** Asian Tigers economies

The Asian Tiger Economies

Figure 1.--The raucous electronic sinage on Hong Kong streets is a good example of the free-wheeling capitalism that brought prosperity to the British colony. Hong Kong at the time that the Communists seized power in China (1949) developed into what arguably might be called the most capitalist free-wheeling economy in the world with Taiwan pursuing similar free market policies. The Communists across the border on the Mainland, along with North Korea, proceeded to create the world's most radically socialist economy. Their economic performance was thus a kind of real world test comparing the performance of capitalism and socialism. (The same was true for East and West Germany, althought not as clear cut.) Rarely are there real world experiences to test economic theory. The results were as stark and claar cut as you can come in economics. Socialism (China and North Korea) did create an egalitarian society as proimised--locking people into permanent abject poverty and terrible famines. Capitalism (Hong Kong, South Korea, and Taiwan) in contrast lifted people from abject poverty to the prosperous middle-class and all in only one single generation.

The Asian Tigers are the four initial high-growth economies in the region. They include Hong Kong, Singapore, South Korea, and Taiwan. These four countries in contrast to the policies pursued by most newly independent countries pursued both vibrant free market capitalist economic policies and various levels od democratic political goverance. Most of the countries emerging from the post-World War II decoloization process adopted socilaist, big-government economic policies. It was the perfect time fo Marxist advocates to show case the validity of their economic policies. The peoole in these countrues were jubilent with their expectemnyly bright fuilures. Almost uniformily their expectations were not realized. Even the prosperous colonies failed to prosper. Not only did independence fail to bring prosperity, but in many if not most, economic consitions deteriorated. Which is difficult to understand given the sizeable aid programs offered by the Unoited states and Europe. The reason of course was the socialist, big-government policies these countries adopted. There were four exceptions. The four Asian countries, in contrast to other developing countries adopted free market, capitalist policies which fueld rapid imdusdtrialization and increasing transformed their economies and lives of the population. From abject poverty we see the population of these countries entering the prosperos middleclass. The countries achieved and maintained high levels of economic growth begininng inthe 1960s. As a result, all four of the Asian Tigers have entered the elite ranks of the world's wealthiest nations. Hong Kong and Singapore have become among the most respected worldwide financial centers. South Korea and Taiwan are essential hubs for global manufacturing of automobile and electronic equipment amd increasingly information technology. The obvious comparisons with North Korea and China (before market reforms), could not be more stark.

Historial Precedent: The Soviet New Economic Policy (1921-28)

Such was the power of socialist thought after World War II, the power of capitalism and its ability to generate wealth and prosperity came as a great suprise when the Asian Tigers rose above the Third World countries that adopted socilist polices as ashirt cut to erconomic devlopment. Not only were the the bright hopes of indeperndence dashed safter indeprendence by socialism, but some of the new countries were actually worse off than during the colonial era. It should not have suyrprise anyone. It was none other that Communist icon, Vladmir Lenin, that adopted cpitlisdm to save the Russian Revolution. As a result of the Civil mWar and War Communism, Russia experiennced a terrible famine. This was the first of the great 20th century famines -- most caused by Communists. His effort was the New Economic Policy (NEP) which Stalin ended after he was in full control of the Soviet state. Stalin took the final sterp in creating a socilist economy--seixzing the land of the peasantry, killing millions in the process.


Actually the first Tiger economy was also Asian--Japan. Imperial Japan was the first Asian country to industialize, a process the Meiji Government befan in the 19th century (1870s). It was a procdess initiated by the Imperial Government with a largely capitalist model similr to the polivcies adopted by the Imperial German Government. This was a capitalist economic model, but with far more state economic involvement than was the case in America and Britain. Japan was similar to the four modern Asian Tigers in that the country had virtually no natural resources and was a very poor country when they began to industrialize. The super-isolated Japan became the first Asian country to introduce Western methods and industrialize. After the Unied States forced Japan to open its ports (1850s), the Tokogawa Shogunate began the industrilization of the country. That process was excelerated by the Mejii Restoration. One of the major steps taken by the Mejii reforers was to end the feudal system. The first sector to industrilize as with the induistrial revvolution in the West was the textile industry, primarily cotton and especially silk. Cotton had to be imported, but silk was produced domesticlly. Traditionally silk was produed at home workshops in rural areas. Modern Japanese textiles plants dominated the domestic marke and had begu to competey with British textiles in China and India (1890s) Japanese shippers had begun competing with European lines to carry goods in the Pacific and had begun to open European routes. The textile mills employed mainly employed women, about half of whom were teenagers. Their fathers incouraged this to increase family income. Japan largely skipped over theearly water power phase that Britain went thrug and early mills oprated on steam power. This created ademand for coal, onentural resource Japan had. The Mejii Government intervened massively in the economy. The government often introduced new industries seen as important, especially industries needed for producing military weapons and supplies. The Goverment would not operate these new industries over a long period. Once a factory had achieved some success, it was sold to private operators, not uncommonly at attractiove prices. Thus the Japanese Government was financing the creation of a capitalist economy. Many developing countries maintain high-import duties on foreign goods to promote the development of domestic industries. Japan did not do this. Thus Japanese industries while supported by the sate developed in a competitive environment and became highly efficient. It also meant that the companies could compete on the world market. Even before World War I, Japanese products had begun to compete with Western goods in China and other Asian markets. The relationship between industry and military power was clear. The country, however, took to economic moderization much quicker than to political ans social modernization.

