“Northeast Asia undoubtedly benefited from capitalism (private profit-driven production), andfrom access to the world market. To this extent the mainstream is correct. But five qualifications
have to be made.
First, for the first several decades the Northeast economies relied not so much on \u2018the world
market\u2019 as on \u2018empire preference\u2019 to the US market\u2014and to US technologies, US capital, US
military and civilian aid, and US public procurement\u2014thanks to their role in the US\u2019s geopolitical
strategy to contain communism and show the world that \u2018capitalism\u2019 was superior to \u2018communism\u2019.
Second, the US\u2019s threat perception, its commitment to getting front-line allies economically strong
enough to be a credible defence against communism, and its intense involvement in national
economic policy-making and institution building, kept the national elites relatively unified and not
at each other\u2019s throats. So on the spectrum of \u2018weak state\/special interest state\/common interest
state\u2019 these were special interest states moving towards\u2014with a lot of American help in the first
decades\u2014 common interest states.
Third, steered by a developmental mindset, the developmental state was organized differently than
the model neoliberal state. The latter has no strong centre of coordination (because markets played
by private capitalists, not states, are the resource coordinating institution), and has arms-length
relations between the various ministries and between ministries and business. The developmental
state has one or a few powerful centres of coordination and market leadership, a limited role for
the legislature in matters of economic, financial, and security policy, and well-developed
mechanisms of consultation and coordination with private capitalists, in the spirit of \u2018embedded
autonomy\u2019.
Fourth, these governments made intensive use of policies and institutions frowned upon in the
neoliberal playbook\u2014such as managed trade, sectoral industrial policy (\u2018making, not picking,
willing winners\u2019), targeted concessional credit, and capital controls. These instruments were
intended to buffer (not insulate) producers in selected sectors from international competitive
pressure and volatility\u2014so profit-raising protection and subsidies came with performance
conditions, which were enforced. The whole complex would have scored poorly by Washington
Consensus criteria. For example, Taiwan\u2019s financial system was and remains the despair of visiting
western economists. That being said, there is no knock-out evidence on the effects of these
\u2018government interventions\u2019. The causality is too difficult to disentangle rigorously.
Fifth, from early on they undertook to develop domestic technological capacity, such as
engineering faculties at universities and public laboratories, to aggressively seek out western
technologies and domesticate them for deploying in national firms, and much later to undertake
world-standard innovation and attract back a high proportion of overseas graduate students\u2014this,
rather than rely, as in much of Latin America, on incoming western multinational companies.
Singapore, as noted, did rely on western multinationals\u2014which were left in no doubt as to who
called the shots”<\/p>\n\n\n\n