The economic status of East Asia has become one of the most flourishing and positively growing regional economies in the globe in recent times and something to reckon with. The region has turned to be the home of the global significance as well as the most affluent economy consisting of countries such as; Japan, China, Hong Kong, Singapore South Korea and Taiwan. There have been numerous and major factors that have turned the economic success of the region to be a positive gain to the countries (Chang, 14).
Some of the key constructive factors that have contributed to the developments of the positive economic status in the region includes: positive legal and political environments for both commerce and industry, through the plentiful natural wealth of different kinds, to ample supplies of comparatively low-cost, trained, and flexible employment. The success of the regional economic developments can highly be adopted in many other developing countries. This paper looks into the extent into which the model that has been adopted by the East Asian region, and how well is it suited to be adopted by other developing countries globally (the suitability of the East Asian model into the development of developing countries’ economies) (Hira, 21).
Literature review
The most successful developing countries over the last over the last half a century have come from East Asia. The rapid economic growth of the eight Asian economies which is often referred to as ‘East Asian Miracle’ brought along two major questions; (I) what policies and other factors contributed to that growth? (ii) And can other developing countries replicate those policies to stimulate equally rapid growth? There have been numerous analyses on the success and also based on case studies econometric data, and economic theory, offers a list of the ingredients that contributed to that success (Kwon et al, 32).
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Researchers have been done, concerning the model deployed by the East Asian economies and how the countries have managed to navigate through economic crises. World Bank and financial institutions, has conducted the applicability of the development model applied by the East Asian countries into the developing countries. The development evidence of the East Asian financial system has been impressive, especially when compared to that of other developing countries. How can such a record be accounted for? What lessons can we draw from it? What has been the role of public policy? These are questions that have aroused heated debate in recent years, especially among the mainstream neoclassical school and the non-orthodox or revisionists (Saggi, 36).
According to World Bank 1993, the ‘East Asian Miracle’ model has been a positive gain to the Asian economies which can as well be adopted in the developing countries. In addition, Haggard, 2004 noted that, there is no fixed definition of what is contained in the ‘East Asian model’ of development. How economies grew, how industrial structures were transformed, how governments intervened in solving coordination problems, pursuing efficient policies, making credible commitments, etc. varied depending on time and location (Hughes, 18).
Different writers select different characteristics, often depending on what country (or countries) they are studying, and, at times, in function of their ideological preferences. At the clear risk of over-simplification, but so as to maintain the discussion manageable, four major features will be selected that have, arguably, been both common to, and crucial for, the experiences of Japan, Taiwan and South Korea over the periods here examined (Chang, 26).
Introduction
The historical, trade and industrial growth in East Asia described as ‘East Asian Miracle’ brought a huge attention into the world and has provided a large literature on the economic development theories since then (World Bank, 1993).
The Review on To what extent the East Asian model is transferrable to other developing countries
... for Policy Studies Park, H. J. (2002) ‘The East Asian Model of Economic Development and Developing Countries” in Journal of Developing Societies 18: p. 330 ... H. (1994). Why Isn’t the Whole World Experimenting with the East Asian Model to Develop?: Review of the East Asian Miracle. World Development, 22 (4), pp. 627-633. ...
The countries, Korea, Taiwan, Hong Kong, and Singapore, followed Japan, which itself was the very first country that succeeded, becoming an industrialized country outside the famous western economy, and achieved similar economic success in the phase of development following the Second World War from the 1950s to the 1970s and named as the four Asian Tigers. Then the three newly Industrializing economies (NIES) of Southeast Asia, Thailand, Malaysia, and Indonesia also managed to take off becoming large enough to reach the respective status of middle income countries in the second phase from the 1970s to the 1990s. (Chang 2006, World Bank, 1993, Jomo, 2001).
The adoption of the given model led to the adoption of a strategies directed towards this regional economic development and in turn coming to be a central aspect in development these economics and the model was denoted as the ‘East Asian Development Model (EADM)’. The model has different defining clauses and includes factors such as state control over finance, direct support for state owned enterprises by the government, import substitution industrialization in heavy industry and shift to export-led industry, a high dependence on export markets and a high rate of domestic savings among other practices.
