Growling at Asian Tigers

A LOT of business leaders, statesmen, investors, spies, and diplomats would like to know if that catchy slogan the ''Asian Century'' is going to prove accurate in the years ahead. So would the transpacific leaders assembling in Osaka next week for the Asia-Pacific Economic Cooperation meeting.

Their interest has little to do with current end-of-century, end-of-millennium ballyhoo. It's a matter of wanting to make sure their long-range planning is accurate.

You're a corporate leader. You need to decide how to deploy your marketing forces, where to build overseas factories, with which firms to strike strategic alliances, which languages your global executives should learn. Something analogous is roughly true for diplomatic services and presidential advisers.

Knowledge of future Asian growth rates and productivity increases is also important to scientists trying to estimate environmental changes such as global warming. Take just the single example of the Chinese economy's ability to enable hundreds of millions of potential drivers to buy carbon-dioxide-emitting cars and to use more coal-generated electricity.

Given this need for knowledge about Asian growth rates, it's important to assess a hot debate among economists about the Asian Century.

Last year the World Bank produced an influential report titled ''The East Asian Miracle.'' Its authors analyzed the factors producing the world's highest regional growth rates. In addition to having (1) relatively cheap labor with a strong work ethic, and (2) high savings rates that formed domestic capital and attracted foreign capital, the Asian boom states were propelled by a third factor, the bank's authors said. That was increasing productivity (output per worker) through technological innovation.

Thus was conventional wisdom bolstered by new research. But conventional wisdom also attracts contrarians, in this case, iconoclastic econo- mist Paul Krugman. He argued, in a provocative article titled ''The Myth of Asia's Miracle,'' that the World Bank had overestimated Asian innovation and therefore increasing productivity.

Krugman's bottom line: Japan, the Asian ''tigers,'' and China would never catch up with the West - because they had already made their most significant gains by mobilizing labor and modern machinery but were deficient in innovation.

So who's right? As with most economic scenario-building, the answer has to be played out in real life over time. But real-life observation in East Asia today suggests that Mr. Krugman may be at least partially wrong. As population growth rates shrink in the Asian boom nations, education levels are rising rapidly. And with them innovation rates.

The Japanese have long been conscious that their meticulous but rigidly disciplined schooling is producing large numbers of excellent engineers and managers but fewer Nobelists and basic science geniuses. They are trying to remedy this lack. China's science and technology educators are also seeking to stimulate innovation.

It's true that prosperity tends to dilute the work ethic in any society. Six-day weeks become five-day weeks. Savings rates erode in favor of consumption. Percentage growth rates that were large when the base was small begin to dwindle. And some governments are diverting capital into mini arms races. But, even so, the East Asian growth momentum remains strong.

Those economists who measure by what their eyes see in Asia credit Paul Krugman for raising the right question. Many of them agree that US innovation remains strong, and future US productivity will make the American economy hard to overtake. But few who really know the area doubt it will continue to justify ''Asian Century'' expectations. We concur.

Innovation is the key to Asia's future growth, and Asians seem to have learned that.

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