Encyclopedia
The term
East Asian Tigers refers to the economies of
Hong Kong,
Singapore,
Taiwan, and
South Korea. They are also known as
Asia's Four Little Dragons. These countries and territories were noted for maintaining high
growth rates and rapid industrialization between the early
1960s and
1990s. In the early 21st century, with the original four Tigers at or near to fully
developed status, attention has increasingly shifted to other Asian economies which are experiencing rapid economic transformation at the present time.
The four Tigers share a range of characteristics with other Asian economies, such as
People's Republic of China and
Japan, and pioneered what has come to be seen as a particularly "Asian" approach to economic development. Key differences include initial levels of
education and physical access to world markets .
Characteristics of the Tiger economies
The East Asian Tigers pursued an export-driven model of economic development; these countries and territories focused on developing goods for export to highly-industrialized nations. Domestic consumption was discouraged through government policies such as high tariffs. The East Asian Tigers singled out education as a means of improving
productivity; these nations focused on improving the education system at all levels; heavy emphasis was placed on ensuring that all children attended elementary
education and compulsory high school education. Money was also spent on improving the college and
university system.
Since the East Asian Tigers were relatively poor during the 1960s, these nations had an abundance of cheap labor. Coupled with educational reform, they were able to leverage this combination into a cheap, yet productive workforce. The East Asian Tigers committed to egalitarianism in the form of land reform, to promote property rights and to ensure that agricultural workers would not become disgruntled. Also, policies of agricultural subsidies and tariffs on agricultural products were implemented as well.
The common characteristics of the East Asian Tigers are:
- Focused on exports to richer industrialized nations
- Trade surplus with aforementioned countries
- Sustained rate of double-digit growth for decades
- Non-democratic and relatively authoritarian political systems during the early years
- Undervalued currencies
- High level of U.S. treasury bond holdings
- High savings rate
Role of traditional philosophies
Economic success in Japan, followed by the East Asian Tigers, has been attributed to the existence of harmonious labor-management relations.. “Industrial Harmony” is this unique “Culture of harmony” that was consciously invented and developed over the last century in Japan. A semi-bureaucratic organization called the “Kyochokai” was established in 1819 to meet the needs of an emerging industrial society. The “Kyochokai” took the lead in trying to define the values which would be suitable for a new Japanese-style industrial society, at the time of great social troubles in industrial Europe. The resulting "invented" tradition has played an important role in the evolution and character of Japanese economic values and behavior of social peace for economic development. .
Japanese experience appears to challenge unilinear theories of modernization, and to suggest that Japan’s uniqueness lies in the creation of her own kind of modernity, sharply divergent from that to be found in Western countries, and based paradoxically upon a reaffirmation of ancient
Confucian values and native Japanese tradtions of harmony, self-sacrifice and non-individualistic group striving in pursuit of a common cause. Japan’s emphasis on long-term growth, scrupulous market evaluation, and process engineering are all well regarded as important components of its economic development.
This "Industrial Harmony" is the foundation of "Asian Political economy".
Criticism of the export-driven trade model
The East Asian Tigers were strongly affected by the 1997
Asian financial crisis, which impacted each Tiger to varying degrees. While Taiwan was not as strongly affected, South Korea was badly battered by the crisis. Because of the focus on export-driven growth, many of the Tigers became caught up in a game of currency devaluation. The current criticism of the East Asian Tigers is that these economies focus exclusively on export-demand, at the cost of import-demand. Thus, these economies are heavily reliant on the economic health of their targeted export nations. In addition, these nations have met difficulties after they lost their initial competitive edge, cheap productive labour.
India and the
People's Republic of China have now emerged as fast-growing economies based on cheap labour, largely replacing the Tigers.
Asian Financial Crisis
In the aftermath of the 1997 Asian Financial/Economic Crisis, many so called 'Asian Tigers' countries suffered deep depreciation of their currencies, stock market prices declined and social and political unrest. This was due to the withdrawal of foreign and domestic capital out of the East Asian countries such as
Thailand,
Malaysia,
Republic of China ,
Hong Kong ,
Singapore,
South Korea, and the
Philippines. Prior to the financial crisis, all the Asian economies were enjoying very high economic growth, high interest rates to attract foreign investments.
