The emperor is fully clothed, if a little ragged: East Asian miracles and crises

This essay explores evidence from the experience of East Asian economies when they were successful, and lessons from the roots of the current crisis, to attempt to identify ‘good’ economic policies. The essay argues that one of the most important initial conditions in the successful East Asian economies was a predisposition towards a relatively equitable distribution of the gains from growth. Governments in those countries perceived a tradeoff between extracting rents and achieving growth, but most had the administrative and institutional capacity not to subjugate the interests of rent‐seekers to those of pro‐growth policies. In terms of economic policy, macro‐economic management, promotion of a dynamic agricultural sector, government intervention by regulation rather than tax distortions, and relatively export‐oriented trade policies, all appear to be conducive to growth. The current crisis identifies a number of caveats: the dangers of trying to maintain a relatively fixed exchange rate and the costs of not having safeguard regulations in financial markets. Avoiding these mistakes offers a lesson for all.