The nature of this model EADM was opposed to the protestations of the IMF-led “Washington Consensus”, model, which itself constitutes principles, and policies that are aimed at global economy work through the act of harmonizing the way that national economy operates. For example, the models work through the act of reducing barriers to international trade such as tariffs deregulation led to reductions in government control with the pushing for free trade practices. However, the World Bank’s influential study, on the East Asian Miracle represents the neo-classical claim in the current East Asian debate by acknowledging that, the frequent use of state intervention in the East Asian development process, but also inefficiency of the intervention. According to World Bank (1993), the intervention was not harmful, though still not helpful.
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However, it is widely recognized now that the export-push strategies in East Asia are very much linked to selective industrial policy and state intervention actively promoted economic growth in the region. According to Wade (1992), the development of a concept of the governed market theory, explains the East Asian success by three causes; (I) high levels of productive investment. (ii) Relatively an increased investment in certain key industries and finally (iii) exposure of many industries to international competition. It is argued that such economic policies, incentives, controls and risk spreading mechanism allow them to sustain rapid development, which produces different level productions and its huge outcomes in the private sector. This theory emphasizes on capital accumulation rather than resource allocation as per the orthodox theory as the principle source of growth (Nissanke & Ernest, 11).
It is unrealistic to assume that there is only one development model and it can be mostly agreed that nations have been taking their own or different ways of pursuing the EADM model with diverse development strategies. Hence, this paper will argue based on the World Bank’s famous distinctions of the model;
Northeast Asian model; based on the Japanese paradigm of industrial policy and more active state intervention, which refers namely the NIEs countries
Southeast Asian model; described that more open and market-friendly regimes, which refers ASEAN-3 countries; Thailand, Malaysia, and Indonesia
It is often criticized that, the re-applicability of the Northeast Asian model by claiming is not possible in the contemporary context, not only because it ignores the importance of the global market, but also owing to the Unique historical context of Northeast Asia and the constraints under the new regime of the ‘WTO’. Therefore, the first goal of this paper is to refute the initial condition argument while addressing analytical shortcomings of this orthodoxy theory; it deals mostly with static concerns and thus has little say about dynamic changes, and also it downplays the social-political dimensions of the economic development, adopting just a kind of ‘economic determinism’ in their approach (Richter, 44).
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Positives from the East Asian Model
Diversity in ecosystem, population, ethnicity, religion, social structure, and political regime
Equally great diversity in GDP, per capita income, and economic development
High growth sustained over a long period almost throughout the region. Associated with this high growth are high, savings and investment rates, active, but managed external opening, export orientation, industrialization, and general improvements in social indicators.
Accomplishments and Characteristics of the East Asian Development Paradigm
One of the major achievements of the model is the rapid economic growth of the region. For example, the implementation of the model led to the real income per capital grow four times bigger than it was previously in Japan, Taiwan, Hong Kong, Singapore, and South Korea. Another accomplishment of the model was declining inequality. This is whereby; the positive gains and economic developments were evenly distributed throughout the populations. Thirdly, the model led to a quick reduction of the technology gap through massive investment in human capital, importation of foreign technology, export orientation, and the opening of markets for foreign direct investment as a means of introducing advanced technology. Finally, the model led to reduction of poverty rates in the region (Saggi, 51).
Adaptability of ‘East Asian Miracle’ into the Developing Countries (To What Extent Can the Model Be Used By the Developing Countries)
Less developed, countries or better still developing countries globally are nations denoted by the poor living standard as well as underdeveloped in industrial aspects. Base as well as a low human development index, when compared to other countries. One of the aspects used to differentiate between a developed and an underdeveloped country is the value of the county’s GDP per capita. Less developed nations are countries that have not realized a considerable degree of industrialization in relation to their populations. In most cases, they are said to have medium or poor standards of livelihood.
There is a well-built relationship connecting low earnings and high populace growth. Once an expansion strategy is chosen, the proper policy systems will in turn certainly be formed or laid down as the foot print to development, and in turn the outcome of economic growth is, to a greater extent, determined by whether the preferred developmental strategies are right or wrong. If only the macroeconomic setting and government guiding principles are well thought-out, and not looking into positives and negatives of the given development plan, then a general idea of where the problems lie is impossible. Modification plans thus raised can barely give solutions to problems existing in the wealth of African states (Hughes, 40).
