The East Asian countries-Japan, Taiwan, Korea, and China-have shown better economic performance than any other region in the world with respect to increased income and reductions in poverty during the last half century. There have been thoughtful debates on whether their performance was due to a development model specific to the region which could be differentiated from development models in other regions. After the East Asian crisis of 1997~98, in particular, several economists indicated the serious problems of the development strategies in East Asia. However, the swift and strong recoveries from the East Asian crisis and the more recent global financial crisis of 2007~08 have raised the need for reevaluation of East Asia’s development model.
First, this study shows the economic performance of the East Asian countries during the last half century compared to that of other countries and regions. Then we discuss what the unique development strategies were that can be differentiated from the traditional Anglo-American model. Higher government intervention, more emphasis on exports and manufacturing, and higher saving-investment ratios are commonly understood to be the major components of the East Asian model. We compare and evaluate them with those of the Anglo-American model.
In the early stage of economic development, the governments of the East Asian countries placed their priorities on resource allocation because of their limited physical, financial and human resources. The most important criteria on which governments selected and supported industries and firms were their ability to export, because sizes of domestic markets were limited and foreign currency was badly needed for imports of technology and capital goods. They also understood that export promotion could only be accomplished through the development of their manufacturing sectors which are better suited to a trade economy than the service sector. Through this process the East Asian model put more emphasis on the export and manufacturing sectors than the Anglo- American model.
However, the East Asian crisis of 1997~98 revealed to us that the traditional East Asian model could not guarantee a sustained, long-run growth of the East Asian countries. They thus modified traditional development strategies by accepting several components of the Anglo-American model. It would be necessary for East Asian countries to make compromises in the future and harmonize their development models with those of the west, including the Anglo-American model, to obtain robust growth that can be sustained over the long-run. The balance of emphasis between government intervention and market mechanism, the balanced growth of manufacturing and service sector, more emphasis on domestic demand, the maintenance of appropriate saving ratio, and the strengthening of East Asian economic cooperation are suggested as examples of ‘harmonized’ development strategies for the future.