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Economic Development: The Tiger Economies

18 May 2017Economics Essays

The end of the Second World War resulted to the decolonization of many Southeast Asian states, and the eventual nation-building of war-torn countries like Japan, Korea, China, Taiwan, and the Philippines. The weakened state of many European countries allowed the regional spread of nationalistic sentiments. Many of the conquered peoples rose in rebellion and declared self-determined nations. However, decolonization was not the sole cause of nation-building. Much of the war-torn economies of Asian countries were dependent on US aid. The United States government promised billions of dollars in aid to the economies of East Asian countries (Taiwan, South Korea, Japan, and China). These economic aids were directed to: 1) allow the reconstruction of essential economic sectors, 2) enable the United States to have a free hand in dictating economic policies to these countries, 3) formalize the establishment of democracy as the only legitimate form of self-determination, and 4) improve trade relations with these countries.

Note that while the United States was busy showering economic aids to these countries, Southeast Asia suffered heavily from long-term inflation and famine. The Philippines, a former US colony, received only 1/8 of US aid to Japan. Indonesia, a former Dutch colony, was in a state of widespread rebellion. The Dutch government refused to recognize the Indonesian Independence Movement. It received no substantial aid from its mother country because the latter was busy rebuilding its economy.

British colonies fared well. After the war, most of British colonies in the Pacific received economic aid. The colony of Malaysia was rehabilitated. Singapore, Hong Kong, and Burma received substantial amount of capital from the British government. Except Burma (which was granted the status of independence after the war), these countries used the money to strengthen the export-oriented economies. In short, the capital was used in the creation of an efficient export-oriented economy.

Economic aid was never the sole determinant in the creation of the ‘Tiger Economies.’ From 1945 to the 1950s, the United States introduced the so-called ‘Modernization Project.’ This project involved the political, social, and economic restructuring. Japanese education was westernized. Democracy became the emblem of a new order. The power of the emperor was severely reduced. In fact, the emperor renounced his divine status to allow the efficient flow of democracy in the country. The office of prime minister became the governing authority. The Japanese parliament represented the people from all levels. On the economic side, Japan was heavily involved in the creation of an export-oriented economy. From the 1950s to the early 1960s, Japanese exports reached 2/3 that of the United States. Japan’s per capita GDP was almost equal to the United States. Japan’s back-breaking path to development was due to three factors: 1) the intensity of US aid flowing in the country (discussed in the first part of the paper), 2) the modernization and democratization of the country (stability of government is one of the essential factors in economic development), 3) the so-called ‘culture of good life’ (widespread to all classes of Japanese society, and 4) the creation of an export-oriented economy.
South Korea and Taiwan followed the Japanese path to economic development, albeit, in different ways. Taiwan pursued an aggressive land reform program under Generalissimo Chiang-shek (the former Chinese president). The capital obtained from the land reform program was used in the creation of an export-oriented economy. After the division of Korea into two states, South Korea pursued a radical agricultural program (the establishment of a huge agricultural bank directed to provide substantial loans to farmers and traders). Again, the capital obtained from the agricultural sector was used in the establishment of an export-oriented economy, specializing in capital goods and manufactures.

Hong Kong and Singapore were given self-governing status by the British government, allowing these countries to pursue long-term economic goals (without interference from the United Kingdom). These long-term economic goals were supplemented by high savings rate (this was also present in S. Korea, Taiwan, and Japan) which hastened the creation of strong manufacturing economies. There were indications that China, the sleeping giant of East Asia, was on the verge of economic progress by 1947. This was however disrupted by the Communist takeover in 1949.

Conclusion

From the vantage point, it seems that the path to economic development of the above-mentioned countries was a miracle. But when analyzed from the perspective of a technocrat, reality begins to manifest itself. Regardless of political system (not to be confused with political stability), these countries were able to create export-oriented economies (gained from the agricultural sector).

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