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The implementation of the East Asian Model in the developing countries would somehow be of great achievement in terms of development. One of the major contributors to the development of the East Asian is the growth driven by trade and investment. For each of the countries in the region, the long term growth path as well as the achievement of industrialization can be tracked by income trends as well as structural shifts in GDP and exports. The exceptional feature of East Asian growth is that it has been achieved through the very existence of East Asia as a powerful arena of economic interaction among its members, and not merely by “market-friendly” policies or good governance of individual countries alone (Kwon et al, 57).
One of the achievement or realization that has contributed to the development of the East Asian regions in terms of economy is the realization of the economic growth through participation in a series of dynamic production network that is generated by private firms. This has been benefited by Linked by trade and investment, a system of international division of labor with clear order and structure exists in the region. Taking this approach into the developing country, the model can be of positive gain to the developing nations. The model also explains the importance of the private sector in the economic development of a nation. This can be adopted in the developing nations as it would lead to the increase of the country’s GDP (Kwon et al, 68).
Another point that can be borrowed from the East Asian development model is the interaction among the members of the region. Thus, can be deployed in other regions such as Africa and also becomes a success. This would lead to the formation of powerful arena in terms of economic interactions between different countries. Moreover, good governance should be adhered in order to achieve the benefits from the model implementations. For the developing countries to develop and adopt the model into positive gains, the developing countries, have no choice but to initiate development, and undertake international integration via trade and investment. The East Asia model has also described the need to have well established political, social and economical conducive environment for a better economic development. This van as well be adopted in the developing nations which are greatly denoted by poor political establishments, and deteriorated social and economic aspects (Hira, 71).
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One of the developing regions or countries is the African states. The biggest question that remains for the African states is: Can African learn from the ‘East Asia miracle’ development model? Yes, the model can be of great help to a number of African nations as majority of them are categorized as developing countries. Since 1970’s all the way to the late 1990’s, East Asia has experienced has embarked on a model that has resulted in an outstanding evidence of high and unrelenting fiscal growth. The model has become a development model to other developing regions as is the case of African states (Chang, 49).
One of the major aspects of the model is the East Asian regions embarked on the plan to increase the value and the amount of exported goods and as well reduce the number of imported goods. Through the increase in the volume of exports from the Asian countries, there was an increase in the volume of finished goods and the success in export trade has seen maintenance of high deposition and domestic venture rates. This provides the capital essential for economic expansion. Consequently, reducing the dependence on foreign investment and embark on home trade, investment and in turn increasing the value of GDP (Nissanke & Earnest, 63).
Following the attainment of independence, the third world countries were faced with the task of identifying the right approaches to build up their economies. This was meant to exterminate poverty as soon as they could. Many of these countries (developing) turned to strategies that targeted industrialization acceleration. This opted choice by some countries brought along an economic system that was an unclear macro policy setting and designed distribution structures for properties and the micro-management need for self-sufficiency. The result of the countries that deployed this approach to develop their economy, were shocked as such economic structures smothered economic growth. In return the economies of these countries which followed such strategies didn’t step forward at all, as some of the nations fell behind development as they were faced with more problems (Chang, 80).
In contrast to this scenario, the development plans adopted in the East Asia signified an extra choice and approach to economic development. The region members gave massive contemplations to their resource state of affairs, and in turn they took advantage of their ample labor availability resources which provided them with low costs of labor. This approach allowed them to establish industries that are labor intensive as an economy development take-off. In addition, in order to achieve positive results in their economy development, the countries had to adjust their industrial organization. This approach was deployed in the ‘East Asia miracle’ model, which turned to be a success in the region. However, the approach of the same by the developing countries would be of great benefit to the countries and their regions such as Africa (Richter, 55).
Another advantage of the miracle model for the developing countries is that, it teaches the developing economies to sustain a constructive macro-economic situation as well as the correct basic policies. The Asian countries have maintained their debt within bearable limits. One of the factors that has dragged the economic development and prosperity of the developing economies is the massive and inability to control their debts. The countries are heavily indebted to the financial institutions such as the World Bank and IMF, such that, they are unable to control their debts owed to another stable and developed countries. With the inability to control their debts, the developing countries couldn’t control their inflation as well as both their home and foreign debts to a definite extent. Most of the developing countries are agriculture products dependent in terms of their productions. The East Asian models for economic development guaranteed the effectiveness of their policies which in turn was to enhance an increase in agriculture production (Jomo, 76).
