Laos: a state coordinated frontier economy

This paper assesses the current variety of capitalism in Laos using Hall and Soskice’s (2001) comparative approach and the emerging body of knowledge on Varieties of Asian Capitalism. In addition to a systematic discussion of the traditional capitalist elements proposed by Hall and Soskice (the financial system, industrial relations, internal structure of the firm, education and skills formation and inter-company relations), this paper also takes into account foreign direct investments, social and environmental sustainability. The available evidence suggests that Laos can be categorised as a State Coordinated Frontier Economy in which elites and foreign investors accumulate wealth at the expense of small firms, villagers and the natural environment. The government is particularly present in the spheres of finance and inter-company relations. A continuation of this variety of capitalism is likely to result in excessive inequality and severe environmental degradation. The task for Laos is now to foster more inclusive forms of state coordination and balance economic growth with ameliorative policy initiatives catering to the natural environment, displaced villagers, ordinary employees and small business owners. This will be a difficult endeavour as there is still a profound mismatch between prevailing economic institutional complementarities and historically informed cultural institutions.