ABSTRACT

There is one central, simple, and everyday question in economic growth theory: why are some countries/races rich, and others poor? Economic growth theory is concerned with the rise and decline of economic systems. Its central task is to explain economic growth and interdependence between growth and other variables (such as education policy, R&D policy, economic structure, income distribution, saving, work efficiency, population, capital, resources, sexual division of labor and consumption, public goods, and tax structure). How can we account for the phenomenal disparities in living standards around the world? Why are countries, like the United States and Japan, so rich, and why are countries, like Mainland China and Vietnam, so poor? How can one explain the fact that while the average resident of a non-Asian country in 1990 was 72 percent richer than his or her parents were in 1960, the corresponding figure for the average South Korean is no less than 638 percent. Why could East Asian economies, like Japan, Korea, Singapore, Hong Kong and Taiwan, have experienced rapid economic growth after the Second World War? We may also ask why some countries have experienced economic declination. Figure 1.1 caricatures changes of incomes per capita in Taiwan and Singapore over 40 years from 1960 to 2000. Over the four decades, some rich countries like the U.S. have remained rich; while some poor economies like Singapore, Hong Kong, and Taiwan had experienced ‘economic miracles’.1