The First East Asian Economic Miracle: Wages, Living Standards and Foundations of Modern Economic Growth in Southeast Asia, 1880-1938

This paper presents new estimates of the living standards of unskilled and skilled wage earners in Southeast Asia. It estimates welfare ratios in nine Asian cities (Bangkok, Hanoi, Jakarta, Penang, Rangoon, Saigon, Singapore, Surabaya and Tokyo) during 1880-1938 and compares them to those in two European cities (Milan and Paris). It finds that the welfare ratios in most Southeast Asian cities were close to or above the Italian and Japanese levels. By the 1930s those in Bangkok were even close to Paris. It also finds a wage premium for skilled labour that was higher than in Europe and Japan. These findings suggest that there was a sustained strong demand for skilled workers, as well as savings potentials and opportunities for the development of markets beyond basic commodities in these Asian cities. These findings are consistent with recent research into economic growth and living standards in pre-war East Asia. The paper synthesises these findings to argue that some of the foundations of modern economic growth, and therefore the second East Asian Economic Miracle since the mid-1960s, were being established before World War II. But it took most countries in Southeast Asia until the 1960s and after to draw the full benefits from these preconditions when their processes of modern economic growth accelerated.