State-Based Industrial Policy as the Cause of the Asian Miracle

* Article: Industrial Policy, Asian Miracle Style. Reda Cherif and Fuad Hasano. Journal of Economic Perspectives—Volume 39, Number 4—Fall 2025—Pages 101–126

URL = https://pubs.aeaweb.org/doi/pdfplus/10.1257/jep.20251448

Summary

"In this paper, we address the following question, paraphrasing a comment from Lucas (1988): Is there some action a government of countries like Ghana or Colombia could take that would lead their economy to grow like the Asian Miracle economies? If so, what, exactly?

We argue that the secret of the Asian Miracles lies in the special type of industrial policy they had in common. We suggest three key principles that made the industrial policy of the Asian Miracles stand out compared to the numerous failed attempts at industrial policy in developing economies (Cherif and Hasanov 2019a, 2024):

(1) proactive and continuous state action to steer resources into the development of sophisticated industries, with the goal that domestic firms participate fully in technology creation and innovation;

(2) exports, exports, and exports; and

(3) enforcement of accountability for the support received, both through increased domestic market competition and through goals set based on market signals. We outline a way of putting these principles into action in a large array of contexts, focusing on the institutional set-up and necessary actions.

We take a pluralistic perspective in our discussion, drawing from disparate literatures that do not usually speak to each other (in the spirit of Chang 2014).

The patterns and commonalities on which we focus draw from a rich non-neoclassical literature in economic history, development studies, and political economy, which studies in detail the policies and contexts of the Asian Miracles. However, we remain fully steeped in the neoclassical tradition inspired by the work of Lucas (1988), as we rationalize the principles of successful industrial policy using neoclassical theories of economic growth and market failures. This framework allows us to synthesize the success into a limited number of replicable principles instead of a vast array of historical and political conditions and factors—say, political consensus built on Cold War geopolitical conditions, the quality of the bureaucracy, culture, or the supportive political system—as is often the case in development studies of the Asian growth miracles. Our argument emphasizes a role for the state in determining the thrust and direction of growth,"