The well-known economic historian Professor Angus Maddison claims that the Asian economy accounted for nearly 60% of the global GDP in the late 18th century. However, as industrial development remained primarily limited to Europe and North America, by the early 1950s, the Asian GDP shrank to just over 15% of the global total. But over the last half-century, things have turned around, and Asia's share of the global GDP increased to about 40% in 2020.
The phenomenal economic growth in Asia over the last decades remains a mystery to many, even though most economists around the globe generally agree that there is no real secret behind this unique achievement. Instead, it can be attributed to common-sense performance and determination. By saying this, one acknowledges that any nation could achieve similar results if blessed with qualified and responsible leadership and motivated people contributing their part.
The results are well known: over the last 30–40 years, most Asian countries have enjoyed average growth rates between 4% and 6%. Consequently, there are already 11 Asian countries among the world's top 50 (Table 1 in the Annex), and Singapore, the undisputed champion, has increased its GDP per capita since 1966 from about $500 to an estimated $91,100 in 2023 (Switzerland $89,349 and the USA $80,034). The increase in Singaporean GDP from 2020 to 2021 has been 26%, which is absolutely unprecedented.
In Table 1 at the end, we can observe the performance of 11 Asian countries in the global innovation ranking among the top 50 countries during the period from 2018 to 2022.
It is encouraging to note that 10 countries, with half of them hailing from Asia, have improved their ranking by more than 3 positions during this period. In contrast, seven countries, none of which are from Asia, have experienced a decline in their ranking by more than three positions.
Additionally, five Asian countries have achieved the most significant improvement in their global ranking, while only two out of the 50 listed countries have experienced a modest decline in their ranks.
Best improvemment 2018 – 2022 (10 countries – 5 from Asia):
- India: 57 -- 40 (+ 17)
- Turkey: 52 –- 37 (+ 13)
- UAE: 38 -- 31 (+ 7)
- China: 17 –- 11 (+ 6)
- Estonia: 24 -- 18 (+ 6) = total 72 positions
- Korea: 12 –- 6 (+ 6)
- Malta: 26 –- 21 (+ 5)
- United states: 6 -- 2 (+ 4)
- France: 16 -- 12 (+ 4)
- Austria: 21 -- 17 (+ 4)
Worst deterioration 2018 – 2022 (7 countries – none from Asia):
- Ireland: 10 -- 23 (- 13)
- Slovakia: 36 -- 46 (- 10)
- Montenegro: 52 -- 60 (- 8) = total 52 positions
- Latvia: 34 -- 41 (-7)
- Australia: 20 -- 25 (- 5)
- Israel: 16 -- 11 (- 5)
- Luxemburg: 15 -- 19 (- 4)
These shifts demonstrate the consistent progress achieved by Asian countries, driven by a deliberate emphasis on strengthening their knowledge-based competitiveness.
Another key factor behind Asian success is the focus on enhancing their innovation capacity. This has become a top priority for these countries, evident not only in their declared strategies but also in the effectiveness of their policies and support programs. These initiatives encourage not only the research community but also companies to invest in bolstering their knowledge-based competitiveness.
To assess the success of the selected 18 Asian countries in advancing their innovation performance, we can refer to the ranking of 132 countries in the WIPO's Global Innovation Index 2022. This index provides valuable insights into how these countries are performing in terms of innovation on a global scale.
One can clearly distinguish among them three groups: the most advanced being Korea, Singapore, China, Japan, and Hong Kong; the second group ranging from the UAE to Vietnam; and the rest comprising the third group. The average ranks of the countries within these three groups are 10, 43, and 103.
The contribution of competent leadership is undoubtedly the decisive factor for success. Importantly, Asian leaders have not blindly followed any economic doctrine, whether neoliberal or etatistic (government-controlled model). They understood that the power of the market should not be restricted but, at the same time, accepted the responsibility for formulating adequate development strategies and creating stable and productive economic systems and policies. Simultaneously, they did not allow excessive economic differentiation, which brought about significant socio-political and economic benefits.
It is therefore no surprise that Asian countries have maintained political stability, even though, by Western standards, their governance often leans toward autocracy. Remarkably, there have been no major upheavals, indicating that people have willingly accepted certain limits on democratic debate and individual behaviour. This acceptance is rooted in the understanding that intensive growth is the only viable path forward and that it will ultimately benefit everyone.
Most Asian leaders deserve credit for recognizing that the foundation of intensive growth lies in the expansion of human and physical capital. This was achieved primarily within open economies, with a degree of reliance on foreign investors. These countries also tapped into external expertise and experience, allowing investors to repatriate their profits at generous levels. Education and research received due attention, contributing significantly to the overall growth.