The Four Asian Tigers

The four initial Tiger economies had many elements in common. They were all Asian ar least Pacific countries. Actially one might also include Jpan which begam to industrialize in the 19th centuty. The Asian Tigers are four very different countries, but they had many common characteristics. First they were very poor colonies even at the mid-20th century. Second, they had virtually no natural resources. Third, they were colonies of either Britain or Japan. Fourth, they had very little indistrial development. (The Japnese indudtrialized North Korea, but not South Korea because the natiral resources were located in the north. South Korea was almost entirely agricultural.). Fifth, and mot importantly, unlike other newly independent countries, they decided to pursue a capitalist economic model rather than socialism.

Hong Kong

Hong Kong and Taiwan along with Portuguese Macau were the two areas of China not taken over by the Communists in the Civil War (1948). As a result, there were test cases in the developing Cold War. In these areas, especially Hong Kong and Taiwan, officials pursued capitalist free market principles while Mao pursued a radical Communist program of collectivization and nationlization. The result was not just economic stagnation, but the most terrible famine in human history. Few countries perhaps with the exception of North Korea and Cambodia have a worst economic performance. In comparison Hong Kong and Taiwan (the areas of China not under Communist control) which not only retained capitalism and market forces, but made these principles the cornerstone of the economic system. Hong Kong became one of many plaves where people voted with threir feet against Communism and Socialism and for Capitalism. The result was stunning successes. They became two of the phenomely successful Asian Tigers with their vibrant economies, in large part because they were some of the world's freest economies. Hong Kong's rise began as a service economy offering low-priced, but high-qualiyty goods because of low wages. On this base, Hong Kong created a modern prosperous economy which now offers its people European level affluence. Shanghai had been China's financial center. Hong Kong had also been important, but after the Comminist victory, Hong Kong became a leading international financial center with a strong service-based economy. Hong Kong offered low taxes, the rule of law, virtually free port trade, a trusted international financial market, and a first class education system. And it did all this without any natural resource--except the drive and hard work of its people. The Chinese Communists as they took over Hong Kong pledged to retain the character of this vibrant capitalist enclave (1997). Hong Kong is to continue to be a free port and allow its laws to remain unchanged for 50 years. Its first chief executive, Tung Chee-hwa, announced a policy agenda based on the concept of 'one country, two systems'. A now often repeated formulation. The stated idea was to preserve Hong Kong's economic independence.


Singapore like Hong Kong was created by the British. I began as a tiny, non-descript fishing village liker countless others in Southeast Asia. It became a major outpost of the British Empire. The econmy was initally based on a local market fore regionally produced raw materials. Singapore became a buyer of raw material for processing and export. Singapore achieved indeopence (1965). (After a brief federation with Malaysia.) At the time, there the only significant manufacturing industries were an elemental electrical assembly industry and some oil refining. With independence and favorable policies, these two sectors took off rapidly. There was an especially important expansion of oil refining (1960s). The electronics industry was aided by Texas Instruments which built a semiconductor manufacturing plant (1967). Singapore patriarch Lee Kuan Yew adopted free market capitalism at a time when most newly independent countries persued socialism. Texas Instruments was attracted by tax incentives. Other foreign electronics companies also set up plants. Singapore became an important part of the expamding electronicvs industry. Sinapore mafe a name for itself as an atrractice place to do business in Asia. Pharmaceutical compoanies was the next major industry to enter Singapore. While manufacturing led the way, services followed. By far the most important was financial services. Singapore privided the security need for a final services sector. It was a haven for the violent chaotic situation of neignoring countries. And the exciting life of one of the world's most vibranbt cities became a tourist draw. Singapore free market, capitalist policies including government intervention, low inflation, prudent macroeconomics, have led to high growth and rising incomes. Singapore has developed rapidly into not only a huge port, but major financial center. The result was unlike widespread economic failure in most newly independent countries, Singapore was one of the most successful economies in the world. Singapore became one of the Asian Tigers which achieved rapid economic growth and high percapita incomes. In recent years the Government has been attempting to increase the participation in the higher end manufacturing operations. They are pushing innovation along with research and development so that the country not only assembled compoments. They are also entering biotechnology and other high-tech sectors. The Government wants Singapore to become a center for new ideas to be invented rather than executed. The country has an excellent, modern education system, but on that is not yet producingyoung peole best suited for this change. Manufacturing is, however, only a quarter of the economy. Services are much more important, especially finanaciual services. Singapore was adversely affected by the Asian financial crisis (1997-98). The Government responded with heavy investment in new infrastructure. Stock market trading was liberalized and banking restrictions eased to improve the country's competitive edge over regional comptetitors.

