6 - The Rise of Intermediary Demand: A Reassessment of the “Asian Miracle”

Summary

For most analysts, it is an unexamined article of faith that the so-called “Asian miracle” is a push rather than a pull story, a supply-side narrative in which the administrative efficiency, entrepreneurial energy, and productive capacity of a select group of Asian economies created rapid economic growth. Drawing on new data that allow us to examine disaggregated trade data as if they are historical documents, we find clear evidence that pull factors relating to the organization of intermediary demand and the demand responsiveness of Asian manufacturers must be counted among the most important causes of growth in, and divergence among, Asian economies beginning in the initial period of industrialization and continuing through today. A level of economic activity that we call “intermediary demand” (by which we mean a range of market-making activities that include, among other things, merchandising, retailing, and the infrastructure of product procurement) had, and continues to have, a major impact on the organization of Asian economies and has, in interaction with local conditions, decisively shaped the different rates and divergent trajectories of growth throughout the region.

Using our revised Walrasian framework to conceptualize Asian firms, we not only need to examine the interconnectedness of markets within countries, as we did in Chapters 3 and 4, but we also need to examine the interconnectedness of markets between countries. Part I shows that differences in the interconnectedness of markets within countries had systemic repercussions for the organization of those economies.