Other positive which can be of great advantage and can also be adapted into other developing countries includes the foundation of fundamental sound development policies. A large portion of economy development in East Asian can be attributed to getting the fundamentals needed correctly. These factors or fundamentals include responsible and disciplined fiscal and monetary policies, which are beneficial in maintaining moderate rates of inflation in the developing countries. Inflation is one of the factors that are a hindrance to economic stability in these developing countries. In addition, the model called for the conducive economic environment for private investment. For the developing countries, it helps realize the vital and the importance of the private sector in the economic development of the countries. In addition to the importance of the private sector in the economic development, the East Asian “miracle” model also advocated for high investments in education. To the developing countries, investment in education, such as post secondary education, vocational and technical skill training developed a better educated labor force suited for rapid economic development (Kwon et al, 86).
High rising and saving rates were also a practice advocated by the model. The East Asian governments developed a relatively sound and stable financial system. This was achieved through strengthening prudential regulations and supervision of financial institutions and setting limits on competition. They also expanded the financial system network by promoting postal saving systems to successfully increase the accessibility of financial savings instruments to non-traditional savers. Finally, the fundamentally sound development policies included actively seeking foreign technology through foreign licensing, capital goods imports, and liberalization of foreign direct investment. The policies were some of the adaptable policies what would work well with numerous developing countries globally (Hughes, 98).
In fact, since the 1970s, Africa nations have continuously explored and re-assessed their development strategies, so as to seek out with a unique development pattern suited to Africa. This exploration is still underway. In this regard, African country can gain some ideas from the experiences of East Asia. A favorable macroeconomic policy environment is needed to support the practice of comparative advantage development strategies. For this purpose, productive factor markets and finished products, markets, which are feasible and fully competitive, must be established, so as to conform to the smooth operation of the market mechanism. Some African countries are making efforts in this direction while adjusting their structure. Meanwhile, they should pay special attention to adjusting policies (Hira, 89).
Agricultural policy for agriculture remains the mainstay of the economy in most African countries; the support of the agricultural sector is significantly to economic development. The experiences in East Asia have shown that with the right agricultural policies and a measure, agriculture plays an important role in pushing the national economies forward. Many African countries have improved, to differing degrees, in prices and the circulation of goods, as well as agricultural tax policies. But there is a long way to go. Improving the management of State assets and raising profits in most African countries. State enterprises play a significant role in production and employment. However, poor profits and large losses have become an emerging problem facing economic development. Many countries have proposed the privatization of State enterprises. So far, the process has made little progress and has had little effect. In this aspect they still need to explore new methods of reform (Nissanke & Ernest, 78).
Defining government functions either under the marketing economy or the planned economy, government plays a very important role in economic development, only differing in its functions. The experiences in East Asia have indicated that the government should intervene only in the fields where it is needed, leaving markets to operate freely. Only in those fields, such as developing human resources, constructing and protecting infrastructure, environmental protection and so on. Where markets are not able to operate, will the government need to intervene? This will create a stable, sustainable and fair environment for the operation of market mechanisms. Choosing suitable development strategies and forming correct policies, this is a precondition for achieving favorable results, but not the full condition for ideal development. An effective and powerful government is a basic guarantee for the realization of the development aim. During the past three years, the African economies have continually risen and the overall situation has been improved. But the adjustment of strategies and improvements in external conditions requires time. Africa will be able to step on the path of continuous economic growth only if it undertakes long-term efforts and carries out suitable economic reforms (Chang, 101).
Reasons why the development model won’t work with other developing countries
Letdown of the East Asian growth Model
Despite the progress made by the East Asia region in terms of economic developments, criticisms of the model have been raised as well as the models, adapted to other countries such as the developmental one. In addition, the adaptability and sustainability of the model have been questioned. The path trodden by East Asia has not always been smooth as some nations in the region failing to achieve high growth, and the states were hit by occasional setbacks. East Asia has had its share of hardships in its history, with hot and cold wars, social instabilities and financial crises. In addition, the structural weakness of the model is a posing threat to the adaptability of the system into other countries economy development. Despite the weakness, not a sign of the end of the system, it may instead be a signal that the model in dire need of repair in order to be a success even to other different regions (Nissanke & Ernest, 92).
