Business Essays (1407 words) - Economic Booms,

conomic Growth: Politics or Policies Matter Today's rapidly growing economies are classified as Newly Industrializing Countries or NICs and most of the NICs are located in Asia. Despite the current economic crisis, which remains as a mystery, NICs experienced a rapid economic growth over the last 40 years. Economic growth refers to an increase in the productive capacity of an economy Japan was the first country to experience a rapid economic growth in Asia. Its economy continued to expand rapidly from the mid-1950s through the 1960s. The annual growth rate averaged close to 11% in real terms for the decade of the 1960s. This compared with 4.6% for the West Germany and 4.3% for the USA in the period from 1960 to 1972. And it was well above twice Japan's own average prewar growth rate of about 4% a year. It is generally agreed that the rapid expansion of Japan's economy from the late 1950s through the 1960s was powered by the vigorous investment of private industry in new plants and equipment. The high level of saving of Japanese households provided banks and other financial institutions with large funds for heavy investment in the private sector. The rapid increase in capital spending was associated with the introduction of new technology, often under license from foreign companies. Investment for modernization made Japanese industries more competitive on the worl d market. This created new products and brought Japanese enterprises the benefits of mass production and improved productivity per worker Another factor behind Japan's economic growth during this period was the availability of an abundant labour force with a high level of education. Reasonably large numbers of young people entered the labour force every year. There was also a heavy migrartion of agricultural workers to manufacturing and service jobs located mostly in the larger cities. In 1960, the Japanese government established Income Doubling Plan, every 10 years, so that the government's economic policies aimed to encourage saving, stimulate investment, protect growth industries and promote exports. During this period, Japan benefited from an expansionary world economic climate caused by the availability of an abundant supply of relatively cheap energy from abroad. Despite a few short recessions, the Japanese economy enjoyed a long period of prosperity. In 1960s-70s, the real growth rate was averaging close to 12%. The main factor behind this growth was rising capital investment and to obtain economies of scale, bu ild additional facilities to increase export capacity, and acquire equipment needed to respond to changes in the economic and social environments, such as labour-saving tools and pollution-cutting devices. Increases in exports due to the stronger price competitiveness of Japanese products also supported the sustained rise in business activity Within 25 years, Japan established one of the largest financial centers in the world. Soon, so-called high-performing Asian economies (HPAEs), notably, Hong Kong, Korea, Singapore, Taiwan, and later Indonesia, Malaysia, Thailand, China, India and Vietnam, start following Japan's policies. The process is also known as the 'flying geese phenomenon.' Since late 1970s these countries have experienced between 8-11% economic growth. Countries that were more open to international trade have enjoyed a more rapid rate of economic growth. This is especially true with China because it suffered greatly under pure communist economic policies in the 1950s and 1960s. However, in the 1970s, Mao Zedong initiated 'Great Leap Forward' economic programs and established ties with the West since then many things have changed radically. China began a program of economic liberalization. Since 1980s, trade liberalization and reforms have accelerated. China's rate of per capita income growth, during 1985-95, was 8.3% per year. Most importantly, China, South Korea and Taiwan established universal primary education to empower women. This helped to increase people's standards of living while reducing the high birth rate and expanding labour intensive industries Not surprisingly, in 1995 the Singapore economy registered a growth rate of 8.8%, pushing its per capita GDP to more than US $28 thousand, a level above that of the United States. In January 1996, the Organization for Economic Cooperation and Development (OECD) removed Singapore from the list of recipient countries of official development assistance, and reclassified it into a new category of countries, 'more advanced developing countries.' The rapid economic growth, in