Seeking to assess the origins, causes and dynamics of growth, the UN appointed Commission on Growth and Development, chaired by Nobel Laureate in Economics, professor Michael Spence, in 2008 published The Growth Report: Strategies for Sustained Growth and Inclusive Development. The report notes how little we know about and understand growth, and also that sustained growth is very rare. Out of a total of some 200 economies in the world, only 13 have achieved over seven per cent growth for a sustained period of 25 years or more. Nine of the 13 are East Asian: China, Hong Kong, Indonesia, Japan, South Korea, Malaysia, Singapore, Taiwan and Thailand. Vietnam is the most likely candidate to join that group in the near future. Over their sustained growth period, these nine economies have seen their GDP per capita multiply between five and ten times.
There can be no doubt that during the last 30 years, East Asia has contributed considerably to global growth, global development and global prosperity. But it is also the case that the East Asian economies have contributed to global imbalances. In the West there is the US economy (as well as some other Western economies) with its strong tendency to spend, consume and borrow. And in the East there are economies with a very high savings rate, that produce far more than they consume, hence consumption accounts for a relatively low proportion of GDP. These economies are therefore in a position to accumulate foreign exchange reserves, from which they lend to their Western indebted trading partners. Another highly important and contentious issue is that East Asian economies are accused of also being responsible for considerable global environmental degradation.
Of course, for a balanced and robust world economy the West must adjust to the new global economic paradigm and especially to East Asia. But the story of the following decades will also very much depend on whether the East Asian economies can produce the next miracle: by transforming themselves from centres of production and export with a fairly strong tendency to pollute into centres of innovation and consumption, developing much more their service sectors and being at the forefront of green technologies. South Korea’s “Green New Deal” project is a very positive step in that direction. It remains to be seen whether other East Asian economies will follow suit. This is undoubtedly one of the most important questions of our time.
Jean-Pierre Lehmann is founding director of The Evian Group, and professor of international political economy at IMD business school, Lausanne.