Main report

Abstract

The report examines the public policies of 8 high-performing Asian economies (HPAEs) from 1965 to 1990. It seeks to uncover the role those policies played in the dramatic economic growth, improved human welfare, and more equitable income distribution in Hong Kong, Indonesia, Japan, Malaysia, the Republic of Korea, Singapore, Taiwan (China), and Thailand. HPAEs stabilized their economies with sound development policies that led to fast growth. They were committed to sharing the new prosperity by making income distribution more equitable. Their public policies promoted rapid capital accumulation by making banks more reliable and encouraging high levels of domestic savings. They increased the skilled labor force by providing universal primary schooling and better primary and secondary education. Agricultural policies supported productivity, while requiring only modest taxes. HPAEs kept price distortions in check and welcomed new technology. Legal and regulatory structures created a positive business environment. Cooperation between governments and private enterprises was fostered. Beyond the fundamentals of accepted macroeconomic management, HPAEs adopted policies at variance with the notion of the level playing field of open-market free enterprise. HPAEs targeted key industries for rapid development. In key areas, resource allocation was strictly managed. Trade in manufactured exports was promoted by government-established marketing institutions. Analysts disagree about the effectiveness of such interventions, but agree that without the foundation of macroeconomic stability and development of human and physical capital, the expansion would not have been so dramatic and sustainable. This report reviews the basic development policies of HPAEs that created macroeconomic stability. It explains why most countries should not use government interventions in today's changing global economy. Co-publication by the World Bank and Oxford University Press.