I just finished reading Joe Studwell's magisterial book, How Asia Works: Success and Failure in the World's Most Dynamic Region. It's the book I was looking for throughout college: a conceptually unified but historically aware account of industrialization in East Asia.
The book I thought I wanted was about the newly industrialized countries (Hong Kong, Taiwan, South Korea, Singapore). But as Studwell points out, Hong Kong and Singapore aren't real countries--the lessons offshore financial centers have to offer aren't nearly as relevant to the ultimate goal of global development as that of countries that have to manage a rural-urban divide and a large population. So he ignores them. And he talks about Japan, which is a good dodge of the temptation to focus only on "news."
One of the clear elements of conceptual unity is the idea that the north of East Asia has succeeded--see South Korea, Taiwan, Japan, and now China--while Southeast Asia (Thailand, Malaysia, Indonesia, the Philippines) have failed for the same reasons. To wit, the importance of export discipline and conscious industrial policy. Macro management broadly, and the financial sector in particular, explicitly does not make the cut as an important criterion for success: monetary prudence in Malaysia couldn't save it, and recklessness in Korea didn't halt progress there.
"Export discipline" is the term Studwell uses for policies that shower big industrial firms with credit and domestic protection if continue to expand exports and acquire new technologies from abroad--and then deny those benefits to companies that focus only on the domestic market. He presents the classic infant industry argument (citing List as I learned in French high school) that industrial policy is needed to move countries from the bad equilibrium of low value-added production to high value-added. The export discipline twist is that exports provide a "fitness function" governments can apply to companies while still protecting them against competition domestically. Moreover, industry has to be the bedrock of development; with the exception of construction, the service sector intrinsically lacks the job-creating power of industry. Another big idea is the importance of smallholder agriculture, which is much more productive than commonly believed. In Asia, at least, small growers have always outproduced commercial plantations; peasant households "exploit" themselves and have access to much cheaper (and knowledgeable) labor than commercially-managed farms.
So those are the main points (there's also one about how stocks and bonds give governments much less control than working through banks). Behind those points are two concepts that seem neglected in many policy discussions, perhaps because they are too obvious: learning-by-doing and information.
Know-how matters, and for the most part it depends on doing what you're trying to learn. That holds for machinists, managers, and merchants alike. Gaining a technological foothold is not simply a matter of making investments in technologies (for instance by funding tertiary education and pursuing joint ventures), but it requires actively and frustratingly building up businesses that are clumsy and inefficient at first. Over time, if there are incentives to keep up learning efforts, and if joint foreign investors aren't allowed to take over the hard technology-intensive stages of production, companies gain mastery. Then they can take another step up the technology ladder. There's a footnote to the effect that this is somehow different than the classic theory of learning-by-doing, which is apparently leads to the same conclusions of conventional static equilibrium analysis. To look up.
Even more fascinating is the argument that, if they are to implement industrial policy, governments need sources of information to replace market signals. Otherwise, they will be easily captured by firms that can easily make up stories about their progress. For the successful industrialized countries of Asia, exports provided a yardstick for performance of the large manufacturing conglomerates. In a world of information overflow, it frequently surprises me to realize that policymakers lack critical information as basic as knowing which industries are doing well, but the argument seems fully plausible. I am reminded of the cluelessness of the Chinese central government during the Great Leap Forward--when tens of millions were dying.
There's also a really useful distinction between the economics of efficiency (relevant to rich countries) and the economics of development (relevant to poor countries). While the economics of efficiency has its own problems, this distinction highlights the difficulty of getting useful insight from formal models of growth in developing countries. The process of development is driven by humans learning (quite separate from being educated) myriad diverse tasks, and describing the situations that cultivate that learning is difficult to do outside of broad brushstrokes. Similarly, political economy models seem more relevant than proper economics if the informational weakness for which Studwell prescribes export discipline is as important as he suggests.
