Unit 1 / Learning environment 2

Essential reading

Economic and political aspects of Asia

Index

1 Geopolitics of division in Asia: the decline and reemergence of the region

2 The Asian Miracle

3 Inequalities within and among Asian countries

Key words: Economy of Asia, geopolitics, Asian Miracle, inequality.

1. Geopolitics of division in Asia: the decline and reemergence of the region
“Geopolitics” refers to many things depending on the historical and geographical context of its use.
In this context, and for the purpose of the analysis at hand, geopolitics embodies the effects of
demography, economy and the physical geography of countries in the international relations and the
factors that directly or indirectly influence foreign policies of the countries.

Having introduced a key term for this reading, it is important to follow the effects that it has had in
the international politics of Asia.

Figure 1. Geopolitics.
Source: Vigerova, M. (2015).

Since the end of the Second World War, each Asian economy adopted different policies to promote
its own internal production. Some of them were shown to limit austerity, such as the case of the
People’s Republic of China and India, whereas other policies proved to boost the economic growth
of the region. This last scenario was not only evident in the case of the so-called Four Asian Tigers
(South Korea, Taiwan, Singapore and Hong Kong) and Japan, but it also provided recognition to the
continent in terms of economic power and influence.

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The existing evidence recognizes that Japan positioned itself as a leader in the region, as it complied
with a high level of effectiveness in terms of this economic improvement during the postwar. This
situation undoubtedly took by surprise the rest of the world due to the country’s state of damage
and its reconstruction policies. However, it greatly impacted the Asian country and it significantly
promoted a reorganized context of integration across all Japanese industries.

Figure 2. Industries.
Source: Ryan (2018).

One major issue in the development of the region, however clear to the entire international system,
was that all countries did not fully comply with the same growth potential of states such as Japan. In
order to achieve a deep analysis of this historical aspect at the beginning of the 20th century, it is
imperative to separate countries based on their performance and the strategies that they approached
at the end of the Second World War.

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Figure 3. Japan.
Source: Vectorportal (2011).

Researchers continuously debate over the level of effectiveness that several policies had during this
time in Asia, and it has been most of the investigations often focus on the concrete actions that led
effective economies to perform better than the rest, however it is uncertain whether one specific
action drove one country or the other into any path of success. Therefore, with the aim of creating
a clear comparative evaluation of the topic, in this Learning environment the attention will be drawn
to the contrasting approach and the two leading patterns that none of the prosperous economies
followed when searching for development.

The first pattern focused specifically on markets and it was primarily based on the roots of Adam
Smith and his theory of the “invisible hand”, where the main argument was that markets lead
themselves to productive outcomes. According to this, the role of the government was secondary,
resources distribution would be a product of a non-intervened process, nonetheless this strategy was
eventually proven to fail.

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The second strategy, on the other hand, was directed to allow government actions to be strict and
authoritarian planning was followed by those nations which did not trust the forces of the market
at the level that Adam Smith had proposed in his theoretical approach. Therefore, governments
were compelled to ensure through planning that every resource was used in certain way that would
promote economic growth, but this also failed its objective.

In 1954, Arrow and Debreu recognized and pointed out the numerous conditions that a market is
expected to comply with in order to produce desirable outcomes by itself, among these are: “[first],
the absence of externalities (external economies or diseconomies that affect the activity in question)
and of public goods (commodities or services that, once provided, can be obtained without payment
by others); second, the presence of perfect competition; and, third, a complete set of markets,
including markets extending infinitely far into the future and covering all risks”.

With this in mind, there is an explanation of the incapacity of the first group of Asian nations to achieve
the desired outcome with the force of the “invisible hand”, since perfect competition does not exist in this
or in any other market. Also, external factors are inherent to economic activities, therefore the discussion
contributes to the idea that markets do not have the capacity to regulate themselves. Hence, since none of
these conditions were granted, these economies suffered market failures.

To this day, it is still not known whether a complete control of the forces of the market guarantees the
success of a country, but there is factual evidence that successful economies, such as Japan, have let
the government decide to certain point which are the limits to the economic aspects of the country.

