Rashid A Mughal
ASIA’S stunning economic growth over the past half century or more has surprised many. According to the trends shown by economic indicators it seems that most of the growth in world economy in the next decade will be seen in Asia. This will have far reaching implications not only in improving the lot of poor and reduction of poverty globally but also in striking a balance between rich and poor. Unfortunately this narrowing of income gaps will do little or nothing for the world’s poorest population miserably living in African countries whose only involvement in the global economy has been through the exploitation of the natural resources and seems to be facing a bleak future. But even for some of them there could be hope for two reasons.
The first is that growth in consumer spending in Asia and China in particular, may lead to a higher commodity price. The second is the possibility that Europe and Asia may finally agree to re-examine and rationalize their protective policies for food and agriculture sector. If this happens this would open up unprecedented possibilities for advancement of the poor in Africa, North America and Caribbean. Health sector has not achieved much. While it is less increasingly become difficult for most of the people to afford quality medical treatment it is equally impossible to meet the quality educational cost for the children for large portion of population. It is haunting the general public on both ends. Despite the hype of Asia’s economic miracle, some argue that the harsh reality is that Asia is suffering from stunted economic development. No major Asian economy has caught up with global leaders like the US and Germany in terms of GDP per capita and living standards. Why?
Apart from Hong Kong and Singapore, none could be considered open market economies. Size does matter, however. Countries like China, India and Indonesia, thanks to enormous populations, have some of the world’s biggest economies, and have become economic and political powers. But we should not forget that behind Europe and America becoming an economic giant is the long bumpy journey they have undertaken with periods of ups and downs. It has taken them centuries to be stable, resilient and shock-proof to withstand economic jolts. Asian economies are nascent, in the process of evolving and often suffer from two main push-back factors like corruption and bad governance. Most of the Asian countries were colonies of the big imperialist powers that were mainly using these countries as source of cheap labour or for exploitation of their natural resources. Japan’s very rapid recovery from the ashes of World War II took the world by surprise. Many economists were then pessimistic about the prospects for Asia, which suffered greatly from the war. The continent had a few natural resources and an enormous population compared with Africa and South America. But as Japan’s growth continued, many then believed that Japan would overtake the US, in much the same way that the US overtook the UK in the 19th Century. Japan’s economic dynamism inspired the four Asian newly industrializing economies—Hong Kong, Korea, Singapore and Taiwan—on a similar path of rapid development. This gave rise to talk of an “Asian miracle” by the World Bank and others and the group was labelled the Asian tigers.
Much ink has been spilt in analyzing the rise of these Asian economies. The main factors were their export-orientation, good education, macro-economic stability and strong government leadership. But geopolitics also played an important role in the context of the Cold War, as the US offered official assistance and open markets to its friends in Asia. And all of these successful economies were motivated to become strong in the face of their threatening neighbourhoods, as they faced China, North Korea and the USSR. But the shortcomings of the Japanese model became all-too-apparent following a financial crisis in the early 1990s. Japan (and Korea and Taiwan) has since failed to both reform its economy and deal with demographic decline. The prospect of these economies catching up to world leaders now seems difficult, if not impossible. Singapore and Hong Kong are rare birds in Asia, in that they have caught up to the US and Germany, and in Singapore’s case well overtaken them.
There are some very simple reasons. Both are Asia’s only two genuine open market economies, with large immigrant populations, in contrast to Japan, Korea and Taiwan. They are also financial centres and tax havens, which allow Asia’s super rich to hide their (often ill-gotten) wealth from the taxman. When these city economies are compared with other financial centres like London, New York or Zurich, their success seems much less surprising. The next group of Asian economies to take off in the region’s “flying geese” pattern of development included Malaysia, Thailand and Indonesia. Their rapid development was mainly driven by a wave of investment from Asia’s advanced countries, which off-shored lower-value-added activities as they climbed the development ladder. But the education and technological capacities of these countries are relatively weak, and their economic catch up to date remains modest. These countries would seem to be caught in a “middle-income trap”, meaning that they are unlikely to graduate from middle-income to high-income status.
China stunned the world with three decades of 10% growth rates, following its opening up, which began in 1978. More recently, Vietnam launched a similar opening to the world economy. Today, Chinese economy is envy to many economies of the world due to its robust, continuous and un-hindered growth for the last three decades, though with an enormous population it also faces a grave risk of getting stuck in a middle-income trap. In the early post-war period, Asia’s success stories (Japan, Hong Kong, Korea, Singapore and Taiwan) all had a great incentive to build strong economies through inclusive economic institutions albeit instability in Southeast Asia. They were also dependent on imports to supply their energy and other natural resources—this meant that export-oriented growth was necessary to finance imports. They, therefore, focused on cheap exports and today are the major suppliers of goods to entire Europe, Americas, Africa and Australia-New Zealand, led by China, of course. The future thus seems to be very bright for the Asian economies and already there are predictions from many renowned economists about China overtaking America as No.1 economic power by 2050. The current trajectory of Chinese economic boom indicates this may well be possible.
— The writer is former DG (Emigration) and consultant ILO, IOM.
