UNDERSTANDING the distinctive features of the Asian development model as a whole, as well as its individual varieties, can be invaluable in measuring and understanding the response of these countries toward such events as the Asian financial crisis of the latter half of the 1990s.

Far from being a vague, mystical concept, there are empirical realities rooted in the cultural and historical foundations of the Asian development model that are fertile for social science exploration.

In the post-World War II era, it had become common to look at the East Asian economic development as a discrete model. In 1993, the World Bank published a well-known study of the Asian development model called, The East Asian Miracle: Economic Growth and Public Policy.

One of the things that has struck economists has been the rapid economic growth of East Asia along with gains in equity. The concept the of East Asia is used primarily as a cultural identification marker, including, above all, the Confucian philosophy.

Certainly, the cultural differences among the East Asian countries are prominent, resulting in variations in the East Asian economic development model. Thailand, Japan, South Korea, Taiwan, Singapore, Hong Kong, Malaysia, Indonesia, and China each have their variants, but certain striking similarities also emerge across space and time.

Economists have suggested that the development experiences of the East Asian countries— Japan, the so-called Four Little Dragons: South Korea, Taiwan, Hong Kong, and Singapore; the new dragons, Malaysia, Indonesia, and Thailand; and China - are distinct enough compared with the West to allow us to speak of them as a “second case” of capitalist modernity.

Some of the salient features of the Asian development model are as follows: high growth rates, sustained over many years and even decades; association of high economic growth, particularly in a country like Taiwan, but also others, with surprisingly diminishing income inequality; a remarkable improvement in the material standards of living of nearly the entire population; a highly active government role in shaping the development process (while East Asian countries can be said to follow capitalism, with the exception of Hong Kong they do not follow pure laissez-faire capitalism); low tax rates and high savings rates; economies mostly geared to exports; and finally, even in Japan, relatively under-developed welfare states (compared certainly to the generous welfare states of Western Europe). Together these economic features constitute a distinct variant of capitalism.

But what’s even more interesting, even to so-called “hard-nosed economists,” is that these economic features are linked to distinctive historical and cultural features.

These include, as many analysts have noted: a highly developed sense of collective solidarity, both within the family and in artificial groupings beyond the family; great prestige of education, with the motivation to provide the best education for one’s children; and severe meritocratic norms and institutions, which, while egalitarian in design, serve to select out elites when they are at an early age (Westerners are familiar, above all, perhaps with the rigorous meritocratic norms in Japanese institutions of learning).

Economists tend to refer to these features under the vague category of “human capital.” But what is worth investigating is the extent to which the economic and socio-cultural features are causally linked. This indeed has been a tough question for economists and others to grapple with, and remains full of interesting potential for further research.

If in the West, clear lines of causal linkage have been drawn between individualism (such as the picture drawn by Max Weber’s “Protestant ethic”) and capitalism, then what can be said about the East Asian cultural and historical experience and its relationship to the particular capitalist model that has developed there?

East Asia, even in its modernized sectors continues to adhere to values of collective solidarity and discipline that strike the Western observer as being very different from his accustomed values and patterns of conduct.

Could it be that the East Asia has successfully generated a non-individualistic version of capitalist modernity?

If that is the case, then the linkage between modernity, capitalism, and individualism has not been inevitable or intrinsic; rather, it would have to be reinterpreted as the result of contingent historical circumstances.

More than merely a reinterpretation of the past, such a conclusion would suggest the possibility of changes in this linkage in the future, leading to either elevation or denigration of Western individualism.

The answer to this question is not yet clear, but the fact that such a question can even be raised with reference to East Asian development suggests that the central points of reference in this debate could at least stand a departure from the accustomed Weberian frame of analysis.

The Confucian hypothesis has enjoyed a great vogue in the last two decades in exploring this question. It is said that both Japan and the newly industrializing countries of East Asia belong to the broad area of influence of Semitic civilization, and there can be little doubt that Confucianism has been a powerful force in all these societies.

So the hypothesis is that a key variable in explaining the economic performance of these countries is Confucian ethics - or post-Confucian ethics, in the sense that the moral values in question are now relatively detached from the Confucian tradition proper and have become more widely diffused.