Along with the previous economic perspective, the importance of regional geopolitics in Asia can
also be tracked to the great influence of the security events that took place which were rooted in the
interests of many global powers such as the former Soviet Union, China and their communist allies,
on one hand, and United States of America and its European allies, on the other. To further elaborate
on this argument, three different events could be mentioned that specifically had influence on the
current structure of the Asia-Pacific region. These events were the Vietnam war, the Korean War,
and last but not less important, the boost of investment and aid from the Japanese economy. With
these important episodes, the role of the United States was to secure the region from communist
forces, and the fear that this political perspective would extend to the rest of Asia basically promoted
financial aid from United States’ allies creating an immediate impact on Asian markets.

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Figure 4. The communism flag.
Source: Vectorportal (2013).

Transportation, communication and infrastructure benefited the most from the evolution of the
conflicts where western countries took side. United Stated provided Asia with technology and capital,
Japan provided goods, and Southeast Asia also played an important role by placing raw materials in
the process of development of the markets.

By 1970, the U.S. decreased its involvement in the Vietnam War and Japan became the most
significant source of investment in the region. The three-sided trading plan had ended, and Japanese
businesses became vital to the region’s economy.

Although these events proved that the political economy of Southeast Asia was influenced by the
geopolitics of the entire region, the economic development in the continent in these last years must
be interpreted with caution and it should not be understood without taking into consideration the rest
of the Asian countries.

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2. The Asian Miracle
Globalization has been the main factor of economic growth around the world, it also has made
the increase of Asia’s share in the market since the 1980s possible, in contrast with the trend of
the mid 1950s for smaller Asian states that were suffering a decline in their economies. With this
account, there is evidence that suggests that progress in the region during the postwar was due to
the adjustment of major economic development of the countries from a state-driven projection to a
wider perspective of market-driven management.

Numerous causes are important components of this period of reemergence in the Asian continent,
the rapid economic growth of the 23 nations was faster than those of the other regions and there
were eight East Asian countries, including the Four Asian Tigers (Hong Kong, Singapore, Taiwan
South Korea, Japan, Indonesia, Malaysia, and Thailand) that enhanced the economic development of
the continent since the 1980s, creating the well-known Asian Miracle, that describes a miraculous
recovery of Asia due to the following three drivers: technology, capital investment mixed with export
promotion, and demographic transformation.

The first factor to be instrumental in the new economy of Asia was the receptivity of the region
to technological advances. Although countries in the continent were separated based on their
performance in face of technological productivity, it was, and still is, common to find new line
products or brand-new technology in the market of every Asian economy.

Figure 5. Technology.
Source: Zeller (2016).

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Observations indicate that the business sector in Asia encourages the necessity of research and
development for the new technology, thus the time between coming up with new ideas and accepting
them in the market is very short in these countries. As a result, there was a systematic enlargement of
the industry, as well as a reinforcement of the capability of development of the nations.

Different to the rest of the world, Asian economies have been spending a higher percentage of their
Gross Domestic Product (GDP) on research and development, particularly countries such as Japan,
Taipei, China, Singapore and South Korea. The fact that these leading economies invest in this sector
clearly opens up the possibility for the rest of Asian countries to obtain this type of technology as
well. Also, the nature of investment required by technological change has been linked to policies
implemented by governments and the mix of businesses stimulating the rapid growth of the sector,
therefore the success of these policies has inspired their replication in the rest of Asian countries.

Central to the entire factor of technological advance is the concept of communications and
the consequent revolution it has provoked around the world. In many traditional countries, this
phenomenon has demonstrated to have the power to incite to a radical change in politics. In Asia, this
has made information very accessible for population with high and middle incomes, which ultimately
had a major implication in the adjustment of relations among societies, governments and private
business. Asian citizens are now a more educated and have constant contact with the rest of the
world, which has gradually implied higher levels of accountability demanded to governments and an
alteration in the employment sector.

