Eight countries namely Japan, Taiwan, Singapore, Hong Kong, Indonesia, Malaysia and

Thailand have extensively become known as the “EAST ASIAN MIRACLE”. They have
been called so because of the rapid growth in the GDP of the respective countries between
1965 and1990. During this period the GDP of the respective countries rose twice as fast
compared to any other country. Not only did these countries manage astronomical rise in
their economy but they also managed to simultaneously have a significant reduction in
income inequality and a reduction in poverty which is as impressive as their sudden rise in
their GDP
This rise in GDP is mainly because of the revolutionary changes in their economic policies
but a few also argue that the countries could achieve such a feat because of their authoritarian
leaders. These leaders made themselves available, approachable and credible to the business
communities and the citizens. This involved the leaders interacting with various sections of
their population to create a sustainable environment where business and thus the economy
could thrive. To make something like this happen, the leaders had to convince the broad
community that their short term risks will yield long term benefits and then convince business
firms that their properties and products will not be expropriated.
These countries adopted policies which encouraged rapid capital accumulation by making
banks very reliable and also encouraged the public to invest huge amount of money in the
bank because they provided a higher rate of return. These countries also increased their
skilled workforce by providing free universal education, this in turn helped the firms have
skilled labour which produced high quality goods at cheaper prices and in minimal time
which resulted in increased efficiency of the firms and also swelled up their profits.
A few theorists believe that the ethnic culture ie the Confucian ethics attributed to the rise in
the economy of the East Asian countries but in truth it is the efforts put in by the authoritarian
leaders and the revolutionary changes in the economic policy. We can also say that the
countries were lucky in sense of the time at which these policies came into effect and when
they decided to enter the world market.
It must be noted that Hong Kong was the first of the “East Asian” cities to undergo a sudden
boom in the economy and industrialisation as a result of development in the textile industry,
this was in the 1950s. In the mid 1960s these countries industrialised with heavy involvement
from the government, they drew inspiration from each other (smaller ones mainly who drew
inspiration from Japan) and started pursuing export oriented industrialisation. They had a
collective goal which was investing in infrastructure and education and they pursued it and
this proved to be vital for them.
By the end of the 1960s, these countries began investing heavily in human labour and capital
labour, this investment exceeded far more than other countries had put in at similar level of
development. This in turn led to a subsequent rapid growth in the per capita income.
Export policies have been one of the major reasons for the rise in economy of the East Asian
countries. Although the approach adopted by these countries have been different. Hong Kong
decided to go with trade policies that were liberal in nature and encouraged free trade, this is
because of a very small domestic market and as a result domestic prices were linked to
international prices. Taiwan on the other hand adopted a mixed trade policy so as to
accommodate and promote their own export industries, Taiwan introduced export incentives
for traded good sectors.
However, the East Asian economies suffered a financial setback in the year 1997, this set
back can be referred to as the Asian Financial Crisis. During this year Hong Kong suffered
speculative attacks against their stock market. South Korea on the other hand was burdened
by foreign debt which was resulted due to the currency rate falling by almost fifty percentage.
Singapore and South Korea also saw losses of at least 60%.
This stable economy and growing GDP were a result of a stable macroeconomic environment
on which the policies were made by the government. Each of the East Asian countries were
extremely successful in turning the economy around. This was possible mainly due to three
variables namely – external debt, exchange rates and budget deficits. The East Asian
countries made sure that their budget deficits were kept within their financial limits so as to
not destabilize the macroeconomy. This in turn proved to be a vital factor in flourishing their
economy