Moreover, the East Asian model has evolved over time and adapted to the changes that has occurred in the region such a political, societal and economic changes which have not only occurred in Asia but also in other parts of the world. The fundamental question from this is whether the model can adapt to some of the most significant changes and developments that change the economic landscape of the developing countries such as democratization and domestic economic liberalization, globalization in parallel with regionalization, and the emergence of a new economy driven by information technology. The model can be able to adjust to significant changes in the region, but at the same time fail to adapt to the same changes in other regions such as Africa (Chang, 120).
East Asian countries were constantly showing a lot of structural strains and rigidities. The model was hampered by four main failures that affected the credibility and applicability of the model into the developing nations globally. One of the failures is that, the model neglected the differences involving the government mechanism and the elected policy as well as the market liberalization. In addition, the failure to reorganize the financial structure was a stumbling block for the model to be adopted in the developing countries. Finally, the congested and non-transparent corporate sector within the developing countries such as the African states was a stumbling block to the implementation of the model (Kwon at al, 136).
Asian Financial Crisis In 1997
Despite the growing status as one of the blossoming economic growth globally, the east Asia economy had to overcome some worrying and threatening financial crises. The Asian region was at some time faced with a severe financial crisis, Fro example is the ‘Asian financial Crisis in 1997’ also known as “Asian Contagion”. This was a succession of money devaluations that had spread through a good number of Asian markets. This financial menace started in Thailand, and spread to other Asian countries such as Hong Kong, Malaysia, Philippines, Indonesia and South Korea. The Asian financial crisis was a period of financial crisis that gripped much of East Asia beginning in July 1997, and raised fears of a worldwide economic meltdown due to financial contagion (Harrold, 66).
The currency markets first failed in Thailand as the result of the government’s decision to no longer peg the local currency to the U.S. dollar. Currency declines spread rapidly throughout South Asia, in turn causing stock market declines, reduced import revenues and even government upheaval. According to Krugman’s Paul view, the east Asia economic growth had historically been due to the increase of capital investment. However, the total factor productivity of the region had only increased marginally or not increased at all. In the case of long term prosperity, there ought to have grown only in total factor productivity and not capital investment.
The collapse of the Thai Baht in July 1997 was followed by an unprecedented financial crisis in East Asia, from which these economies are still struggling to recover. A great deal of effort has been devoted to trying to understand its causes. One view is that there was nothing inherently wrong with East Asian economies, which have historically performed very well. These economies experienced a surge in capital inflows to finance productive investments that made them vulnerable to a financial panic. That panic–and inadequate policy responses–triggered a region-wide financial crisis and the economic disruption that followed. In addition, The weaknesses of the financial sector in the East Asian region were masked by rapid growth and accentuated by large capital inflows, which were partly encouraged by pegged exchange rates (Harrold, 103).
Key Root Causes Of The Asian Financial Crisis
In summary, the main causes of the financial crises in Asia were:
Large current account deficits that left the countries vulnerable to changes in investor confidence and macroeconomic conditions (i.e., slower growth).
Overvalued exchange rates that were often pegged to the U.S. dollar, which was, at that time, appreciating quite rapidly.
Rapid and unsustainable increases in asset prices, especially stock market and real estate prices.
A currency mismatch between assets and liabilities that left banks and enterprises vulnerable to exchange rate devaluations.
Inadequate bank regulation and supervision. Implicit and explicit government guarantees that made high-risk projects (including projects which relied upon continued appreciation in real estate prices) attractive to investors.
Political instability
Lessons learned from the Asian crisis
In East Asia, in addition to supporting the International Monetary Funds programs, the Bank provided Structural Adjustment Loans to prop up and re-capitalize on selected banks by supporting bond issues. In addition, the World Bank set up credit lines to help finance imports. The Asian crisis menace came as an eye opener and as a surprise to policymakers, investors, and academics alike, where buy despite majority accepting the menace was expected it would have been controlled and avoided too. This would be of great help to the developing economies such as the African States cases. The recommendations that were passed for the prevention of Asian financial crisis prevention would be of great help to prevent the re-emergence of such a case again.