From the outset, it was clear that mere economic growth was not sufficient. These countries needed to undergo structural transformation, shifting from agrarian, and often colonial, economies to modern (post)industrial economies with a strong emphasis on knowledge and cutting-edge technology. This transformation is precisely what took place.
This was the general pattern, but it is important that each individual development model takes into account the specific cultural, historic, and political circumstances of the respective country. Let us have a look at some of those specific features that have been applied in some countries in order to properly interact with various economic and political circumstances.
The People's Republic of China undoubtedly occupies a unique position in its development journey. Its sheer size, rich historical civilization, current socialist character, and ambition to become the world's leading global power all contribute to understanding how it has pursued modernization and development. Despite limited public discourse on the matter, China has unequivocally prioritized the construction of a knowledge-based economy, placing significant emphasis on strengthening its human capital and recognizing innovation as the key driver of accelerated development.
The government of China has outlined five broad and strategic priorities: electronics and informatics, advanced manufacturing, energy and environment, biology and health, and maritime development. Furthermore, it has substantially increased the share of GDP allocated to research funding, with gross expenditure on research and development (GERD) reaching 2.55% in 2022.
Remarkably, China has managed to strike a balance between supporting research and development (R&D) and fostering entrepreneurship, a characteristic not typically associated with socialist countries. The country boasts 4,298 market spaces, 400 accelerators, and an innovation fund dedicated to technology-based firms, which annually supports around 4,000 small and medium-sized enterprises (SMEs).
The government plays a significant role in shaping science and technology policies and even determining which research projects should receive public funding. However, there has been a gradual shift toward entrusting experts with the selection of promising research projects.
The vibrancy of entrepreneurship in China is exemplified by two impressive figures: in 2022, an average of 23,800 new companies were registered daily, and as of January 1, 2022, there were a staggering 52 million SMEs operating in the country.
Recently, some economic weaknesses have come to the fore in China. For instance, the youth unemployment rate has surged to 20%. In response to a deteriorating property market and weak consumer spending, the Central Bank has reduced key interest rates. It remains to be seen whether the leadership will attempt to reduce the market's role, which would likely be counterproductive, or heed market signals and respond appropriately.
Turning to India, the world's most populous country, it has historically experienced modest economic progress. However, over the past decade, India has emerged as one of the fastest-growing major economies globally. It is estimated that India has contributed approximately 12% to global economic growth over the last five years.
In its World Economic Outlook Update, the IMF maintains India's growth rate for 2022-2023 at 7%, with a forecast of 6.5% for 2023-2024. Nevertheless, former Governor of the Reserve Bank of India, D. Subbarao, emphasizes that India faces significant challenges in sustaining this growth rate and lifting millions of people out of poverty. He underscores the importance of addressing medium-term challenges related to improving education and health outcomes, noting that countries worldwide that have transitioned from low to middle income have achieved this by investing in education and health.
Subbarao also highlights unemployment as a major challenge for India, with 12 million people entering the labour force each year while the country struggles to create a sufficient number of jobs. He characterizes this problem as reaching explosive proportions.
Private consumption has grown by 25.9% year-on-year, and investment has seen a growth rate of 20.19%. It's crucial to consider that India still grapples with widespread poverty, particularly in rural areas with high population growth (the growth rate in 2022 was 0.68%, down from an average of 0.80%). Rural areas, home to over 900 million people, face particularly acute challenges.
Two concerning issues are the labour force participation rate and the unemployment rate. The labour force participation rate, representing those working or seeking work, has declined to 40% of the total population from 46% six years ago, according to CMIE. By comparison, the labour force participation rate in the US stands at 62%, with an unemployment rate hovering around 7-8%, up from about 5% five years ago. This anomaly, where GDP is growing rapidly while employment is decreasing, is unique to India and has been observed since 2011, raising concerns about future development prospects. Nonetheless, many experts anticipate even higher growth rates in India from fiscal year 2024 onwards.
Singapore is indeed a remarkable case in economic history. It has achieved an unprecedented transformation from a humble fishing village into a prosperous, highly developed post-industrial city-state with a population of 2 million in less than half a century. This remarkable progress constitutes an economic miracle, with the highest global value-added per person standing at $83,000 (compared to Japan at $65,000, China at $20,000, Indonesia at $7,000, and Cambodia at $2,600).
Singapore also stands out globally as one of the five least corrupt countries, boasting exemplary public services and infrastructure that even the wealthiest nations envy.
Following its independence in 1965, Singapore was briefly part of Malaysia but soon opted for full independence. The driving force behind the country's incredible development was undoubtedly its leader, President Lee Kuan Yew, who served for four terms and was succeeded by his son in 1990. President Lee implemented policies such as "Stop at 2" for family planning when the country was still relatively poor. Later, he offered incentives for highly educated mothers to have more than two children, recognizing that the quality of human capital is crucial for a nation's socio-economic progress.
