Is ALL WELL IN EAST ASIA?

Abstract

This paper argues that serious signs of economic weakness, which could lead to social and political disintegration, are emerging in some of East Asia's leading economies. The first section discusses the economic policy distortions that weaken East Asian countries' participation in the global economy. A slowing down of growth rates may be expected as the more advanced of the East Asian economies catch up with the more mature industrial countries, but if present policy distortions are not contained and reversed, a substantial fall in growth rates and worsening income distribution will lead to economic stagnation and widespread social and political unrest before high incomes are reached. The second part of the paper turns to underlying political economy issues that have to be resolved if growth with equity and environmental sustainability, and hence social well being and economic and political development, are to continue.