Catching up with the West: a perspective on Asian economic development

East Asian countries have been catching up with the West for most of the post-war period. Indeed, during the last 15 years, developing East and South East Asia have emerged as the most dynamic region of the world economy. This paper attempts to make analytical sense of this extraordinary Asian drama. It concentrates on the extremely high rates of corporate savings and investment, achieved by these economies. The accumulation story is conceptualised here in Kaldorian terms and emphasises the investment-profits-savings nexus. The essential argument is that high corporate savings and investments in countries like Japan and Korea were not simply the outcome of the invisible hand of the market, but rather, government-business interactions and the relationship between the corporation and the financial system were crucial in the process. The last part considers the implications of the analysis for Latin America. Despite Latin America's deficits in this area, it is recognised that these countries are unlikely to follow any dirigiste lessons from Asia or elsewhere. Unlike the "reluctant" Asians, the Latins, following the Washington Consensus, have been enthusiastic liberalisers. The paper poses the question whether such financial liberalisation in particular is wise for the real production side of the economy.