Could the “East Asian Miracle” work anywhere?

The East Asian Miracle is the name given to the pronounced growth of East Asian economies in the post-Second World War era. The economic advancement of these countries seemed to defy both liberal modernization theory and development theory.

In a sense, both theories combined together- the neoliberal model of regional dynamism, with the national developmental state- to create the East Asian Miracle. Its occurrence suggests that culture and historical background also influence the development trajectory of a country.

Domestic institutions: The state heavily invested in education, and assisted the market. It provided the initial capital to promising industries/sectors. The stable financial institutions it set up encouraged savings and investment, creating a steady line of credit.

Foreign linkages: Kaname Akamatsu’s flying geese paradigm (FGP) explains the method for East Asia to “catch up” with the West through the “Import-production-export (M-P-E) sequence.” Countries that initially import most of their goods, slowly start producing them.

After fulfilling domestic demand they start exporting the surplus. The sequence also witnesses sectoral shifts of production from primary and then consumer goods to capital goods. Production shifts from advanced nations to developing ones.

The initial capital came from the regional leader through Foreign Direct Investment (FDI). Japan’s investment propelled the whole region forward. As the other countries in the region start going through the MPE sequence, Japan moved to other more advanced industries and sectors.

The first-tier of the Asian Miracle are well-known success stories. South Korea, Taiwan, Hong Kong, and Singapore (commonly known as the Asian Tigers) developed into high-income economies by the 21st century.

But the second-tier, which includes Indonesia, Malaysia and Thailand, faced more hurdles, which displays the failure of FGP. Speculative attacks on the Thai currency triggered an economic crisis in Thailand in 1997 which in turn affected the regional grouping.

Sometimes the developmental state’s promotion of a business-friendly environment through stability led to the propping up of authoritarian governments. Additionally, a close relationship between the state and the business sector led to the entrenchment of corruption.

Bottom Line. The East Asian Miracle displays practical alternative to ideology-infused liberal and socialist models of development. But is such a method possible for all countries, or is it a feature of a particular moment in history, unique to a set of “miracle” Asian countries?