The second factor that allowed Asian countries to have a rapid and continual economic growth the
last three decades is the mixture of capital investment with export promotion. Countries that led the
Asian miracle started with the efficient allocation of resources which later demonstrated to be a very
well-established strategy that brought considerable attention from the rest of the world. Additionally,
economies such as Japan paid more attention to capital stock, and nowadays in this country there is a
more extensive capital stock per worker than in most of developed countries in the world. The growth
of this aspect, capital stock, often helps emerging economies to get richer and more capital intensive,
helping to the progress in different sectors through investment and renewing other countries’
interest, a case that can be verified in all the Asian region.

The third and more challenging aspect in the continent that also helped the miraculous economic
episode in Asia was the demographic transformation it went through. Over the last three decades
Asia has seen such an increase of its population that it currently holds 59.6% of people worldwide.
This aspect took the potential labor force to rise, creating a snowball effect on the participation of
Asian people in the world market.

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In addition to the constant increase of population in Asia, there is a strong relationship between the
emerging of middle class and the region’s economic growth. This sector of society often demands for goods
and services and drive the economy to create more and new products. The level of consumption adopted by
the global middle class currently accounts for one third of the total demand, evenly distributed by European,
North American and Asian countries, which provides a significant evidence for believing that the changing
demography of Asia has been key to this whole process of development.

3. Inequalities within and among Asian countries

Aside of the impressive economic evolution that Asia had during the last thirty to forty years, there has
been an unanticipated and somewhat contradictory output in their internal performance. Contrary to
expectations, there has been an increase in the inequality within the Asian countries’ population.

“The data presents a mixed picture – several economies in the Asia-Pacific region experienced a
considerable rise in income inequality between the early 1990s and the 2010s, while many other
nations saw declines during this period. On average, according to data from 46 countries, the region’s
inequality increased by close to 5 percentage points during this period; from 33.5 in 1990-1994 to
38.4 in 2010-2014” (ESCAP, 2018, 11).

Figure 6. Income inequality by region, changes between early 1990s and early 2010s.
Source: ESCAP (2018).

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Under a general look, Asia performed remarkably well in terms of economic advancement, decreasing
of poverty worldwide and increasing their share in the global middle class.

However, a set of other aspects different to the economy are too fragile to become drivers of people’s
security; problems in factors such as age, ethnicity, religion, sexuality and gender are direct causes of having
difficulty in attainment and maintaining it. Thus, there are still some countries in this continent where
principally non-income inequalities have raised continuously. These countries seem to have accepted that
their inequalities in general terms tend to be a sort of price for the globalization process.

It is clear that these nations’ transition differs from that of the Four Tigers as it has been previously
mentioned, there are some unique factors of each society which explain why developing countries,
especially in the region of south Asia, have not gain enough strength in their capabilities in terms of
human development.

Under the scope of a strong institution such as the United Nations, there are several tools that help
in the process of assessing economic and non-economic disparities around the world. One of these
tools has been the agendas that different actors have promoted with the main purpose of advancing
topics regarding human development. The first known agenda was the Millennium Development
Goals (MDG) (2000), which encouraged governments around the world to achieve common goals
in the path of promotion of populations’ well-being. However, despite the long path the institution
of the UN has gone through, the lack of a general agreement over the priorities in every country has
blocked the coherent or consensual vision of a singular action plan. Thus, when evaluating how much
governments have advanced in specific topics, it is usual to find gaps in several matters.

Some of the most representative topics that have shown to be hard to achieve in the region, and
where governments still struggle with in terms of inequalities are the following:

First, comparison of the progress regarding gender equality confirms that the proportion of women
involved in non-agricultural wage employment is 32%, far from the target of 45% expected. This
number highlights in a great manner the way in which gender disparity in terms of opportunities in
employment prevails in most of the countries, narrowing the multi-dimensionality expected from
economic growth.

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Another significant illustration of the delay in terms of human development is the number of people
living with HIV in the region. Although each of the county’s case is unique, infected population
suffering from this disease increased from 2 million to 7.2 million in only 20 years, stressing the
deferment in health progress in the area. Also, in topics such as sanitation and nutrition there are
findings that confirm the lack of coverage of vulnerable population. The portion of the population
that lacked basic sanitation in the region of Asia-Pacific by the beginning of 2013 was almost 42%, a
situation that can be therefore assumed as a vital issue for the progress of these nations.

