Asia and the Pacific Area:
An Overview

I.    Religion and Culture

A.  Asian polytheism and syncretism vs Western monotheism

B.  Hinduism - Lives full of suffering and pain. Accumulate record of spiritual understanding and action, or karma, to unite fully with Brahman. Requires more than a single lifetime, so reincarnation

C Buddhism --Arose within Hinduism.

1.   Four Noble Truths:

a.   life is full of pain and suffering;

b.  causes of suffering are inappropriate desire  and ignorance;

c.   to escape suffering, overcome desire and move to higher consciousness (nirvana); 

d.   to pursue nirvana, follow disciplines of the Eightfold Path, seeking balance

2.   Theravada -- conservative sect resisted departure from ancient scripture or ritual, spread from India into Southeast Asia. Today, dominant in Cambodia, Laos, Singapore, Sri Lanka, Thailand, and Vietnam.

3.   Mahayana --new scriptures, more flexible --China, Korea, and Japan.

4.   Vajrayana -- elaborate ritual-- influenced Mongolia and Tibet.

D.  Taoism - Similar to Hinduism/Buddhism; encouraged a simple style of life. However, seek social harmony with a policy of "strength through weakness," extending individual freedom and spontaneity.

E.   Confucianism - Hierarchical influence in Chinese society;  spread with Taoism to Korea, Japan, and Vietnam. Practical social ethics, based on mutual obligations of servants and masters. Respect for knowledge.

F.   Islam -- Dominant in Bangladesh, Indonesia, Malaysia, and Pakistan.

G.  Christianity -- dominant in Australia, New Zealand, Papua New Guinea, and the Philippines, and accounts for 29% of the population of South Korea.


Poor performance of India and Nepal MAY be explained, in part, by aspects of Hinduism. Caste system restricts mobility and opportunity. Buddhism allegedly improved the economic fortunes of Southeast Asia. East Asian countries may combine the strengths of Buddhism and Confucianism. But, until the 1980s, average incomes evidently were higher in Hindu India than in Confucian China.

II.  Colonialism

A.  South Asia

1500 B.C., Aryan invaders absorbed/destroyed the aboriginal Indus Valley civilization.

326 B.C., Alexander the Great left Greek outposts, facilitating trade and cultural exchange.

700s, A.D., Moslem invaders entered, developed Moghul empire.

1100s, AD, merchants from Venice and Genoa established contacts.

1298, Marco Polo, Description of the World, publicized riches of the Orient

1498--Vasco da Gama of Portugal found his way around Africa to India.

1600--English East India Company

Created elite of educated civil servants and professionals. Encouraged production of raw materials for British factories. Organized construction of canals, roads, railways.

1920--Mahatma Ghandi gained control of National Congress; led fight for independence. After World War II, Britain ready to surrender.

Economic and social benefits to India--strengthened transportation and higher education. Evidence shows costs from colonial priorities and taxes.


B.  Colonialism in Southeast Asia and the Pacific

Sixteenth century, Portugal established outpost on the Malay peninsula.

Spain arrived in 1571, conquered the Philippines.

Seventeenth and eighteenth centuries—Dutch dominant.

1770--British claimed possession of Australia

1878 –U.S. Samoa, 1898, Spanish-American War, U.S. gained Spanish colonial holdings in the Philippines and Guam.

Thailand (Siam) only nation in Southeast Asia to avoid domination.


C.  Colonialism in East Asia

Western colonialism had important impact, but less important than in South and Southeast Asia.

III. Asian Cooperation and Socialism

East Asian societies combining Confucianism with Mahayana Buddhism seem to encourage  highest levels of social cooperation. By promoting educational opportunity, emphasizing group over individual, and encouraging leaders to serve inferiors, Confucianism encourages cooperation and equality of income. East Asian countries overturned conventional view that income inequality supports economic growth.


In China, the home of Confucianism, history of communitarianism. During Taiping Revolution (1850-1864), peasant campaign against unfair land holdings, excessive taxes, and foreign imperialism. Taiping rulers attempted to abolish private ownership of land and other property, proposing equalitarian land tenure.


1897, influenced by British Fabian Socialists, Dr. Sun Yat-sen included socialism, together with nationalism and democracy, among the Three Fundamental Principles that would lead Nationalist Party in revolution against Manchu rule.


Marxian socialism gained popularity in Chinese intellectual circles after the Russian revolution. In 1918, Li Dazhao established socialist New Tide Society.


1949, Nationalist party established government in Taiwan and Communist party, led by Mao, established the People's Republic of China on the mainland.


In India, socialist programs supported by Mahatma Gandhi (1869-1948) and Jawaharlal Nehru (1889-1964). Both were exposed to Fabian Socialism in England. Condemned caste. Nehru followed policies of the British Labor party. Thus, Nehru's model of socialism was more urban, more industrial, and more oriented toward social modernization.


