1. Seeking the Model of the East Asian Economic Growth
J.D. Han

2. 1. “Asian Miracles” by World Bank
The first official report started in 1993.
The full report can be found at

3. 2. Original WTO Report “Asian Miracles”
The High Performing Asian Economies (HPAEs) : Japan, Hong Kong, the Republic of Korea, Singapore, Taiwan, Indonesia, Malaysia, and Thailand (Note that China was not in).
“It finds that the diversity of experience, the variety of institutions, and the variations in policies among the HPAEs does not allow a model to be developed.” (World Bank said at the time; we may know better)
However, some lessons for other developing countries can be learned from the East Asian experience.
First, growth is not Automatic: HAPEs use a variety of government intervention or policies to achieve three functions of growth - accumulation, allocation, and productivity growth (there are some controversies; for example Krugman’s Growth Accounting).
Second, it is essential to get the fundamentals right. 1) High levels of domestic saving, 2) good macroeconomic management, and 3) broad based human capital.
Third, the government intervention should have specific orientations, such as limited price(market economy) distortions, and export-promotion.

4. 3. Facts and Statistics East Asian countries have recorded
unique experiences of Economic Growth
-> Fast
-> Sustained over a fairly Long-run

8. There is a marked difference
*Note well that
There is a marked difference
before and after the 1997 Asian Financial Crisis
HPAEs did not include China before AFC
HPAEs’s growth rates have fallen significantly after AFC
-Even after the recovery from AFC, there is no recovery or big increase in investment in HAPEs or China: Savings go to U.S., and to China.

10. 4. Analysis Tool What caused such a high growth?
In its explanation, the World Bank report
In the Conventional/ Neo-Classical Theory
: K, L, and Technology

11. Some argue that there is no big
contribution by T
to the economic growth
in the EA countries (Paul Krugman;
Alwyn. Young).
In fact there is not much of indigenous
technical innovations of the EA.

12. What if the above cannot explain the EA growth fully?
Endogenous Growth Theories
Human Capital;
Social Capital; and
Government Policies

13. 4. Factors of East Asian Miracles
Word Bank attributed the Asian Miracles to
Accumulation of Physical Capital (Savings);
Hard work (Labor Supply); and
___________________________________________
3) Fostering Human Capital (Education);
4) Social Capital (Harmony-not confrontation, Law and Order, Lack of Corruption);
5) Sound Government Policies (Industrial Policy, Export Promotion, etc.)
*Slightly ambivalent about Technology(?).

14. *The composition of Capitals is important:
-World Bank report classifies K into at least 4 (Physical; Natural; Human; Social)
West Africa: Natural Capital is relatively large, but Human Capital is relatively small
East Asia: Human Capital is relatively large and Natural Capital is relatively small
- Carolos Leite argues that natural capital without the balancing forces of other capitals hurts, not help economic growth.

15. 5. Human Capital in East Asia
Human Capital = Creativity; Knowledge;
Soundness of Mind and Body
Human Capital is fostered through
Education of all levels

16. 1) Measuring Human Capital
Human Capital is conventionally Measured/proxied by Schooling (Years) and/or National Expenses on Education (They are incomplete measures!)

17. *Public Expenditure on Education is misleading: It is not High in Asia

19. 2)Other Measurements Home Education Private Education Costs
However, in East Asia other training expenses should be included for the proxy of Human Capital:
Home Education
Private Education Costs
Overseas Studies
Military Training/Services
Company-Run Night Schools

20. 3) Reflect on Education in East Asian context
Why is education so much valued in EA?
In East Asia, Education has been
the most important means of
Social Mobility or
the Upward Movement in Social Class.

