Over the past decade, there has been rapid long-term economic growth for East Asian
countries. These newly industrialising countries are experiencing growth rates in GDP
per head at around 6% to 7% compared to the 2% to 3% for most industrial economies. If
this growth continues, South Korea and Taiwan might take away America's distinction as
the world's richest country. This rapid economic growth is a result of several economic
and political factors. The pace of economic development, growth in world trade and
communications, and the investment in physical capital and education have all played a
role in the sudden rise of the East Asian economies.
One factor which has helped the long-term economic growth of South Korea and Taiwan is
the pace of economic development. The pace has accelerated over time. As time
progresses, countries seem to be able to grow at a much more rapid rate. From 1780, it
took Great Britain 58 years to double its real income per head. It took America 47 years
to double in the 1800's while Japan took 34 years from the late 19th century. Finally,
South Korea was able to double its real income per head in an amazing 11 years from 1966.
It would seem that the later a country has industrialised, the faster it has been able
to do so. Another important factor is the degree to which a country is behind the
industrial leaders. In the case of the East Asian countries, South Korea and Taiwan,
both started out with an extremely low income per head. This allowed much faster growth
when copying the leaders. It is important to realize that these growth rates should slow
as the countries catch up.
An area in which East Asia is investing much of its GDP is in physical capital and
education. Compared to the industrial leaders, the East Asian countries have sustained a
much higher investment in these areas. South Korea invests 35% of its GDP which is more
than double America's capital spending. The East Asian countries have placed much
emphasis upon education. Education is the key to mastering the technologies which they
have been borrowing from the economic leaders of the world. The standards of education
for these countries have improved as rapidly as their economies.
Another factor which has helped the long-term economic growth of these East Asian
countries is the global market. No longer is a country's economy hurt by a small
domestic market. World trade has grown tremendously over the past few decades. Exports
account for about 30% of South Korea's GDP and 40% of Taiwan's. This growth in world
trade has allowed technology to become more available today than in the past. The growth
in international communications has helped spread new technology throughout the world.
South Korea and Taiwan should continue to experience long-term economic growth in the
next several years. Both countries are investing heavily in education and physical
capital; areas which are key for economic development. They also are benefiting from
world trade and the diffusion of new technologies. All of these factors should help
continue their recent economic success.
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