Asian Tigers

1
Asian Tigers

• Kenneth R. Szulczyk

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Background

• Countries
• Highly regulated
• High tax rates
• Tend to grow slowly
• Countries
• Free, competitive markets
• Tend to grow quickly

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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

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Asian Tigers

• Asian Tigers
• Real GDPs grow approximately 10 per year
• Real affect of inflation removed
• Hong Kong
• Singapore
• South Korea
• Taiwan

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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

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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 countrys exports

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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!

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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

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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.

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Characteristics

• Asian Tigers build larger factories
• Country is supplying international market
• Economies of scale
• The larger a factory, the lower is the per-unit
  manufacturing costs

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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

12
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!

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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