Academic journal article Atlantic Economic Journal

An East Asian Paradigm?

Academic journal article Atlantic Economic Journal

An East Asian Paradigm?

Article excerpt

I. Introduction

In September 1993, the World Bank released a controversial report, The East Asian Miracle: Economic Growth and Public Policy. Academic response divided along two lines. Political economists complained that it gave insufficient weight to the influence of the "developmental state" in East Asia. Neoclassical economists carped it gave too much credit to government intervention in East Asia's stunning success.

The dispute had a geographic locus as well. According to the World Bank, there were two patterns or approaches to national development among the eight "high-performing Asian economies" (HPAEs) it studied. The first group, consisting of Japan, Taiwan, and South Korea, had institutional and historical assets that allowed them to establish clear performance criteria for selective interventions and performance monitoring [World Bank, 1993, p. 6]. But the second group of newly industrializing economies in Southeast Asia was said to offer a more constructive role model for developing countries because government interventions played a much less prominent role in their economic success [p. 7].

This article examines the tension between the two versions of the East Asian "miracle story" - for and against the government as a central actor in economic development. The author evaluates its implications for both Japan's economic prospects and its relations with East Asia.

II. The World Bank's "East Asian Miracle" Report: A Tale of Two Miracles

The World Bank's East Asian Miracle (EAM) report is a far more complex document than the initial response suggested. Time has allowed some of its critics to cool down, and the emerging mainstream view is that the theoretical contribution of EAM lay in its explanations of the micromechanisms by which governments in East Asia addressed market coordination failures. As Aoki et al. [1995, p. 4] observe, EAM explores a third ground between the neoclassical economics and the developmental-state view.

Advocates of industrial policy, including the Japanese, were especially incensed by EAM's analysis that high levels of government intervention in East Asia had negligible impact on productivity growth. EAM argues that the policy emphasis on exports shared by all the HPAEs was far more influential than any specific interventions, although it presents Japan as a "possible exception" [World Bank, 1993, pp. 324-5]. John Page, who led the EAM research team, and Howard Pack conducted a total factor productivity analysis, combing for signs that industrial targeting had triggered growth in East Asia. They found only limited correlation between productivity change and industrial policy in the case of export promotion and, to a lesser extent, directed credit policies.

The Japanese were even more riled by EAM's rejection of the Northeast Asian model in favor of Southeast Asia. The whole purpose of the EAM exercise was to identify policy lessons for developing countries out of the East Asian experience. Thus, by favoring the Southeast Asian model - one of relatively open foreign investment and financial regimes - the World Bank appeared to criticize Japan for maintaining steep barriers to foreign investment despite its economic superpower status.(1)

EAM asserts that the global environment changed radically between the time of Japan and the Northeast Asian miracles and the second-tier HPAEs in Southeast Asia. What worked for the Northeast Asian HPAEs in the 1960s and 1970s worked less well in the 1980s and will not work today, when the mood of advanced industrial countries is to restrict market access to developing country exporters that flout international trading conventions [World Bank, 1993, p.25]. Thus, the later miracles - Thailand, Malaysia, and Indonesia - are more appropriate role models than Japan, Taiwan, or South Korea [pp. 32-45].

In the same breath, the World Bank report suggests that history had more to do with the success of the Northeast Asian economies than specific development strategies [World Bank, 1993, pp. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.