Debunking popular myths about everything related to economic management

Whatever the theoretical justifications for government intervention in the economy, the success or failure of such initiatives depends primarily on the professionalism of those who design and implement them. This is particularly important for developing countries, but not only for them. Not all public servants have a deep knowledge of economics, but in seeking effective policies, they must be aware of the limits of their competence. 

It can be risky to pursue economic policies without understanding their patterns; it is important not to embark on programs that may be difficult to implement. When choosing between sector-specific industrial policy and a free market, where opportunities for government error are minimized, the latter should be preferred. The market-oriented approach is attractive because it requires officials not to intervene directly, but rather to take into account market dynamics, reducing the risk of devastating consequences due to wrong decisions.

 

How things actually work

 

Professional economists are not always necessary for the successful implementation of economic policy. History shows that the most effective economic policies in Japan, and at least in South Korea, were developed not by economists but by lawyers. In Taiwan and China, engineers implemented strategic economic decisions. These experiences suggest that economic education, especially one focused solely on free market principles, is not always critical to success. 

Over the past thirty years, the growing dominance of free-market ideology has been reflected in the deterioration of global economic performance: growth rates have declined, economic instability has increased, and inequality has widened. The result was the global financial crisis of 2008. As economic processes inevitably affect the whole of society, it is important to seek a variety of ways to participate in and manage them, beyond the mere expectations of the free market philosophy. 

 

Economies do not have to be run by Harvard economists to ensure an economic boom

 

East Asian countries such as Japan, Taiwan, South Korea, Singapore, Hong Kong and China are often categorized as “economic miracle” regions. This definition is often considered hyperbole, but the comparison is justified. During the industrial revolution of the 19th century in the countries of Western Europe and its successors - North America, Australia and New Zealand - the average income per capita increased by 1-1.5% per year. During the so-called “Golden Age of Capitalism”, covering the period from the early 1950s to the mid-1970s, this figure reached already 3.5-4% per year. 

However, in East Asian countries during their “economic miracle”, from about 1950 to the mid-1990s, the growth rate of per capita income averaged 6-7% annually. While a rise of 1-1.5% is called a revolution and 3.5-4% is called a “golden age”, an increase in income of 6-7% per annum is well deserved as an “economic miracle”.

In the light of such impressive economic achievements, it is logical to assume that East Asian countries owe their successes to outstanding economists, just as Germany thrives in mechanical engineering thanks to the skill of its engineers, and France is world-renowned for the talents of its fashion designers. At first glance, it seems self-evident that the Asian states that have achieved so-called “economic miracles” have gathered the best economists around them. 

This assumption is especially strong when it comes to countries such as Japan, South Korea, Taiwan and China, where state support has played a key role in the rise of the economy. However, this perception is, paradoxically, completely wrong. Moreover, it is precisely the absence of economists in leadership positions that has attracted the attention of researchers.

In fact, in Japan, most of the officials in charge of the economy had a law degree, while in Taiwan, engineers and scientists held the lion's share of key positions. A similar distribution was observed in Korea, where the economic bureaucracy until the 1980s included a significant number of lawyers. 

For example, Oh Won-chul, the architect of the industrial program of the 1970s, was behind the development of the chemical industry, which enabled South Korea to move from exporting cheap products to creating high-quality goods in the fields of electronics, shipbuilding, and steel. His vision and pragmatic approach, backed by expertise in engineering and management rather than economic theory, provided the basis for the country's dramatic leap in development.

 

Conclusion

 

The phenomenon of the economic miracle in East Asian countries sheds light on a unique approach to governance and development based less on traditional economic knowledge than on the practical experience and technical expertise of government officials. The lawyers, engineers, and scientists who found themselves in key positions brought their professional skills and thinking to bear, enabling them to adapt to changing conditions and successfully steer national economies toward growth and modernization. 

This example shows that breakthrough achievements are possible not only through traditional economic analysis, but also through broad coordination and an integrated approach, where technical and managerial knowledge becomes an equally important success factor.

Read also the article about popular misconceptions about the power of economists and why their role in economic management is overemphasized.