The Myth of Asia’s Miracle

Source: Council on Foreign Relations

Author: Paul Krugman

Publication Year: 1994

Muhammad Danish 04202113048

Teacher Dr. Muhammad Nadeem Mirza

Article Review

Author’s Introduction

Paul Robin Krugman born on February 28, 1953, is a distinguished Professor of

Economics at the Graduate Center of the City at the University of New York, is an
American economist and a columnist for The New York Times.1

Summary

This article delves into the historical context of Asia's economic growth, focusing
particularly on the rapid expansion of the Soviet Union and its satellite nations. It
explores the shifting views of economists, particularly Herbert Hoover's evolving
perspective, and the gradual change in how economists understood the nature of Soviet
growth. He argued that the economy of communist Russia was flourishing and achieving
a growth rate two times higher than that achieved by any important capitalistic country
over any considerable number of years and three times higher than the average annual
rate of increase in the United States. This article ultimately provides a full-scale
exploration of economic the complexities and growth that lie beneath the surface of
popular assumptions.

Methodology

The methodology is more quantitative and statistical analysis, to support his argument he
uses facts and figures while focusing on the economic growth of different East Asian
states, particularly the Soviet Union and its satellite states.

Theory
1
https://en.wikipedia.org/wiki/Paul_Krugman#cite_note-krugmanonline-7.
In “The Myth of Asia's Miracle” by Paul Krugman, the primary economic theory used is
Neo-classical Economics. Neo-classical economic principles are used to analyze and
challenge the widely held perception of miraculous economic growth in Asian and
Eastern bloc states, focusing particularly on the Soviet Union and its satellite nations.

Analysis

Paul Krugman’s article “The Myth of Asia’s Miracle” explores the intricate history of
economic growth in both Eastern and Western nations, illuminating the political and
economic myths that have molded the world economy. In this piece, Krugman delves into
a number of important issues that refute common perceptions about the quick rise of
Eastern economies, mainly those of the Soviet Union and its satellite states.

This highlights how the economic divide between the East and the West finally turned
into a contentious political issue that sparked a great deal of discussion and investigation.
The 1950s saw the publication of a large number of polemical essays and alarmist books
during the early stages of the communist economies’ explosive growth. He does point
out, though, that some economists were brave enough to probe beneath the surface and
discover an alternative viewpoint that markedly deviated from conventional wisdom.

The dominant narrative surrounding Asia's economic miracle, especially within the
framework of the Soviet Union, suggested that it was driven by an enigmatic force that
eluded rationalization. He challenges this idea by stating that there are specific,
measurable reasons for this quick expansion. He recognizes the main forces behind
growth, which include rising employment, rising educational attainment, and—above all
—significant expenditures in physical capital. The astounding surge in output becomes
predictable when these factors are considered. In essence, he contends that under
thorough examination, the Soviet rise was not mysterious.

Krugman’s examination of how Western economists, like as Hoover, first questioned

official Soviet data, arguing that they overstated the real growth rate, is one of the
article’s most fascinating features. They did, however, eventually come to believe that
Soviet promises of extraordinary accomplishment were true. Some thought that compared
to free-market democracies, a “collectivist authoritarian state” may be intrinsically better
at fostering economic growth. By the early 1970s, this estimate even hinted that the
Soviet economy might surpass the US economy.

It emphasizes how many economists who first examined Soviet growth came to a totally
different conclusion. They did not deny the existence of Soviet expansion in the past, but
they presented a different explanation of its character that had important ramifications for
the future. This suggests that the widely held belief about Asia's economic miracle was
only that—a myth.
Concluding the whole debate while agreement with the author’s arguments as these
arguments are well-supported by statistical analysis in which he talks about different East
Asian states that were performing well economically as these things were a matter of
concern for the Western world because the Eastern Asian states were providing cheap
labor with more production and their products were cheaper than the western world such
things grabbed the attention of the multinational corporations that invested in the east
Asian country like Singapore etc., as in Singapore the number of local industries is less
than multinational corporations. High investment rates are thus part of the Asian success
story. The high-performing Asian economies (HAPES) except Singapore, show a
remarkable ability to keep pace with the world's technological evolution, especially when
contrasted with their fellow developing regions of Latin America and Africa.

References

1. https://en.wikipedia.org/wiki/Paul_Krugman#cite_note-krugmanonline-7.
2. https://hbr.org/1994/07/does-third-world-growth-hurt-first-world-prosperity.
3. https://www.tandfonline.com/doi/pdf/10.1080/00220389908422579.
4. https://www.jstor.org/stable/pdf/20047112.pdf.