Miracle Growth: East Asia

Explosive Chinese GPD Growth

Has had highest growth rate since 1990, surpassing the US for largest economy in 2016 at about $21.13 trillion

Comparatively low GPD p.c.

At only $20k, it ranks below most of East Asian as well as Malaysia and Singapore in South East Asia

Broadberry, Guan, & Li

Evaluate historical data for Yangzi GDP p.c., and find their high estimate to be comparable to European frontier 1400-1600

Land-poll tax

Combination of land taxes (self explanatory) and poll taxes (fixed sum paid per individual)

Qing Province Tax Revenue

Grew from $32M in 1685 to $46M in 1821 before dropping to $41M in 1841, LPT was consistently about $30M

Chinese Historical Tax Structure

Start out taxing farmland and people at same levels (1660) followed by increasing head tax contributions which steadily decrease after 1700, and fluctuating land taxes to account for population changes

Admiral Zheng He

Chinese Explorer who voyaged 1405-1433 for 7 total voyages for Ming government along coast all the way to Mozambique

Canton System

Restricted all foreign trade to the port of Canton (during trading season) and foreigners needed to engage with specific traders who had monopoly over Chinese exports

Qing Industrialization Attempt

After opium wars, 'self-strengthening' movement was attempted to increase trade domestically, though it was implemented from the top down and resisted by both bureaucracy and local populations

Century of Humiliation

China's term for its domination by imperialists from the first Opium War to Communist victory, 1839-1949

Events of the Century of Humiliation

Opium Wars, Taiping Rebellion, 1st Sino-Japanese War, Republic of China -> Warlord Era, Chinese Civil War, & Japanese Imperial occupation

Meiji Restoration

Industrialization of Japan after the US forced them to open ports where they adopted western technology & industrial processes and became the leading producer in silk

Mao's Great Leap Forward

After taking power in 1949, implements Soviet style economic policy (Great Leap Forward) and performs broad top down ideological reform (Little Red Book)

Chinese Collectivization

Agricultural reforms that created large communes out of small private farms, increased mechanization, paid everyone equally, and had rich peasants/landlords killed

Incentives of Production on Collective Farms

Hard to supervise labor -> hard to reward effort -> low incentive to work hard -> low productivity

Great Famine in China

Agricultural polices lead to massive starvation in China (36M dead 1958-1962) where poor incentives and no price signals exacerbated problem

State Owned Enterprises (SOEs)

Government-owned corporations providing public services.

Problems with Chinese SOEs

Had no domestic competition or price mechanism to inform production levels so low incentive to be efficient or precisely meet demand

Chinese Cultural Revolution

Program launched to remove western and intellectual influence on Chinese culture leading to a purge of intellectuals and bourgeoisie (500k-2M dead) and everyone having to carry Mao's Little Red Book

Rise of Deng Xiaopeng

Fills power vacuum left by death of Mao, and implements pragmatic reforms that are an ideological break from Mao's policies

Deng's 4 Modernizations

1. Modernizing agriculture
2. Expanding industry
3. Developing science and technology
4. Upgrading China's defense forces

Deng's Pragmatism & Experimentation

Decreased ideological policies, implemented local level policy changes and allowed peasants/local to implement small land-holdings and capital production

Small Hill village

18 Peasants secretly agreed to experiment with private farming and produce so much more grain that others join them after first year

Household Responsibility System

Removed collective farms and replaced them with 15 year plots that farmers could run while utilizing the dual-track pricing system

Dual-Track Pricing System

Rural reform program that lowered production quotas and allowed the sale of surplus agricultural produce on the free market

Industrialization from Below in China

Township & village enterprises competed with state-owned enterprises which spurred 'Individual Economy'

Individual Economy in China

Policy that allowed unemployed youth to start businesses when the state sector could not employ them

Special Economic Zones (SEZs)

Government-designated areas in China where foreign investment is allowed and capitalistic ventures are encouraged (Shenzhen is the important one, also Xiamen, Shantou, & Zhuhai)

Why SEZs were set up

Wanted to attract Foreign Direct Investment (FDI) in regions where China had historical global trading links

Effects of Global Politics on Chinese Development

After China has ideological break with USSR, Reagan Administration enters trade deal with them to promote capitalism, import US technology, and attract further FDI

Chinese Capitalism

No longer communist, but not a total free market economy because farming is still managed by the state, FDI can only come in through SEZs, and state owned enterprises are still prevalent

Coase & Wong

Argue that economic transformation was not the result of a deliberate, top-down design by the Chinese Communist Party, but rather an accidental path resulting from "marginal revolutions" from below

Kaoru Sugihara

Argued that East Asian societies performed Labor Intensive Industrialization contrasting with Western Europe's capital- and resource-intensive growth driven by abundant land and coal

Labor Intensive Industrialization (LII)

Alternative model of industrialization that relied on cheap, skilled labor and resource-saving technology to maximize land productivity, allowing regions to industrialize without the labor-saving automation seen in the West.

Flying Geese Model

Hierarchical pattern of industrialization where a leading nation drives development by initially producing goods, then shifting to higher-value industries as labor costs rise, while transferring labor-intensive production to less developed "follower" nations

AJR on Korea

Cite the divergence between North and South as a primary empirical example supporting their theory that inclusive institutions drive long-term economic prosperity, while extractive institutions lead to stagnation or poverty

Japan's Second Economic Miracle

-Most dramatic change was the rapid rise of Japan -Japan was able to join the ranks of the other great powers -Government workers helped advise capitalist on which type of industries they should invest in -Japan began building up it's electronics, shipbuilding, automobile industry surpassing the U.S. in a few decades -Japanese prime minister committed to doubling the national income

Japan's Second Industrialization

In recovery efforts after WWII, created Ministry of Economy Trade and Industry (MITI) to do central planning and created Zaibatsu

Zaibatsu

Large conglomerate corporations through which key elite families exerted a great deal of political and economic power in Japan (ex: Mitsubishi)

Singapore's economy

Reliant on entrepot trade through Strait of Malacca where they re-export goods from East Asia, take advantage of spices still being valued exports, and grow with the support of ASEAN

Role of the State in Long Term Growth

Use of financial controls/economic policies as well as investment and promotion of specific industries mean state plays an active role in the economy, without replacing private production

Democracies vs Autocracies in East Asia

Singapore, China, and Thailand show that democracy is not required for economic growth and stability, also subvert the Washington Consensus through investment in Africa and other parts of Asia