Historical evidence on the spread of Confucian education and ideology is very relevant to this hypothesis, but equally important is empirical research into the sway of Confucian-derived values in the lives of ordinary people.

Confucian-derived values such as a sustained lifestyle of discipline and self-cultivation, respect for authority, frugality, and an overriding concern for stable family life, are likely to have influenced the work ethic in the region.

But East Asian Buddhism is another important area of exploration. As Buddhism crossed the Tibetan plateau and the great Himalayan passes, it underwent a profound transformation, changing from perhaps the most world-denying religion to a distinctly world-affirming one.

This transformation was the work of the Chinese mind. Some of the world-affirming themes can already be found in Mahayana Buddhism in India, but it was in China and the other Mahayana countries of East Asia that salvation was located consistently in this world, culminating in the proposition that nirvana and samsara are one and the same. Taoism and Shintoism further refine this basic attitude. Folk religion, in addition to East Asian Buddhism, also fills in the picture along with Confucianism in understanding the spirit of Asian modernity. These traditions all lead to this-worldliness, activism, and pragmatism.

How was East Asia able to combine rapid growth rates with reduction in poverty and inequality? In other words, how did it manage to distribute the fruits of growth evenly enough that the population as a whole stayed behind the economic experiment?

East Asian growth consistently outpaced growth in China or in many resource-rich countries — rapid during some periods and slow or negative in others — once they adopted their development model.

These were and remain egalitarian societies compared to other mixed economies. Only in Korea in the 1970s was income distribution less egalitarian. In 1980, all of them were more egalitarian than comparable countries.

An indirect measure of welfare, which is greatly affected by income distribution, is life expectancy: where income is unequally distributed the poor die young. In the 1960s, life expectancy in East Asia, excluding Japan, was about 50 per cent greater than in low-income and 25 per cent greater than in middle-income countries. By the 1970s the gap had shrunk, but was still about one quarter to one-third. In the 1970s the physical quality of life index (PQLI), a composite of several welfare indicators, in East Asia was about one-third higher than in all middle-income countries and double that in low-income countries.

These countries have had success with achieving growth and simultaneously reducing poverty while following different degrees of government intervention. Hong Kong has been a consistently highly market-oriented economy, while Singapore has bent toward the dirigiste end of the spectrum. Taiwan was market-oriented in the 1960s and dirigiste in the 1970s. Korea is similar to middle-income countries, but more market-oriented than the low-income areas.

The East Asian countries, on the whole, seem to be more market-oriented than most LDCs, but not markedly so. As for the size of the public enterprise sector in the economy to measure the importance of governmental intervention, Korea, presumably capitalist, is not much different from India, presumably socialist. On the other hand, most people accept that the government plays a far greater role in Japan than in most other developed economies.

So it seems that some unique blend of government intervention and the market economy has been obtained to achieve growth with poverty reduction in these economies.

With growth built around labour-intensive manufactured exports, there was a rapid increase in the demand for unskilled labour, the activity from which the poor derived most of their income.

In other words, the poor also benefited from rapid growth in these countries, and there was no worsening of income inequalities.

In Hong Kong, some 730,000 jobs were created in medium- and large-scale industry between 1957 and 1979, a massive number in a labour force of 1.5 million. Some jobs were lost in the lower-income, small-scale manufacturing sector, but the net gain was still around a third of the labour force. Over 80 per cent of the workers in industry were unskilled in 1974, an increase from 71 per cent in 1951, so almost all the new employment was for unskilled workers, mostly in the garment, plastics, and electronics industries.

The additional income in industry meant the creation of secondary jobs in construction, trade, and service occupations, many for unskilled workers as well. If one secondary job was created for each one in manufacturing, then industry, essentially producing for export, generated one million jobs in twenty-odd years in a country with a labour force of about 1.5 million. Similarly, dramatic proportional gains occurred in manufacturing employment in the other East Asian countries. Comparing the mid-1950s with the mid-1980s, roughly two million jobs were created in Taiwan and six million in Japan, while in Korea the increase was two million in less than twenty years.

