ECONOMIC LESSONS FROM THE ASIAN TIGERS, JAPAN, EUROPE AND AMERICA

Economic History of the Asian Tigers

The four Asian Tigers – Hong Kong, Singapore, South Korea and Taiwan consistently maintained high levels of economic growth since the 1960s, fueled by exports and rapid industrialization, which enabled these economies to join the ranks of the world’s richest nations.

Hong Kong and Singapore are among the biggest financial centers worldwide, while South Korea and Taiwan are important hubs of global manufacturing in automobile/electronic components and information technology, respectively.

Common Characteristics of the Four Asian Tigers

Common characteristics of the four Asian Tigers include the following:

1. They focus on exports,
2. They have educated populace
3. They have high savings rates

Factors that Account for the Rapid Development of Tiger Economies

1. High public and private saving rates:Savings were high in both the public and the private sectors. The incentive to safe was very high and this enabled capital to be accumulated for massive investments in the high income generating sectors.
2. High life expectancy:This is made possible by adequate care of the people by government and this leads to high productivity.
3. Highly developed capital and money markets: They pursued stringent credit policies and state-imposed below-market interest rates for loans to specific export-led industries.
4. High level of information technology development:Their highly developed and breakthrough in information technology boost their external trade and increased foreign exchange earnings which are used for further investment.
5. Purposeful, honest and articulate leadership:Their leaders were in their office to serve the interest of people and ensure that people enjoyed the good things of life.
6. Export-based industrial policies:They effectively pursue industrial policies which supported massive exports to the rich industrialized nations of Europe and America.
7. Heavy government investment in education and human capital development:This helped them to develop highly skilled manpower required to turn the economy around within a very short time.
8. Quality and standardization:Emphasis was placed on production of high quality standardized goods that would compete at the global level. Experts on Standardization and quality assurance were brought in from Japan, US and UK.
9. Culture and Religious beliefs:- The religious beliefs of Singapore, hard work, innovativeness coupled with their culture of openness and harsh punishments for criminal offences led to a corruption free economy.
10. Outward oriented strategies/policies: – Their more rapid growth can be associated with much greater openness. This was achieved by removing all restrictions on imports and giving freedom to the export sector.
11. Slow growth rates of population:- This played a great role in reducing family sizes (dependency ratios), creation of an educated labour force, accumulation of household and government savings, rise in wages and impressive growth of investments in manufacturing technology
12. Effective and stringent public policies:. This consisted of credible macro-economic policies that kept inflation low, interest rates low, fiscal policies that focused on raising saving rates and investment rates, as well as policies that enhanced the development of infrastructure.
13. Knowledge-driven economy– The Asian Tiger governments committed to improving research and development.  The industries became knowledge driven industries and e.g. in Singapore gradually 2 out of 3 jobs were for knowledgeable and skilled workers in manufacturing sector and 3 out of 4 of the export services sector.

Lessons for the Nigerian Economy

1. Focus on exports: Whereas other developing countries use import substitution strategies for economic development, the Asian tigers focused on export-oriented industrial development to richer countries. Domestic production was discouraged through government policies such as high tariffs also trading the surplus with the richer countries.
2. Human capital development: They developed specialized skills for their personnel in order to improve productivity through raising their educational standards.
3. They had an abundance of cheap labour. This is highly needed for economic development.
4. Existence of an adequately developed financial system: An adequately developed capital market would ensure adequate mobilization of capital for industrial and economic development.
5. Maintaining social and political stability together with a stable macroeconomic environment,
6. High tariffs on imports in the early days to discourage import and encourage export.
7. Leadership that is interested in the welfare of the citizens would motivate labour to work hard, thereby raising the level of productivity.
8. High saving rate will increase the rate of capital formation. This should be done by private institutions and government instead of spending prestigious non-productive project.
9. Development of export industries and promotion of certain basic industries that produce competitive goods for the world market.

The Japanese Miracle and Lessons from Japan

The period between 1953 and the early 1970s which witnessed unprecedented growth rate in Japan is termed by some people as “miracle period growth”. The Japanese economy was devastated by the world war II and the economic activities almost grounded to a halt. But by the early 1970s, the Japanese industries had become internationally competitive and the income gap between the country and the United State of America was closed considerably.

Factors that Triggered off the Japanese Miracle

1. Private sector led investment:The profit-motive associated with private sector investment promoted large-scale investment, leading to economies of scale in production.
2. High literacy rate and high education standards:Japan is acclaimed to have the highest literacy rate, and the nature of educational curriculum encouraged discipline.
3. A well disciplined, relatively cheap, highly educated and skilled work force, with reasonable wage demands by labour unions.
4. Proper management of natural resources.
5. Promotion of exports through the development of world-class, responsive export-oriented industries which were provided with adequate incentives
6. Massive investments in infrastructure and in heavy manufacturing industries.
7. Highly developed financial and marketing systems
8. Adaptation of foreign or imported technology
9. Massive research and development made them to discover efficient production techniques.
10. High saving rate accompanied with high levels of investment.

Economic Lessons from Europe

There are lessons to learn by developing countries from Europe. These are:

1. Economic integration or co-operation: This has helped to limit wars which led to waste of resources in the past. Co-operation in many areas of development has created economies of scale in production and increased the level of investment.
2. Export-oriented economies: They bought cheap raw-materials from the developing countries and produced manufactured goods in which they have comparative advantage.
3. Massive investments in manufacturing industries with reduced reliance on agriculture.
4. Massive investment in education and human capital development.
5. Agrarian and industrial revolutions in Britain led to discoveries and inventions which changed the economic landscape of Europe.
6. A well developed financial sector: Europe has a well developed financial sector with financial institutions among the leading ones in the world. This makes for easy accumulation and transfer of capital for investment

EVALUATION (Post the question title and your answers in the box below for discussion and evaluation)

1. (a) Explain the meaning of the ‘Japanese miracle’.

(b) What lessons can your country learn from the economic development of Japan?

2. What is meant by “Asian Tigers?” Examine the development strategies adopted by these countries and discuss the economic lessons your country can learn from them.
3. Examine the development strategies of the countries of Western Europe. What economic lessons can your country learn from them?