The role of government in East Asian economic development has been a continuous issue. Two competing views have shaped enquiries into the source of the rapid growth high-performing Asian economies and attempts to derive a general lesson for other developing economies: the market-friendly view, according to which government intervenes little in the market, and the developmental state view, in which it governs the market. What these views share in common is a conception of market and government as alternative mechanisms for resource allocation. They are distinct only in their judgement of the extent to which market failures have been, and ought to be, remedied by direct government intervention. This collection of essays suggests a breakthrough, third view: the market-enhancing view. Instead of viewing government and the market as mutually exclusive substitutes, it examines the capacity of government policy to facilitate or complement private sector co-ordination. The book starts from the premise that private sector institutions have important comparative advantages over government, in particular in their ability to process information available on site. At the same time, it recognizes that the capabilities of the private sector are more limited in developing economies. The market-enhancing view thus stresses the mechanisms whereby government policy is directed at improving the ability of the private sector to solve co-ordination problems and overcome other market imperfections. In presenting the market-enhancing view, the book recognizes the wide diversity of the roles of government across various East Asian economies-including Japan, Korea, Hong Kong, Malaysia, and China-and its path-dependant and developmental stage nature.

Japan's rise from the ashes of defeat in the Second World War to its position now as one of the world's foremost economies has long been recognized as one of the most startling turnarounds of the 20th Century. With economic reform again at the top of the global agenda with the fall of the Soviet bloc and the continuing struggle of the developing nations, the lessons of Japan's success have never been more valuable. This volume looks closely at the origins of the current Japanese economic system, focusing particularly on the contrast between the war period of 1930-1945 and the preceding situation. The contributors argue that Japan had an `Anglo-Saxon model' economy until the 1930s, and that the special features of the Japanese system -- good labour relations; employee-based corporate governance; the main banks' financial system; and the principle of `administrative guidance' -- were all deliberately created during militarization (1930-1945).

This collection of papers developed out of a World Bank project on the contentious issue of whether government played any positive role in the success of the so-called high-performing Asian economies. It goes beyond the influential World Bank volume The East Asian Miracle to chart a middle ground that recognizes the diversity among the different East Asian economies and the evolutionary nature of government intervention.