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On the ‘Asian Miracle’

Here’s a letter that I sent yesterday to a local D.C. radio station:

After your report on Thursday afternoon on the continuing growth of Chinese exports, you interviewed an ‘expert’ who asserted that East Asian economic success of the past several decades is the result of “pragmatic industrial and trade policies” pursued by governments in that region.  This gentleman added that America would experience similar success were it not for our “stubborn free-market ideology” whose proponents “ignore facts.”

I see.  Perhaps the quotation below is from one of those fact-ignoring free-marketeers:

“The realities of East Asian growth suggest that we may have to unlearn some popular lessons.  It has become common to assert that East Asian economic success demonstrates the fallacy of our traditional laissez-faire approach to economic policy and that the growth of these economics shows the effectiveness of sophisticated industrial policies and selective protectionism.  Authors such as James Fallows have asserted that the nations of that region have evolved a common ‘Asian system,’ whose lessons we ignore at our peril.  The extremely diverse institutions and policies of the various newly industrialized Asian countries, let alone Japan, cannot really be called a common system.  But in any case, if Asian success reflects the benefits of strategic trade and industrial policies, those benefits should surely be manifested in an unusual and impressive rate of growth in the efficiency of the economy.  And there is no sign of such exceptional efficiency growth.”

These words were written by that infamous apostle of Milton Friedman, Paul Krugman.*

Donald J. Boudreaux

* Paul Krugman, “The Myth of Asia’s Miracle,” Foreign Affairs, Nov./Dec. 1994; reprinted in Paul Krugman, Pop Internationalism (MIT Press, 1996), pp. 167-187.  The quotation in the letter is on page 184.  (By the way, I highly recommend this Krugman book; it is superb on many counts.)