IV. Asian Growth Miracles

A.  Culture

B.  Government

1.   Neoclassical Washington Consensus view -- Asian growth supported by "market friendly" government policies, avoiding regulation of prices, interest rates, rents, and other payments, and by maintaining small budget deficits, stable monetary policies, low levels of foreign debt, and low barriers to internal and external trade.

2.   Opposing interpretation-- developmental states --industrial policies. World Bank, The East Asian Miracle: Economic Growth and Public Policy (1993), strong and intelligent bureaucracies contributed to growth. No broader evidence for industrial targeting.

C.  Trade Policy --Export led, but sometimes included import substitution.

D.  Saving and Investment

1.   Neoclassical view -- saving and investment in NIEs grew spontaneously when NIEs gained independence from colonialism and they introduced market-friendly policies.

2.   Cultural view -- frugality encouraged by Confucian heritage and survivor mentality.


E.   Productivity Growth

1.   Total factor productivity (TFP). Growth arising from higher TFP, in turn, may indicate improvements in labor motivation or industrial organization, gains from domestic and international trade, and a host of other factors.

2.   High TFP growth seems more "miraculous" and implies growth will continue.

3.   Paul Krugman claimed East Asian miracle was a mirage. "If there is a secret to Asian growth, it is simply deferred gratification…."

UPDATE: More recent research by Jungsoo Park finds that past economic growth in most of Asia has been based on high rates of investment, but many countries are shifting to a more productivity-based growth. In China, however, his projections suggest a decline in TFP growth.

F.   Income Distribution

1.   Challenge to conventional wisdom on inequality and growth. Inequality lower in high-growth Asia than in low-growth Africa or Latin America, and inequality declined in Singapore, Malaysia, and Hong Kong.

2.   Perhaps, Asian growth encouraged by same policies that reduced inequality, and growth encouraged by equality itself.

a.   Growth and equality both supported by programs of public health and education, land reform, trade liberalization, and support for small business.

b.   Income equality contributes directly to economic growth by strengthening political stability, reducing chance of political stalemate, preventing progress in divided societies, and by reducing demands for protectionism.

V.  Regional Economic Integration

Regional Trade

A.  Introduction -- Lester Thurow suggested integration would languish in East Asia because Japan (and later China) were unwilling to open their markets. However, trade among Asian countries is comparable to trade in the Americas, and is far ahead of trade among African countries.

B.  Multilateral Organizations

1.   ASEAN

2.   South Asian Association for Regional Cooperation (SAARC)

3.   Asia Pacific Economic Cooperation (APEC) "open regionalism"

CGE analysis says all APEC members will gain GDP from trade liberalization program, but the excluded European Union will lose slightly from trade diversion. Larger gains for poorer countries. Gains largest if free-trade area is as large as possible. Exclusion of any region (the U.S., China, or ASEAN) harms that region, reduces estimated gains of others.

C.  Growth Triangles/Export Processing Zones

D.  Multinational Business Networks

1.   Japanese

a.   While China is moving aggresively, Japan is still investing more heavily in infrastructure in Southeast Asia. Japan’s infrastructure investment since the 2000s -- both completed and ongoing -- totaled about $230 billion, while that of China reached about $155 billion, according to BMI.

Japan and China Infrastructure Investment in Southeast Asia

b.   Japan organizes regional industrial policy according to flying geese formation.

2.   Chinese

a.   Loose network of expatriates living throughout East and Southeast Asia. Overseas Chinese account for fewer than ten percent of S.E. Asians, but about 86 % of  billionaires. Businesses earn about $450 billion annually—exceeded by national incomes of only ten countries in the world.

b.   Tend to be family owned, centrally controlled, individual firms typically are small- and medium-sized. Often based on ethnic clans.

c.   Importance grew during 1980s when China opened. Hong Kong and Taiwan account for 65 percent of China's total contracted investments. Much of investment going into regions of ancestral origin.

VI.   Asian Crisis

A.  July 1997—Collapse of Baht

      December 1997—Korea near default

B.  Dimensions – Poverty rate in Indonesia jumped from 11% to 50%

C.  Causes

1.   Rise and fall of Japanese Bubble Economy

2.   Fixed exchange rates, mutual funds, and huge inflows/outflows of capital -- short run confidence and long-run panic (inflow of $50 billion in 1996 turned to outflow of $20 billion in 1997).

3.   Financial institutions--under-supervised, over-guaranteed, non-transparent

D.  Solutions

1.   IMF support-- $118 billion

2.   Restructuring banks and opening markets.

3.   Capital controls in Malaysia.  Mahathir and Paul Krugman vs IMF

 Asian Growth 1980 to 2015