In addition, the crisis was an eye opener to the economies of developing countries as well as the importance of the IMF. These include conditional financing, bail out from the such menaces as well as the structural adjustment package. As seen from the Asian Financial Crisis case, financial intervention from the International Monetary Fund and the World Bank played a vital role in reversing the scenario. As a result of the crisis, many nations adopted protectionist measures to ensure the stability of their own currency. Often this led to heavy buying of U.S. Treasuries, which are used as a global investment by most of the world’s sovereignties. Financial and government reforms in countries like Thailand, South Korea, Japan and Indonesia. It also serves as a valuable case study for economists who try to understand the interwoven markets of today, especially as it relates to currency trading and national account management.
In summary, of the Asian financial crisis in 1997, the East Asia’s experience suggests that while a classic panic may have played a role, financial sector weaknesses were a major contributor to the recent financial crisis. Such weaknesses appear to reflect the inability of lenders to use business criteria in allocating credit and implicit or explicit government guarantees against risk. This implies that it would be prudent to accompany efforts to spur recovery in East Asia by reforms designed to strengthen the financial system.
‘East Asian Miracle’ Application To African Countries (Kenya)
From the early 1970s onwards, the nations of East-Asia, also known as the Asian Tigers due to their astounding growth and expansion economically that demystified the conformist economic theory based on the western model of growth that adopted industrial development as an approach for overall development. Numerous researchers have pointed out that, contrasting the western model, the Asian model is premised on capital build up as well as that of human capital, which are seen as influential in the growth of these countries economies. The Asian economic growth has been very notable such that it has served as a textbook case for strategy makers in numerous Least Developing Countries such as is the case in Africa (Nyong’o, 2007).
This growth incident has baffled various economic historians as well as geographical experiences recorded so far leading to researchers to argue that, success in Asian countries was based on an updated version of primitive accumulation and that, their success can be a model if only their high savings rates can be replicated. This is in contrast to African economies such as Kenya, which took off at the same time and indeed rate as the Asian economies. Contlarry of the Asian countries, Kenya recorded dismal and unsatisfactory growth and development over the last two decades prompting a number of scholars to call the incident “a crisis of proportion. This rather tremendous contrast between the two regions, that so recently shared a similar turbulent past, raises many questions which should be of interest as well as a challenge to policy makers, especially in Africa to discern what went wrong with their policies and policy implementation, against what went right with Asian countries.
Such questions that beg urgent answers are even more pertinent when one considers that, Kenya was poised to grow faster than the Asian countries considering its resource advantages. For example, at the time of self-government countries such Kenya and Ghana were said to have had a healthier growth prediction than any country among the Asian tigers. According to the world bank, (2003) “it would be hugely important for African researchers, practitioners, and policy makers to have the opportunity to observe directly the economies of East Asia and Southern Asia themselves to discuss economic policy reform directly with the academics, practitioners and policy makers from the Asian region.”
However, one point that should be kept in perspective is that, there are no two nations that are similar so as to assume that expansion and growth in one can be replicated in the other. One point to be noted in cases of development, there are some fundamental factors that must be in place for a country to latch into the development phase and the rest depends on the model the country pursues to sustain the development. Many policy makers and indeed some academics in Kenya, and Africa at large have, for quite some time now, tended to attribute Africa’s poor development record of its historical past, specifically blaming it on her colonial legacy, and later neo-colonial ‘manipulation by western countries’. Such attitude holds no ground when one considers that Asian countries had a comparable historical environment, which limits the extent to which these arguments can be held to justify the poor development record of many African states 50 years on.
One point to be noted when it comes to Kenyan case and other African countries is that, African economies at the time, were not capable of creating good governance on their own, nor could they be expected to assemble the human and capital resources necessary to ensure a development process. According to Nissanke (1998), the failure of African states to economically develop like the Asian case, after independence is that, whilst all seemed to have a common goal of accelerating the pace of economic growth and thus development, they tended to diverge on such issues as: the role of the state, the degree of openness that could be accommodated, the desirable partner of investment in social services versus economic services, and the government-private sector relations. The long-standing results obtained were not dissimilar, suggesting that, failure was the outcome of a wrong mix of policies which are uncoordinated, absence of institutions, external environment, lack of societal preparedness, which were by and large constraints overcame by their Asian counterparts.