Along with increasing demand for skilled labour, real wages also rose rapidly. They were very low indeed in the 1950s. In Japan they ranged from less than US, $ 1.00 per day in agriculture to less than $1.50 per day in the textile industry. In Hong Kong and Taiwan, industrial wages were not much above $0.50 per day. In South Korea and Singapore, wages were high in US dollars relative to other East Asian countries, because of the overvaluation of the currency. Once this problem was corrected, these countries joined the other countries in the Asian model of rapid growth in income based on rapid growth of manufacturing exports.

During these countries’ periods of rapid growth, wages tended to rise between five and ten percent per year in real terms. Since these are real wages in agriculture, textiles, and construction, they are in most cases compensation primarily for unskilled labour. Unskilled workers in turn are the greater majority of the poor, persons who derive their income primarily from selling their labour, with little physical or human capital to increase that income.

Income distribution measures clearly show gains for the Asian countries. For Japan and Taiwan, the share of the poorest 20 per cent in income distribution increased sharply over the 20-25 years before 1990. For Hong Kong there was little change. There and in Taiwan the share of the richest 20 per cent declined sharply, and the middle income groups, including some who are very poor by developed country standards, gained. It was only in Korea that there was a major decline in the share of the poorest 20 per cent in the early 1970s. This deterioration happened because Korea changed its strategy at that time, placing greeter emphasis on capital and skill intensive industries such as steel and chemicals. But even after that decline, the share of the poorest 20 per cent was still higher than for the average of comparable countries.

The absolute income of the poor increased rapidly between 1957 and 1979 for all five countries. In Hong Kong, for instance, the income per household more than doubled for the poorest 20 per cent, more than tripled for the next poorest, and increased 360 per cent for the third-poorest 20 per cent of households. Other measures of welfare, such as life expectancy, show similar gains. So measures of performance for the poor are distinctly good compared to other developing countries.

Some have said that the poverty reduction and egalitarian development of the East Asia were due not entirely to their strategies, but because of asset redistribution which took place shortly after the war and the subsequent emphasis on manufactured exports.

True, there was effective land reform in Japan, Korea, and Taiwan, after the war, which produced a more egalitarian distribution of land. It helped spread widely the benefits of agricultural development and contributed to an egalitarian income distribution.

But the contribution of initial factors can be exaggerated. The experience of other countries suggests that differentiation in income and wealth can come quite quickly, even with a distribution that is initially egalitarian.

The essence of growth with equity still seems to have been a labour-intensive pattern of development in these labour-abundant countries. The poor just above the bottom 20 per cent seem to have benefited the most, while the absolute income of the lowest income groups also improved considerably.

Pursuing high rates of investment in the immediate post-war period, the East Asia encouraged a high rate of return for private investors. These were austere societies where status accrued to businessmen for expanding their empires, not for conspicuous consumption. Labour was used efficiently, and government intervened to correct the distortions of private decision makers in terms of short-term outlooks. Rapid industrial development, utilizing abundant labour, was the key to growth with equity.

Features of the Asian model are visible in all these countries’ individual development experience, which was truly remarkable before 1979.

Japanese industrial corporations adopted important cultural characteristics, such as employment not being a purely contractual affair, or employees tending to identify their enterprise as an extension of primary or secondary social entities such as the family or village community. Taiwan’s rapid economic growth in the 1960s and 1970s was a function of extremely rapid industrial growth, reaching nearly 13 per cent per annum. Taiwan was highly dependent on foreign trade, as were the other Asian economies in general. Furthermore, in Taiwan small-scale farm families quickly accepted new varieties of seed to raise agricultural production rapidly. Firms in Taiwan, as in the other Asian economies, responded quickly to changes in the international market and maintained the competitiveness of their products.

In South Korea, too, growth has been marked by rapid industrialization, the industrial sector has been led by manufacturing, and manufacturing by exports. Much has been said about the Korean “national character,” deriving from the principles of social organization and world views already described above.

