What are the new tiger economies?
Not Bangladesh and India
Let’s make something clear, as I pointed out to Razib Khan (who blocked me for “midwit takes”, such as pointing out the seventh century Roman Empire was both ancient [“Late Antique”] and Roman [because it controlled the city of Rome and was a direct continuation of the third century Roman Empire]): Bangladesh is not an Asian tiger. Nor was Thailand during the 20th century. Even China is not an Asian tiger, despite its fast growth. The reasoning for this is simple: these countries have no prospects for becoming high-income countries. “Asian tiger” economies were not just those that experienced fast growth during the 20th century, but (as implied by the alternative name for them, “newly industrialized countries”) those that went from low-income (Taiˊwanˉ and Korea) and middle income (Hong Kong and Singapore) to high-income. There are countries close to that image which exist in the world now. But they’re mostly located in Europe, not in Asia.
The best way to understand Bengali economic growth, and South Asian economic growth in general, is through a Middle Eastern, not an East Asian light. India is not actually richer than Morocco, and it is substantially behind countries like Tunisia, Algeria, and Egypt. And this is after forty years of relatively rapid economic growth! Judging by the standards of Japan and South Korea, India, as with China, has about twenty to thirty more years of economic growth left in the sack, and I doubt India (or Nepal, or Pakistan, or Bangladesh) will advance beyond Egypt or Sri Lanka during that time. Egypt, Sri Lanka, and Tunisia did have their periods of relatively fast growth, but, for good reason, nobody ever claimed they were in the same rank as the East Asian tigers.
In Asia, the only thing close to a tiger economy right now is Malaysia, which surpassed its 1997 peak GDP per capita relative to the United States in 2008, is roughly as rich as Eastern Europe, and is closing in on Greece in per capita GDP by PPP. But even Malaysia may well stagnate before becoming a high-income country. So let’s move on to Europe:
This is in PPP terms; in nominal Euro terms, Romania has half the actual individual consumption of Greece (Greece has twice the price level of Romania due to its more developed export sector, much like Uruguay has twice the price level of Russia and Australia more than twice the price level of Taiˊwanˉ). However, it does make sense to use PPP terms here, as changes in price levels tend to not drive changes in living standards. Czechia and Slovenia were already fairly rich during the socialist era, so they cannot be considered “tiger economies”. However, even including these, we see that the most obvious “European tiger economy” or “newly rich country” (“industrialized” really doesn’t work as a term for “rich” these days, as manufacturing share of employment and output peaks around Mexico’s level of per capita GDP) existing today is Lithuania, in the headlines in recent months for living up to the high-income country stereotype of being poor relations with China. The fact it now has a higher actual individual consumption per capita by PPP than Ireland should demonstrate to everyone (and four out of four people who voted in my Twitter poll voted that Lithuania was a neoliberal country) that neoliberal policies are the best way to convergence with the developed countries.
The country second closest to being a “tiger economy” in Europe now is, of course, Poland. Having test scores as high as Germany and France, it only makes sense for Poland to converge with the West after having been capitalist for thirty years. Its fast economic growth has even allowed it to brake its population decline, thus allowing its economy to grow faster than that of the United States, despite truly dismal fertility rates.
The third example of a “tiger economy” in Europe is one that has come closest to defying the economic law of gravity, Romania. Despite having test scores no better than Uruguay’s, Romania’s actual individual consumption is the same as that of the (on paper) much more advanced in all respects Estonia. Romania’s economic growth is, like that of the Dominican Republic, a testament of its far above-average economic institutions. Whether its growth -or even its present position- is sustainable for future decades is something that is quite uncertain, but so far, it has held up and the country seems on track to catching up to Spain and Portugal (by PPP only).
Estonia might be the fourth example of a “tiger economy” within Europe, though it was substantially richer than Romania under socialism. The reasons for its fast growth are obvious and, as for Lithuania, can be attributed to neoliberalism and, as for Poland, human capital.
After the rise of Eastern Europe and Malaysia, there are unlikely to be further “tiger economies” in Europe (or anywhere in the world), given the forces of global convergence will likely be spent by that point, which will likely occur around 2040. The 2020s will, as the 2000s were for South Korea, be the last decade of fast Chinese growth, and, though China will continue to grow above OECD average during the 2030s, noone will any longer think of it as being in the same rank as the Four Asian Tigers or even northeastern Europe. From then on, the Communist Party will need to make reforms in order to prevent economic Japanification (or, given its relative income level, even Mexicanification).
“Myth of Asia's Miracle”?
