Limitations of the East-Asian Growth Model and Lessons to Be Learned for Developing Countries

Models have their limits. The East-Asian growth model is no exception. There are lessons to be learned for developing countries which are willing to emulate the East-Asian growth model.

Some of them are:

-Recognize the limits of a command economy. They have developed the institutional setup for the so-called Japan Inc. and Korea Inc. to grow. This institutional setup was good for a command economy, but not necessarily good for the free market system. The entrenched oligarchy system formed has persisted, hampering the rule of law, which is an important part of the wealth creating mechanism.

-Their productive capacity and innovation apparatus have been icing on the cake to some extent. Their solid industrial output and export mechanism boosted the manufacturing employment and standard of living. Yet it is dwindling. Innovation/productive capacity is a crucial part that comprises the health of a nation, and yet it has to be accompanied by other factors…

-Dissonance between manufacturing and finance sectors has hindered the productive capacity.

-State’s control of the financial system and central planning of money have fundamental flaws and the privatization of the financial institutions without proper regulations has drawbacks as well…

-Excessive government interventions do more harm than good, and bloated government has impeded the real economy…

-As noted, the East Asian countries’ growth model was flawed from the start and was bound to hit the wall. Their rapid growth model has come with a cost. The strengths of the model had turned into a liability due to several factors…

-Losing the manufacturing job base has far-reaching consequences…

-Once their manufacturing advantage started to lose its steam, the financialization of the economy has taken hold. In order to mask the real loss that is in progress, they have engaged in wealth destroying activities…

-The East Asian economic development model is highly susceptible to the U.S. policies…

-Recognize the perils of big business-centered economic model…

-Beware global forces in collusion with each country’s oligarchy system behind the rise and looming decline of East Asian countries

(A detailed analysis on this topic won’t be shared due to the proprietary nature of the content.)