The Myth of Asian Economic Development and Innovation Model

What is interesting to note is that Japan, Korea, and China show similar features of development path economy-wise and technology-wise

All three countries have valued high tech development in the course of economic growth. They have also depended on exports and purchased the U.S. treasuries.

They also demonstrate signs of asset bubbles and massive government interventions including heavy government directed investment. They all have bad loan problems.

Japan enjoyed high export growth, high personal savings and high standards of living in 1980s. Then their economy has stagnated for two decades. Their asset prices plummeted, resulting in an 85% decline in real estate and stock market prices.

Korea is facing many challenges as well including structural unemployment and increasing sovereign/household debts.

China seems to be in similar boat. While their economy appears to continuously grow and to move up the value added food chain, they have many potential problems such as the yuan/USD peg and property bubble.

Japan and Korea have become high tech powerhouse in some areas, and China is fast accumulating its technological capacity. Yet, regardless of specifics, all these countries face tremendous challenges.

Technological competence is critical in growing and sustaining economy since it is an important means for creating wealth.

And yet, it alone is not sufficient. It has to be coupled with other forces to foster the productive economy. The cases of Japan, Korea, and China have demonstrated this.

The Asian economic development and innovation model shouldn’t be analyzed in a vacuum.

Some lessons drawn from the Asian experience:

-The Asian innovation model should be understood in the overall economic/political/social contexts: for instance, why they have rigorously built their technological base; why much of their technological competence is owned by big corporations.

-The state-led economic model has been both positive and negative forces for innovation.

-Their export-dependent model which has been a driver for their technological accumulation and hard currency earnings should be also analyzed in relation to international politics and global economics as well as their domestic economic structure and political dynamics.

- The overall health of economy including public and private debt loads affects their innovation apparatus. Although they have built the robust technological/manufacturing base, dissonance between finance and manufacturing sectors could impede their innovation competence.

-The global forces can’t be excuses for policy failures and corporate mismanagement.