East Asian Economic Modernization

Hong Kong

Hong Kong, 2008; photo credit: Cecilia Riek-Whitham

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When I first thought of adding some notes for this last unit of the course, I thought of the dramatic economic modernization achieved by countries of the Pacific Rim, the so-called "Asian tigers" (sometimes also called the "Asian dragons"), in the past three or four decades. I'm referring specifically to Hong Kong, Singapore, South Korea and Taiwan. I've also learned, as I was doing some background research, that there are also "tiger cubs," and this would include Indonesia, Malaysia, the Philippines, and Thailand (sometimes also Vietnam).

These countries are all part of a broader Pacific Rim economic sphere that includes China, Japan, Australia, the United States, and the countries along the Pacific Ocean in South and Central America and also in East Asia. That's a lot of countries. Here's a map.

I'm going to restrict my comments to the Asian side of the Pacific Ocean, and further I'd like to focus on the tigers and cubs. The tigers have had exceptionally high-growth economies since the 1960s with a focus on increasing exports and rapid industrialization. The economic transformation of these economies centers on the shift from raw materials or foodstuffs to textiles to higher-margin electronics and financial instruments. Hong Kong and Singapore have become two of the most prominent worldwide financial centers, while South Korea and Taiwan are essential hubs for the global manufacturing of automobile and electronic components, as well as information technology.

The tiger cubs are attempting to mimic the same economic development path blazed by the tigers and create newly industrialized economies focusing on the export of high margin goods and electronics. Generally, these countries are just starting on the path that the tigers began in the 1960s, but growth can be rapid. Indonesia is already a G20 country.

Let's start with South Korea. Here are three dominant companies that few would have ever heard about in 1970 (I didn't.) but that are now world famous. Maybe some of you drive a Hyundai car, but no one in America was driving a Hyundai in 1970. But Hyundai, founded in 1967, is now almost a 200$ billion dollar a year company, with five five percent of the world's motor vehicle market. (Global automotive market share by brand, 2021; growth in market share). LG Electronics (Goldstar), founded way back in 1958, first exported some radios to the United Stats. Now they are a global powerhouse of appliances and all kinds of consumer electronics. Heck, I even have a LG high efficiency washer/dryer set. That would have been unthinkable 25 years ago, when Sears Kenmore and other American companies dominated the appliance market. And what about Samsung, founded in 1938, which first started exporting some black-and-white televisions in the early 1970s. Now Samsung makes all kinds of consumer electronics and smartphones with about 23% of world market in smartphones. Over 1.5 billion! smartphones estimated to have been sold in 2018, and averaging about a 19% market share.

Taiwan was at one time known for cheap tin toys, tin robots, plastic items that flooded the U.S. in the 1960s. Now it is a manufacturing center of electronics with such companies as Lenovo, which you might have heard of as a manufacturer of personal computers and personal devices, or Hon Hai Precision (electronics), which you probably haven't heard of, yet is one of the leading wireless equipment companies in the world. Taiwan Semiconductor Manufacturing company, founded in 1987, is now the world's largest semiconductor chip maker/foundry (Disclosure: I have invested in TSC.).

Hong Kong, which also once upon a time flooded the United States with cheap toys and goods, is, along with Singapore, now the major Asian financial center and market. Just about every night on the news you can hear how the Hang Seng index on the Hong Kong stock market did; it's the most important market in Asia.

So, how impressive has the economic growth of the Asia tigers been? Well, I found this 2015 article with a great graph, Japan Officially Gets Leapfrogged by the Four Asian Tigers. In terms of real GDP (gross domestic product = "the total value of goods produced and services provided in a country in one year") per capita, the economies of the tigers have caught and surpassed the economy of Japan by 2014. The Japanese economy was the first "economic miracle" in Asia as a result of Japan's growth after the 1950s.

Now, just a few quick words about the tiger cubs. First, some of these countries are further along the path to tiger status than others, and some are really just starting. All of the tiger cub economies tend to differ from one another quite dramatically. Indonesia is the big player with a population of well over 260 million; Malaysia is the smallest economy in terms of per capita income, but Malaysia is also home to what was once the world's tallest building, the Petronas Twin Towers. The Philippine economy is in a transitional phase, moving from a high reliance on agriculture to a service-sector and manufacturing-based economy, yet problems remain as wide income disparities exist between the country's regions and economic classes. Vietnam has only recently shifted from a centralized, planned economy to a more mixed economy, yet it is one of the fastest-growing economies in the world. In sum, all of the tiger cubs are trying to move their economies from agriculture and textiles to electronics and profitable consumer goods and services.

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