Explanations of East Asian Economic Development

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EXPLANATIONS OF THE
ECONOMIC SUCCESS OF EAST ASIA NATIONS:

Introduction
The economic success of the East Asian countries has inspired many economists to study the background of their rapid growth. Interestingly, different economists interpret this success in entirely different ways. During the 1970s and an important part of the 1980s advocates of the neoclassical model argued that growth in East Asia was the result mainly of the market mechanism and the emphasis on export promotion in these countries. Especially since the mid-1980s the neoclassical approach was criticised by economists who stressed that government intervention played a crucial role in the process of economic growth. This paper aims at presenting a survey of the arguments recently put forward by the critics of the neoclassical approach to explain the role of government in the economic success of the countries in East Asia. Such a survey is very useful, since it forms a new breeding ground for the discussion on the role of the government in the economic development of other Developing countries and the countries in Eastern Europe.

Without a doubt East Asia’s economic expansion during the past twenty years is one of the most remarkable economic changes since the Second World War. Gross national product of the East Asian countries increased by more than five per cent per year in the period 1965-1990, which is considerably larger than that of Latin America (1.8 per cent), sub-Saharan Africa (0.3 per cent), or even the OECD (2.4 per cent). Six of the seven fastest growing economies in the period 1960-1985 (measured on the basis of the average growth of per capita GDP) were East Asian countries. The economic success of these countries has inspired many economists to study the background of this rapid growth. What is rather remarkable in this context is the fact that different economists interpret this success in entirely different ways. During the 1970s and an important part of the 1980s advocates of the neoclassical model argued that growth in East Asia was the result mainly of the market mechanism and the emphasis on export promotion in these countries. This interpretation dominated the debate for a long time. Especially since the mid-1980s the neoclassical approach was criticised by economists who stressed that government intervention actually played a crucial role in the process of economic growth. In this paper these economists are referred to as the new interventionists.

The debate between the neoclassical economists and the new interventionists seems to concentrate on the issue concerning the role of the government in the process of economic development in general and the East Asian growth miracle in particular.

In this article East Asia includes the following countries: Japan, South Korea, Taiwan, Singapore, Hong Kong, Indonesia, Thailand, and Malaysia. A significant part of the literature used for this article concentrates mainly on South Korea and Taiwan.

This paper mainly aims at presenting a survey of the arguments recently put forward by the critics of the neoclassical approach to explain the economic success of the countries in East Asia. In particular, it emphasises their view with respect to the role of the government in the process of economic development. Such a listing of the contributions of the new interventionists concerning the backgrounds of the Asian miracle and the possible contribution of the government is very useful

The article is structured as follows. Section 2 presents a survey of the contributions of development economists with respect to the role of the government in the process of economic development as put forward by them in the 1940s and 1950s. Section 3 describes the reactions of the neoclassical economists on these early contributions. They emphasised that especially the market mechanism played an important role in the growth of the East Asian countries. Section 4 deals with the critics of the...
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