Japan Finding The Report
Assess The Contribution Of World Bank Report The East Asian Miracle (1993), To Our Understanding Of The Success Of High Performing Asian Economies (Hpaes). You Should Use Supporting Research In Developing Your Assessment Of The World Bank (1993) Report.
The economy of East Asia has experienced a remarkable growth between 1965 and 1990. The resilient contribution of twenty-three countries has helped East Asia to achieve a sustainable economic growth as compared to other European and American economies. According to the article, Japan and four Asian tiger economies Hong Kong, Singapore, Taiwan, the Republic Korea, China, Indonesia, Thailand and Malaysia are the eight major contributors to this miraculous economic performance. The group of these eight nations is termed as High Performing Asian Economies (HPAEs). Equal income distribution among HPAEs has led to the change in the Gini Coefficient combined with greater growth in per capita income (Wade 1996). These unique characteristics have made the HPAEs different from other developing countries in Asia. The data states that Japan including the four tigers have recorded four times growth in real per capita income from 1960 to 1985. The transformation of the Japanese economy is the key concern of this study. Imposition of effective subsidy policy and convincing governmental policy are claimed to promote miracle economic growth in Japan.
The article states that market friendly approach is the driving force for the Japan’s success. The extensive intervention of the Japanese government has resulted in the macroeconomic stability in the country. It has been observed that share of the international trade to GDP has intensified to a great amount following the effectiveness of the government intervention (Beckley, Horiuchi and Miller 2018). To explore the economic opportunities, the government has guided the resource allocation process between the public and private sector. As per the economic theory, accumulation of economic resources, fast technological catch-up and efficient allocation are the fundamental pillars of the Japanese economy. It is important to identify the appropriate functional approach to understand the nature of the economic growth. The policymakers in Japan have preferred to adopt fundamental intervention policy to support the sustainable economic growth. They have decided to invest more in human capital and secure stability in the financial systems through limited price changes. Meanwhile, the competitive discipline has accelerated the economic growth process depending on the competitive market structure. Both exporter and importer in Japan have accrued benefits from modification in the governmental strategies. The intensive focus on the pro-exporter regime during the early 1950s and 1960s has introduced the import-substitution policy in Japan. Well bureaucratic structure with substantial power has helped the macroeconomic policymakers to formulate a credible economic strategy.
Nonetheless, the business-friendly attitude between Japan and other HPAEs countries has reported to promote competitive advantage in the international trade regime. High private savings rate and greater interest cost on bank loan has considerably reduced the average expenditure on the luxury goods (Yusof and Othman 2016). This has resulted in the improvement of the human welfare. The article has found that the Japanese government has deliberately taken government assistance which is associated with great social returns (Esteban-Pretel and Sawada 2014). The evidence supports that financial repression has helped both private and public bank sectors to revive the growth from the devastating condition. Adoption of direct credit control policy of the deliberative council can be directly linked to the growth of chemical, automobile and shipbuilding industries in Japan. As implicit subsidies seemed very small it was important for the Japanese government to direct the credit allocation process.
Miracle stands for unexpected change in the economic condition. The article has indicated the extraordinary economic growth of Japan and other four tiger Asian economies as East Asian miracle. The unexpected economic performance is not only supported by the overwhelming economic performance also improvement in the human and physical capital. Most of South-East Asian countries were far lag behind the developed countries in Europe and America (Arkhipov, Yerznkyan and Martishin 2015). Significant gap in technology and human capital were the key differential factors behind this considerable economic disparity. However, this situation got changed following the 1960s, especially for Japan. The country has received huge devastating impact during World War II. Instead of that, Japan has been successfully achieved the sustainable growth along with other eight nations in Asia. The progressive growth in per capita income combined with equitable income distribution has helped Japan to uplift among the top 20 countries during 1960 to 1985 (Kim 2018). The extraordinary growth has also been noticed in the country’s trade and financial sector.
The changes observed in the Japanese economy can be explained by the ‘trickle down’ hypothesis of Joseph Stiglitz. The economist explains that regressive economic policy finally results in the improvement of every section of the people irrespective of rich and poor people. The economic benefits get trickled down to everyone, which in turn, leads to equitable distribution of economic welfare among the entire population. Stiglitz has observed that pattern of the economic growth during the twentieth century is same as of the growth structure during 1950s and 1960s. He observes that Gini index in terms of the income inequality has exhibited best performance for the Japanese economy. Japan has observed only 6% (approximately) improvement in Gini Index in the last twenty five years among all other developed countries, like, Canada (13%), Germany (22%), the UK (13%0 and Italy (8%). The richest population is used to hold 1% of total income of Japan, whereas, the concentration of income has increased from 5.8% in 1980 to 14.7% in the UK. The data reflects that the miracle economic growth of Japan with respect to other developed countries.
World Bank Fundamentals and Selective Intervention
The overachieving economic performance of Japan is also discernible in the context of 2020. The country has ranked the 3rd position in terms of the world GDP rank with expected GDP growth of 0.5% in 2020. Economists predict that Japan will be able to hold strong market position on the account of resilient growth of the technology and manufacturing sector. The banking sector of Japan has been trying to establish projects considering the fundamental economic criteria and rigorous credit evaluation program.
