Neo-classical economists do not like political intervention in markets. They claim that markets are inherently efficient. But history shows that markets – with the primordial exception of what the institutional economist Ronald Coase dismissed as ‘individuals exchanging nuts for berries on the edge of the forest’ – are created. 1 Which is to say that in a functioning society markets are shaped and re-shaped by political power. Without the dispossession of landlords in Japan, Korea, Taiwan and China there would have been no increased agricultural surplus to prime industrialisation. Without the focus on manufacturing for export, there would have been no way to engage tens of millions of former farmers in the modern economy. And without financial repression, it would not have been possible to pay for an accelerated economic learning process. In all of the above, markets and competition were made to serve development. The message that east Asia – and indeed an historical understanding of development around the world – sends to economists is that there is no one type of economics. At a minimum, there are two. There is the economics of development, which is akin to an education process. This is where the people – and preferably all the people – who comprise an economy acquire the skills needed to compete with their peers around the world. The economics of development requires nurture, protection and competition. Then there is the economics of efficiency, applicable to a later stage of development. This requires less state intervention, more deregulation, freer markets, and a closer focus on near-term profits. The issue is not whether there are two kinds of economics that exist at different stages of development. The question is where these two stages meet. This is the difficult and interesting subject to which economists could more productively apply themselves.
There is no 1 kind of economics that works for all economies. Having a strong ideology can be counter-productive to choosing the best course of action. Debating to prove any chosen form of ideology might lead to some unproductive discussions.
