OVERVIEW OF THE ECONOMIC

DEVELOPMENT
ECONOMIC DEVELOPMENT
WEEK 3
BEFORE WE START…
THE GAME IS…
LEARNING OBJECTIVES:
• To know the economic history that has been marked as “Economic
Miracle”.
• To understand the dynamic economic growth and development of Japan.
• To understand the economic growth of newly industrialized economies
(NIEs) or the “Asian Tigers”
• Differentiate what is Economic Development from Economic Growth.
• To identify and understand the measurement of growth and development
THE ECONOMIC MIRACLE
• Economic miracle is an informal 
economic term commonly used to
refer to a period of dramatic
economic development that is
entirely unexpected or
unexpectedly strong. The term has
been used to describe periods in
the recent histories of a number of
countries, often those undergoing
an economic boom, or described
as a tiger economy.
JAPAN’S DEVELOPMENT
TheJapan's postwar economy
developed from the remnants of an
industrial infrastructure that suffered
widespread destruction during World
War II. In 1952, at the close of the
Allied Occupation, Japan was a “less-
developed country," with per capita
consumption roughly one fifth that of
the United States. Over the following
two decades, Japan averaged an
annual growth rate of 8 percent,
enabling it to become the first country
to move from “less developed” to
“developed” status in the postwar era.
The reasons for this include:
• high rates of both personal
savings and private sector
facilities investment
• a labor force with a strong work
ethic
• an ample supply of cheap oil
• innovative technology
• and effective government
intervention in private-sector
industries.
JAPAN’S DEVELOPMENT
• Japan was a major beneficiary of
the swift growth attained by the
postwar world economy under
the principles of free trade
advanced by the International
Monetary Fund and the General
Agreement on Tariffs and Trade,
and in 1968 its economy became
the world's second largest,
following that of the United
States [Source: Web-Japan,
Ministry of Foreign Affairs,
Japan]
CHINA’S ECONOMIC DEVELOPMENT
• China’s meteoric rise over the past half century is one of the most striking examples
of the impact of opening an economy up to global markets.
• Over that period the country has undergone a shift from a largely agrarian society to
an industrial powerhouse. In the process it has seen sharp increases in productivity
and wages that have allowed China to become the world’s second-largest economy.
• The socialist market economy of the People's Republic of China is the world's
second largest economy by nominal GDP and the world's largest economy by
purchasing power parity. Until 2015, China was the world's fastest-growing
majoreconomy, with growth rates averaging 6% over 30 years.
• China is the world's largest manufacturing economy and exporter of goods. It is
also the world's fastest-growing consumer market and 
second-largest importer of goods.[31] China is a net importer of services products.[32]
 It is the largest trading nation in the world and plays a prominent role in 
international trade[and has increasingly engaged in trade organizations and treaties
in recent years.
 CHINA’S SOCIAL MARKET ECONOMY
• The socialist market economy (SME) is the economic system and model
of economic development employed in the People's Republic of China.
The system is based on the predominance of public ownership and 
state-owned enterprises within a market economy.[1] The term "socialist
market economy" was introduced by Jiang Zemin during the 14th National
Congress of the Communist Party of China in 1992 to describe the goal of 
China's economic reforms.[2] Originating in the Chinese economic reforms
initiated in 1978 that integrated China into the global market economy, the
socialist market economy represents a 
preliminary or "primary stage" of developing socialism.[3] Despite this,
many Western commentators have described the system as a form of 
state capitalism.
 STATE CAPITALISM
• State capitalism is an economic system in which the state
 undertakes commercial (i.e. for-profit) economic activity and where
the means of production are organized and managed as 
state-owned business enterprises (including the processes of 
capital accumulation, wage labor and centralized management), or
where there is otherwise a dominance of corporatized government
agencies (agencies organized along business-management practices)
or of publicly listed corporations in which the state has controlling
shares.
THE NEWLY INDUSTRIALIZED ECONOMIES
(NIES) OR THE ASIAN TIGERS
• The Four Asian Tigers, Four Asian Dragons or Four Little Dragons, are
the economies of Hong Kong, Singapore, South Korea and Taiwan, which
underwent rapid industrialization and maintained exceptionally high growth
 rates (in excess of 7 percent a year) between the early 1960s (mid-1950s
for Hong Kong) and 1990s. By the early 21st century, all four had
developed into high-income economies(developed countries), specializing
in areas of competitive advantage. Hong Kong and Singapore have become
world-leading international financial centers, whereas South Korea and
Taiwan are world leaders in manufacturing electronic components and
devices. Their economic success stories have served as role models for
many developing countries, especially the Tiger Cub Economies of
southeast Asia.
 THE TIGER CUB ECONOMIES
• A developing country is a nation
that fares poorly on the HDI and
has low levels of
industrialization. HDI stands
for Human Development Index. A
developing country is less
developed than a developed
country.
• A developing country is a
relatively poor agricultural country
that is trying to become more
advanced economically. It is also
seeking to become more advanced
socially.
• Tiger Cub Economies collectively refer to the
economies of the developing countries of 
Indonesia, Malaysia, the Philippines, Thailand
 and Vietnam, the five dominant countries in 
Southeast Asia.
• Tiger Cub Economies are so named because they
attempt to follow the same export-driven model
of technology and economic development already
achieved by the rich high-tech industrialized 
developed country of South Korea and nation 
Taiwan along with the wealthy financial centers
of Hong Kong and Singapore, which are all
collectively referred to as the Four Asian Tigers.
