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Economic upgrading in a state-coordinated, liberal market economy

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Abstract

Well-established research into different models of capitalism has not been applied well to developing countries. Changing global conditions, institutional differences, and path-dependent histories have forced late developing countries to create models of their own. By and large, however, these models have been less than successful in fostering economic development through technological upgrading. A comparison of skills upgrading in several fast-growing economies in Southeast Asia suggests that perhaps there is a new “State Coordinated, Liberal Market Economy” developmental model that can successfully lead to upgrading-driven economic development. This model combines elements from the Developmental State, Coordinated Market, and Liberal Market Economy models while differing significantly from each.

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Notes

  1. Chang (2002) argues that perhaps this difficulty is overstated.

  2. Recent research suggests there are no essential institutional configurations, only institutional capacities [see Evans (2002) and Haggard (2003)].

  3. Hall and Soskice argue that this will not be possible “because their business and labor associations usually lack the encompassing character required to administer such policies well...[and] do not possess enough structural influence to sanction the government for deviations from them” (2001: 48).

  4. See Hall and Soskice (2001) for a more complete discussion of the complementarities of institutions.

  5. This is important in any case, but especially because of the inductive nature of the research. Ultimately, generalizability will only be established through additional research in other countries.

  6. On the differences between North and Southeast Asia, see Booth (1999).

  7. In fact, the term ASEAN-4 was coined as a way to distinguish the capitalist countries of Southeast Asia MINUS Singapore.

  8. A distinguished colleague of mine who has lived and worked in Singapore is fond of saying that any research on Singapore is useless since, “as we all know, Singapore is not a country.”

  9. See http://www.becker-posner-blog.com/archives/2005/04/. In a personal communication, a Singaporean government official confided that Singapore was not sufficiently large to have a gene pool that would produce enough geniuses to ensure future economic competitiveness and must therefore import needed talent.

  10. Examples include IDEMA, the hard disk drive business association in Southeast Asia, which has seen some success in coordinating the research and development as well as product manufacturing efforts of several large, multinational computer peripheral companies (Personal communication with Peter Brimble, Bangkok 2005).

  11. Certainly this may vary by the nationality of the various firms. That is, German companies doing business in Singapore probably have access to Germany’s financial system, which is a coordinated market economy (Hall & Soskice, 2001: 21–27). The point is that financial systems in Singapore are driven primarily by market forces, although even here there is some coordination among government-owned banks and government-linked corporations in what appears to be a very weak form of kiretsu management.

  12. See Birdsall, Pinckney, and Sabot (2000) for more on resource endowments and development strategy and human capital development; See Shafer (1994) for an insightful look at how industrial structure influences institutional capacity to tax.

  13. Author Interviews, Bangkok 2006.

  14. These functions used to be carried out by the Productivity and Standards Board before its responsibilities were divided between a number of ministries.

  15. Author interviews with officials from the Ministry of Manpower and Productivity and Standards Board, Singapore 1999, 2000.

  16. See the Manpower 21 plan from the Ministry of Manpower, among others.

  17. In Singapore firms contribute to an overall pot from which any firm can draw. This creates a first come first served environment. If funds are not claimed, a competitor is likely to use them. The result is a 100% usage rate among firms with more than 10 employees. In Malaysia the usage rate of funds is closer to 50%.

  18. On the power and influence of big business in Thailand see Hewison (2001).

  19. Author interviews 1999–2004.

  20. A well-known literature on the developmental state explains well these “reciprocal” relationships. See, inter alia, Johnson, (1982), Wade (1990), Woo-Cumings (1999), and Amsden (1989).

  21. Author interview with corporate officers from Seagate Corporation, Singapore, 2000.

  22. Author interview with corporate R&D manager, Seagate corporation, Singapore, 2000.

  23. Personal conversation with two CEOs, one from an American firm and one from a Japanese firm at the MDC’s Advisory Panel Meetings in Cyberjaya, 2000.

  24. Hard Disk Drive Association Conference, Bangkok, 1999.

  25. Author interview with rubber farmers in Southern Thailand, May-June 2004.

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  1. James Madison College, Michigan State University, 302 Case Hall, East Lansing, MI, 48823, USA

    Bryan K. Ritchie

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Ritchie, B.K. Economic upgrading in a state-coordinated, liberal market economy. Asia Pac J Manag 26, 435–457 (2009). https://doi.org/10.1007/s10490-008-9089-0

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