“In human life, economics precedes politics or culture”

— Park Chung-hee (1917-1979) ,

South Korean dictator

The miraculous growth of the Asian economy will totally alter the economic landscape by the middle of the 21st century.

Jim O’Neill, head of Global Economic Research of Goldman Sachs, predicted that the three largest economies by 2050 will be China, the United States and India.

On July 27, President Barack Obama said the U.S. and China will “shape the course of the 21st century” as he opened high-level talks in Washington.

To understand why the word “miracle” is applicable, we need to remember that Asia was in a pitiful state after the devastations of World War II.

Development experts had much greater hope for the more advanced countries of Latin America or resource-rich nations in Africa.

Korea, Taiwan and Singapore, with few sources of money and practically no existing industry, seemed hopeless.

Despite the pundits, the Asian kitten grew into a tiger!

For three decades. Asia has enjoyed the world’s fastest growth rates.

The economies of Japan and the Newly Industrializing Economies, or NIEs, of Hong Kong, Singapore, Korea, China, India and Taiwan have become models of achievement for other emerging economies.

The growth of Asia came in waves.

After Japan, the next group was Singapore, Hong Kong, Taiwan and South Korea.

The third wave comprised Indonesia, Malaysia and Thailand.

The last wave included China, Vietnam and India.

What is the secret to Asia’s success?

No simple explanation is satisfactory.

Asian economies chose different models to facilitate growth. There exists a paradox.

On one hand, Asian governments directed finance and investment, created special banks and set up biased-trade regimes to turn chosen industries into top-notch global competitors.

On the other hand, India and China sparked their miracles by removing state influence from the economy.

Hong Kong and Singapore adopted totally free policies, with virtually no trade barriers. They maintained healthy, stable macroeconomic environments by keeping inflation and budget deficits low.

Political stability was also an important factor, although it is difficult to determine whether stability is a cause or consequence of strong growth.

Asian policy makers invested heavily in education to build up human capital and infrastructure to reduce business costs.

Some people highlight Asia’s cultural heritage.

They stress Confucianism, the ancient moral and ethical code of China. Confucianism emphasizes societal order, respect for hierarchy, bureaucratic excellence and devotion to a strong work ethic

But Confucianism cannot explain everything because the “miracle” spread to peoples such as India’s Hindus, Malaysia’s Muslims and Thailand’s Buddhists. Asia is too large to credit any one culture.

Asian countries adopted wide-ranging policies aimed at transforming themselves into full-fledged market economies. Sound macroeconomic policies were put into place. This provided a stable backdrop for business to grow. Initially, countries focused on infrastructure investment as an aid to exporters. Imports were limited. The main thrust of economic policy became an outward orientation with strong incentives for exporters, and a commitment to growth through trade. As the reform process progressed, greater emphasis was placed on liberalization of the trade and financial sectors.

Park Chung-hee, South Korea’s longtime dictator, wrote that his country’s transformation “is not so much a miracle as the fitting results of many years of hard work to make ourselves stand on our own feet. Economics are built not by policies but by the people who take the bus to work each day and spend 12 hours making the goods counted by the statisticians.”

The story of economics is at its heart the story of human behavior.

Originally published in the Sarasota Herald-Tribune