1 3 Korea, i .Thailand.!, zmj MaI;', ; xanlti. l tl'n tTlIc . ;,. .. !,,' _d'_ **_,_** o0 **.,uoi!** itx. 1e.2 ha **bck. ii IO** i.tOli. **,** h.ii It:s. :. t)'I . i **.'** sfti,ric' .!In;. the _III;, 0C'10). lerhap._ thl' Inc **IriI()O jia I** a. 'Fl l **aInI id, 'A** _iI_ to) .II. **.I** rtrid gJ x' th si fratceg In t<sup>t</sup> mi-n'id - OfK **_0l'_** . "Big Pusli" nhap. **wa;** an ti'4 - l''i-. , *.-#1 **-i ?r,t,'If5'.i fli. , IJ** -l **fi** **_--_** aind MalaY 11;a s libelalization p)s-. x , thL I tl,- I I tie rr'ihi taiun of a rc tht vasii 'sy incieeangIljg intervenltioiiist These!. r1c !lnnoi 'anjd lclati\cl ) fco' ) chongve wh. n ouiepircJ **%withi** thoe--. '.i other regions of the wotId. Latin American countries, for instarnIe, hax **c** suffered wide policvy Xhanges o\ er the last 310 years. **la** addition to struttuial adl u'ptrnmiit s.,l'ili 'liol proeranim have bevn the notn **i** n ltn ATI!erili throughout the I980s,\i%th their s;quel vl ecooI nnic cesin and relative price volatility Man) countries have undergone several stabilization etfort'. in the ;hort p,-vil of a fexk years, av in Argentin., Brazi! and Peru to name the most promilient. Stabilization progran)ms ht\i e **1I.n** few in the su.ccssful .ases of Tast Acia. because they have rarely been necessar).

The Ioo- x'ailability of the real exchange rate in East Asia can bte observed in Table 8. The average coefficient of variation of the real exchange iate for the period 1975-88in the four East Asian countries is 0.097; the same figure for a sample of 7 Latii .Arneri,.an countries is more than twice this, at 0.201. Mioreover, the tigtire foi Thailand. tl-hc East Asian countr\ x\th hi he't coctffictt of variation (0.106), is lower than the figure for any of the seven Latin Amierican countries in the tabic.

Government policies in East Asia have by and large been credible and consistent with emphasis on promoting exports, savings and investment, and on the mindatrialization of the economr.. Investors inside and outside these countnies have perceived thcse goals as pvrmanent and government behavior hab validated these expectations. This has produced an extraordinarily good environment for investment, vwitnessed b)' ver) high private investment rates. The absence of major pol;cy changes over the last three decades, as mentioned above, has no doubt enhanced credibility.

# _(g) Income Dist-ibution_

It has been argued that one of the reasonis that latin American governments have been so erratic in their macroeconomic policies _may_ be the big inconie inequality existing in these countries. 24 Income inequality leads to social pressures **that** governments have attempted to relieve through populist policies. After one or two years of economic expansion inflatior, soars, real xvages fall, unemployment starts to increase and output declines. The policies prove to be unsustainable and the goverarnent has to switch to another set of policies. The populist cycle has been suffered by many countries in the region. _s_ **_.o.._** _. ._ **_._** In East Asia the situation is just the opposite. Indeed, macroeconomic stabiliLy is facilitated by equitable income distribution. The inlcome distribution figures for a group of East Asian and Latin American countries (the share in national income of the top and the bottom quantiles of the income distribution), show **the** tatio of top to bottom income is much lower for East Asian countries than for Latin American ones. In East _A-''--+ **.-** A"AIb"'-A+ **.** JIA' ' .u"m' t "''"" on **a.C** ;.W **U. l** vi **01as, j)UOi** poul **C.i; IO 11CiCiwIL.** In Iatin America, the ratio is 18.6 times (see Tahle 9). Moreover, with the exception of Malaysia, the distribution of income in East Asia is within the range shown by developed economies. Furthermore, even in Malaysia the progress has been impressive. The incideince of poverty in Malaysia has declined by 34.4percentage points between 1973 and 1987. The income difterential between the Chinese and Malays has been greatly reduced. In 1973,a Chinese had a 26 percent less chance of being poorer than a Malay, holding other variables constant. By 1987, the differential had been reduced to 7 percent.

**La4Iz"iii and** Vcrgara, ibid.