One more separate, but related point: I was recently pointed out Paul Krugman’s infamous Foreign Affairs article "The Myth of Asia's Miracle". The article was so moronic, I felt my IQ drop by ten points (to some extent, I think this drop might be permanent) while reading it. It really ranks near the bottom of Krugman punditry, almost to the degree of his claim trade only contributes to aggregate demand via net exports. Did Krugman really think a resource mobilization of the same kind South Korea managed in Sub-Saharan Africa would be even remotely successful? Did he really think there was “"no apparent convergence between the technologies" of the newly industrialized nations and the established industrial powers”? Did he really think that Egypt and Pakistan had anything to teach the Western economies of the late 20th century? Did he really think that if Italy simply mobilized more resources in 1970, it could be as rich as Italy in 2011? That, reader, would literally be an economic miracle beyond anything East Asia achieved, because it would be literally impossible. TFP doesn’t tell us anything about technology levels (this is a point I owe to Alex Guzey) or “future limits to industrial expansion” at all. This is beside the point that the article didn’t actually make any concrete predictions, only claiming that “Japan's experience has much less in common with that of other Asian nations than is generally imagined”, “future prospects for that growth are more limited than almost anyone now imagines”, and “there will still be a substantial shift of the world's economic center of gravity, but it will be far less drastic than many people now imagine”. Today, all the Asian tigers are, by PPP, richer than Japan, so if there was any prediction in that stupid Krugman piece (and there appears not to have been any), it was wrong, too. The piece was, in short, classic Tom Friedman (or, these days, Paul Krugman) style punditry.
A more sensible dismissal of the East Asian economic miracle would have been to point out the countries’ growth is not particularly impressive considering their high standardized test scores and that these countries started out substantially poorer and more technologically backward than the West and, since they are unlikely to adopt more than 100% of the West’s technology, their growth rate is likely to slow down greatly as they near the West’s technological frontier -also, that if these countries actually did succeed in expanding the technological frontier, Western countries would quickly adopt their technological contributions, resulting in no divergence between West and East in the long run.
And don’t forget to
I wouldn't *really* call Lithuania or Latvia "high-income." There has to be some sort of artifact or outlier that pushes their statistics higher. They have an absolutely atrocious emigration rate, Albania and Bosnia tier.
Plus, why would some of them not be able to converge ever? There's only so much growth that can be stuffed in Europe, for example. In some cases, it might be hilariously slow, but trickle down economics do work on a geopolitical scale
This was a fascinating article, but I have a few quibbles/observations.
1. India was *extremely* poor 40 years ago, whereas countries like Morocco were far richer, comparatively speaking of course. According to World Bank data (using constant 2010 dollars), India was three times poorer than Morocco in 1980. Today it has become about half as rich (again, using constant 2010 dollars, not PPP, for better historical comparisons). Morocco has not stood still, so India has indeed converged and will likely continue to converge.
India's growth trajectory should be compared to countries as poor as it was in 1960 (as far back as World Bank data goes), where it has been in the top 10% for sure, only beaten by notables such as South Korea or China. Nevertheless, I agree with you that India is unlikely to become as rich as Taiwan or even China. I think a more likely scenario would be Hindu Brazil - but with better food, lower crime and funkier music. Not too terrible.
2. While Eastern Europe has indeed been the quiet success story, I am not sure I buy your demographic argument. Indeed, massive emigration and rock-bottom TFR ought to produce very slow growth. Yet EE growth has been very TFP-intensive. This shows that demographics are not as important for growth as the neoliberal model would predict ("demographic dividend"), but rather that the quality of human capital - instead of the quantitiy - is the decisive factor. Among other things such as reasonably low corruption etc.
There's a good paper on the non-issue of aging on economic growth. It's available for free here:
https://www.aeaweb.org/articles?id=10.1257/aer.p20171101
3. This brings me to your claim that convergence will be "spent" by 2040. This is an arbitrary claim that I find little support for, once we accept that aging isn't the major constraint here. Furthermore, the so-called "Tiger economies" were outliers. Most rich countries today grew at a relatively torpid pace for many decades, indeed centuries. The Netherlands and the UK averaged about 2% per capita growth over 200 years. It took them a very long time to move from upper-middle income to high-income (using Maddison's database).
Jesus Felipe has written about this claim, in conjuction with debunking the useless "middle-income trap" myth. His full paper deserves to be read, for he marshals a large historical database and makes a powerful case:
https://www.adb.org/sites/default/files/publication/149903/ewp-421.pdf
4. I am in general a skeptic of PPP in these discussions. PPP has its uses to measure poverty, but the finer things in life are often dictated by your purchasing power in nominal terms: how much hard currency or equivalent you can afford to spend. For an ambitious country, it makes sense to use nominal exchange rates instead of PPP. China certainly does whenever I read their reports. Sure, life in Mexico might be better than nominal income per head data might indicate, but do Mexicans want to live like that forever? As nominal incomes grow, PPP narrows as the price differential narrows.
I would also add that the World Bank's definition of "high-income" is laughably low. It got criticised already in the late 1980s when it got unveiled for putting the bar very low. At that point, the US had about $28K per head and the bar was set at barely $6K. Even today, the US is at $67K per head and the "high-income" threshold is at a mere $12K.
Using a more realistic level of around $25-30K per head, many EE smaller countries are still not high-income but on the cusp. Malaysia still has a very long way to go.
5. East Asian underperformance is indeed a fact, but it isn't as bad as many may think. Nominal wages in South Korea or Japan are now at Northern Italian levels. Sure, below the richest Northern European countries+US+AU but still decent. I think while standardised test scores can give some indication of the human capital of the country, it fails to measure creativitiy, which is very important for innovation (and thus productivity growth at the frontier, since you can't learn from anyone else once you are very rich; you must innovate yourself). Perhaps these countries do worse on this? It's not a subject we test well, or know much about.