Asian Tiger Phenomenon

The “Asian Tigers”—Hong Kong, Singapore, Taiwan, and South Korea—have had a considerable impact on the global economy. The influence of the region has had global dimensions since the Cold War, when Asian countries like Korea and Vietnam served as a battleground between two competing global forces. The region has since elevated to an economic power, affecting the rest of the world by setting business trends and leading capital movements. Throughout this period and beyond, observers have attributed the growth of this region to a number of factors, from application of traditional Eastern philosophy to economic policy to replication of manufacturing techniques. Regardless, the place of these countries in international relations has had no less of an impact, positive or negative, than established powers like the United States and the United Kingdom.

The 1950s and 1960s, when the Tigers' growth began, were a time when the state system and international relations were going through significant changes, including postwar shifts and decolonization. although there were similarities among the Tigers in their respective political economies, each had a different predicament. In economic terms, each Tiger started with very little capital and low savings rates, which, according to the Solow-Swan growth theory, are the key components for sustainable growth. While still a British colony, Hong Kong began exporting manufacturing goods such as textiles in earnest, while at the same time keeping labor costs low. In Singapore, growth accelerated in 1965 through foreign direct investment and a shift to an economy where the price of goods was based on the general economic principle of supply and demand (i.e., market-based economy). Also in the 1960s, postwar South Korea turned to a trade strategy similar to Hong Kong's in manufacturing labor-intensive goods at a low price. Finally, Taiwan shared similar growth origins with Singapore—it received significant foreign investment while using development aid (capital) from the United States to build its infrastructure.

The economic changes in each country were based on the changing political structures of each state. During the 20th century, decolonization and the Cold War affected the government, which affected [Page 91]the economy. In colonial Hong Kong, the government was made up of both British and Chinese officials in the 1970s, which, rather than having negative effects on coalition politics, turned out to be beneficial for the region. The Chinese had innate regional knowledge, which led to effective decisions in strategy, while the British allotted capital funding for the country. In postcolonial Singapore, the government led by Lee Kuan Yew and the People's Action Party, facing problems such as the brief union with Malaysia (in part due to issues over religion) and the threat of communism, adopted a policy of neutrality. The country sought foreign investment to increase capital stocks, which was seen as a basis for growth. To do this, the government had to create stability in the labor market (at the time, the country was known for labor strikes and disputes), which it did through legislation that limited the power of labor unions and worker disputes. For Taiwan, the Republic of China that governed the island sought closer economic ties with the world. Today, Taiwan's government is a head wearing “two hats”: raising interest rates periodically, which has led to higher savings that are used to finance new businesses (“greenfield” investment). In addition, it encourages technological advancements in agriculture. This strategy followed the neoclassical economic theory of the production function stating that technology maximizes output through its effect on the factors of production (labor, capital). Like Taiwan, the government of South Korea broke from a Communist foe. Still, the government was shaped by military dictatorships up until the 1980s but sought technological progress and aided in the development of the export-oriented industries. Afterward, the government made strides to transform itself into a liberal democracy but has maintained its economic policies. In essence, the global political climate affected the domestic economies, and today the domestic economies of the Tigers affect the global political environment.

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