I stumbled upon a fascinating piece by Nobel Laureate Paul Krugman called The Myth of Asia's Miracle: A Cautionary Fable. It was written in the early 90s — therefore, it can be interpreted with the luxury of hindsight. Krugman analysed two earlier economic races: one between the US and Soviet Union (1950s through to the 1980s), and another between the US and Japan (1970s and 1980s). He cited plenty of popular commentary from those days, which read ominously like today's obituaries.
By way of example, he quoted economist Calvin Hoover (1957) who had predicted that “a collectivist, authoritarian state was inherently better at achieving economic growth than free-market democracies (and) the Soviet economy might outstrip that of the United States by the early 1970s”. Others asserted that “Japan would overtake the US in real per capita income by 1985, and total Japanese output would exceed that of the US by 1998”.
According to Krugman, these predications were bound to fail because they ignored the intangible force-multipliers of innovation, technology and competitive efficiency. He added that similar predictions were also being made then (do remember that 'then' were the early-90s!) about the US and China. 'The World Bank estimates that the Chinese economy is currently about 40 per cent as large as that of the US. If China can grow at 10 per cent annually, by the year 2010 its economy will be a third larger than ours.' Of course, at that time Krugman concluded that this comparison, too, could fail. Today we are in 2010, and we know that Krugman was right. Forget about being a third larger, the Chinese economy continues to be less than 40 per cent of the US even today.
Full report here Hindustan Times
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