The World Bank published a document in 1989 under its countrywide research project titled ‘The East Asian Miracle’. This study broadly comprised of a view that development for less developed nations will not be so much a repetition of the Euro-American development as previously envisaged by modernization theory. Now, the development for third world is the transformation path from tradition to modernity as traced by the East Asian countries.
The basic precondition for the growth of any economy as opined by the World Bank is the opening up of their economies to international market, which called as ‘market friendly approach’. This was evident from the foreword given by the President of the World Bank, which says rapid growth in each economy was primarily due to the application of a set of common market-friendly economic policies, leading to both higher accumulation and better allocation of resources. In relation to the other Third World countries, the president of the World Bank further emphasized that while this (above stated) conclusion is that strikingly new, it reinforces other research that has stressed the essential need for developing economies to get the policy fundamentals right.
The above is clearly the neo-classical view which suggested the need of opening of their economies to international market on the part of Third World countries. It also implied to the attitude of the state in the Third World countries towards liberal economic policies. It is clear in arguing that the success of growth achievement in East Asian economies is due to their better provision of stable macro-economic environment and a reliable legal framework to promote domestic and international competition. Since the local resources are not sufficient to achieve this growth, opening of economy to international markets is the only strategy that has been followed by many of the Third World countries at present.
World Development Report 1991, which was another publication series of the World Bank traced the nature of policies associated with rapid growth rates in East Asian countries. The report emphasised on “the effective but carefully limited government activism” in East Asia, which caused the achievement of rapid growth. In the ‘market-friendly approach’ the report argues that “the appropriate role of government is to ensure adequate investments in people, provide a competitive climate for private enterprise, keep the economy open to international trade, and maintain a stable macro economy”.
The distributive role of the government in East Asia lies in the building of institutional capability, which is regarded by the World Bank as the principle ‘engine of growth’. In the process of explaining these concerns the World Bank report stated that “the explicit mechanisms were used to demonstrate the intent that all would have a share of future wealth. As a part of this, Korea and Taiwan carried out comprehensive land reforms programmes, Indonesia used rice and fertiliser price policies to raise rural incomes, Malaysia introduced explicit wealth sharing programmes to improve the lot of ethnic Malays relative to the better-off ethnic Chinese, HongKong and Singapore undertook massive public housing programmes, and in several economies governments assisted workers co-operatives and established programmes to encourage small and medium-size enterprises”. The report further stated that these programmes demonstrated that the government intended for all to share the benefits of growth.