Chapter 1: East Asian Models of Development
1.1 INTRODUCTION East Asia is one of the fastest-growing regions, with fascinating developments in trade growth since the 1960s (World Bank, 1993). Yet different economists tend to describe East Asia’s phenomenal economic growth according to their own “pet theories,” through “partial insights and shaky evidence” (Wade, 1992). Among many theoretical arguments, macroeconomic stability, high savings ratios, heavy investment in physical and human capital, and outward-looking trade policies are the commonalities in East Asian development that most economists could agree upon (Birdsall and Japersen, 1977). On empirical grounds, trade as the engine of growth has been playing a catalyst’s role in East Asian development, with Japan as the leader for those latecomers to industrialization in the region. The timely shift of trade strategy from import substitution to export promotion in the first tier of the newly industrialized countries (NICs) – i.e. Hong Kong, Korea, Singapore, and Taiwan – in the 1960s enabled them to penetrate the world market at least one decade ahead of most Latin American countries. After the first energy crisis of 1973–1974, the export-promotion strategy in the Asian NICs was followed by the ASEAN-4 – i.e. Indonesia, Malaysia, the Philippines, and Thailand1 – which is generally considered as the second tier of NICs, and by China after its economic reform and openness in 1978–1979. However, even within the relatively less disputable topic area of export-led growth (Bhagwati, 1999; Balassa, 1988), empirical studies on East Asian trade patterns could hardly support any single trade theory that describes what has generated East...
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