THE TIGER CUB ECONOMIES
 EAST ASIAN DEVELOPMENT MODEL
• The East Asian model (sometimes known as state-sponsored capitalism)[1] is an 
economic system where the government invests in certain sectors of the economy in order to
stimulate the growth of new (or specific) industries in the private sector. It generally refers to
the model of development pursued in East Asian economies such as Hong Kong, Macau, Japan
, South Korea and Taiwan.[2] It has also been used to classify the contemporary economic
system in Mainland China since the Deng Xiaoping's economic reforms during the late 1970s.
[3]

• Key aspects of the East Asian model include state control of finance, direct support for state-
owned enterprises in strategic sectors of the economy or the creation of privately owned 
national champions, high dependence on the export market for growth and a high rate of
savings. It is similar to dirigisme.
• This economic system differs from a centrally planned economy, where the national
government would mobilize its own resources to create the needed industries which would
themselves end up being state-owned and operated. East Asian model of capitalism refers to
the high rate of savings and investments, high educational standards, assiduity and export-
oriented policy.
 MEASURING GROWTH AND
DEVELOPMENT
• For many years economic development was considered
synonymous with economic growth.
• Economic development is broader and much more
encompassing view that economic growth.
• Economic development relates levels of social and
humanitarian achievement and income distribution, as
well as a narrower measure of per-capita income.
MEASURING GROWTH
 WHAT IS GDP?
• Gross Domestic Product (GDP) is the total monetary or market value of all the
finished goods and services produced within a country's borders in a specific time
period. As a broad measure of overall domestic production, it functions as a
comprehensive scorecard of the country’s economic health.
• There are several types of GDP measurements:
•      Nominal GDP is the measurement of the raw data.
•      Real GDP takes into account the impact of inflation and allows comparisons of
economic output from one year to the next and other comparisons over periods of
time.
•      GDP growth rate is the increase in GDP from quarter to quarter.
•      GDP per capita measures GDP per person in the national populace; it is a useful
way to compare GDP data between various countries.
GDP EXPLAINED
 WHAT IS GNP?
• Gross national product (GNP) is an estimate of total value of all
the final products and services turned out in a given period by the
means of production owned by a country's residents. GNP is
commonly calculated by taking the sum of 
personal consumption expenditures, private domestic investment,
government expenditure, net exports and any income earned by
residents from overseas investments, minus income earned within
the domestic economy by foreign residents. Net exports represent
the difference between what a country exports minus any imports
of goods and services.
GNP EXPLAINED
GDP VS GNP
GDP IN CONSTANT US DOLLARS FOR
SELECTED ASIAN COUNTRIES
MEASURING ECONOMIC DEVELOPMENT
• The Human Development Index (HDI) is a statistic composite
index of life expectancy, education, and per capita income indicators,
which are used to rank countries into four tiers of 
human development. A country scores a higher HDI when the 
lifespan is higher, the education level is higher, and the gross national
income GNI (PPP) per capita is higher. It was developed by Pakistani
economist Mahbub ul Haq, with help from Gustav Ranis of Yale
University and Meghnad Desai of the London School of Economics,
and was further used to measure a country's development by the
United Nations Development Program (UNDP)'s Human
Development Report Office
HUMAN DEVELOPMENT INDEX
 HEALTH LIFE EXPECTANCY
• A measure used World Health
Organization (WHO) summarizes
the expected number of years to
be lived in “full health”. The
years of ill-health are weighed
according to severity and
subtracted from the overall life
expectancy rate to give the
equivalent years of healthy life.
• According to the lates data
available from the WHO,
Japanese men have thelongest
hekalthy life expectancy of 72
years among 191 countries,
compared to 27 years for the
lowest ranking country Sierra
Leone.
GREEN GNP
• One of the more recent approach developed to address that inherent
shortcoming of GDP and GNP as growth and development measures is
based on what is known as the “green” system of national accounting.
GNP is the informal name given to national measures that are adjusted to
take into account the depletion of natural resources (both renewable and
non-renewable) and environmental degradation.
• The type of adjustment made to standard GNP would include the cost of
exploiting natural resource and valuing the social cost of pollution
emissions. Damages to the global environment such as global warming
and depletion of the ozone layer, should also be deducted, but these
damages are hard to estimate.
 MAKING COMPARISONS BETWEEN
COUNTRIES
• EXCHANGE RATE
METHOD
Uses the rate between the local
currency and the US dollar to
convert the currency into US
dollar equivalent. A country’s
GDP and GNP per capita would
then be valued accordingly, in US
dollars.
• PURCHASING POWER PARITY (PPP)
METHOD
Develops a cost index for comparable basket of
consumption goods in local currency and then
compares with this prices in US for the same
set of commodities. It is defined as a number of
units of the country’s currency required to buy
the same amount of goods and services that a
dollar would buy in the US. Because PPP
method uses a basket of many goods and
calculates the relative price of these goods,
many economists view this as a better measure
of the relative standard of living than the
conventional exchange rate method.
• PPP method gives higher estimates of living standards for developing countries
compared with exchange rate method. The reason is that GDP based on
exchange rate valued depend only on their relative price of traded goods,
whereas PPP method considers a basket of goods that include both traded and
nontraded goods.
• Nontraded goods are generally much cheaper in developing countries and this
helps to lift the estimate of GDP for these economies.
• PPP method is unaffected by exchange rate changes.
• PPP method has become the preferred measure of GDP for country comparison.
• One difficulty of PPP method is that it is costly to maintain since price
movements need to be updated on a regular basis.