Abstract
Starting from the early 1960s continuing until the 1990s, Singapore, South Korea, Taiwan, and Hong Kong experienced dramatic economic growth. These nations were labeled as the “Four Asian Tiger Economies” because of their unprecedented GDP growth. After Japan’s surrender in WWII, all four tigers gained independence and were also left with extremely underdeveloped and poor economies. With the government’s support, the tiger economies were able to sustain high amounts of growth by creating investor-friendly policies, as well as being able to efficiently implement them. However, the ability to quickly execute new legislation came at the expense of having an authoritarian regime. Opponents of the ruling party were oppressed, as well as workers. To this day, we have not seen any other developing nations grow as quickly as the four tigers did. The unprecedented economic growth of the four Asian Tiger Economies came from direct government support for private firms and investments in the population through education but ultimately came at the expense of the working class as well as smaller firms without government support.
1. Economic Policy
From a macroeconomic perspective, the Asian tigers had engaged in expansionary monetary policy as an effort to maintain high GDP growth. By creating a secure banking system as well as encouraging savings among households, they were able to direct the savers’ money to public investments with high returns, such as infrastructure development (East Asian Miracle 349). Compared to other developing nations in Latin America, the tigers had lower savings rates in 1965, but by 1990 they had savings rates 20% higher than the nations in Latin America. Additionally, by 1990, East Asian countries had far higher investment levels than comparable developing nations in South Asia and Sub-Saharan Africa (East Asian Miracle 41). Along with increased savings, the tiger economies’ improving education system led to a skilled workforce with higher productivity. Investments in human capital are known to be a key factor in expanding economies, and because the Asian Tigers had universal primary education as well as rapidly increasing secondary education, they were able to outpace other developing nations in the economic expansion (East Asian Miracle 349).
2. Tiger Regimes
Prominent authoritarian leaders commanded their economies by destroying opposition to create fast changes in their economic frameworks. Leaders such as Chiang-Kai Shek in Taiwan and Park Chung Hee in South Korea used land reforms by redistributing agricultural plots to the poorer classes, therefore decreasing income inequalities. This further industrialized their nations and decreased the amount of property that rent-seeking elites owned, continually alleviating the struggles of the lower classes and the growing economy (Gulati 167). With governing power solely consolidated to the de facto leaders of these countries, they were able to create domestic coalitions and develop an institutional structure that quickly implements legislation changes regarding economics (Gulati 170). Along with unopposed industrialization, the tiger nations had high amounts of cheap, unskilled labor at their disposal which made sure that their products could be competitively priced (Stock).
3. Direct Government Support for Private Industry
Not all the policies that the Asian tigers used were the definition of laissez-faire, with central banks giving below-market interest rates to certain export-focused firms (Gregory et al. 38). In South Korea, Chaebol, or large conglomerates were the main driving force behind their unprecedented economic growth. Chaebol firms such as Samsung and Hyundai benefited from financial assistance, tax benefits, and foreign investment incentives. Smaller-sized firms in South Korea were dependent on these large Chaebols, with their resources being funneled solely into the Chaebols for their growth. Since 1960, South Korea had maintained an average GDP growth rate of 8%, due to this monopolistic economy (Lee 2). However, this wasn’t the first instance of an economic model where private companies receive direct support and protection from the government. Japanese colonialism in East Asia can be linked to the rise of large state-supported firms or Zaibatsu. Corporatist ideology was imposed upon Japanese-occupied territories such as Taiwan, Korea, and Hong Kong. They followed the philosophy of “authoritarianism in politics, capitalism in economics,” as seen with the firm support and explicit direction for the private sector (Gulati 164).
4. Export Economies & Foreign Investment
In other parts of the developing world, nations would decrease their independence from already developed nations by creating and protecting domestic industries and therefore “substituting” imports with domestic production. Instead of following Import-Substitution Industrialization (ISI) for their economic growth, the tigers chose to use Export-Oriented Industrialization (EOI), where they export goods to already industrialized nations (Stock). American investment in East Asia led to the switch from ISI to EOI, and it was in America’s best interest to do so. Their main motive was to gain influence in Asia during the early Cold War days, in order to prevent the USSR’s communist sphere of influence expansion. EOI has historically been known to destabilize economies in the short term, so to convince the Koreans and the Taiwanese to shift to an export focus, the US fully opened their economy to them and showed that free trade would be beneficial for all parties involved (Gulati 166). Additionally, the Japanese pressured the tigers into EOI in an attempt to further develop their “regionalized production system” (Hart-Landsberg and Burkett 100). The United States used an incredibly large amount of its foreign aid budget to invest in Taiwan and Korea, with each receiving $5.6 billion and $13 billion between 1945 and 1978 respectively (Gulati 166). They used the aid to finance their import surpluses as well as develop their militaries, which were responsible for keeping political opponents oppressed (Gulati 166). Again, we see the tiger economies using similar strategies as the Zaibatsu in Japan in order to emulate their rapid economic growth.