Some economies were becoming overheated, stock prices were overvalued, property prices were sky-high and investors were jittery and nervous. Because of the structural weaknesses in the regulatory framework, once
capital flight began, the stock market nosedived and the major Asian currencies depreciated significantly. This caused social unrest, political instability, regime change and financial bailing out by the
International Monetary Fund. This also gave impetus to some Asian governments to impose capital controls to restrict currency outflows and maintain monetary and financial stability.
Malaysia maintained a currency peg to the US Dollar. The
Republic of China created legislation requiring all outgoing capital transfers to be declared. However, there were no direct restrictions.
Since the crisis most of the Tiger economies have become financially stable with resilient institutions and companies and regulatory frameworks in place to prevent another crisis. This has also shown many Asian governments that the easy and predictable prosperity of export-led growth and cheap labour costs won't last forever. To better compete with the emerging manufacturing giants like the
People's Republic of China and
India, they will have to create new industries, move up the value-add chain and create stronger service sectors in their economies.
Comparisons
Other "Tigers"
Over time, the term
Tiger has become synonymous with nations that achieve high growth by pursuing an export-driven
trade strategy. This entails creating Industrial policy to attract high levels of foreign direct investments. Recently, the
Southeast Asian nations of
Indonesia,
Malaysia, the
Philippines and
Thailand have sometimes been considered
Tigers or the
Four New Asian Tigers. The term is not limited to Asian nations; in
Europe, the
Republic of Ireland has been called the
Celtic Tiger for its rapid growth in the 1990s, while
Estonia is known as the
Baltic Tiger for its presently high growth rates while
Chile has also been referred to as the
Latin American Tiger for its solid economic policies and rapid export-led growth since the
1980s.
People's Republic of China
Comparison between the
People's Republic of China and the Tigers can be divided between the
Maoist era and the
era of reform starting with
Deng Xiaoping. The main question that has been raised with respect to the Maoist era is to what extent the economic performance of the Tigers was reproducible in the People's Republic of China in the 1960s. The main question that has been raised with respect to the post-Maoist era is to what extent the development of the PRC is sustainable.
An important question is the relevance of the experience of the Tigers to current economic growth in the People's Republic of China. In the 1980s it was common to argue that the export-centered growth of the Tigers was of limited relevance to the People's Republic of China because the Tigers were small and any effort to mimic them would result in more exports than the developed world could handle. This objection was later less often raised since the pattern of economic growth has been for exports to trigger economic growth in the coastal regions, and for these coastal regions to serve as markets and triggers for growth in the interior.
Since the late 1990s, some of the heat has dissipated from this debate, in part because its become of more historical than current interest: as a result of the Deng Xiaoping reforms, the PRC has one of the world's highest rates of per capita
GDP growth. Furthermore, the
Communist Party of China and
Kuomintang today both view the creation of a new
Republic of Taiwan as a common adversary and are much less likely to assert superiority over the other. Ironically, and to the chagrin of many western observers, it is now common for the Communist Party of China to use the experience of the Asian Tigers as justification for its authoritarian rule. The argument by the Party is that at the current stage of economic development the PRC needs a non-democratic system similar to those that the Tigers had in the early years of growth.
Taiwan and the People's Republic of China compared
The Asian Tigers' spectacular ascent to economic prominence attracted much attention and analysis. Some Western economists, notably at the
World Bank, depicted it as a vindication of free-market principles, and this interpretation of the Tigers' success formed large part of the Washington consensus. This view is not without controversy. Many economists have pointed out that the governments of the tigers were quite active in their economies. East Asian Tigers all practiced aggressive land reform and made large investments in public health and elementary education. In addition, while the tigers relied on export markets to develop their economies, they also put in place high trade barriers which protected local industries from foreign competition. Some Western observers have argued that the
People's Republic of China would have reached Taiwan's contemporary level of development if the
Kuomintang had stayed in power. However, this claim has been disputed by those who point out that Taiwan is by no means a microcosm of the mainland.
