A frequently overlooked lesson from East Asia's success is the power of stable, predictable growth rates. Developmental states focused on minimizing volatility, which signaled to the private sector that steady expansion was reliable. This encouraged long-term private investment, a crucial component often missing in more volatile economies.
Related Insights
Contrary to popular belief, the success of semiconductor industries in Taiwan and Korea isn't primarily due to massive government subsidies. Instead, their governments excel at creating an extremely stable and predictable business environment with streamlined permitting and minimal regulatory friction, which is more critical for long-term, capital-intensive projects.
After being 'shunned by the world for 10 to 15 years,' emerging market assets are benefiting from a slow-moving, structural diversification away from heavily-owned U.S. assets. This long-term trend provides a background source of demand and support, contributing to the asset class's current resilience against short-term volatility.
China's economic ascent began when Deng Xiaoping invited American experts to teach them about capitalism. This strategy, combined with becoming the world's manufacturing hub, allowed them to learn the system, grow strong quietly, and eventually become a dominant global power.
Despite America's high standard of living, decades of wage stagnation have created a national psychology of pessimism. Conversely, China's explosive wage growth, even from a lower base, fosters optimism. This psychological dimension, driven by the *trajectory* of wealth, is a powerful and often overlooked political force.
The global economy proved more resilient than feared due to three factors: stronger institutions built after the 2008 financial crisis, the private sector's agility in absorbing shocks like tariffs, and the fact that widespread retaliatory trade wars did not fully materialize.
Deng Xiaoping’s reforms, which ignited China’s growth, were based on adopting American free-market principles like private enterprise and foreign capital. China’s success stemmed from decentralizing its economy, the very system the U.S. is now tempted to abandon for a more centralized model.
Investors often mistakenly equate strong economic growth with strong stock market performance. Historical data, particularly China's market performance versus its GDP since 1992, shows no reliable correlation. Starting valuation is a far better predictor of long-term returns.
China's constant building of subways, high-speed rail, and parks provides tangible proof of national improvement. This "physical dynamism" creates a powerful sense of public optimism and builds political resilience for the Communist Party, a stark contrast to the stagnation felt in the U.S.
Singapore's economic success is credited to its founding leaders' decision to attract and retain top-tier talent in the civil service and politics with high compensation. This creates a highly competent bureaucracy capable of sophisticated, long-term policy planning that enables a thriving business environment.
Singapore's prosperity is attributed to its founding leaders' decision to create a highly-paid, highly-educated, and hard-working civil service. This ensures top-notch talent formulates long-term policies that allow businesses to thrive, which is seen as crucial for guaranteeing the country's success over a multi-decade horizon for its citizens.
