East Asia has led the global recovery since the pandemic, but deep welfare imbalances are now threatening the sustainability of its growth model.

East Asia has led the  global economic recovery since 2020, but its current pace continues to lag behind pre-pandemic levels,  renewing worries about the sustainability of an export-led growth model. But rarely discussed is the reluctance of East Asian leaders to abandon productivism, a welfare strategy that emphasises rapid growth and human capital investment over social protection.

Seen in this light, the region’s growth challenges are symptoms of a welfare imbalance, rather than simply the result of external shocks or diminishing returns to the traditional drivers of expansion. The book  _Misery Beneath the Miracle in East Asia_ not only details the human costs resulting from a productivist orientation, but also finds that a supposedly pro-growth strategy is now hindering economic performance. This happens through three primary channels – decreasing consumption, particularly among the elderly, obstructing the accumulation of human capital and exacerbating the decline in total fertility rates by discouraging marriage and childbirth.

East Asia’s limited social spending has held back the transition away from an over-reliance on capital investment and export promotion. In China, the absence of a comprehensive social welfare system has caused citizens to save at very high rates. Insufficient government support for affordable housing, along with the emergence of a market-oriented housing model, has also compelled individuals to set aside funds for mortgages and down payments. This low level of household spending has impeded government efforts to move from an export-led strategy to one based more on domestic consumption that is less vulnerable to external conditions.

Lacklustre consumption is most evident among the elderly. Seniors are the largest and fastest-growing group of consumers in most advanced industrial societies, fuelling ‘silver boom’ economies. But in East Asia, a ‘silver bust’ is occurring.

As seen most acutely in South Korea, inadequate old-age security has led to high levels of elderly poverty. In 2020, South Korea’s elderly poverty rate of  40.5 per cent was nearly three times greater than the OECD average. Rates were also very high in Japan at 20 per cent and Hong Kong at 32 per cent. Public pensions often fail to meet the basic needs of many seniors because they have insufficient non-contributory schemes, forcing them to depend on meagre savings and uncertain support from their adult children who are  less able or willing to help.

Rising incidence of child abuse and neglect in the region, which have gone unchecked by governments, also undermine economic vitality. Unprecedented urbanisation linked to rapid development has dismantled the traditional family support systems and created a prime environment for maltreatment to spread. Child maltreatment in the region  costs hundreds of billions annually, or about 2 per cent of its GDP – or even 5.1 per cent in South Korea. Victims are more likely to have learning disorders or mental health issues that increase the risk of being unproductive or unemployed.

Productivist policies have dealt with this issue superficially, concentrating on detecting and reporting abuse cases, leaving critical protection and rehabilitation systems chronically underfunded. Protecting children’s overall well-being is a crucial pillar of long-term economic growth.

Even investments in human capital through education and vocational training, which were once seen as the  foundation of East Asia’s success, have not always yielded the desired outcomes because they have failed to consider the social welfare of all citizens. In Taiwan, an oversupply of university-educated workers driven by an excessive focus on tertiary education has  led to lower wages and provoked the mass exodus of talented students and skilled workers, making Taiwan the most talent-deficient of the 46 nations in  a Oxford Economics 2021 survey. Moreover, policymakers have largely ignored the plight of the many working poor who toil in sectors with low productivity.

Low and declining  birth rates in East Asia have multiple causes, many of which are also at play in other regions, including improvements in women’s socioeconomic status and changes in family structure. Yet they are also tied to the productivist welfare approach.

Productivism, which involves excessively long working hours and unmanaged socioeconomic risks, has contributed to trends that reduce fertility such as delayed marriages, having fewer children — or none at all — and an increase in singlehood. Plus, East Asian policymakers implemented various measures to discourage childbirth in the 1960s and early 1970s out of concern that high fertility would lead to families spending less on health and educational services per child, impeding their development as skilled labourers. Reversing these policies has proven to be exceedingly difficult, as it has in other countries.

East Asia must move beyond focusing solely on economic growth. Social welfare is not a drain on the economy, but a critical piece of infrastructure that serves as a foundation for future development that uplifts everyone. The next  East Asian miracle may not dazzle, but by reframing the narrative from trade-offs to synergies between welfare and growth and addressing the growing social vulnerabilities quietly undermining the region’s  economic potential, it can endure as a source of inspiration and resilience.

Republished from the East Asia Forum, 17 December 2025