First, one million
Kuomintang supporters fled to
Taiwan in 1949, establishing the small island of six million as the seat of the
Republic of China .
Taiwan thus benefited from the flight of many well-educated, bourgeois Chinese. A disproportionately high share of the immigrants were governing elites, merchants, Chinese capitalists, and well-educated professionals. While a large number were also poorly-educated
Kuomintang soldiers, the wave of immigrants was not a reflection of Chinese society. Furthermore, many in the ROC leadership accused of corruption and incompetence on the mainland were either exiled or purged from the
Kuomintang following defeat in the
civil war.
Second,
Taiwan, and for that matter all four of the Tigers, benefitted economically from previous foreign rule or influence, whether it was
British commerce in
Hong Kong and
Singapore, or
Japanese industrialization and
American land reform in
Taiwan and
South Korea. Furthermore, three of the Tigers were an artificial polities severed from larger neighbors— the
People's Republic of China in the case of
Taiwan and
Hong Kong ,
Malaysia in the case of
Singapore . Likewise,
South Korea was a product of postwar division and bloody civil war. Each therefore felt acute insecurity, which was translated into political structures that restricted civil liberties and subordinated short-term social well-being for economic growth.
Third and perhaps most important, Taiwan's economy, wrenched in quick succession from Japan's orbit and then the People's Republic of China's, could not have developed without direct American aid, which constituted more than 30 percent of domestic investment from 1951 to 1962. Land reform, government planning, U.S. aid and investment, and free universal education brought huge advancement in industry and agriculture, and in living standards. In addition, land reform was an essential step in modernization. In conducting land reform on Taiwan,
Chiang Kai-shek was aided by American encouragement in addition to the fact that many of the large landowners were Japanese who had fled there after
World War II, and the remaining indigenous landowners had little voice in government. Most agree that it is extremely unlikely that
Chiang Kai-shek would have revolutionized Mainland Chinese society to that extent if he had defeated the Communists led by
Mao Zedong.
In summary, the transformation of
Taiwan cannot be understood without reference to the larger geopolitical framework. Although aid was cut back in the 1970s, it was crucial in the formative years, spurring industrialization. In addition, even after the cutoff of aid, security and economic links were maintained. Uncertainty about the U.S. commitment accelerated the country’s shift from subsidized import-substitution in the 1950s to later export-led growth. Like
South Korea,
Taiwan moved from cheap, labor-intensive manufactures, such as
textiles and
toys, into an expansion of heavy industry and infrastructure in the 1970s, and then to advanced
electronics in the subsequent decades. In response, it has been argued that the role of
United States aid and direct investment is overstated. In particular, it is pointed out that the capital for investment came largely from indigenous sources and that foreign aid had ended before the economy had taken off.
India
India has not had a land reform as consistent and thorough as
Korea's or
Taiwan's. The liberalisation of the post-colonial
Indian economy occurred in 1991 under the finance minister,
Manmohan Singh, the current prime minister of India. With the collapse of the
Soviet Union,
India's
socialist-inspired economic policies which had stagnated growth in the
1970s, after initial periods of success in recovering the country from
British occupation, were put under pressure as
India's main supporter disappeared, and a balance of payment crisis, as well as rapid decline in foreign exchange reserves threatened financial meltdown.
Unlike many other fast-growing Asian economies, India's growth is largely driven by domestic consumption, like many advanced economies of the West. India's vast educated workforce is responsible for its ongoing
information technology and
services boom. This has helped other industries such as
retail,
finance,
construction and hospitality to benefit from the buoyant domestic demand. India's competitive IT industry has also created a new-found confidence in Indian industry in general, protected from international competition till 1991. The current focus is on developing world-class infrastructure and industrialization to encourage large manufacturing clusters. This is crucial in to divert a significant part of the 60% of India's workforce, currently dependent on
agriculture, to
industry.
Although it has its share of difficult problems, India is on its way to overtake
Japan by the end of 2006 to become the third largest economy in the world. The inherent strength of a democratic political system coupled with a free market economy will increasingly work to India's advantage as it grows further.
See also
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