A myth of the east asian miracle economics essay

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A myth of the east asian miracle economics essay

Its aim is to make accessible to a broad readership of nonspecialists some of the economic research being produced in the International Monetary Fund on topical issues. The raw material of the series is drawn mainly from IMF Working Papers, technical papers produced by Fund staff members and visiting scholars, as well as from policy-related research papers.

This material is refined for the general readership by editing and partial redrafting.

China’s model of accumulation

It has been prepared by David D. Growth in East Asia What We Can and What We Cannot Infer The spectacular growth of many economies in East Asia over the past 30 years has amazed the economics profession and has evoked a torrent of books and articles attempting to explain the phenomenon.

Articles on why the most successful economies of the region Hong Kong, Korea, Singapore, and Taiwan Province of China have grown, to say the least, robustly invariably refer to the phenomenon as "miraculous. Confusion is compounded when he discovers that ideological debate has multiplied even further the analyses of this phenomenon.

Rather than swelling the torrent of interpretations, this paper sets for itself the modest agenda of reviewing the weightiest arguments in the literature that attempt to identify the reasons for the extraordinary economic growth in East Asia and trying to decide which arguments make sense.

It is best if we start with the facts. Since Asia, the largest and most populous of the continents, has become richer faster than any other region of the world.

Of course, this growth has not occurred at the same pace all over the continent. The western part of Asia grew during this period at about the same rate as the rest of the world, but, as a whole, the eastern half ten countries: The worst performer was the Philippines, which grew at about 2 percent a year in per capita termsabout equal to the average of non-Asian countries.

China, Indonesia, Japan, Malaysia, and Thailand did better, achieving growth rates of percent. This impressive achievement is, however, still modest compared with the phenomenal growth of Hong Kong, Korea, Singapore, and Taiwan Province of China, known as the "Four Tigers" because of their powerful and intimidating economic performance.

The Tigers have had annual growth rates of output per person well in excess of 6 percent. These growth rates, sustained over a year period, are simply amazing. While the average resident of a non-Asian country in was 72 percent richer than his parents were inthe corresponding figure for the average Korean is no less than percent.

This paper begins by looking at the long-running debate over the nature of growth. Is growth the result for the most part of an accumulation of manpower and machinery, or is it the result of employing the latest technology? The paper then looks at the growth record of the four countries from three other angles: The paper concludes with a few minimalist observations on possible areas for future study.

The Nature of Growth: Factor Accumulation or Technological Progress Everyone agrees that the economies of East Asia, and particularly the Four Tigers, have grown spectacularly over the past generation, but nobody seems to agree on why. The debate over why they have grown so well in the past raises difficult questions about regional growth in the future and about the aspiration of countries elsewhere to replicate the East Asian success.

The arguments at the center of the debate are based on theoretical notions of growth accounting.

Background

This accounting method deals with three elements that contribute to the production of goods and services: Labor and capital, known collectively as the "factors of production," refer in this context to the workforce and to the capital goods buildings, machines, vehicles that the workforce uses in manufacturing some product or providing some service.

Technology refers to all the methods employed by labor and capital to produce a good and depends on the development or acquisition of practical skills to get the job done more quickly and more efficiently.

No one denies that all three elements must be present to some degree if an economy is to grow. What is subject to debate is the contribution of the factors of production relative to that of technology.

Some believe that increased use of labor and capital explain all growth; others are persuaded that the answer to growth lies in the use of more efficient technology. Within the growth accounting framework it is possible to describe mathematically, using a simple equation, the contributions of these three elements to the overall production of an economy.

By dividing the equation by the number of people in the workforce, one can derive a dynamic equation that shows how output per person increases over time. Such an equation mathematically describes the contribution to higher output of the growth rate of labor participation, of capital employed per person, and of technology the latter also known as the growth of "total factor productivity".

If applied empirically to specific economies this equation can give a good idea of what proportion of increased output is a result of higher labor participation and better use of capital and what proportion is the result of technological progress. The traditional formulation of this equation suggests that a significant and sustained rate of technological progress is the only possible way, over the long run, for an economy to achieve a sustained rate of growth in output per person.The myth of Asia's miracle Krugman, Paul Foreign Affairs; Nov/Dec ; 73, 6; ABI/INFORM Global pg.

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Paul Krugman wrote a famous paper in the s outlining the myths surrounding the Asian miracle of the 20 th century.

A myth of the east asian miracle economics essay

Rather than it being a ‘miracle’, he presented a less dazzling critique of Asia’s economic success. The World Bank (), The East Asian Miracle The Economics Student Society of Australia. MENU Home; About. About. The Levy Economics Institute of Bard College is a non-profit, nonpartisan, public policy think tank.

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