Global economy Case Solution
The Asian miracle of East Asia has a remarkable record of high and sustained economic growth. However, twenty-three economies grew faster than all other region in the Asian continent over the period of 1965 to 1990. This achievementis ascribableto seemingly miraculous growth in around eight high-performing Asian economies (HPAEs).Moreover, over the past thirty-five years, Taiwan, Korea and Singapore and the three newly industrializing economies (NIEs) of South-east Asia, Indonesia, Malaysia, and Thailand have transformed themselves from technologically backward and poor, to relatively modern and affluent economies.
Over the period, East Asian economies provide a wide range of policy frameworks- extending from Hong Kong’s relatively complete laissez-faire to the highly selective policy of regimes of Korea. It co-occurrence of activist public policies, and rapid growth in some of the East Asian economies. However, these four countries (including Taiwan, Hong Kong, Singapore and South Korea) have raised complex and disputable questions.Concerning the relationship between government, themarket, and the private sector.
Furthermore, the HPAEs are primarily a highly diverse group of economies, differing in natural resources, population, culture and economic policy. On the other hand, firstly identify the characteristics of these eight economies that could share them to be grouped together, and set aside from other developing economies.
In addition to this, these all eight countries had rapid and sustained growth over the period of 1965 to 1990. Thus, this in itself is unusual among developing economies. All the eight HPAEs are positive outliers in the income-growth distribution. On the other hand, Malaysia, Indonesia, Philippines, Thailand are all closer to their predicted values. While the remaining four economies Korea, Taiwan Singapore and Hong Kong all are relatively significant above their predicted gross domestic product (GDP) per capita growth rates, on the basis of relative income level.
By the time, all the HPAEs were catching up to the more developed countries. However, recent work on growth rate persistence indicates that growth rates for individual economies are highly unstable over time(Fogel, 2009). The HPAEs whereas appear to be an exception. Depending on the period selected, and the measure of persistent success (in a manner of the fraction of the distribution used to measure high growth).The HPAEs consistently rank with the handful of persistently rapidly growing economies.
Moreover, the HPAEs are unique in relation to rapid sustained growth, with highly equal income distributions. However, the proportion of forty economies is ranked by the ratio of the income share of the fifth richest of the population to the income share of the fifth poorest, and per capita real GDP growth during 1965 to 1990.
On the other hand, all of the high-growth low-inequality income economies are in East Asia. However, with the comparison of East Asia economies. The Gini coefficient, and growth rate by decade indicate that the distribution of income was relatively more equal in the fastest growing HPAEs. Additionally, improvement in the income distribution generally coincided with the period of rapid growth(Moenius, 2008).
In the same manner, the fundamentalist-mystic isconsequently at heart the debate on the public policy origins of East Asia’s success. However, fundamentalists have stressed East Asia’s success in relation to basics right. They lead to attributing success to policies that increased physical and human capital per worker,and that provided for efficient allocation. They proclaim that the successful Asian economies have been better than others at providing a stable macroeconomic environment, and also providing a reliable legal framework to promote domestic and international market competition. However, they also stress that the orientation of the HPAEs toward international trade, the lack of managing price and other distortionary policies have led to relatively low price distortions. Investments in education, people and health are primarily important roles for government in the fundamentalist story(Nelson, 2016).
In East Asia, the mystics proclaim, governments remedied this by deliberately “getting the price wrong” to promote industries that would not otherwise have to succeed(Robertson, 1998). The mystics lay stress on the dynamic gains of activistgovernment policies to reorganize industrial infrastructure, and promote technological learning over time at theexpense of static allocative efficiency. In the same manner, while fundamentalists would explain growth with a standard set of relatively sustained policies, mystics state that the policy mixes used by East Asian economies were flexible and diverse. They proclaim that East Asian governments “governed the market” in critical ways(Mody, 2016).
On the other hand, the fundamentalist view of the success of the HPAEs is that their investment levels in human and physical capital relatively exceed those for other countries at same levels of development, evolving in more rapid growth in per capita income. However, the relationship between income level and average investment rate for the period of 1965 to 1990 indicates that there is substantially more regularity in the relationship between relative income and investment share. The investment rate for overall countries increases with income up to nearly about 70 percent of U.S GDP in the mid-1960 and then declines………………………………………………
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