed exchange rate. Further, Malaysia and Singapore had implemented the positive policy of Foreign Direct Investment (FDI), which encourages foreign investors to invest in domestic markets. On the other hand, although FDI is in restrained in Japan and Korea, a large amount of license have been offered by Japanese and Korean governments to attract foreign companies. In order to stimulate investment, governments transferred the public sector into private sectors (World Bank, 1993). Theoretically, the efficient utilization of resources can produce a rapid of economic progress. Thus, price becomes the best tool to allocate resources and there is an aim of ‘free market’ to decline price distortions. Table  shows para-tariffs and average tariffs in 1985. It implies that Tariffs were used by HPEAs to protect domestic industries. Yet, the domestic price was close to international price. According to this, it is likely to say that market-led economy has a significant impact on the EAM.
Table  Average Tariffs and Para-Tariffs, by region 1985
Tariffs plus para-tariffs
Source from: World Bank (1993)
However, despite that the effects of ‘free market’ is not displaceable, the EAM could merely be attributed into liberalization. In other words, developing countries, which have been sponsored by international institutes such as the IMF and the World Bank, have applied the neoliberal policies compulsorily. As a result, this situation triggers economic recession. We can see a typical case which has happened in Latin America. In order to develop Latin America and decline the debt, the term “Washington Consensus” (the WC) was introduced to stimulate the development in Latin America. The framework is established by the economic conception called “neoliberalism”. It encompasses three main aspects, in terms of macroeconomics, market-based economy and the policy of openness. Williamson claimed that the framework of the WC was not suitable for Latin America but other developing countries (Williamson, 1990). Nevertheless, Fine mentioned that the WC was “clearly failing to deliver in terms of economic development and stabilization” (Fine, 2001). Lack of stability in Latin America runs counter to the sustainable growth. Furthermore, Weeks and Stein (2006) pointed out that the main interests of developing countries were damaged by the WC, such as the decline of output and the deficits generated by inflation. They also mentioned the Baker Plan had produced the debt crisis because of the prohibition of what developing countries sell their bonds under the nominal values. Thus, Latin American countries, such as Argentina and Brazil, were encountered with hyperinflation and the decline of per capita income (Weeks and Stein, 2006).
Always on Time
Marked to Standard
As what I mentioned above, it could be concluded that the WC does not exit universality. Stiglitz (1998) points out that the “fundamentalist” polices cannon be easily replicated in different parts of economic regions. The way to develop should not be a “one size fits all” which means “unilateralism” and “simplification”. He also mentions that there are other factors to be taken into account, in terms of the inclination of economic policy, social structure and social culture (Stiglitz, 1998). On the other hands, as one of the revisionists, Chalmers Johnson (1995) suggests that the government leadership in Japan has a vital impact on Japanese development. The government had monitored selected industrial sectors to so as to maintain benefits of participants including the state and business partners, while protecting emerging industries from economic recession or preventing those industries from corporate financial crisis. That is, government has a co-operation with the targeted industrial sectors while bringing their business strategies into correspondence with the long-term development of the state. Then those sectors are earlier to attain government financial support compared to other sectors, which is regarded as “picking winners”. The banks are authorized by the state to offer capital for companies in research and development. This enables Japanese companies to lead the status of technological advancement and maintain comparative advantages comparing to foreign companies. However, the capacity of government is questioned by the critics. Additionally, it is likely to argue that the related industrial policy produced little contribution to domestic productivity and damaged industrial structure (World Bank, 1993). Despite of this, the proposal was replicated into other Asian countries, such as Korea and Thailand.
According to the success of the EAM and the failure of the WC in Latin America, Stiglitz (1998, cited in Fine et al, 2006) emphasizes that the state and market are complementation. The government should focus on the infrastructure due to reform the market. Thus, a new proposal was introduced: “more instruments and broader goals: moving toward the Post Washington Consensus” (Stiglitz, 1998). Although the Post Washington Consensus (the PWC) still advocates liberalization, privatization and deregulation, it emphasizes on complementing market imperfection which is established on the information-theoretical framework theory. The PWC tries to remedy the failure of the previous market policy and institution failure, avoiding dogmatic economic determination. Stiglitz (1996) puts forward that the major cause of the EAM is political intervention rather than free market. Through government intervention in institutional infrastructure, markets are able to improve their function, which prevents corruption, building a found relationship between government and private sectors as well as promoting cooperation in government and business.
Asian Values and Asian developmental model
As has been discussed above, a state-led economic model causes the EAM at large. Japan and Korea had greatly invested in domestic private sectors which had a potential economic and productive growth while prohibiting foreign direct investment (FDI). On the contrary, Singapore and Malaysia strongly relied on FDI to attain technology transfer and absorb latest management knowledge. Hong Kong completely opened the market to foreign investor, minimizing the government intervention and becoming one of financial centers around the world. However, there were some commons between them, in term of successful international trade and effluent saving as well as positive export policy.