By Deepak Nayyar
The fifty years since witnessed a remarkable economic transformation with Asia emerging as a global economic powerhouse. Like so many, it was hard for Mydral to imagine Asia undergoing such rapid economic progress – development on a scale rarely experienced in history.
The development experience of Asia informs our understanding of complex development processes. The successes, failures, and mixed outcomes of the Asian experience provide important insights into the economic prospects of latecomers to development. They also reflect how the next twenty-five years might unfold for Asia in a changing and evolving global context.
A half-century of Asian development was driven by economic growth characterized by high investment-savings rates and rapid industrialization, often export-led, and associated with structural changes in the composition of output and employment. Over the period 1970–2016, the GDP growth rate in Asia was more than double that in industrialized countries. Importantly, unlike Latin America and Africa, structural change drove economic growth. This rapid growth, which gathered momentum around 1990, led to a sharp reduction in absolute poverty in Asia.
It also seems that the public provision of education and healthcare, combined with employment creation, sustained growth in Asian economies and improved the wellbeing of its people. This process characterized the success stories in Asia.
There were, however, marked differences between Asian countries in geographical size, colonial legacies, nationalist movements, initial conditions, natural resource endowments, population size, income levels, and political systems. All of these contributed to differences in policy choices that resulted in a diversity of development outcomes.
Economic openness also played an important role in Asia’s development. Given their colonial legacy of underdevelopment, most Asian countries were restrictive in terms of openness until around 1970. This changed rapidly thereafter. In Asia, openness did not mean a passive insertion into the world economy. Instead, it was often strategic and selective. Success at industrialization was based on such strategic and selective integration into the global economy, combined with the use of industrial policy.
The countries in Asia that modified, adapted, and contextualized their reform agenda, while calibrating the sequence of, and the speed at which, economic reforms were introduced, did well. They did not hesitate to use heterodox or unorthodox polices for orthodox economic objectives, or orthodox policies for heterodox or unorthodox economic objectives.
As Asian economies look to the future, a lesson from their history remains - learning and unlearning are part of a process in which economic policies are a means to the end of development.
Deepak Nayyar is Emeritus Professor of Economics at Jawaharlal Nehru University, New Delhi. He is the editor of Asian Transformations: An Inquiry into the Development of Nations, a WIDER Studies in Development Economics book, now available open access from Oxford University Press.