by John Seiler | January 31, 2014 1:15 am
Fabled investor Jim Rogers brings up an important point: Why has there never been an Asian winner of the Nobel economics prize? Yet during the 44 years the prize has been awarded, it’s Asia’s economic dynamism that has astounded the world.
Meanwhile, economists in Europe and America, who have won all the economics prizes but one (for a professor at Hebrew University), have seen their own economies stagnate. It’s not a language problem because all major economics papers and books today are published in English. And the prize is awarded by Swedes on Sweden’s central bank.
Certainly, there have been stellar winners, such as free-market winners Friedrich Hayek, Milton Friedman, James Buchanan and Ronald Coase. But most winners have been advocates of government controls, such as Robert Samuelson and Gunner Myrdal.
But 40 years later, the world is experiencing a historic shift from West to East. The great economic successes since 1969 are certainly not the United States or Europe. In this span, the US went from the largest creditor nation in the world to not just the largest debtor nation in the world, but the largest debtor nation in the history of the world. That U-turn may deserve a prize, but one that brings embarrassment rather than prominence.
Today, most major international creditor nations are found in Asia – economies like China, Japan, South Korea, Singapore, Hong Kong and Taiwan.
Of course, America and California have enjoyed the vast growth of the computer industry. But even that is underpinned by most manufacturing, and even the engineering now, being done in Asia. America rules on software and design, but not in other areas.
Singapore has been the greatest economic success of the past four decades, but former prime minister Lee Kuan Yew and Dr Goh Keng Swee, a former deputy prime minister who died in May,have never been acknowledged by Stockholm. And Dr Goh even held a degree from the London School of Economics.
China has also experienced huge economic success during this time, yet neither Deng Xiaoping nor any of his economists were ever awarded the prize.
Rogers also pokes fun at Paul Krugman (who is not directly named in the article), the most eminent and influential of living Nobel winners, especially because of his influential New York Times column:
In fact, one esteemed Nobel laureate published a paper in 1994 titled “The Myth of Asia’s Miracle” in the journal Foreign Affairs. The same winner proclaimed loudly in 2009 that it was untrue that huge amounts of Western assets had moved to Asia. Perhaps he had to try to cover for his 1994 paper. He has not returned his award. (This same laureate insisted this year that Fannie Mae and Freddie Mac had nothing to do with the mortgage and housing collapse.)
I looked up Krugman’s paper of 20 years ago, “The Myth of Asia’s Miracle.” He actually wrote this, comparing the Asian growth to that of the Soviet Union in the 1950s:
Can there really be any parallel between the growth of Warsaw Pact nations in the 1950s and the spectacular Asian growth that now preoccupies policy intellectuals? At some levels, of course, the parallel is far-fetched: Singapore in the 1990s does not look much like the Soviet Union in the 1950s, and Singapore’s Lee Kuan Yew bears little resemblance to the U.S.S.R.’s Nikita Khrushchev and less to Joseph Stalin. Yet the results of recent economic research into the sources of Pacific Rim growth give the few people who recall the great debate over Soviet growth a strong sense of deja vu. Now, as then, the contrast between popular hype and realistic prospects, between conventional wisdom and hard numbers, remains so great that sensible economic analysis is not only widely ignored, but when it does get aired, it is usually dismissed as grossly implausible.
What actually happened was that Stalin died in 1953. His successors, led by Khrushchev, freed most prisoners in the Gulag slave labor camps, which always consumed more resources than they produced; and freed some parts of the economy. And whereas Stalin executed his critics as “wreckers,’ even those trying to improve the system, the “thaw” after 1953 allowed limited criticism, provided it was intended constructively — such as to improve production methods.
The lessening of government controls seems similar to what happened in the Asian markets. First Japan enacted strong market reforms in the 1950s. Then the Asian “tigers” — South Korea, Taiwan, Hong Kong and Singapore — enacted free market reforms. Then, massively, China switched from starvation-inducing communism to Deng’s market reforms. Vietnam followed.
Unlike in the Soviet Union, these were not just reductions in socialist controls, but full-blown, and increasingly thorough, market reforms. That’s why the Asian economies have kept booming.
By contrast, in the early 1970s, the Soviet economy faltered. It couldn’t keep up with the free economies. Everybody could see the contrast, for example, between East Germany and West Germany: same people, same language, different results.
Eventually, in 1989, the Berlin Wall was ripped down. In 1991 in the Soviet Union, the Communist Party was abolished and some market reforms were established. The Soviet Union broke part. Russia, despite many problems, is much better off than under communism.
Nowadays, it’s American and Europe, with their own growing governments and massive debt loads, that resemble the Soviet Union in the early 1970s. No wonder Nobel economics laureate Krugman is our most famous economist.
The Asians should establish their own economics prize and give to their top free-market economists. Call it the Lao Tzu prize because the ancient philosopher said: “The people are hungery: It is because those in authority eat up too much in taxes.”
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