21. Incentive for Education
Education is Investment
Investment responds to Returns
Upward Mobility
through Income and Recognition Scales
of the Society = Social Mobility

22. 6. Social Capital Order Social Cohesion Lack of Social Conflicts
Harmony
Lack of Civil Wars

23. 7. Government Policies Industrial Policies Facilitating most efficient
Resource Allocation
Export Promotion Policies
Promotion of Strategic Industries

24. Export-Orientation is conducive for Economic Growth:
Specialization based on Ricardo’s
comparative advantage theory of trade
Trade provides Expanded Market, which enables (Large) Scale of Production
Openness provides changes for
Technology Transfer

25. * Example of a ‘Wrong Government Economic Policy’: Perils of Import Substitution Policy
The focus is on minimizing Imports
by producing all kinds of Goods
No Specialization
Producing Outputs which have
no Comparative Advantage
-> Inefficient Allocation of Resources
No Benefits of Scale of Production

26. Scholars started linking
the Five Attributes for
East Asian Miracles to
more Fundamentals, such as
Institutions or Value/Belief of
Neo Confucianism, readily found in
Japan, Taiwan, Korea…..

27. Confucian Idea of Meritocracy
Person with Merits ->
Select the person with merit
for leadership
At the top is the ‘Philosopher King’ or
‘Wise Dictator’
He has Noblesse Oblisse
Noblesse oblige  is a French phrase literally meaning "obligation of Nobility
person with status has to fulfill social responsibilities, particularly in leadership roles.

28. *Confucianism, Education System, and Social Mobility in Historical Conext
Ch’ing dynasty
Social mobility increased during the early Ch'ing, supported by a pervasive belief that it was possible for a peasant boy to become the first scholar in the land. An ethic that stressed education and hard work motivated many households to invest their surplus in the arduous preparation of sons for the civil service examinations. Although the most prestigious career in Ch'ing society remained...
Ming dynasty
...the Ming civil service, that influential families did not monopolize or dominate the service, and that men regularly rose from obscurity to posts of great esteem and power on the basis of merit. Social mobility, as reflected in the Ming civil service, was very possibly greater than in Sung times and was clearly greater than in the succeeding Ch'ing era.
T’ang dynasty
...examination system had facilitated the recruitment into the higher ranks of the bureaucracy of persons from lesser aristocratic families, most officials continued to come from the established elite. Social mobility increased after the An Lu-shan rebellion: provincial governments emerged, their staffs in many cases recruited from soldiers of very lowly social origins, and specialized finance...

29. This is still the case in Japan, Korea,
Taiwan, Singapore, and China to some
extent.

30. ** Limitation of the Contemporary China
* Click here for an
interesting paper on the social mobility of the contemporary China
-> What would you predict for the Hukou system as the communist party is faced with a shortage of Human Capital in the
party?

31. In Sum The East Asian Economic Growth Model
is a kind of Endogenous Economic
Growth Model based on Human Capital,
Social Capital, and Government
The last two can be included in
“Institutions” and Value/Belief, which is Neo Confucianism in East Asia.

32. 7. Criticisms of the EA Economic Growth Model
Paul Krugman
Growth is due to increased factor intensity, or increases in K, and L input, and Not much due to Technical Innovation; According to Neoclassical Theory, there will be convergence, and the East Asian growth is not sustainable.

33. * Empirical Evidence:
Growth Accounting applied to East Asia does not show Technology as an Important Factor
*Refer to my note on Growth Accounting
In the East Asian setting

34. 2) Asian (Financial) Crisis
Corruption at all levels of society
Lack of Transparency - Opaqueness of Governance
Vulnerable to ‘Herding’

35. Korea recovered fastest from the Asian Financial Crisis of 1997.
No discernable changes except for
Openness to the U.S. capital and
Investment

36. *Reflection 1) Opaqueness also exists in Western Economies
2) Transparency may not be culturally possible
: “Zen”(禅）； ”From Heart to Heart”(以心传心）

37. 3) Transparency may not be the only way to Information Efficiency
: “Dominicans and Jews Need not Apply” in Cents and Non-Senses by J. Carr
4) A moderate degree of Corruptions
may be efficiency-enhancing
in the imperfect economic system.