17th-Century Western Europe and Tiger Economies Essay

Introduction

The rise of the “Asian tiger economies” as the economies of South Korea, Taiwan, Singapore and Hong Kong, is oftenly said to have caught the developed world by a surprise. Previously viewed as just developing countries, the economies have had their economies growing at double digits rates to earn that name. Their growth models have differed from what conventional economics would recommend. Their rise began in the 1960s at the height of the cold war. Their rapid growth is often compared to the rise of western powers in the 17^th century. In this context, the western powers are recognized as France, Spain, England and Netherlands. This paper thus compares and contrasts the rise of these early western powers to the rise of these four tiger economies as we know them today.

Discussion

The 15the and 16^th century saw the development of big merchant ships that opened up trade via the sea and allowed increased commercial activities between Western Europe and Asia. Three empires in Asia, Ottoman, Saffavid and Mughal Empires had been identified by merchants as the most appropriate markets for their products sourced from the Western Europe. Thus trade was dominantly the main economic activity of the western powers. According to (Clapman et al 2001), the Western European countries used the mercantilism theory of development that proposes governments to uphold exports and reduce imports through tariffs and quotas. Though the form of governance in these early times was relatively weak, the collaboration of the merchants with the ruling class oftenly enabled the ease of facilitating such measures. The story is the same in the tiger economies. These countries rely on exporting cheap manufactured goods that are mainly labor intensive. This has helped in keeping the costs of production low thus adding on the countries comparative advantages when it comes to international trade.

Capital as one of the factors of production has to be present for any business activity to take place. The money is used to fiancé the business operation in is this case the investors. In these early times, the word investor was not common but the word merchant was. With the invention of primitive banking in the 16^th century, merchants could borrow money for entrepreneurial activities and pay it at a commission (Clapman et al, 2001). The lenders by then were goldsmiths and other valuable metal workers who were being used by gold owners as keepers of their valuable metals. This was the favored medium of exchange and thus in high demand. This marked the beginning of banking as a service industry. The more the capital was available the more the merchants could borrow and expand their business and improve the regional economies. Comparing this to the case of the tigers we see that the flourishing of the banking sector and availability of capital has spurred growth. Hammond, (2000) says that the South Korean government from the 1960’s encouraged investors by ensuring that the was affordable capital for them by putting in place a interest ceiling which is simply putting a limit on to the level of interest rates charged to borrowers. Though this interfered with the rule of a free market, it helped in creating many entrepreneurial activities mostly manufacturing labor intensive goods.

Looking at the two phases of regional economic growth, we come to see that though the 17^th century growth of Western Europe was a bit slower than the case of the Asian tigers, we notice that there are also some major differences in the role of government in facilitating economic growth. As earlier said, the form of governance in the 17^th century and more so in Western Europe were not as developed as the case we have of the tigers (Clapman et al, 2001). For the tigers to grow, we see the government plays a more central role of regulating market forces to suit their case. High taxes on imports are imposed while entrepreneurs dealing in exporting of manufactured goods receive incentives to make their goods cheaper and more competitive in the international market (Hammond, 2000). Merchants as exporters in the 17^th century never got the chance to benefit directly from the government as is the case with tiger economies.

The social strife that has dented the growth of the Tiger economies was not as pronounced in Western Europe in the 17^th century. Taking the case of Korea for example, the intensification of labor over capital led to very poor working conditions for workers that between the summer of 1987 and late 1989 Korean workers almost in all sectors launched over 7000 strikes equating to an average of ten strikes a day (Hammond, 2000). These strikes were organized by trade workers unions which were not present in Western Europe in the 17^th century.

Another differentiating factor between the two is the issue of globalization and economic prosperity in other regions. While the tigers and the early Western Europe relied on economic prosperity of other regions and resultant increased demand for goods, the Tiger countries also rely on the same but are more favored by technological advancements and globalization. Undeveloped infrastructure and poor knowledge in economics of trade and manufacturing meant that growth of the Western Europe economies was carried out on a try and error basis while the case of the tiger economies involves market research and product development in order to create demand for their products as exports (Hammond, 2000).

References

1. Hammond, A. Which world? Scenarios of the 21^st century, (Birmingham: Island Press, 2000)
2. Clapham, J. et al, The Cambridge economic history of Europe Vol 4. (London: CUP Archive, 2001)