The article asserts that the East Asian economies have gained the miracle success due to the compliance with the country-specific economic policies. The countries have adopted a group of common strategies to achieve the significant growth. World Report states that stability of the macroeconomic model is accomplished driven by three fundamental parameters, including, accumulation, fast technological catch-up and effective allocation (Sugihara 2017). These necessary economic activities can be possible through selective and fundamental interventions. As per the fundamental approach, steady and secure fundamental system, greater investment in human capital, good governance in the macroeconomic policy, trade openness to the overseas countries and controlled price strategy can develop a significant economic outcome for the countries. Meanwhile, alteration in the interest rate, export stimulation strategy and foreign direct investment are considered as principal objectives of the selective interventions (Francks 2015). According to the analysts, selective intervention calls for the sustainable development of the economy. On this account, World Bank emphasizes on the three necessary prerequisite conditions which include addressing the market nature, selection of fundamental economic policies and establishment of the government policies. In this regard, economists contest for the cooperative coordination between public and private investment in Korea and Japan (Castley 2016). The deliberation council of Japan has been reported to play a significant role in credit distribution on the performance of the competing firms.
The economic outlook of Japan is concerned about the engrossing presence of the global business, increasing consumption tax and trade tariff. This results in the downsize impact on the consumer expenditure as well as lower investment in the trade sector (Stubbs 2017). The restriction on the trade sector discourages the investors to the export and import sector. Along with that, the drowning index condition of the industries and enterprises exhibits the lack of coordination between the public and private sector. Referring to a reliable data source, the 0.50% of GDP growth will be led by the private sector. This gradual growth pace is possible to be achieved with the help of government assistance of around $10 trillion for the structural development work (Fitzgerald and Rowley 2017).
According to the World Bank Report 1991, the miracle economic growth of HPAEs including Japan is the reflection of the neoclassical view. It has been observed that economic progress has successfully promoted both international and domestic competition. Negligible price control in case of international trade is the part of the market friendly view. Growing investment for the export promotion policy has played as a key influencing factor for the exporters (Settsu, Bassino and Fukao 2016). Apart from that, government intervention has resulted in the less distortion of relative price. The difference between the export earnings and import spending has been reported to get reduced by a significant level. The neoclassical economists believe that the reliable trade system is the fundamental pillar of the country’s macroeconomic stability. Investments in publics, health and education are valid roles for government under the neoclassical framework (Wan 2016). The theory identifies the cumulative effect of these investment has led to the development of the human capital in Japan. The application of the market policy by the Japanese government is unendingly effective for the country’s robust growth.
Nevertheless, revisionists argue that the intervention in the financial markets and industrial framework of HPAEs has performed better than the neoclassical mechanism. HPAE’s progressive action in the public savings model and bank interest rate has intensified the growth process of the economy (Martishin 2014). The miracle economic growth has been supported by the shared growth model. The government’s initiative on cooperation and competition has delivered social legitimacy to the people. In this way, people have become ensured with government assistance and action of the institutional model. HPAEs have never encouraged the limited government mechanism like the neoclassical theory.
Arkhipov, A.Y., Yerznkyan, B.H. and Martishin, E.M., 2015. Anatomy of the “economic miracle”.
Beckley, M., Horiuchi, Y. and Miller, J.M., 2018. America's Role in the Making of Japan's Economic Miracle. Journal of East Asian Studies, 18(1), pp.1-21.
Castley, R., 2016. Korea’s economic miracle: The crucial role of Japan. Springer.
Esteban-Pretel, J. and Sawada, Y., 2014. On the role of policy interventions in structural change and economic development: The case of postwar Japan. Journal of Economic Dynamics and Control, 40, pp.67-83.
Fitzgerald, R. and Rowley, C. eds., 2017. Multinational Companies from Japan: Capabilities, Competitiveness, and Challenges. Routledge.
Francks, P., 2015. Japanese economic development: theory and practice. Routledge.
Kim, Y., 2018. The Southeast Asian Economic Miracle. Routledge.
Martishin, E.M., 2014. Evolutional and institutional foundation of “economic miracle”. p.101.
Settsu, T., Bassino, J.P. and Fukao, K., 2016. Revisiting Economic Growth in Meiji Japan: Industrial Structure, Labour Productivityand Regional Inequality. Economic Review, 67(3), pp.193-214.
Stubbs, R., 2017. Rethinking Asia's economic miracle: The political economy of war, prosperity and crisis. Macmillan International Higher Education.
Sugihara, K., 2017. The European Miracle and the East Asian Miracle: Towards a New Global Economic History (1). In The Pacific in the Age of Early Industrialization (pp. 1-21). Routledge.
Wade, R., 1996. Japan, the World Bank, and the art of paradigm maintenance: The East Asian miracle in political perspective. New Left Review, pp.3-37.
Wan, M., 2016. Japan Between Asia and the West: Economic Power and Strategic Balance: Economic Power and Strategic Balance. Routledge.
Yusof, S.M. and Othman, R., 2016. Leadership for creativity and innovation: Is Japan unique. Journal of Advanced Management Science, 4(2).