Transcript Asian Tigers - Ken Szulczyk

Asian Tigers
Kenneth R. Szulczyk
Background
Countries
Highly regulated
High tax rates
Tend to grow slowly
Countries
Free, competitive markets
Tend to grow quickly
Background
Totalitarian states – can grow
quickly
Nazi Germany
Soviet Union grew quickly during 1960s
Added cities
Added factories
During 1980s – Soviet economy stagnated
Economic growth may not be
sustainable for long time periods
Asian Tigers
Asian Tigers
Real GDPs grow approximately 10% per
year
Real – affect of inflation removed
Hong Kong
Singapore
South Korea
Taiwan
Characteristics
• Asian Tigers do not have abundant
natural resources
• African and Latin American
countries tend to have natural
resources
– African and Latin countries have poor
growth
Characteristics
• Two Theories
• Theory #1
• Resource abundant countries
attract foreign investment, causing
its currency to appreciate.
– Appreciating currency
• Increases a country's imports
• Decreases a country’s exports
Characteristics
• Theory #2
• A government in countries without
resources have limited options.
• Thus, government opens economy
to free markets
• That is only thing they could do!
Characteristics
• Asian tigers pursue export oriented
policies
1. Asian country allows markets to
compete internationally
– International trade is large part of
economy
– Low trade protection
Characteristics
2. Asian Tigers have low price
distortions
– Distortion - the market has a price that
is not set by the market
– Distortions are caused by taxes,
subsides, price controls, regulations,
etc.
Characteristics
• Asian Tigers build larger factories
– Country is supplying international
market
– Economies of scale
• The larger a factory, the lower is the perunit manufacturing costs
Characteristics
• Have high education levels
– Emphasize vocational and technical
training
– Accelerates the adoption of new
technology and know how
– Asians dominate PhD programs in the
United States
Characteristics
• Asian Tigers tend to save more
– People deposit savings into banks and
banks lend to businesses
– Businesses buy machines and
equipment
– On average, U.S. savings rate is ZERO!
Characteristics
• Asian Tigers tend to devalue (or
weaken) their currencies
– Strengthens exports and weakens
imports
– Asian currencies are stable (low
volatility)
– Note - there was a rapid devaluation of
Asian currencies in 1997