This book applies and develops the concept of “ersatz capitalism” in the analysis of industrial policy blockades to economic development in Malaysia and Indonesia. Drawing on insights from international political economy, development studies, industrial and innovation policy, and new institutionalism to refer to a specific type of capitalism, the book analyzes different paths and institutions of economic development within the entire East Asian region. Comprehensive theoretical insights are complemented by empirical case studies that relate to country and sectoral studies – the automotive and ICT industries – in Malaysia and Indonesia. Applying contemporary research on international political economy to refer to a specific type of capitalism, the author examines how conflicts of interest between factions of state apparatus, associations, and companies contribute to the failure of developmental policies. The unique combination of theory formation and empirical analysis provides a novel approach to international comparative research on capitalism. The book will be of interest to researchers in the fields of international political economy, development studies, new institutionalism, East Asian and Southeast Asian studies, and industrial and innovation policy.

This book by a leading expert considers the growth of an inefficient superlayer in Southeast Asian economies and assesses the problems that this poses for future economic development. Yoshihara argues that as technological backwardness, the low quality of government intervention, and discrimination against those of Chinese descent have prevented capitalism from stimulating development, there has emerged a brand of ersatz capitalism very different from the capitalism in Japan and the West. He goes on to offer recommendations for creating a dynamic capitalism while acknowledging that obstacles to their implementation exist in current Southeast Asian social and political systems.

Southeast Asia's Misunderstood Miracle emphasizes the contribution of government intervention, especially selective industrial policy, to growth, structural change, and late industrialization in Thailand, Malaysia, and Indonesia. Although government intervention has certainly been abused for private gain, it has also been crucial for the sustained rapid growth and structural change experienced in the region. Similarly, Southeast Asian resource wealth may have weakened the imperative to industrialize in the region, but inferior government intervention probably accounts for the relatively less impressive industrial achievements of the three countries. The study also stresses the significant contribution of regional economic dynamics, especially the increased role of direct foreign investment from Japan and the first tier, newly industrializing economies of South Korea, Taiwan, Hong Kong, and Singapore.Thus, the book qualifies, contradicts, and challenges some of the conclusions and policy recommendations of other works such as the World Bank's influential East Asian Miracle (1993), which suggested that other developing countries should seek to emulate the second tier Southeast Asian NICs rather than the first tier East Asian NIEs.

Professor Yoshihara, an international expert on the Southeast Asian economies, looks beyond the causes of the current crisis to discuss what can be done to build a dynamic economy in Asia to ensure prosperity for the future. He takes the viewpoint that the only way to achieve this is to promote integration into the global economy through free trade and free capital movement. He puts forward a convincing argument that government intervention is not the way forward and has in fact helped cause the present crisis. But a prosperous future is possible, he argues, by renovating institutions and adapting new attitudes. A most timely book with lessons for other parts of the world as well as for Southeast Asia.

Professor Yoshihara, an expert on the Southeast Asian economies, looks beyond the causes of the late 1990s crisis to discuss what can be done to build a dynamic economy in Asia to ensure prosperity in the future. He believes the promotion of integration into the global economy will achieve this.

As the Asian crisis triggered or precipitated the meltdown, a second, objective is to explore the reasons and factors for the breakdown or redundancy of developmental states, distinguishing between domestic transformative capacity and external global factors as identified. A third objective is to cull experiences and lessons beyond East Asia. With many transition economies in Central and Eastern Europe beside China and Indochinese states, the theory and practice of developmental states may be a useful bridge. These are by no means exhaustive and comprehensive aims, questions and issues. For individual developmental states covered in this volume, country-specific lessons may also be drawn for them to be reconfigured to stay relevant. The most important consideration for this volume is to value-add to the literature, both the theory and principles of the Asian developmental state as well as empirical observations observed elsewhere. This volume comprises 13 chapters in two parts.

This book aims to distil from both sets of developments before and after the Asian crisis of 1997 a generic business model for East Asia in the context of the new economy. Globalisation, information communication technology, knowledge-based economy, deregulation and emerging new competition delineate and set the challenges for the new economy. More rapid technological change in the new globalised economy means greater creative destruction and tick of premature obsolescence to companies and workers of capital, job skills and earning power.