The Asian story has served, or at least interpretation of it have served, as the model for development policy throughout the world, especially before the 1997-1998 Financial crisis. Its success was clearly based on export-oriented growth (EOG), in contrast to ISI policies popular prior to the 1980s, and the success of the four original Tigers. Their spectacular growth based on the growing problems ISI began facing in the 1970s. Neoliberal economists argued that if exports produced success, then all countries should open up to the market,pursue their comparative advantage,and export as well and as much as they could.
the original SAP efforts based on neoliberalism assumed that the success in Asia was founded on getting the state out of way of the market and allowing comparative advantage to work its magic. Further research clearly showed this was not always the case in the successful East Asian cases. Hong Kong, still under British colonial rule, certainly followed a laissez-faire policy of minimal governmental intervention, probably the most minimal on the planet. The other three Tigers, however, did not. In 1993 the world Bank published a major study, The Eat Asian Miracle, that distilled this resarch into a series of lessons learned that could be applied to policy elsewhere in the world. This study showed that the state had a greater role in the economic successes in Eats Asia than originally had been assumed. Taiwan and South Korea especially had developmental states similar to Japan’s that guided industrialization. They used carefully tergeted credit and subsidies and provided some protection to create new industries that could compete on the world market. The state guided investment into areas of comparative advantage, rather than simply allowing the market to send signals. These states did certainly follow neoliberal recommendations on fiscal and monetary policy,keeping inflation low and their currencies stable and realistically valued vis-a-vis other, which encouraged investment and exports. They had begun with ISI policies but had shifted their focus to EOG very early (in the 1950s and 1960s), and their success had also been based on a highly educated, literate populace able to utilize a high-quality education system. The 1993 study went on to suggest that a key component to all of this was a strong state, one in which key economic bureaucracies were insulated from short-term political pressures so that they could pursue solid,long-term polities. A strong state was necessary to make the often painful transition from ISI to EOG early on, as well as to guide the subsequent industrialization along channels that enhanced rather than diminished comparative advantage. This revised understanding of the Eat Asian miracle helped lead the World Bank and other development experts to recognize that the state still has a role to play in effective developmnt.