Above all, the Korean version of neo-Confucianism is said to have contributed heavily to the quality of human resources in that country. Korea began as a well-educated society and accelerated that tremendously during the 1960s and 1970s, allowing it to move to higher levels of industrial production for export.

More recently, traditional Koran authoritarian, hierarchical, and collectivistic orientations have suffered a backlash by the young, reformist, more Westernized segments of the population, but the essence of the Korean model of development, rooted in the rationality of Confucianism, remains intact.

In the 1960s and 1970s, the export performance of Hong Kong and Singapore, both societies having a Confucian-influenced majority culture and a high degree of social homogeneity, was truly remarkable. While high unemployment characterized both societies at the very beginning of their industrial development, soon labour-intensive policies overcame that problem and led to better income distribution. The Singapore government’s involvement in direct production is the result not of an ideological inclination, but a pragmatic response to changing conditions. Is it possible for other countries, in the third world or the west, to learn from the Asian development model? The answer depends on the extent to which one ascribes the role of cultural factors in the economic development of the region. The “culturalist” hypothesis holds that, for instance, the economic success of Taiwan has been crucially determined by the fact that Taiwan is populated by Chinese people, whose attitudes to the world have been shaped by Chinese culture and Chinese social institutions. Having postulated this hypothesis, we may then explore which Chinese patterns and themes have been important in shaping the “spirit” of modern Chinese capitalism.

The “institutionalist” hypothesis, on the other hand, holds that the economic success of Taiwan is only marginally due to such cultural factors, but is rather to be explained in terms of specific economic policies and practices that have nothing to do with the fact that the people executing them are Chinese. Each hypothesis has very different implications for the possible “exportability” of the Taiwanese experience. If the institutionalists are right, there is indeed an Asian development model to be exported successfully to other regions; but if the “culturalists” are right, then there should be grater skepticism about the exportability of the model. We could then say that Middle Easterners or Latin Americans might do well to adopt the fiscal or trade policies of Taiwan, but not that they should adopt Confucian ethics. From the point of view of the East Asian countries, if the culturalist hypothesis is correct, then indeed countries such as Singapore (whose former Prime Minister, Lee Kuan Yew, has been a great proponent of Asian values) would be interested in maintaining the cultural traditions at issue. Introduction of curriculums with Confucian ethics at the core would then become not only a legitimate but an economically crucial determinant of continued success. It is true that the East Asian financial crisis did bring into question the validity of the Asian model. Neoliberal critics used the crisis to discredit any and all government involvement in economic development. Unfortunately, opportunists have also used the abstract Asian model as legitimation for neoliberal structural adjustment policy prescriptions in indebted developing states around the world, emphasizing the non-intervention of Asian governments rather than their intervention. But neoliberal economists are too quick to throw the baby out with the bathwater.

The Asian model is by no means a homogeneous experience. The lessons abstracted from the so-called Tiger nations did not even work well in several other Asian countries. The recent financial crisis has sharpened the awareness that the neoliberal interpretation of the model is far from accurate. Problems of abstraction and application arise when we try to analyze and transfer the East Asian experience. Other countries have not fared as well in their efforts to attract foreign direct investment (FDI) as they seek to emulate features of the East Asian economies.

If we become too obsessed with universalizing the Asian development model, we run into the same problem as the World Bank and the IMF’s universalizing of their neoliberal model. Rather than throwing into doubt the validity of the entire Asian model, the recent financial crisis is better explained as a result of diminishing returns for massive global supply of inputs. A downward adjustment such as what occurred at the end of the nineties should not have been a surprise. Certainly, the Asian economies must now acknowledge the need for increased flexibility and efficiency in information flows as a precondition for future production. Moreover, for the sake of sustained, long-term economic growth, the Asian authoritarian regimes that have imposed a form of “cultural protectionism” to inoculate their citizens against modernizing influences that might encourage individualism must rethink their stance. It may well be that even the weak case of the existence of Asian values as an explanation for economic success in that region is likely to become a burden rather than competitive aid. In the highly competitive global economy, Asian values may have to be moderated to sustain growth and encourage the kind of homegrown innovation required by the current stage of integration into the global economy of the Asian states.