It is not an overstatement to describe economic growth in much of the developed world—especially in the US and Europe—as lacklustre. Since the Global Financial Crisis of 2007–8, growth rates have consistently remained below trend. Notably, this dilemma has persisted for the last 7 years, so it’s about time we better understand why growth hasn’t returned to its pre-crisis trajectory.
Paul Krugman wrote a famous paper in the 1990s outlining the myths surrounding the Asian miracle of the 20th century. Rather than it being a ‘miracle’, he presented a less dazzling critique of Asia’s economic success. He proposed that it was a combination of stringent government policy and the further adoption of free trade that was key to sustaining economic growth in East Asia. Most of this growth occurred in eight economies, collectively referred to as the High Performing Asian Economies (HPAEs) – Japan, Hong Kong, the Republic of Korea, Singapore, Taiwan, and the newly industrializing Indonesia, Malaysia, and Thailand . The relationship between public policy and economic growth is now more important than ever, and in light of the continuing economic crisis in Europe, there are a number of lessons to be learnt from the success of the HPAEs.
There is a certain irony in economics. We economists would like to call ourselves scientists, but unlike the other scientists who are able to indulge in debate amongst the learned few of their field, economists are burdened with the obligation to debate amongst society as a whole. Where society includes scientists and non-scientists, people who are as educated as you and those who are not, people who often feel the unpleasantness of being too full and those who equally often must feel the unpleasantness of being hungry (don’t forget everyone in between too!).