After the World Bank's meeting in Bangkok in 1991 an editorial writer for The
Wall Street Journal proclaimed that "with a few sickly exceptions, such as the
decaying Communist holdouts of China and Vietnam, it seems that the ideas of
Adam Smith, of Alfred Marshall, of Milton Friedman, have triumphed. We are all
This is true only if we accept the most vulgar and imprecise statement of what
being a capitalist means. The economies that have grown most impressively over
the past generation—from Germany to Thailand to Korea to Japan all certainly
believe in competition. Toyota and Nissan grow strong fighting each other.
Daewoo and Hyundai compete on products from cars to computers to washing
machines. But it would be very hard to find a businessman or an official in
these countries who would say, with a straight face, that these industries grew
"automatically" or in a "natural" way.
Two years ago another Wall Street Journal item, this one a review of a book on
[The author] puts it well: 'The benefits of unilaterally adopting free
trade now are greater than the benefits of multilateral adoption of free trade
ten or fifteen years from now.' Ask Hong Kong, which has totally shunned
retaliation and not coincidentally has had the highest growth rate in the world
over the past three decades.
Yes, indeed—ask Hong Kong. Since the end of the Second World War its policy
has generally been laissez-faire. Compared with the rest of Asia, Hong Kong
interferes less, plans less, and leaves market forces more on their own. What
has been the result? During the 1980s the real earnings of Hong Kong's people
rose more slowly than those of the people of Korea, Singapore, Thailand, and
Taiwan. It is a busy, bustling entrepot of merchants, especially those handling
commerce in and out of China. But as an industrial center it is falling behind
In the mid-1980s David Aikman, a journalist for Time, wrote a book about the
"miracle" economies of Asia. The successes of Taiwan and Hong Kong, he wrote,
"demonstrate just how faithful, consciously or not, the rulers of these two
countries have been to American conceptions of free enterprise."
Despite Hong Kong's lack of regulations, though, and despite the small
businesses that abound in Taiwan, to say that either of these places behaves in
an "American" way is to drain the term of all meaning. For example, as late as
1987 most imports of steel into Taiwan had to be approved by the nation's big
steel maker, China Steel. The United States, too, protects its steel industry,
but this is presumably not what the author meant in saying that Taiwan had been
"faithful" to American concepts of free enterprise.
"There is a great deal of misinformation abroad about the trade regimes of
[Taiwan and Korea], misinformation which is cultivated by the governments to
conceal how much real protection there has been," the economist Robert Wade
wrote in an exhaustive study that concentrated on Taiwan and rebutted virtually
everything in Aikman's book.
East Asian trade regimes are inconsistent in important ways with even a
modified version of the standard economist's account of what a good trade
regime looks like.... It is amazing and even scandalous that the distinguished
academic theorists of trade policy.... have not tried to reconcile these facts
about East Asian trade regimes with their core prescriptions [emphasis
Anyone who reads American or British newspapers or listens to political
speeches in English could provide other examples. But they're not necessary.
The Anglo-American theories have obviously won the battle of ideas—when that
battle is carried out in English. The concepts of consumer welfare, comparative
advantage, and freest possible trade now seem not like concepts but like
natural laws. But these concepts are detached from historical experience.