East Asian Miracle: a myth or reality?

Imogen Braddick

Considering the huge policy variations across East Asian economies, can the East Asian Miracle truly be generalised as a “miracle”? Korea and Taiwan were both colonised by Japan and left with similar legacies; how can we call the phenomenon an “East Asian” miracle when Japan’s legacy created the foundations for growth?

East Asia has an outstanding record of rapid and sustained economic growth. From 1965 to 1990 the majority of its economies grew faster than those of all other regions. The highest performing economies are often called the “four tigers”; these countries are Hong Kong, Korea, Taiwan and Singapore. Japan is also a member of the high performing Asian economies (HPAEs) alongside Indonesia, Malaysia and Thailand.

Taiwan was colonised by Japan from 1895 to 1945 and Japan colonised Korea from 1910 to 1945. The essential elements of the Japanese growth model include the creation of an effective centralized state and an emphasis on using the state to facilitate socioeconomic change. The Japanese created a healthier environment through direct government and administrative control; enforced quarantine regulations, compulsory testing for malaria and regular public health inspections all contributed to the emergence of a healthy population capable of stimulating economic development.

Japanese colonialism left an imprint on the political economy of Korea; the state was transformed from a traditional agrarian society into a highly authoritarian regime, laying the structural and political foundations for high growth. 

The Japanese colonial system left a stock of human resources that created a foundation for industrialisation; illiteracy rates in Korea declined from around 40 percent of the work force in 1946 to approximately nil by 1963 and the share of the work force with secondary education rose from 7.4 percent in 1946 to nearly 50 percent in 1983. 

Like Korea, Taiwan saw great advancement in social welfare; enrollment in primary school rose from 5.8 percent in 1910 to 71.3 percent in 1945. Drawing on the lessons learned from Japan’s own agricultural development, agricultural programmes were devised for Taiwan to improve the economic and technical environment to maximise production.

If the roots of contemporary Korea and Taiwan are embedded in a relatively unique colonial experience, then it becomes difficult to transfer the ‘model’ of development and generalise the path to all economies in the region.

As Paul Krugman states, “the extremely diverse institutions and policies of the various newly industrialized Asian countries, let alone Japan, cannot really be called a common system” (Krugman, 1994, p.78).

Colonisation meant both economies exhibited state-led transitions yet followed different development models with differing agricultural-industrial balance. Taiwan followed a pro-stability model; the government nurtured the small-medium enterprise (SME) network structure, emphasising the importance of small firms and networks in their flexibility to adjust to market situations. Contrastingly, Korea followed a high-debt model, nurturing large family-owned chaebols.

The most distinctive feature of the Korean developmental state is the choice to prioritise and nurture a small number of industries. Whereas the state in Taiwan were reluctant to nurture or subsidise big businesses for fear of ethnic conflict and too much specialisation. The SMEs were highly successful in Taiwan due to the spillover effects from state-owned enterprises; some scholars argue this success was due to a ‘dual economy’, with Taiwan having both SMEs and state-owned enterprises complimenting each other.

The rapid economic development of Korea and Taiwan is not a result of their own policy, it is a product of Japanese colonisation. Once independence was gained, this platform paved the way for developmental states and emphasis on industrial policy, education and social welfare as a key route to further growth and development.  
All in all, I’m arguing that colonial foundations are hugely important when considering a country’s development path.