Taiwan and Japan
Breaking formation
This year Taiwan's standard of living surpassed Japan's
by S.C. | SEOUL
This year Taiwan's standard of living surpassed Japan's
IN THE 1930s the Japanese economist Kaname Akamatsu proposed a theory of how the economies of Asia could take wing. It became known as the "flying geese" model of development. As Akamatsu pointed out, "Wild geese fly in orderly ranks forming an inverse V, just as airplanes fly in formation." Japan, the first Asian country to industrialise, would lead the way. Its neighbours would follow, breaking into industries as the goose in front graduated out of them.
But this year Japan was overtaken by one of the geese in its slipstream. The upstart was not China, which remains far poorer than Japan, even if its economy is now bigger, but Taiwan. In 2010, according to the IMF, Japan's income per head will amount to $33,800; Taiwan's will be over $34,700 (see chart).
These incomes are converted not at market exchange rates, but at purchasing-power parities (PPPs), which take account of the higher cost of living in Japan. Taiwan is not the first of the trailing geese to overtake the leader, based on this measure. Singapore and Hong Kong both caught Japan in the early 1990s. South Korea is also closing the gap, although the other Asian tigers, such as Malaysia, lag further behind. Akamatsu's inverse V is beginning to turn into an X.
Of course, calculated at market rates, Japan's per capita income ($42,300) is still far higher than Taiwan's ($18,300). Tokyo's chic neighbourhoods certainly look better heeled than their counterparts in Taipei, which even some residents describe as outdated and quaint. And if Akamatsu's theory applies to a country's industrial mix, rather than its standard of living, Japan can still claim to be out in front. It has progressed further in the transition to a service economy, with industry now accounting for less than a quarter of its GDP, compared with almost a third in Taiwan.
But despite 15 years of deflation, Japan's punishingly high prices still take a toll on its residents' standard of living. PPPs are based on a global survey of prices led by the World Bank in 2005. It found that Taiwan's housing was a third cheaper than Japan's, even though Taiwan's population density is 90% higher. The bank also found that Taiwan's food was half the cost of Japan's. Its price checkers did their best to compare like with like, matching the price of staples and delicacies in each country. But inevitably the comparisons can be contested. Taiwanese food may seem cheap next to Japan's sushi, sashimi and fugu. But, then again, how much would you pay for stinky tofu?
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