Impact of education on economic growth, development: Case study of Taiwan

To any development economist or economic policy adviser interested in economic growth and development, the East Asian economic growth experience since the 1960s offers great and interesting lessons.

In the 1960s, a country like South Korea was poorer than many Sub-Saharan African countries and Taiwan was also not all much richer. Since then, these countries and their East Asian counterparts, otherwise known as “Asian Tigers”, did experience average increase in per-capita income of seven per cent far above the Sub-Saharan African countries and others like Mexico, Brazil, India and Argentina which had been much richer before the 1960s.

Between 1965 and 1990, on the average, the East Asian countries otherwise referred to as the Asian tigers, including Taiwan, grew by seven per cent, according to Meier and Ranch (2000). This was a remarkable exception to the historical experience and contemporary evidence in other regions.

By 1960, the per capita income of Ghana was approximately $183, far in excess of that of Taiwan which was negligible and nothing to write home about at the time.

However, by 1980, the per-capita income of Ghana and that of Taiwan stood at $411.5 and $2,701.04 respectively and by 2015, these figures for Ghana and Taiwan stood at $1,401 and $22,083.00. Source: World Development Indicators and IMF WEO Indicators (2016).

During this period, the proportion of people living in poverty declined from 50 per cent in 1972 to 17 per cent in 1982 (within 10 years).

Malaysia had its poverty reducing from 37 per cent in 1973 to 15 per cent by the end of 1987.

Within the same period, India, for instance, had its poverty level declining from 54 per cent to 43 per cent, while Brazil experienced a decline from 55 per cent to 21 per cent. Ghana did not experience any appreciable decline in poverty, let alone inequality during this same period under review.

Questions

An obvious question that bothered the minds of development economists, politicians and other academicians was: what caused the miracle success?

Why were they growing far above global trends? What were they doing that was not being done elsewhere?

It became imperative to find answers to these legitimate questions in order for economic policymakers to learn lessons for Sub-Saharan African countries in particular and the developing world in general.

There were a lot of factors that accounted for the miracle of these countries. Among the principal engines of the remarkable growth was education.

Lessons

Here, I want us to share some lessons from Taiwan, one of the East Asian countries.

Taiwan experienced annual growth rate of 10 per cent between 1965 and 1980, which is over a 25-year period consistently.

According to the 2014 estimate, life expectancy in the country stood at 79.84 years.

It had infant mortality of 4.44 per 1,000 live births (2015 estimate) and population below the poverty line of 1.5 per cent (2012 estimate).

Taiwan’s GDP composition had Agric (2%), Industry (35%); inflation at 1.4 per cent (2014 est.); - 0.3% (2015 estimate.).

It had a low unemployment rate of 5.9 per cent (2009); 4.44 per cent (2011); 4.02 per cent (2014) and 3.8 per cent.

The labour force shares, according to 2015 estimates, were agriculture - five per cent, industry - 36 per cent, services - 59 per cent, and public debt - 32 per cent of GDP (2015 estimate).

The central bank discount rate was 1.63 per cent by December 31, 2015, and commercial banks’ prime lending rate was 2.83 per cent during the same period.

Foreign exchange and gold revenue stood at $426 billion as of December 31, 2015.

Adult literacy rate (defined as those over age 15 who could read and write) was 96.1 per cent (2003); 98.2 per cent (2012) and 98.5 per cent (2014 estimate), where males had 99.7 per cent and females had 97.3 per cent (2014 estimate).

The internet user as per cent of the total population was 80 per cent (2013) among others.

The explanations for the success were many, including extensive infrastructure development, early and thorough land reforms, high rates of capital accumulation and investment, a mix of constructive foreign influences and diffusion of commercialisation from Japan and USA, effective public industrialisation policy and emphasis on education, as well as work ethics and productive attitude of the Taiwanese, among others.

Education in Taiwan

Let’s have a look at the historical emphasis on education by the Taiwanese policymakers. There has been a six-year compulsory education since 1958.

Primary enrolment by 1956 was above 90 per cent (90% female; 96% male). They also expanded compulsory education to nine years in 1968.

It may interest you to know that the overall student-teacher ratio is less than 20 according to the 2002 estimate and teachers’ salaries are higher than middle management position in that country.

In the country, emphasis is placed on general rather than job-specific education and a calculated attempt is made to give incentives for building a close relationship between schools and businesses.

There is also a tax break for company donations to schools.

Education is among the principal factors which have contributed to Taiwan being counted among the high-income countries in the world.

The country is gradually moving to high technology field, which implies that soon there will be no relatively unskilled industrial jobs available in the country. Any lesson(s) for our country?