Chapter 87 Section 5 Asia-Pacific Region

The most economically successful regions in the world are the Asia-Pacific region, which has the highest growth rate, doubles its output every 10 years, and has a savings rate of more than 30% of its GDP, so it has a large number of sources of investment.Of course, it is necessary to separate the institutions, cultures and national conditions of each country.Japan, for example, emphasizes decision-making by consensus, and its society is well-ordered.Its intricate tangle of financial and industrial conglomerates and its less developed marketing system set it apart from the standard model of Western capitalist economies.South Korea's economy is also dominated by large industrial complexes with close ties to the government.

However, the situation is by no means quite the same throughout the Asia-Pacific region.In China, the government decided in the late 1970s to allow a de facto private sector to emerge first in agriculture and then in other areas.Indeed, the Chinese have demonstrated their unique entrepreneurial flair throughout the region, with success in Singapore, Malaysia, and Taiwan.In Hong Kong, Chinese genius was on display within the framework of British political and financial institutions.Although Hong Kong has a population of only 6 million, its loosely regulated free trade economy ranks it eighth in world trade.

Despite their many differences, Asia-Pacific countries have certain economies in common: government spending, borrowing, and taxation are all low as a percentage of GDP, and they do not have an excessive welfare burden.The workforce is motivated, productive, and getting better paid.The irony of Asia-Pacific economic performance as being based on low wages rather than high productivity is increasingly misrepresenting the reality.Even the more stringent regulatory regimes of Japan and South Korea are far from the most moderate of socialism.Their governments have steadfastly abandoned social engineering, insisted that success should be rewarded, and valued the role played by independent small businesses.Like the evolution of modern Western capitalism, cultural factors also play a role, but the basic principles of economic success are the same.

India is located on the edge of the Asia-Pacific region. With its own strength, it is an emerging power.Its examples are also educational.Britain's legacy to India had both advantages and disadvantages.On the plus side, there is the rule of law, a tradition of clean government, a common language, and of course an established democratic system.But the corresponding disadvantages were overbureaucratization, overstaffing in the state sector and the socialism of the LSE and Oxbridge that had influenced two generations of local politicians.Redistribution of wealth, industrial planning, subsidies, price and exchange controls, monopolies, import licenses, almost insurmountable high tariff rates, all these policies have achieved the same result as other similar countries and continents - poverty.The first step in getting rid of this self-destructive economic system began with the agricultural reform in the late 1960s.Under Rajiv Gandhi, these reforms were carried out in fits and starts.It was not until the shock of the economic crisis in 1991 and the appointment of Narasimha Rao as Prime Minister and Manmohan Singh as Finance Minister that India was steadily on the right track.Tariff rates have now been reduced significantly, and further reductions are on the way.Foreign exchange controls have been lifted and foreign investment is being encouraged - foreign companies are taking full advantage of these opportunities.As controls on farm prices were removed, food production increased and farmers began to be able to purchase modern equipment.A new, confident middle class is emerging.The Indian economy is growing vigorously.

A similar economic experiment is also being carried out in another fringe area of ​​the Asia-Pacific region.Long before India, Australia and New Zealand were influenced by British-style socialism.Public ownership (often monopoly ownership) and unions' effective control of the labor market went further in Australia.But in New Zealand, "socialism without doctrine" had been the dominant watchword even before the First World War.At the time, the two countries were able to temporarily withstand the adverse economic consequences of the collectivist policies of the left-wing and right-wing governments because of their ability to export commodities, especially mineral and agricultural products.They are unique in this regard.But by the early 1980s, it became obvious to everyone how far the economy had fallen relative to each other, and a new path needed to be found.

In Australia, while the Labor government retained too much control over the labor market for political reasons, it removed many fiscal controls and, most importantly, abandoned protectionism.The limited opening of the Australian economy to competitive pressures has reversed a downward spiral in economic growth rates.Unemployment remained high, however, without subsequent measures to liberalize the labor market. As for New Zealand, it went farther, and therefore far better, first under the Labor government of Treasurer Roger Douglas and then the National government of Treasurer Ruth Richard.It lifted fiscal controls, abolished import restrictions, lowered tariff rates, welcomed foreign competition in service businesses, reduced unemployment benefits, lowered income taxes, and shifted emphasis to indirect taxes.And crucially, unlike Australia, it liberated the labor market.The result is an annual growth rate of more than 4 percent, new jobs are being created, unemployment is down, inflation is low, productivity is growing, and businesses are investing.New Zealand's traditional similarities to the UK make the former's success - in terms of implementing the same general policies that I implemented in the UK in the 1980s - particularly significant.