As a prelude to the more specific capital market studies which follow, this chapter seeks to lay out a broad political economic framework in which the development of East Asia’s capital markets will likely fit. This framework is founded on a number of major strands of development in the world’s political, social and economic spheres over the last decade. We will try to argue the points by drawing together evidence in recent years and the theoretical bases on which the understanding of the role of capital in political economy rests. Along the way, we will raise several questions regarding this political economic role of capital, how capital has evolved over time, and whether an analysis of the interaction between the modern global capital market and national counterparts in East Asia could help shed light on to the development path of these markets. Besides interesting theoretical implications, this analysis could also serve as a strategic outlook on capital market trends that might prove valuable for international funds managers and investors.
According to Rostow, there is no common thread, no single pattern or sequence, that runs through the experience of all countries’ economic development history. This is particularly true, he conceded, of stimuli required for the economic take-off stage which may come in various forms, one of which is through technological revolution. This seems to conform to later, more extended views on economic growth despite Rostow’s pre-occupation with the industrial revolution in his theorising. 1
One of his outspoken critics, Kuznets, questioned the empiricism of Rostow’s thesis, demanding a more detailed description of what Rostow meant by ‘political, social and institutional framework…which exploits the impulse to expansion’, a requirement for the take-off not to be aborted. Equally in need of clarification is Rostow’s claim that investment be maintained at over 10 per cent of national income for the take-off stage to be sustained. 2