South Korea

The results were staggering--The Miracle on the Han. The Han River flowed through Seoul. It stood in sharp contrast to the disaster on the Yalu to the north. A rich vibrant market economy with world class industry emerged in the south. This is amazing given what was left of South Korea after the Korean War. And doubly amazing given that the south was the poor, agricultural part of Korea. The Communists in the north inherited the northern area with the resources that the Japanese industrialized. The Korean Economic miralcle is perhaps more surprising than the German and Japanese Economic Miralcles because it emerged in a basically poor agricultural country. And it began later than in Germany and Japan, in fact while their economic miracles were well under way. South Korea emerged as one of the hugely successful Asian Tigers. Four Asian econonies diverged from the socialist policies adopted through the Third World--and the results were spectacular. The command economy in the North has brough economic decline, hunger, and repression. One Korean scholar writes, "The post colonial decades, when living standards improved rapidly in South Korea, while North Korea returned to the world of disease and starvation. The dramatic history of living standards in Korea presents one of the most convincing pieces of evidence to show that institutions � particularly the government � matter for economic growth." [Cha] One of the most dramatic expression of the differences between North and South Korea is night time satellite imagery. South Korea energes as a bright jewel of modernity while Koreas in the North are visually shown as living in a new Dark Age. Market capitalism in three decades transformed South Korea into one of the most modern prposperous coutries in Asia and Seoul was transformed into a sparkling global city, a major hub of business and finance. South Korea today is an modern nation rivaling Japan and Western Europe with an advanced technological and communications infrastructure.


Taiwan is one of the great sucess stories of Asia. It is a country with limited national resources that has constructed not only a successful industrial economy, but a vibrant democracy as well. It is one of two large islands located off the coast of China. The other is Hainan located further south. Despite the close location, China until the modern era took virtually no interest in the island and the populatiion was not Chinese, but Austronesian aborigines. There is virtually no mention of Taiwan in Chinese sources. Thus we know virtually nothing about the economy until the Dutch arrived (1622). The Dutch reported a population of about 70,000 aborigines, about 1,000 Chinese, and a few Japanese. The Chinese and Japanese were mostly merchants, male transients. The aborigines had a agricultural economy supplemented by the export of dear hodes. The Dutch conducted an extended campaign to seize seized control (1630s-40s), but made no real attempt to change the economy. Chinese emigration go Taiwan developed. Koxinga, a Chinese-Japanese war lord with a fleet, expelled the Dutch (1661). Chinese emigration to Taiwan continued. The Qing dynasty defeated Koxinga's grandson and seized control (1683). The Qing government originally saw control of Taiwan as financial burden, but necessary to control piracy. The principal Qing policy was to restrict the Chinese emigration to Taiwan. The reason for this was to limit conflict with the aboriginees. Much more information on the Taiwan economy before the First Sino-Japanese War (1895-95) during which the modernizing Japanese Empire stunned China with its new power. Part of the settlement was transferring Taiwan to Japan. The Japanese called it Formosa. Japanese rule was brutal, but it also brought a measure of economic development, particularly basic infrastyructure. Thus at the onset of the Pacific War, Taiwan was more prosperous than China. Taiwan remained agricultural and unlike Korea, there was little Japanese effort to industrialize. The Japanese after the Pacific War were rquired to return Taiwan to China an repatriate Japanese nationals. The Taiwan popiulation was not consulted. After losing the Chinese Civil War, Chiang Kai-check and the Nationalists retreated to Taiwan. The Chinese Communists did not have the naval and air capability to briudge the Taiwan Straits. After the outbreak of the Korean War, the United states extended its security zone to include Taiwan. This also brought increased economic commerce with America. And this led to both South Korea and Taiwan along with Singapore emergging as the economic Asian Tigers. Taiwan prospered under a capitalist system while Mainland China agressivly pursuing socialism languished in poverty and economic stagmation. It is interesting that the to most successful Asian Tigers came from the former Japanese Empire.