5. Trade-offs For Tiger Economies
Critics of the Tiger Economies have often pointed out the repressive nature of their growth models, as well as questioned their long-term stability after the 1997 Asian Financial Crisis hit. For example, Chaebol firms in South Korea have relied on high-profit margins domestically to fuel their investments and maximize profits for export markets, and because of Korea’s economic growth labor costs have risen which in turn caused these firms to look internationally for cheaper workers, and higher profits (Hart-Landsberg and Burkett 100). The incentivization of continued export-led growth has resulted in worker-class exploitation and only benefits the top executives of these companies. Furthermore, not only did the Chaebols lead the way for rapid economic growth in South Korea, but they also pushed the economy into ruins. With the support of the government, Chaebols were able to grow so large to the point where they controlled the entire financial system as well as the economy. With that power, these firms illegally financed their debts, crushed smaller and rival firms with predatory tactics, and lobbied the government for open market policies (Lee 2). When the 1997 Asian Financial Crisis hit, Chaebol firms were at fault because of their over-reliance on short-term high-interest foreign loans to finance their growth. Additionally, since the Chaebols often had the management monopolized by the founder and his family, who often had political connections, their decisions were based on personal interests rather than real economic interests (Lee 6). To this day, corruption still runs rampant in South Korea, and many controversies arise regarding Chaebol’s high amounts of political influence. In 2017, former president Park Geun-Hye was impeached on charges of corruption and abuse of power. Her aide, Choi Soon-Sil, along with other senior staff used their influence to extort over $60 million from Korean Chaebols in exchange for political favors (South Korea’s Presidential Scandal). To summarize, mismanagement and contradictory leadership of the Korean economy led to virtually all asset markets crashing as well as the currency’s value falling by unprecedented amounts. However, because of the demands made by the IMF in their rescue package to South Korea, they were able to recover and restructure their economy (Lee 11).
5.1 Labor suppression
The governments of the Four Asian Tigers have implemented measures to repress labor unions in order to keep labor costs down and therefore maximize potential growth. Specifically, in South Korea and Taiwan, strikes were made illegal in foreign-owned enterprises as well as public firms (Gulati 167). Rising standards of living can be seen as a threat to export-led growth, and with conglomerates like Hyundai running away from giving back to their laborers in South Korea, they move internationally for cheaper labor to reap the benefits while regular Koreans suffer. The state and businesses have both expected the population to work increasingly long hours at below-average wages, in order to remain globally competitive (Hart-Landsberg and Burkett 101).
6. Increases in Overall Quality of Life
In contrast to the criticisms made by Hart-Landsberg and Burkett, the Four Asian Tigers have experienced incredible amounts of improvements in terms of life span and GDP per capita, along with their overall economic growth. The argument could be made that only the top capitalists in these countries benefitted from their firm’s growth, but on average the life of citizens have gotten better. Figures 1 and 2 show life expectancy increases and GDP per capita growth respectively.
Conclusion
From a macroeconomic standpoint, the stark growth that the Asian Tigers experienced was due to the unorthodox government support for private industries as well as increased education and investment in the people. This growth also came with negative effects, such as having authoritarian regimes as well as the working-class suffering. In the 21st century, the Asian Tigers now have some of the world’s best primary and secondary education because of their devotion to economic growth. The export-oriented industrialization of these nations was financed by an abundance of foreign direct investment, and the growth was maintained by military suppression. Furthermore, Japanese Zaibatsu corporations were the building blocks for the economic models of Taiwan and South Korea, but these countries now face rampant corruption issues. Even with all these issues that arose because of GDP expansionist ideology, these countries ultimately are still able to compete with western economic powerhouses because of it.
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