The Asian Economy and Asian Money: Volume 287

The book series “Contributions to Economic Analysis” was established under the editorship of Jan Tinbergen in 1952. Its purpose ever since has been to stimulate the international exchange of scientific information and to reinforce international cooperation by publishing original research in applied economics.

As the historic process of Europeanization of Europe has reached its present stage of dynamic progress, Asianization of Asia cannot be far behind. The Asian Economy and Asian Money presents my research on the subject for the past quarter of a century. A notable reference is Economic Regionalism in Western Europe: Asia-Pacific Economies – Macroeconomic Core and Microeconomic Optimization. American Economic Review – Papers and Proceedings, 82(2), 67–73.

Historically, Asia was known for its history of ancient civilizations, philosophies and religions, performing arts and exotic lifestyles, and of course, spicy culinary specialties. The rest of the world made tremendous efforts to discover this land of charm and mysticism. Asia, however, was not known for its economic scores. In general, the Asian economies were preindustrialized, traditional, and agricultural. The share of gross domestic product (GDP) from the agricultural sector was relatively large as the industrial revolution had yet to reach Asia. People farmed with primitive indigenous tools and the marginal productivity of labor was low. Hence, the income of the individual farmer, man or woman, remained insignificant and poverty was the overall end product. As late as the 1970s, ranking economists questioned if Asia beyond Japan could ever industrialize (Krugman, 1994; Lau and Kim, 1994). The doubt is no more. The historic success of the import–export-led growth model in the context of Asia has been robustly explained (Klein, 1990). The world now marvels at the success of Asia's industrial revolution.

The introduction of the 22 member countries of the 4+10+2+6 model of the Asian economy is the immediate task. Japan, Korea, China, India, Indonesia, the Philippines, Brunei Darussalam, Malaysia, Singapore, Thailand, Vietnam, Cambodia, Laos, and Myanmar constitute the now-famous 4+10 model. Following the principle of inclusion, Mongolia, Chinese Taipei, Bangladesh, Bhutan, Nepal, Pakistan, the Maldives, and Sri Lanka, as they belong to the regional map of the continent of Asia, are the eight remaining member countries (see Chapter 1). An overview of Asia's 22 member continental economy the AE-22, with its 3.6 billion people (2006) who have made the region of Asia their home in a land area of 20.5 million km² should be welcome. To put these figures in perspective, the AE-22 comprises only 13.7 percent of the world's land area, but is home to over half the world's population. Tables 2.1–2.4, presented below, illustrate the various figures relating to population, land area, GDP, and GDP per capita of the member nations of the AE-22.

Robert Mundell is the father of the concept of optimum currency area (Mundell, 1961) and he has since then taught us a great deal more about it (Mundell, 1970, 1999, 2003). President Kennedy reminded his fellow countrymen that it is the strength of the US dollar, bolstered by the strength of the US economy, not the US military arsenal, which contributes to the international leadership of the USA. Saburo Okita sought to explain policy approaches in the framework of economic regional communities in the context of global economic cooperation, and thus responded to the question if we will have one world or several (Okita, 1989, 1994). Indeed, he pioneered the concept of multiple currency areas.

The industrialization of the Asian economies beyond Japan has been an accomplishment. This chapter presents a study of selected parameters, pointing to the structural changes of Asia's traditional agricultural economies, as the process of their industrialization progressed over several decades of the last millennium.

Much has been written about the low-wage rates in the pre-industrialized Asian economies. True, in several of those economies in Asia, supply of labor, unskilled as well as skilled, was relatively abundant. Most of these economies enjoy large population bases. The migration of labor from the agricultural sector within a given economy, when the economy's industrial population base was not large enough, helped augment the process of industrialization. However, a more intensive analysis of investment theory teaches us that the cost of labor, wages, and borrowing funds for investment, be it from financial institutions or from individual sources, the rate of interest, are known cost factors to the investors. The principal motivating factor is the expected profit, which remains unknown to the investors, and becomes the subject of speculation. The expected profit factor thus remains to be defined.

With more than half the population of the world and a reasonably large resource base, the progressive industrialization of the Asian economies beyond Japan following their open economic policy initiative in the recent decades has resulted in a dramatic increase in the gross domestic output of the regional economies, increased inflows of varied forms of foreign investments, and huge leaps in productivity. The exploration and expansion of markets for goods produced followed. The portion of exports of the new manufactures sent to international markets to earn export revenues in convertible currencies became a necessity for the success of profit repatriation by foreign investors from savings-rich countries (Chapters 1 and 3). Independent of that, theses economies had surpluses of goods produced and they engaged in mutual intra-regional trade for a number of reasons.

Australia and New Zealand are two very special economies of the South Pacific. The settlers of these two economies came from Europe, mostly the UK. Indeed, both were colonies of the British Empire and Her Majesty, the Queen of England, continues to be the constitutional head of Australia and New Zealand. The original peoples of the two economies acceded to the authority of the European settlers. Some went on to complete an English education and earned places of official rank and accommodation under the new regime. It was only recently, on February 23, 2008, at the initiative of Prime Minister Kevin Rudd of Australia, that the Australian Parliament resolved to offer an official apology to the indigenous peoples of the land for their past suffering.

The case for the Pacific Economic Fraternity (Chapter 7) adds Australia and New Zealand to the discourse. Given the fact that data on all 27-member countries of the EU are not available, we limit our analysis to the data of two key economies of Europe: the UK, as it has historically had extensive economic engagements with Asia, and Germany, the largest economy of the EU-27. In the post-WWII decades, the USA has been a leading economic actor in Asia and so the data for the USA is all too relevant.

Literature on economic cooperation among sovereign nation state economies has been extensive. In the post-WWII decades, the two Breton Woods institutions, the International Monetary Fund and the World Bank, each with 184 member states, have been instituted to sustain the global financial system for the noncommunist free-market economies. Under the umbrella of the UN, the institutions such as the UNCTAD, UNESCO, UNITAR, the WHO; and the World Food Organization (WFO) have their respective economic assignments. The WTO, currently with 148 sovereign nation state members, plays a large role in the negotiation of global trade agreements; an international regime of free and competitive trade has been a subject of numerous substantive negotiations. In 2008, the WTO failed to bridge the gap between the developed nations led by the EU and the USA, and the developing nations led by China, India, and Brazil, leaving the Doha Agreement still unsuccessful. Negotiations may resume in 2009.

Professor Dutta has recently authored three books: (a) Economic Regionalization in the Asia-Pacific: Challenges to Economic Cooperation (1999), (b) China's Industrial Revolution and Economic Presence (2006), and (c) European Union and the Euro Revolution (2007). He is the author of Econometric Methods, a textbook (1975 in English, 1982 in Spanish). He has edited or coedited 25 other volumes, including Economics, Econometrics and The Link, Essays in Honor of Lawrence R. Klein (1995) Elsevier, 2 of his edited volumes have been translated into Chinese.