Rapid Economic Growth In East Asian CountriesOver the past decade, there has been rapid long-term economic growthfor East Asian countries.
These newly industrialising countries areexperiencing growth rates in GDP per head at around 6% to 7% compared to the 2%to 3% for most industrial economies. If this growth continues, South Korea andTaiwan might take away America’s distinction as the world’s richest country.This rapid economic growth is a result of several economic and political factors.
The pace of economic development, growth in world trade and communications,and the investment in physical capital and education have all played a role inthe sudden rise of the East Asian economies.One factor which has helped the long-term economic growth of South Koreaand Taiwan is the pace of economic development. The pace has accelerated overtime. As time progresses, countries seem to be able to grow at a much more rapidrate. From 1780, it took Great Britain 58 years to double its real income perhead. It took America 47 years to double in the 1800’s while Japan took 34years from the late 19th century.
Finally, South Korea was able to double itsreal income per head in an amazing 11 years from 1966. It would seem that thelater a country has industrialised, the faster it has been able to do so.Another important factor is the degree to which a country is behind theindustrial leaders. In the case of the East Asian countries, South Korea andTaiwan, both started out with an extremely low income per head. This allowedmuch faster growth when copying the leaders. It is important to realize thatthese growth rates should slow as the countries catch up.
An area in which East Asia is investing much of its GDP is in physicalcapital and education. Compared to the industrial leaders, the East Asiancountries have sustained a much higher investment in these areas. South Koreainvests 35% of its GDP which is more than double America’s capital spending.
The East Asian countries have placed much emphasis upon education. Educationis the key to mastering the technologies which they have been borrowing from theeconomic leaders of the world. The standards of education for these countrieshave improved as rapidly as their economies.Another factor which has helped the long-term economic growth of theseEast Asian countries is the global market.
No longer is a country’s economyhurt by a small domestic market. World trade has grown tremendously over thepast few decades. Exports account for about 30% of South Korea’s GDP and 40% ofTaiwan’s. This growth in world trade has allowed technology to become moreavailable today than in the past. The growth in international communicationshas helped spread new technology throughout the world.
South Korea and Taiwan should continue to experience long-term economicgrowth in the next several years. Both countries are investing heavily ineducation and physical capital; areas which are key for economic development.They also are benefiting from world trade and the diffusion of new technologies.All of these factors should help continue their recent economic success.Business