The extraordinary economic growth and development of East Asian over the last four decades has been remarkable to world. Such as the East Asian Miracle suggested that (World Bank, 1993), it is a “Miracle”. The miracle means rapid social development and economy growth, reduced inequality, rapid output in agriculture, the transformation from high to low mortality and expansion on primary and secondary education. Exactly, East Asian economies have the highest growth rates in the world for the past half century. Eight countries are the main contributors to the phenomenon: Japan, Hong Kong, the Republic of Korea, Singapore, Taiwan (China), Thailand, Indonesia and Malaysia.
Firstly, World Bank (1993) argued that the HPAEs to achieved their dramatic growth rates by “getting the basic right”, which were operating sound economic policies, expanding the quantity and raising the quality of physical and human capital. Secondly, according to Stiglitz and Yusuf (2001), need follow the fundamentals of macroeconomic management, which including a stable business environment with relatively low inflation, sustainable fiscal policies, financial development to maximize domestic savings and promote efficient allocation, minimize price distortions and spread of primary and secondary schooling. Thirdly, Davis (2000) argued the factors that could explained HPAEs were initial conditions, policy variables, demography, resources and geography. From above theories, it is clearly found that the main keys to achieve East Asian Miracle were economic and government policy, macroeconomic management and improve the level of education or in other words, the role of education.
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The economic and government policy is the most important factor to explain East Asian’s superior economic performance. It is including trade policy, saving and investment policy, industry policy, fiscal policy and Foreign Policy. For example, it is well known that economic and government policy has played a key role in the success development of Taiwan’s economy. Kuo (1999) pointed that China government use case-by-case innovations instituted in response to face economic problems in Taiwan, and always step by the principle of “growth with stability”. According to Kuo (1999), from 1952 to 1994, the real GDP of Taiwan (China) grew at an average rate of 8.6 percent per annum and the real per capita GNP grew at 6.3 percent. Furthermore, the annual inflation rate was 4.3 percent on average and since 1965, the unemployment rate has been below 3 percent. For national saving and investment policy, to a certain extent, it is undoubtedly the high domestic savings means high growth economies. McNicoll (2006) pointed that Singapore and Malaysia are applying mandatory provident funds to ensure the country’s fiscal revenue. While there were many similarities in the policies adopted in these East Asian countries, they used different combinations of economic and government policies to keep their economic growth.
The HPAEs recognized that macroeconomic management was also played an important role in their countries’ economic development. Here, macroeconomic management including low inflation, social stable, high national savings, encouraged private investment and hold a stable financial environment to attract foreign investment. As the East Asian become more closely to the global economy, or in other words, to be an important part of global economy, a good business environment is essential condition. According to the East Asian Miracle (World Bank, 1993), the book used “Pragmatic Orthodoxy” to explain macroeconomic management. It pointed four methods to macro-control:
- balanced budget deficits,
- maintain low inflation,
- control external debt
- Keep the exchange rate in line.
Furthermore, it used Republic of Korea as an example in responding quickly to macroeconomic crisis. In 1979, Republic of Korea faced variety of problems, such as rising oil price, high interests rates cause high cost of debt service, decline output and incomes so national savings had dropped. However, Korea responded those problems quickly. The government ended the fixed exchange rate and tightened monetary and fiscal policy, in order to keep high investment, the government continued foreign borrowing throughout the crisis. As a result, the inflation and current account deficits were decreasing from 1982 to 1983. Overall, South Korea used the effective macro-control, through this economic crisis.
It is widely known that education is the key element in rapid social development. The strong relationship between well trained and educated labor force and rapid economic growth is so clearly. Todaro and Smith (2009) argued that education is the basic “objective of development”, especially for developing countries. Education gives them abilities to develop modern technology, which is the fundament of a sustainable development economy.
With the spectacular economic growth in Thailand, employment rate also increased significantly. Although the income disparities became larger than before, the education level is the key factor to explain these disparities. As primary and lower secondary education became widespread, the higher education has been expanding but still limited for public. However, it is still note that with the improvement of education, the economy is growing rapidly.
Although The East Asian Miracle was real happened, there has been much debate about the East Asian economic development and growth. However, HPAEs show that remarkable growth is possible, it really improve the social development and reduced the poverty in their countries, but behind those dramatic increasing figures, the crisis and some significant problems still exist. The most significant problem is the rising of inequality.
The risen inequality were so clearly in China, Hong Kong (China) and Thailand. The one reason for Thailand is the gap in education. As an increasing in high income for higher level of education, cause well-trained and skilled labor forces distinguish from those primary and secondary educated labor forces. Another example is the income gap between rural and urban areas in China. According to Ahuja, Bidani, Ferreira and Walton (1997), the most important reason was the “inter-provincial gap”.
Except the rising of inequality, Stiglitz (2001) suggest that all these countries in East Asian region would “re-examine their risk management strategies”. As those nations have their policies for their respective national conditions, such as education in Thailand, the population and income gap in China. While keeping a clear mind and continue those remarkable economic growth is difficult, especially East Asian economy become one of the most important regions of the global economy. How to reduce their exposures with expanding international market will become a serious challenge for East Asian countries.
Conclusion
The HPAEs was exactly proved the economic development miracle. These East Asian countries developing their national economies and reduce poverty by using effective policies, macroeconomic management and improve the level and education. While at the same time, economy challenge still remaining, such as minimize inequality, balanced social development and environment and find their new positions in global economy.
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