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figure 38.3
Success and Real GDP per
capita (log scale)
Disappointment
$100,000
Real GDP per capita from 1960 to
2008, measured in 2000 dollars, is
shown for Argentina, South Korea, and Argentina
Nigeria, using a logarithmic scale. 10,000
South Korea and some other East Asian
countries have been highly successful
at achieving economic growth. Ar-
South Korea
gentina, like much of Latin America, 1,000 Nigeria
has had several setbacks, slowing its
growth. Nigeria’s standard of living in
2008 was only barely higher than it had
been in 1960, an experience shared by
many African countries. 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2008
Source: World Bank.
Year
East Asia’s Miracle
In 1960, South Korea was a very poor country. In fact, in 1960 its real GDP per capita
was lower than that of India today. But, as you can see from Figure 38.3, beginning in
the early 1960s, South Korea began an extremely rapid economic ascent: real GDP per
capita grew about 7% per year for more than 30 years. Today South Korea, though still
somewhat poorer than Europe or the United States, looks very much like an economi-
cally advanced country.
South Korea’s economic growth is unprecedented in history: it took the country
only 35 years to achieve growth that required centuries elsewhere. Yet South Korea is
only part of a broader phenomenon, often referred to as the East Asian economic mira-
cle. High growth rates first appeared in South Korea, Taiwan, Hong Kong, and Singa-
pore but then spread across the region, most notably to China. Since 1975, the whole
region has increased real GDP per capita by 6% per year, three times America’s histori-
cal rate of growth.
How have the Asian countries achieved such high growth rates?
The answer is that all of the sources of productivity growth have
been firing on all cylinders. Very high savings rates, the percentage of
GDP that is saved nationally in any given year, have allowed the
countries to significantly increase the amount of physical capital per
worker. Very good basic education has permitted a rapid improve-
ment in human capital. And these countries have experienced sub-
stantial technological progress.
Why hasn’t any economy achieved this kind of growth in the
past? Most economic analysts think that East Asia’s growth spurt
amana images inc./Alamy time that East Asian economies began to move into the modern
was possible because of its relative backwardness. That is, by the
world, they could benefit from adopting the technological ad-
vances that had been generated in technologically advanced coun-
tries such as the United States. In 1900, the United States could
Countries in East Asia have enjoyed un- not have moved quickly to a modern level of productivity because
precedented growth since the 1970s, much of the technology that powers the modern economy, from jet planes to com-
thanks largely to the adoption of modern
technology and the accumulation of puters, hadn’t been invented yet. In 1970, South Korea probably still had lower
human capital. labor productivity than the United States had in 1900, but it could rapidly upgrade
382 section 7 Economic Growth and Productivity