Regarding nutrition, by the end of 2013 it was also noticed that an estimate of 20% of children
under five years old (75 million) suffered from severe underweight, a result that does not seem to be
encouraging for governments.

Although strong achievements have not been made in several areas of human development in Asia, as
previously seen, and inequality prevails as the major inadequacy for the area, it is reasonably clear that
these issues have been preoccupations of policymakers and they have been at the center of debates
for years.

It is worth noticing that the process of analysis of development under a non-economical scope
is not new. Nevertheless, it only gained strength since agendas such as the one of the MDG was
created with the participation of important institutions and different actors of society. Therefore, it
is fair to say that after analyzing the results of the several objectives and after they were shown to be
critical, a set of interconnected actors comprising private business, governments, non-governmental
institutions and the representation of social groups have been taking part of new action plans to fight
the main issues.

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References
Arrow, K. & Debreu, G. (1954). The Econometric Society. Existence of an Equilibrium for a
Competitive Economy, 22(3), 265-290. Retrieved from https://www.jstor.org/stable/1907353?seq=1

Bhatt, V. (1994). Understanding the East Asian Miracle. Economic and Political Weekly, 29(8), 427-
428. Retrieved from https://www.epw.in/journal/1994/8/reviews-uncategorised/understanding-
east-asian-miracle.html

ESCAP (2018). Inequality of Outcomes in Asia and the Pacific: Trends, Drivers and Costs. Retrieved
from https://www.unescap.org/sites/default/files/03Chapter1.pdf

Fischer, S. & Rotemberg, J. (1994). NBER Macroeconomics Annual 1994, Volume 9. MIT Press.

Maizura, I. (July 17 2018). Southeast Asia’s widening inequalities. The ASEAN Post United States.

Olcott M.B, (2001) .The New Geopolitics of Central Asia, 10 E. Eur. Const. Rev. 103

Pang, E-S. (2000). The Financial Crisis of 1997–98 and the End of the Asian Developmental
State. Contemporary Southeast Asia, (22)3, 570-593. Retrieved from https://www.jstor.org/
stable/25798512?seq=1

Sidaway J. (2001). Geopolitics: Twentieth Century Spectre. Geography, (86)3, 225-234.

Stiglitz. J. E. (1996). Some Lessons from the East Asian Miracle. The World Bank Research Observer,
(11)2, 151-177.

Stubbs, R. (1989). Geopolitics and the Political Economy of Southeast Asia. International Journal,
(44)3, 517-540.

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Figure references
ESCAP (2018). Inequality of Outcomes in Asia and the Pacific: Trends, Drivers and Costs. Retrieved
from https://www.unescap.org/sites/default/files/03Chapter1.pdf

Ryan, K. (2018). Untitled [photography]. Retrieved from https://unsplash.com/photos/

pSyfecRCBQA/info

Vectorportal. (2011). Japan Vector Map [vector]. Retrieved from https://www.vectorportal.com/

StockVectors/Flags-and-Maps/FREE-VECTOR-MAP-OF-JAPAN/9002.aspx

Vectorportal (2013). Political party [vector]. Retrieved from https://www.vectorportal.com/

StockVectors/Flags-and-Maps/COMMUNIST-PARTY-OF-CHINE-FLAG/11359.aspx

Vigerova, M. (2015). Untitled [photography]. Retrieved from https://unsplash.com/photos/

sV8XOpKQWNc

Zeller, S. (2016). Untitled [photography]. Retrieved from https://unsplash.com/search/photos/

technological-advance

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 TECHNICAL INFORMATION

Module: Cultura y Economía Regional de Asia

Unit 1: Historical, cultural and economic framework of Asia
Learning environment 2: Economic and political aspects of Asia

Author: Juliana Correa

Pedagogical Advisor: Adriana Alexandra Bolaños Contreras

Graphic Designer: Eveling Peñaranda
Assistant: Laura Andrea Delgado Forero

This material belongs to Politécnico Grancolombiano

Its partial or total reproduction is prohibited

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