Economic power gives you the chance to dominate the world. The US, Germany, and the UK are the economic powerhouses of the world that have significant control over the global trade and hence, exercise more control over international affairs. However, this article is not about these economically powerful countries. It is about the ‘Tiger Economy’ of the countries which recorded rapid economic growth and saw a fast-improving standard of living at some point in the last 50 years.
1. Baltic Tigers
The economy of Estonia, Latvia, and Lithuania boomed during the period of 2000-2007. Between 2004-2007, these 3 countries recorded an average annual GDP growth rate above 8%. For instance, Latvia recorded a GDP growth rate of 11.9% in 2006.
At the start of the Millenium, these 3 countries introduced significant economic reforms that reduced inflation and attracted foreign investments. The factors played an important role for the rise of these 3 economies:
- Liberalization and privatization
- Low wage skilled labour
- Steady currency and low inflation
Before 2000, the average per-capita income of Estonia, Latvia, and Lithuania was nearly one-fifth of the European Union (EU) average. These 3 countries were not a part of the EU and each of them had a different currency at that time.
According to the Latvian economist Janis Oslejs, these countries focused on reviving the banks and maintaining a fixed exchange rate. Usually, a country devalues its currency to write off the loans, promote export of its products, and boost its local industries as imports become very expensive. However, these countries didn’t devalue their currency and it helped them in some way.
2. Celtic Tiger
Writing this article from the ‘Emerald Island’, I can personally vouch for the competitive biotech and IT sector and the entrepreneurial spirit of Ireland. The economic dream run for Ireland continued from 1990-2006. Although Ireland was a part of the European Union (EU) since 1973, it had lower per-capita income and higher unemployment rates than the EU average. From one of the least developed economies in the European Union in 1990 to the second richest country in the EU in terms of nominal GDP, Ireland’s rise to an economic powerhouse is an amazing story to tell.
2.1. What caused the Celtic Tiger?
6 major factors led Ireland to become the ‘Celtic Tiger’ it is known today.
- Low Corporate Tax: Ireland lowered its corporate tax to somewhere between 10-12.5% in 1990s. Even today the corporate tax of Ireland is 12.5%.
- IT Boom:
- Biotech Boom:
- Huge R&D spending:
- Reverse Brain Drain:
- Entrepreneurship Boom:
3. Four Asian Tigers
Taiwan, Singapore, Hong Kong, and South Korea are the four Asian Tigers that catapulted from developing economies to industrialized developed countries with high per-capita income. In fact, these 4 countries have surpassed the technological development in several Western European countries.
The factors which propelled these countries in the 1960s and 1970s to grow above 8% annually are listed below.
- Developed infrastructure: These 4 East Asian Tigers have a well-developed level of infrastructures such as roads, railways, and ports.
- Skilled population: The Taiwan economic miracle couldn’t have been possible without is a well-educated and highly skilled population.
- Cultural traditions that appreciate education and achievement.
- Good geographical location: Singapore is situated along the trade routes in the Indian Ocean. Further, it is close to Australia and New Zealand. This made it perfect for trading, imports, and exports.
- Government support, for example, offering low-interest rates in bank loans.
- Less rigid laws and regulations on labour, taxation and pollution than in home countries of TNCs, allowing more profitable operations. (Low-cost manufacture with cheap labour.