Elsewhere O’Connel (1996) commenting on such failure, emphasized that, African states and especially Kenya, have evolved from a shortage of capital diagnosis of the 1960s and 1970s, to a diagnosis of policy failure of the 1980s and, finally, to a diagnosis of institutional failures of the late 1990s. However, other researchers who, when comparing the source of growth in Asia with those of Germany, UK, USA and Japan, conclude that, by far the most important source of economic growth in these countries is capital accumulation, accounting for between 48% to 72% of their economic growth (Nyong’o, 2007).
Others have pointed out that, it is rather a combination of both capital accumulation and human capital accumulation (learning by doing) which have been the productive engine behind the unprecedented growth, pointing out that, physical capital critical in the growth process, is rather passive and subsidiary to human capital accumulation. This contrasts to the above group of industrialized nations where technical progress played a vital role in their development, accounting for between 46% and 71% of their economic growth (Aryeetey & International Conference).
Whereas capital accumulation and indeed human capital development accounts for growth differentials between Africa and Asian countries, it all depended on policy choices each the countries in Asia took, for such development has not been uniform in most Asian economies either. Rather, Asian countries which have recorded unprecedented growth episodes have combined not only right and consistent policies over time, but also their societal preparedness had an even greater role to play to this end. It has thus been pointed out that, countries such as Malaysia, Singapore, South Korea, Indonesia, Thailand, and of late Vietnam have all had an element of societal preparedness, which is highlighted in the culture of hard work, drive to succeed, and high propensities to save (Nyong’o, 2007).
Others even argue that, the Chinese culture (of hard work and their strive for excellence) entrenched in most of these countries in part explains their drive to grow at the rates that far exceed the growth recorded elsewhere. The dismal performance of a number of African economies has also been explained in the context that, factors attendant in the Asian region, were not to be found in African countries, and no wonder that, no one country latched into development phase close to the Asian Tigers (Aryeetey & International Conference, 2003).
Although many African countries have borrowed a leaf from their Asian counterparts, especially in the areas of human capital development, the new paradigm shift has mainly focused on institutional development. This is even more pertinent considering that, Africa has not been short of capital. Indeed, despite the massive foreign aid and to a lesser extent direct capital flows, African economies have not developed as expected. This reinforces the belief that, capital inflows, whether local or foreign, cannot make an impact in the absence of a conducive environment characterized by transparency, governments, good governance, democratic political economy, conducive economic, social-cultural, and legal environment (Harrold, 96).
Findings and conclusions
At the turn 21st century, there has much dialogue and discussion about the ‘miracle model’ in East Asia and its effectiveness in the economic development and its sustainability. The East Asian economic development model, which built the hypothetical and institutional structure of growth in the area, is liable along with the rest of what was one time called the East Asian Miracle. In an attempt to give a rich, textured analysis, it’s clear from the paper that, the model can be of positive gain to the developing countries in terms of economic development. Despite the ‘East Asian development model’ a workable option for the developing and less developed countries, it had its own shortcomings. The contributors provide a cohesive review of the East Asian development model, exploring its cultural heritage, the political context through which it arose, its basic assumptions, and its recent failures. In particular, they identify the causes and consequences of the Asian economic crisis, describe the features of economic development throughout the region, and discuss the strategic responses of Asian firms to newly developing economies of countries such as African states.
The sustainable and swift economic growth in East Asia has attracted wide attention in Africa, and they believe the successful experiences of East Asia should be followed to develop African national economy vigorously. It’s clear that the model deployed by the countries in the region (East Asia) was effective in raising the country’s GDP and in turn it was worthy to be deployed in the African countries which are an example of developing states. Despite the growing challenges over the time, the model can be of great help to numerous growing economies.
However, the fact that the East Asian model is so attractive to many African countries is bound to have profound implications for development practitioners. Western aid is not the only game in town anymore, and the global development agenda is no more immune from the influence of a rising Asia than the global economic system has turned out to be. Developing countries can now choose between an ever-growing variety of donors, trading partners, investors and development strategies. Whether or not we agree with the models they pick – or even with the idea of a development “model” at all – we would do well to listen to and engage with these views. There’ll be no point in trying only to reform and improve western aid if the real debate is happening somewhere else.
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