In the early stages, immigration was restricted, but it later became acceptable, especially for educated individuals and entrepreneurs. Singaporean citizens have been provided for comprehensively, including education, employment, healthcare, a clean environment, and safety. The government has strictly prohibited and effectively penalized any attempts to disrupt social harmony or create conflicts based on race or religion.
The government has adopted a clear development strategy that capitalizes on the country's strategic geographic position. This strategy has enabled Singapore to become one of the world's largest oil refineries and a crucial international shipping hub.
Singapore's well-organized governance and strategic positioning serve as a testament to what can be achieved in a relatively short period under the guidance of capable leadership, as Singapore has had since its independence. The country has preserved and maintained its achievements over the years, making Singaporean citizenship a privilege.
Japan, as the world's third-largest economy by GDP, holds significant global and regional importance, and it has achieved the status of a global power based on a highly competitive and strong economy.
Despite being severely devastated during World War II, Japan made a remarkable recovery within just 10–15 years and emerged as a formidable competitor in global markets. Japan experienced rapid growth until the early 1990s but was significantly impacted by the global crisis of 2007–2008. Since then, it has maintained more modest growth rates, ranging from 2% to 3.5%.
Japan has a unique tradition of government involvement in its economy, particularly through continuous consultations with corporate groupings within the "keiretsu system" and deep direct involvement in banking. The government plays a crucial role in implementing its development strategy through the Economic Planning Agency, which operates within the Ministry of Economy, Trade, and Industry.
The strength of the Japanese economy lies in its highly competitive manufacturing sector, with a particular focus on hi-tech products, mostly in the field of information and communication technology (ICT) and appliances. Japan has traditionally been a leading shipbuilder and automaker, and it is a significant producer of steel, rubber, aluminum, cement, paper, petrochemicals, and textiles.
The Japanese government has consistently recognized that the competitiveness of its economy hinges on knowledge-based efficiency. It has paid special attention to strengthening its knowledge economy, including recent emphasis on the importance of sustainability in products and services both domestically and in international markets.
While the current Asian share in global GDP is still below its population share (60%), projections from the Asian Development Bank for 2050 anticipate a sixfold increase, reaching $174 trillion (52% of global GDP), approaching the expected Asian population share. This underscores the growing economic significance of the Asian region on the global stage.
Undoubtedly, the historical disproportion of wealth, extended by colonialism, is going to be drastically reduced in the future. Even 10–15 years ago, who could have expected Singapore to become richer than Switzerland in less than half a century?
As elsewhere around the globe, big differences will remain in Asia, probably along the lines of those 3 groups mentioned on page 2. Therefore, special attention should be paid to monitoring the further progress of Korea, Singapore, China, Japan, and Hong Kong. But, as history teaches us, there could also be some big surprises.
What are the lessons from Asian success for other parts of the world, including Europe and North America?
There are several important ones:
- Readiness of governments to accept societal interest as the priority over the interests of the rich minority, in order to achieve common goals – and serving interests of all members of society.
- Committment to socio-economic development and change, instead of just economic growth, in order to transform economies into knowledge societies/economies.
- Awareness that the prime engine of change and growth is high innovation performance – increasingly respecting also the principles of sustainability.
- Readiness and ability to adopt and implement national development strategies – with clearly selected priorities, and being respected by everybody.
The common thread running through these approaches is a focus on efficiency across various aspects of public life, with the aim of benefiting all members of society.
It's ironic that Western politicians and many academics often perceive some of these features as undemocratic, especially when they tend to overlook the influence of big capital in shaping decision-making processes and media narratives in Western-style democracies. This influence, whether through ownership or management structures, can significantly impact the democratic process.
Interestingly, as a response to Western reactions to the rising influence of Asia, the recent BRICS Summit in Johannesburg has initiated a significant expansion of the grouping, incorporating countries like Argentina, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates. This expansion marks the beginning of a potentially important process that could contribute to a more balanced world order, potentially reducing the global dependence on the US dollar as the world's dominant currency.
It's time to move beyond the conventional Western, predominantly American, patronizing attitude that denies others the right to develop their own forms of democracy rooted in their cultural heritage. Asian countries, like the West, are well aware of the weaknesses of Western-style democracy and do not claim that their democracies are the only valid ones. This reflects a level of open-mindedness and objectivity, perhaps stemming from the fact that Asian democracies have a much longer history than their Western counterparts. These observations are not meant to be cynical but serve to highlight notable facts, inviting individuals to draw their own conclusions.