The East Asian Miracle

However the set of extraordinarily successful economies isn't limited to the set of original OECD economies. Economies of the East Asian miracle have over the past two generations exhibited stronger growth than has ever before been seen any place in world history. They haven't yet converged to the standards of living and levels of economic productivity found in world economy's industrial core. Though they are converging.

Just before World War II the regions which are now South Korea, Hong Kong and Singapore and Taiwan had output per worker levels less than one-tenth of the United States. Today Singapore's GDP per capital is 90%, Hong Kong's is 70%, Taiwan's is 50%, and South Korea's is 45% of U.S. level. A second wave of East Asian economies--Malaysia, Thailand--now average more than one quarter of United States' level of GDP per capital.

The successful East Asian economies have some similarities in economic policy and structure to OECD economies. Resource allocation decisions are by and large left to the market. Governments regard the encouragement of enterprise and entrepreneurship as a major objective. And high savings and investment rates are encouraged by some different government policies.

However there are also a number of differences concerning the OECD as well.

Governments in East Asia have been more aggressive in pursuing industrial policy and somewhat less aggressive in establishing social insurance systems than OECD economies. Though they have also had more egalitarian income distributions, hence less need for redistribution and social insurance. They have subsidized corporations that they believe are strategic for economic development so thinking that their bureaucrats know better than market--heresy to economists. (Though it is worth noting that they have focused subsidies on those companies which have proved successful at exporting goods to other countries--hence their bureaucrats have in a sense been rewarding the judgment of foreign markets.) The instances of successful catching-up suggest that things could have been otherwise for world economy. Economies--even very poor economies--can rapidly adopt modern machine technologies and move their productivity levels close to first-world leading-edge standards.