State and markets: political economy explanations of east Asia’s economic miracle

In the last third of the 20th century a number of Asian states, following Japan’s example, underwent enormous economic growth. A rash of books on the ‘Asian miracle’ appeared which sang the praises of Japanese industrialization and its governing capacity, praised Confucian culture, lauded the role of what was called a ‘developmental state’, and identified the region’s export-oriented industrialization strategy and integration into the international economy as reasons for success. Many commentators predicted spiralling economic growth. The ‘Asian century’ was approaching, the ‘American century’ was receding. In the 1990s the miracle turned sour. First Japan entered its ‘lost decade’ after a dramatic stock market crash led to stagnant growth, falling wages and declining property prices. Then more widely, in 1997 the region’s growth nose-dived, as a currency crisis hit South Korea and Southeast Asia, with trigger effects globally. Books such as The Tigers Tamed (Garran 1998) or The Asian Eclipse: Exposing the Dark Side of Business in Asia (Backman 1999) typified much popular writing on Asia’s economic malaise. Asia’s strengths were now viewed as liabilities: Asian states were said to be too interventionist, Asian culture was endemically corrupt, and Asian education failed to spark entrepreneurship. Help was needed. And as capital dried up, currencies depreciated and thousands of companies went bankrupt, the World Bank, the International Monetary Fund and others provided bail-outs to Indonesia, South Korea and Thailand conditional on governments following a programme of financial austerity and economic liberalization. From the perspective of the financial heartlands of the world - the US Treasury and the international financial institutions - the Asian crisis confirmed the virtue of Western capitalist market models towards which they assumed the rest of the world would converge.