Southeast Asia's Misunderstood Miracle: Industrial Policy and Economic Development in Thailand, Malaysia and Indonesia

Southeast Asia's Misunderstood Miracle: Industrial Policy and Economic Development in Thailand, Malaysia and Indonesia

Southeast Asia's Misunderstood Miracle: Industrial Policy and Economic Development in Thailand, Malaysia and Indonesia

Southeast Asia's Misunderstood Miracle: Industrial Policy and Economic Development in Thailand, Malaysia and Indonesia

Synopsis

"As this study demonstrates, government intervention in agriculture, in the management of natural resource rents, & in industrial policies in the second tier NICs was crucial for the success of later industrialization. This book shows that even though these industrial policies could have been better, there is little doubt that they contributed to the success of broad-based growth in the second tier NICs." Michael T. Rock Senior Economist, Winrock International Institute for Agricultural Development

Excerpt

The debate on the major factors contributing to Southeast Asian industrialization continues unabated. As might be expected, there is much at stake in this debate. the debate is largely ideological in nature and partly centers on the role and contribution of state interventions and other institutions in market processes in the context of late industrialization. At the risk of caricaturing the debate, on the one hand, one finds the dominant and more influential position held by those who blame the state for all that has gone wrong and credit the market for all that has turned out right; on the other hand, the minority statist extreme position basically credits most major economic achievements in East Asia to appropriate interventions by developmentalist states. While very few people would actually fully identify with either of these caricatured extremes, much of the discussion actually gravitates around either of these poles.

Hence, on one side, one finds the economic neo-liberals, the laissez-faire free marketeers who insist that Southeast Asia's spectacular economic growth and industrial transformation in recent decades have been primarily due to free market forces at work. of course, some modest state intervention, e.g. in the provision of public goods (especially infrastructure and education), as suggested by neoclassical welfare economic theory, is acknowledged and approved of. For example, the World Bank (1993) claims that the Northeast Asian economic miracle has not been due to other kinds of state intervention, especially government promotion of selected strategic industries. While it is no longer denied that industrial policy has been pursued in Northeast Asia, it is also claimed that the results have been mixed at best, and disastrous at worst (at least in the case of Southeast Asia), and that the Northeast Asian economic miracle cannot be attributed to it. It is also claimed that the Northeast Asian success has been largely due to their ability to extricate themselves from distortionary import substitution to allegedly non-distortionary export orientation in their industrialization strategies.

There has been an important and interesting variation of this argument which Wade (1991) has described as the "simulated free market" thesis (Little 1981; Bhagwati 1988). Unlike the "free market" thesis, it, at least, concedes that the South Korean state has been distortionary, but argues that the distortionary effects . . .

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