Economic Policies for Developing Countries Paper Example

Introduction

Economic development infers advancement in economic wellbeing through higher actual GD and other economic indicators such as better infrastructure, upgraded literacy levels, better healthcare standards, and decreased paucity. Economic development in Japan and other East Asian countries has followed an incredible pattern unlike other emerging economies in the world. The developing countries have a lot to learn from these East Asian economies. The East Asia economies were similar in numerous aspects. Their growth was driven by trade and investment. The countries also focused on macroeconomic stability, privatization and de-regulation, incentives and market planning. These shared features enabled their miraculous economic success (Chowdhury and Hossain, 2003). The same concept can be learned by developing countries to attain economic growth. The paper evaluates the ideal economic policies for effective development in developing countries from the experience of Japan and other East Asian economies.

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Growth Driven by Trade and Investment

For the developing economies, a long-term growth approach and the attainment of industrialization can be monitored by income patterns and structural shifts in exports and GDP. In Japan and other East Asia economies, growth has been achieved through the very existence of East Asia as an influential ground for economic interaction and not just 'market-friendly' policies or good administration of individual nations alone (Park, 2002).

Developing economies should attain economic growth through participation in the dynamic production framework established by private corporations. The emerging economies should also be connected by trade and investment; a framework of global division of labor with concise order and design. The system will allow progression of industrialization through geographical widening. For emerging economies, economic growth is equivalent to becoming one important connection in this production framework under competitive pressure from and cooperative links with other emerging countries (Baffoe-Bonnie and Khayum, 2002). To start growth, developing countries should undertake international integration through trade and investment.

East Asia as a region has provided a political, fiscal and social model and a suitable environment for other countries to emulate. Every nation was under strong market pressure to advance capacities and climb the ladders of growth. It is crucial for developing economies to follow the policies for development from East Asian countries. The nations should mobilize their widespread tools for fiscal cooperation mainly to drive and supplement the market-oriented economic connection.

Macroeconomic Stability

Macroeconomic stability would entail a dedication to low inflation. This establishes a setting where foreign investors have more sureness to invest in the emerging economy. High inflation can result in devaluation of the currency and depress foreign investment. Japan and other East Asian countries ensured that there was effective monetary policy and disciplined fiscal policy. The current situation in East Asian countries is high rates of economic growth, but the biggest concern is that their economies could 'overheat' and cause inflationary pressures. Thus, to maintain inflation is a crucial underlying element in sustainable growth (Aydogan, 2008).

Macroeconomic stability relies on the economic status of an emerging country. Some economies may be in a circumstance where there is an essential lack of demand because of the overvalued exchange rate and tight monetary policy. Thus, economic development may require demand-oriented policies which reinforce aggregate demand. Macroeconomic stabilization in developing countries may entail policies to lessen government budget deficits. Nevertheless, this may entail spending cuts on social welfare programs.

Privatization and De-regulation

A crucial aspect of East Asia's rapid economic growth was the resolution to change their existing economies into mixed economies. Multiple state-owned industries were privatized. This gave the corporation a profit incentive to reduce costs and focus on greater efficiency. De-regulation entails making state-operated monopolies experience competition. This bigger competitive pressure can assist emerging countries to establish incentives to reduce costs. Larger competitive pressures may also be acquired through opening trade and liberalizing markets to global competition (Jullens, 2014).

However, developing economies should be wary of privatization. In some countries, privatization may enable a small number of oligarchs to attain control of major industries at lost cost. Contentiously, this move will require proper monitoring to ensure equitable distribution of the nation's resources.

Market vs. Central Planning

Prior to the rise of East Asia, two aspects dominated growth economics literature; one emphasized on markets driven by Adam Smith's 'invisible hand' as an effective policy to facilitate economic development and the other on administration planning to make sure resources are organized and planned in ways that facilitate economic development. The statistical trials of the opposing aspects were to be granted by the results of the 'progression race' started in the 1950s between East Asian countries especially China and India (Glick and Moreno, 1997).

In their drive for economic advancement, emerging economies should turn away from open-door approaches focused on assimilating their markets into the global economy. The most important aspect of planning in emerging economies is an abundance of in relation to resources. Developing countries should also turn away from export-oriented, external-looking approaches and integration into the global economy.

Incentives and Policies for Export-led Growth

In spite of significant variations in factor endowments and initial fiscal settings, almost all the East Asian nations have focused on export-based strategies for their industrial growth. In regards to the old notion of economic development, export takeoff in these nations propelled industrialization. Japan spearheaded the export-oriented industrialization while the other East Asian countries followed (Ohno, 2002). This is a policy that emerging economies can learn. Variation in resource endowments plays a key role in ascertaining when and how the developing economies will shift from import replacement to export enhancement in their growth approaches. The emerging economies should also focus on getting the best from natural resources which is a crucial factor accountable for a quick shift to industrial exports. Japan and other East Asian countries upgraded their industries through more dynamic and discriminatory industrial approaches advocated by their government. Developing economies should also learn from this policy. Emerging countries endowed with natural resources should pursue industrialization founded on import replacement for a longer timeline than the economies in East Asia.

Conclusion

To reach the level of developed economies like Japan and other East Asian countries, developing economies should improve their macroeconomic conditions and engage in export-oriented development. The developing economies should also show dedication in maintaining low inflation. In the current international setting, the influences of globalization are mainly past one's control. East Asian economies embraced globalization which has been helpful to them. Globalization, when suitably managed, will assist the emerging economies to shift to modernity and affluence. The countries should also learn to embrace international financial markets. Incentive and policies for export-led growth are crucial for emerging economies. The developing economies should also learn to manage the market to drive economic development.

References

Aydogan, N. (2008). Innovation policies, business creation, and economic development: A comparative approach. New York: Springer.

Baffoe-Bonnie, J., and Khayum, M. F. (2002). Contemporary economic issues in developing countries. Westport, Ct: Praeger.

Chowdhury, A. and Hossain, A. (2003). Monetary and Financial Policies in Developing Countries: Growth and Stabilization. Routledge.

Glick, R., and Moreno, R. (1997). The East Asian miracle: growth because of government intervention and protectionism or in spite of it?. Business Economics, 20-25.

Jullens, J. (2014). Lessons from the East Asian Development Model. Retrieved from: https://www.strategy-business.com/blog/Lessons-from-the-East-Asian-Development-Model?gko=986ef on date 30/12/2018

Ohno, K. (2002). The East Asian experience of economic development and cooperation. National Graduate Institute for Policy Studies.

Park, J. H. (2002). The East Asian model of economic development and developing countries. Contributions to Asian Studies, 18(4), 330-353.