Deng Xiaoping who survived the Cultural Revolution was a committed Communist. Mant of those who criticized Mao and were denounced were not so lucky. Denf of course came to power after the Cultural Revolution. Deng repudiated the Cultural Revolution and launched the 'Beijing Spring' (1977) which allowed open criticism of the excesses and suffering experiebced during the Cultural Revolution. He truly believd that Communism was a scientifically proven system for improving human society. But he was not irational. He compared China's backwardness and poverty after three decades of Communism to the rapid economic progress of the Asian Tigers (Sinapore, South Korea, and Taiwan). In a state visit to Southeast Asia, including Singappre (1978). He discussed economic issues with Singaporte President Lee Kuan Yew. This was the beginning of the market reforms that totally remade the economy of China in three decades. Deng sent tens of thousands of Chinese to Singapore to study. This of coure was facilated by the largely Chinese population of Singapore. The free market economic reforms of Deng Xiaoping and engagement with the West (1980s) brought about an economic revolution that at long last unleashed the economic energy of the Chinese people. Never before in the history of the world have so many people emerged from poverty in such ahort period of time. The rate of growth has been stunning, especially compared to the economic stagnation and decline during the Communist era. And it is all due to the potent force of free market capitalism. Deng opened China to foreign investment, the global market and limited private competition. It is notable the differences that developed between China and Russia overv this period. The Chinese under Deng chose capitalism. The Russians under Putin chose ultra-nationalist kleptocracy. There are many questions about the Chinese economy which are difficult to assess in a closed system. There are concerns about highlybindebted state banks, masive overbuilding, and heavily polluted cities. Neighboring countries are concrned bout increasingly ggressive behvior, especially claims to large areas of potentially oil rich areas of the South China Sea far away from the Chinese coast. A major unanswered question about China is if capitalism can proper under a system of political dictatorship.

Celtic Tiger (1990s)

The emigration from Ireland finally declined (1990s). And when rising immigration, the population flow balance has shifted. Some of the new immigrants are individuals of Irish ancestry returning to the Old Sod. The reason is that Ireland has become the Celtic Tiger--a reference to the Asian Tigers--countries which adopted free markets economics and created roaring economies. All of a sudden high-tech companies began springing up in villages that were previously dieing. The town of Leixlip in County Kildare, is famous as the birthplace of Guinness beer. But prosperity in Leixlip now comes from Intel, which built a $5 billion plant there. But many smaller companies are active. Ireland has become a leading exporter of computer software. Ireland was never industrialized like England. As a result, the country with a basically pristine environment is moving from a largely agricultural economy directly into the information technology era. Many of us were appalled by rank McCourt's description of Limerick in Angela's Ashes. He came to America because jobs were so difficult to find. Now Limerick workers are making computers. The recipe for Ireland's success is fairly simple--the same recipe used by other modern success stories. A shift away from socialism toward a business friendly environment and low taxes. The European Union Transfer Payment to poor countries may have been a factor, but some economists believe they were inefficient and even counter productive. Most economists do believe that Government subsidies and investment capital did play an important role. Here the Industrial Development Authority (IDA) was particularly important. Major American corporations (Dell, Intel, and Microsoft) were attracted to Ireland.

Latin America

I have more experience in Latin America. But after teaching school for 2 years in Ecuador I was drafted and sent to Korea (1970). Ecuador and Korea were very different countries, but they were very poor countries. If anything South Korea was even poorer than Ecuador. And Ecuador had important natural resources that South Korea lacked. But since 1970 there has been a remarkable change. In only a little over a generation, free market capitalism has thrust South Koreans from abject poverty into the prosperous middle class with life styles comparable if npt exceedomg Europrans and Americans (#2 Singapore --$94,500 and #8 Hong Kong -- $63,100) South Korea comes in at #28 -- $40,100) below America and the major Euriopean couyntries, but comparable to many European countries. [World Bank] The World Bank does not lidst Taiwan for fear of offending China. Percapita income on Taiwan, however, is nuch higher than in China, even after their market reforms. These capitalist successes in Asia stnad in sharp contrast to Latin America. Outside of the Caribbea (where banking operations affect the data), the most prosperrous country is Chile with a per capita income of $24,200 a year. Of course Chile is the Katin American country which has most wholeheartedly embraced capitalism. Several other countries are in the $20,000 range, but most are below it. So the question becomes why have the Asian Tigers done so well and the Latin American countries done so poorly. Interestingly, while I often hear from left-wingers in Latin Americans and the United States, that America is responsibkle for the region's failure, it is notable that an important part of the success of the Asian Tigers was a close association and economuc ties with the United States.


World Bank (2018). This World Bank data is available on Wikipedia.


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Created: 11:44 AM 9/25/2019
Last updated: 5:22 PM 1/19/2022